SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 28, 2004

Commission file number 1-15983

ArvinMeritor, Inc.

(248) 435-1000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes    [X]     No   [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes    [X]     No   [  ]

69,377,477 shares of Common Stock, $1.00 par value, of ArvinMeritor, Inc. were outstanding on April 30, 2004.

ARVINMERITOR, INC.

INDEX

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

ARVINMERITOR, INC.

STATEMENT OF CONSOLIDATED INCOME

See notes to consolidated financial statements.

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ARVINMERITOR, INC.

CONSOLIDATED BALANCE SHEET

See notes to consolidated financial statements.

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ARVINMERITOR, INC.

CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS

See notes to consolidated financial statements.

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ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

ArvinMeritor, Inc. (the company or ArvinMeritor) is a leading global supplier of a broad range of integrated systems, modules and components serving light vehicle, commercial truck, trailer and specialty original equipment manufacturers and certain aftermarkets. The company also provides coil coating applications to the transportation, appliance, construction and furniture industries. The consolidated financial statements are those of the company and its consolidated subsidiaries.

In the opinion of the company, the unaudited financial statements contain all adjustments, consisting solely of adjustments of a normal, recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. These statements should be read in conjunction with the company’s financial statements included in the Annual Report on Form 10-K for the fiscal year ended September 30, 2003. The results of operations for the three and six months ended March 31, 2004, are not necessarily indicative of the results for the full year.

The company’s fiscal year ends on the Sunday nearest September 30. The company’s fiscal quarters end on the Sundays nearest December 31, March 31, and June 30. The second quarter of fiscal 2004 and 2003 ended on March 28, 2004, and March 30, 2003, respectively. All year and quarter references relate to the company’s fiscal year and fiscal quarters unless otherwise stated.

For each interim reporting period the company makes an estimate of the effective tax rate expected to be applicable for the full fiscal year. The rate so determined is used in providing for income taxes on a year-to-date basis. As a result of ongoing legal entity restructuring to more closely align the company’s organizational structure with the underlying operations of the businesses and the favorable tax treatment of the gain on the sale of AP Amortiguadores, S.A. (see Note 5), the company expects the fiscal 2004 effective tax rate to be approximately 30 percent. The effective tax rate was 26 percent in the second quarter of fiscal 2004 compared to 34 percent in the prior quarter. The second quarter fiscal 2004 effective tax rate reflects an adjustment to arrive at approximately 30 percent for the first six months of fiscal 2004.

Certain prior period amounts have been reclassified to conform with current period presentation.

2. Earnings per Share

Basic earnings per share are based upon the weighted average number of shares outstanding during each period. Diluted earnings per share assumes the exercise of common stock options and the impact of restricted stock when dilutive.

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ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of basic average common shares outstanding to diluted average common shares outstanding is as follows (in millions):

3. New Accounting Standards

On December 8, 2003, President Bush signed the Medicare Prescription Drug, Improvement and Modernization Act (the Act) into law. This law introduces a prescription drug benefit under Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to the benefit established by the law. In January 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) No. FAS 106-1, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003.” The FSP permits companies that are a sponsor of a postretirement heath care plan that provides a prescription drug benefit to either include the effects of the Act in its financial statements or to defer accounting for the Act until the FASB issues guidance on how to account for the federal subsidy. The company has elected to defer accounting for the effects of the Act until specific guidance is issued by the FASB.

In December 2003, the FASB issued Statement of Financial Accounting Standards No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits, an amendment of FASB Statements No. 87, 88, and 106.” This Statement revises employers’ disclosures about pension and other postretirement benefit plans. It does not change the measurement or recognition of those plans required by FASB Statements No. 87, No. 88 and No. 106. It requires additional disclosures to those in the original FASB Statement No. 132 about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. Certain of these disclosures are required for financial statements with interim periods ending after December 15, 2003. The company has included the additional disclosure requirements in Note 16.

4. Dana Corporation Tender Offer

On July 9, 2003, the company commenced a tender offer to acquire all of the outstanding shares of Dana Corporation (Dana) for $15.00 per share in cash. On July 22, 2003, Dana’s Board of Directors recommended that its shareowners reject the company’s initial cash tender offer. On November 17, 2003, the company increased its tender offer to $18.00 per share in cash and indicated it would withdraw its offer on December 2, 2003 unless the Dana Board of Directors agreed to begin negotiating a definitive merger agreement. On November 24, 2003, following

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ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dana’s announcement that its Board of Directors recommended that its shareowners reject the company’s increased offer, the company announced that it had withdrawn its $18.00 per share all cash tender offer. As a result of the company’s decision to withdraw its tender offer, the company recorded a net charge of $9 million ($6 million after-tax, or $0.09 per diluted share) in the first quarter of fiscal 2004. The pre-tax charge includes $16 million in direct incremental acquisition costs and a gain on the sale of Dana stock owned by the company of $7 million.

5. Acquisitions and Divestitures

As part of the company’s continuing strategy to divest non-core business, in the second quarter of fiscal 2004 the company completed the sale of its 75-percent shareholdings in AP Amortiguadores, S.A. (APA), a joint venture that manufactured ride control products. Net proceeds from the sale were $48 million, resulting in a pre-tax gain of $20 million.

