Special Coverage

Management Briefing Seminars

TRAVERSE CITY, MI – “It’s time we stopped health care from destroying the health of our industry and our country,” ArvinMeritor Inc. CEO Chip McClure tells attendees at the Management Briefing Seminars here.

The auto industry has to play a more active role in forcing the societal changes necessary to curb soaring health-care costs, he says.

“The decisions we make today about how we’re going to handle runaway health-care costs could make or break our industry tomorrow,” he says. “I’m not going to allow my business to get pushed to the brink over the cost of prescriptions.”

McClure says it needs to be easier for employees to take more ownership in driving down health-care expenses and improving the quality of their care. Additionally, there needs to be an understanding of the true cost drivers in health-care and how to find creative ways to contain them.

Two years ago, ArvinMeritor increased individual contributions and discontinued health care for retirees. But the supplier has put into place programs that offer financial incentives to employees that adopt healthier lifestyles, McClure says.

He advocates plans that chop $500 from employee deductibles or add that amount to health-care savings accounts for healthy lifestyle changes such as quitting smoking, lowering blood pressure or cholesterol levels, or even keeping so-called body mass indexes within acceptable levels.

ArvinMeritor has gone so far as to paint lines on the sidewalks around its headquarters to encourage employees to walk laps around the building.

McClure notes The Goodyear Tire & Rubber Co.’s $1 billion health-care fund for retirees is a good example of a company driving its own destiny.

Aside from health care, McClure says the industry needs to think outside the box financially.

Creating new relationships with several major banks on Wall Street resulted in the supplier exchanging bonds and extending the maturity of existing bondholders, he says. This is different than the standard approach that involves selling new bonds, getting the proceeds and then going into a different transaction and buying back existing bonds in the market.

“We took care of all of this with one fee instead of two, so we were able to accomplish our goal less expensively and do it with bondholders who already knew ArvinMeritor,” he says.

ArvinMeritor took a cue from the high-tech and biotech worlds, McClure says, and decided to issue convertible debt instead of regular debt, while adding a new feature in the bonds that allows the supplier to minimize the dilution of the current shareholders.

ArvinMeritor currently is in the process of consolidating and closing 13 facilities by 2011 as it continues to right-size its business. The restructuring includes selling its light- vehicle aftermarket business and its emissions-technologies operations.

But McClure emphasizes the supplier also is expanding in key growth areas, noting ArvinMeritor’s recent announcement to form a joint venture with Chery Automobile Co. Ltd. in Wuhu, China. The supplier says the JV will represent $150 million in revenue by 2010.

“We plan to triple our sales in Asia and with the Asian OEMs within the next five years,” McClure says. “That’s more than $1 billion of added sales in Asia/Pacific and more than $1 billion in sourcing from existing and new suppliers in that region.”

dwinter@wardsauto.com