Source: Meritor announcement
TROY, Mich. — Meritor, Inc. (NYSE: MTOR) provided an update on its global operations in response to the continued spread and impact of COVID-19.
“The COVID-19 pandemic has resulted in unprecedented uncertainty in the global commercial vehicle industry and economies around the world,” said Jay Craig, CEO and president of Meritor. “In light of rapidly evolving market conditions, and in accordance with the guidance of global health professionals, we made the difficult but necessary decision, along with many of our customers, to suspend production at most of our global commercial truck manufacturing facilities.
“We are also taking proactive and decisive actions to reduce costs and increase our financial flexibility. Meritor is well capitalized, and I am confident that our financial strength, the continued execution of our M2022 plan and our commitment to serving our customers will enable us to successfully navigate this challenging period.”
Temporary Facility Closures
Due to the rapidly evolving situation related to COVID-19, and due to related market conditions, Meritor will halt production at most of its commercial truck facilities throughout North and South America, India and Europe on a temporary basis. As part of the transition, a significant portion of Meritor’s hourly workforce across its manufacturing facilities will be laid off.
The company will evaluate operating conditions and consider reopening the facilities once it is safe to do so, and, based on information and guidance from local government and health authorities.
The company’s trailer and Industrial businesses remain in operation as customer order activity continues. Meritor’s Industrial customers are producing vehicles for the defense, bus and coach, terminal tractor, fire and rescue and off-highway end markets which are deemed critical in the response to the current healthcare crisis.
Meritor’s aftermarket business is also fully operational to maintain the supply of critical replacement parts to the vital truck and trailer transportation network.
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Cost Reductions and Liquidity Update
Given the uncertainties that have arisen in the global economy due to the COVID-19 pandemic, and out of an abundance of caution, Meritor is aggressively implementing a series of temporary cost reduction measures to further preserve financial flexibility. These actions include:
A reduction to the retainer fees paid to non-employee directors by 60 percent;
A reduction of 50 percent to 60 percent to the base salary of each of its executive officers;
A reduction to the base salary for all other salaried employees in the United States and Canada by 40 percent to 50 percent, and;
The temporary suspension of share repurchases under the company’s share repurchase plan.
All salaries will be reinstated as conditions allow.
Based on its current planning assumptions, Meritor expects that the aggressive cost reduction actions it is announcing today will help position the company to manage cash flow from operations in a range of negative $25 million to break-even in the third fiscal quarter, excluding the one-time impact from receivable factoring programs that the company estimates to be approximately a $150 million use of cash in the third fiscal quarter.
To read the entire announcement, click HERE.