In the second quarter of fiscal 2003, the company purchased the remaining 51-percent interest in Zeuna Stärker GmbH & Co. KG (Zeuna Stärker). The March 31, 2004 consolidated balance sheet includes $111 million of goodwill associated with the purchase price allocation. Incremental sales from Zeuna Stärker were $203 million in the first six months of fiscal year 2004.

The company completed the sale of net assets related to the manufacturing and distribution of its off-highway planetary axle products in the second quarter of fiscal 2003 for $36 million, resulting in a pre-tax gain of $2 million. The company did not consider these products core to its commercial vehicle systems business.

6. Restructuring Costs

During the first six months of fiscal 2004, the company recorded $9 million of restructuring charges. The company recorded restructuring charges of $11 million for the first six months of fiscal 2003. At March 31, 2004 and September 30, 2003, there were $13 million of restructuring reserves relating to employee termination benefits in the consolidated balance sheet.

The company approved workforce reductions and facility consolidations in its Light Vehicle Systems (LVS) business segment. These measures follow the management realignment of the company’s LVS business and are also intended to address the competitive challenges in the automotive supplier industry. The company recorded restructuring costs related to these programs of $4 million and $11 million in the first six months of fiscal 2004 and 2003, respectively. These costs included severance and other employee termination costs related to a reduction of approximately 200 salaried and 350 hourly employees. The $11 million charge recorded in the first six months of fiscal 2003 also included $5 million related to asset impairments.

Due to the declining markets that continued in the company’s Light Vehicle Aftermarket (LVA) business segment, the company approved plans for a work force reduction. During the first six months of fiscal 2004 the company recorded restructuring costs of $2 million. These costs included severance and other termination costs related to a reduction of approximately 50 salaried employees.

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ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the second quarter of fiscal 2004, the company recorded additional restructuring costs totaling $3 million associated with certain administrative and managerial employee termination costs.

In fiscal 2003, the company recorded restructuring costs of $5 million that were incurred as a result of the acquisition of the remaining 51-percent interest in Zeuna Stärker. In the first six months of fiscal 2004, the company recorded an additional $1 million of restructuring costs. The acquisition was accounted for utilizing the purchase method of accounting and these restructuring costs were reflected in the purchase price allocation.

The changes in the restructuring reserves for the six months ended March 31, 2004 are as follows (in millions):

7. Accounts Receivable Securitization and Factoring

The company participates in U.S. and European accounts receivable securitization facilities to enhance financial flexibility and lower interest costs. Under the U.S. accounts receivable securitization facility, the company sells substantially all of the trade receivables of certain U.S. subsidiaries to ArvinMeritor Receivables Corporation (ARC), a wholly owned, special purpose subsidiary. ARC has entered into an agreement to sell an undivided interest in up to $250 million of eligible receivables to certain bank conduits. Under the European facility, the company can sell up to 50 million euro of trade receivables to a bank. As of March 31, 2004 and September 30, 2003 the company had utilized $190 million and $210 million, respectively, of the U.S. accounts receivable securitization facility and 29 million euro ($35 million) and 24 million euro ($27 million), respectively, of the European accounts receivable securitization facility.

As of March 31, 2004 and September 30, 2003 the banks had a preferential interest in $248 million and $255 million, respectively, of the remainder of the receivables held at ARC to secure the obligation under the U.S. accounts receivable securitization facility. The bank had a preferential interest in 4 million euro ($5 million) as of March 31, 2004 and September 30, 2003, of the remainder of the receivables held to secure the obligation under the European accounts receivable securitization facility.

The company has no retained interest in the receivables sold, but does perform collection and

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ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

administrative functions. The receivables under these programs were sold at fair market value and a discount on the sale was recorded in interest expense, net and other. A discount of $2 million was recorded for the six months ended March 31, 2004 and 2003. The gross amount of proceeds received from the sale of receivables under these programs was $1,406 million and $1,113 million for the six months ended March 31, 2004 and 2003, respectively. The U.S. accounts receivable securitization program and the European program mature in September 2004 and March 2005, respectively.

If the company’s credit ratings were reduced to certain levels, or if certain receivables performance-based covenants were not met, it would constitute a termination event, which, at the option of the banks, could result in termination of the facilities. At March 31, 2004, the company was in compliance with all covenants.

In addition to its securitization programs, several of the company’s European subsidiaries factor eligible accounts receivable with financial institutions. The receivables are factored without recourse to the company and are excluded from accounts receivable. The amounts of factored receivables were $16 million and $47 million at March 31, 2004 and September 30, 2003, respectively.

8. Stock Options

The company expenses the fair value of stock options granted under its various stock-based compensation plans. The company recorded compensation expense associated with the expensing of options of $3 million ($2 million after-tax, or $0.03 per diluted share) for the six months ended March 31, 2004 and 2003.

9. Inventories

Inventories are summarized as follows (in millions):

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ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Other Current Assets

Other Current Assets are summarized as follows (in millions):

11. Other Assets

Other Assets are summarized as follows (in millions):

The company anticipates amortization expense for patents, licenses and other intangible assets of approximately $3 million per year for fiscal 2004 and 2005, $2 million in fiscal 2006 and $1 million per year for fiscal 2007 and 2008.

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ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Other Current Liabilities

Other Current Liabilities are summarized as follows (in millions):

     A summary of the changes in accrued product warranties is as follows (in millions):

In the second quarter of fiscal 2004, the company dissolved its transmission joint venture with ZF Freidrichshafen in favor of a marketing arrangement that allows the company to provide the Freedomline^TM transmission family to its customers. As a result, the company reclassified $20 million of product warranties that were previously included as other long-term liabilities in the consolidated balance sheet.

13. Other Liabilities

Other Liabilities are summarized as follows (in millions):

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ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. Long-Term Debt

Long-Term Debt, net of discount where applicable, is summarized as follows (in millions):

   Debt Securities

The company previously filed a shelf registration statement with the Securities and Exchange Commission registering $750 million aggregate principal amount of debt securities to be offered in one or more series on terms determined at the time of sale. At March 31, 2004 the company has $150 million of debt securities available for issuance under this shelf registration.

   Subordinated Debentures

In January 1997, Arvin Capital I (the trust), a wholly owned finance subsidiary trust of ArvinMeritor, issued 9.5 percent Company-Obligated Mandatorily Redeemable Preferred Capital Securities of a Subsidiary Trust (preferred capital securities), due February 1, 2027, and callable in February 2007 at a premium and in February 2017 at par. The proceeds from the preferred capital securities are invested entirely in 9.5 percent junior subordinated debentures of the company, which are the sole assets of the trust. The company fully and unconditionally guarantees the trust’s obligation to the holders of the preferred capital securities.

Prior to fiscal 2003, the company consolidated the trust and the preferred capital securities were included in the consolidated balance sheet. During the fourth quarter of fiscal 2003, the company adopted FASB Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities.” Under the provisions of FIN 46, it was determined that the trust is a variable interest entity in which the company does not have a variable interest and therefore is not the primary beneficiary. Upon adoption of FIN 46, the company no longer consolidates the trust, which issued the $39 million of outstanding preferred capital securities, and has included in long-term debt $39 million of junior subordinated debentures due to the trust.

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ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   Bank Revolving Credit Facilities

The company has two unsecured credit facilities, which mature on June 27, 2005: a three-year, $400-million revolving credit facility and a five-year, $750-million revolving credit facility. Borrowings are subject to interest based on quoted LIBOR rates plus a margin, and a facility fee, both of which are based upon the company’s credit rating. At March 31, 2004, the margin over the LIBOR rate was 125 basis points, and the facility fee was 25 basis points.

   Interest Rate Swap Agreements

The company has in place two interest rate swap agreements that convert $300 million of the company’s 8 3/4 percent notes and $100 million of the 6.8 percent notes to variable interest rates. The fair value of the swaps was $51 million and $46 million as of March 31, 2004 and September 30, 2003, respectively, and is recorded in Other Assets, with an offsetting amount recorded in Long-Term Debt. The swaps have been designated as fair value hedges and the impact of the changes in their fair values is offset by an equal and opposite change in the carrying value of the related notes. Under the terms of the swap agreements, the company receives a fixed rate of interest of 8 3/4 percent and 6.8 percent on notional amounts of $300 million and $100 million, respectively, and pays variable rates based on three-month LIBOR plus a weighted-average spread of 2.51 percent.

The payments under the agreements coincide with the interest payment dates on the hedged debt instruments, and the difference between the amounts paid and received is included in interest expense, net and other.

   Leases

The company has entered into agreements to lease certain manufacturing and administrative assets. Under two of the agreements, the assets are held by variable interest entities. The company has determined that it has a variable interest in one of the variable interest entities, due to a $30 million residual value guarantee that obligates the company to absorb a majority of the variable interest entity’s losses. The assets and liabilities of this variable interest entity are included in the company’s consolidated balance sheet at March 31, 2004 and September 30, 2003.

The company has various other leasing arrangements that are not with variable interest entities. The company has provided a $3 million residual value guarantee associated with one of these leasing arrangements.

   Covenants

The credit facilities require the company to maintain a total net debt to earnings before interest, taxes, depreciation and amortization (EBITDA) ratio no greater than 3.25x and a minimum fixed charge coverage ratio (EBITDA less capital expenditures to interest expense) no less than 1.50x. In addition, an operating lease requires the company to maintain financial ratios that are similar to those required under the company’s credit facilities. At March 31, 2004, the company was in

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ARVINMERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

compliance with all covenants.

15. Financial Instruments

The company’s financial instruments include cash and cash equivalents, marketable securities, short and long-term debt, interest rate swaps, and foreign exchange contracts. The company uses derivatives for hedging and non-trading purposes in order to manage its interest rate and foreign exchange rate exposures. The company’s interest rate swap agreements are discussed in Note 14.