Special Coverage

Management Briefing Seminars

TRAVERSE CITY, MI – In early May, ArvinMeritor Inc. announced its plan to spin off its Light Vehicle Systems group and rename it Arvin Innovation.

And innovation is exactly what Phil Martens, the new company’s designate president and CEO, wants to talk about.

“I believe we need a cultural revolution within our industry, and we need to fire the first shot in that revolution today,” Martens tells attendees at the Management Briefing Seminars here.

ArvinMeritor’s LVS business supplies dynamic motion and control systems and components to the auto industry and had sales of $2.2 billion in 2007. More than 60% of revenues were derived outside North America.

Upon completion of the spin-off, ArvinMeritor will focus on its $4.2 billion commercial-vehicle systems business, including axles and drivelines, braking systems, suspension systems and ride-control products for heavy- and medium-duty trucks and trailers.

“We need to ensure a steady supply of bright ideas within our companies. Only by changing the culture will we attract and retain the kind of talent and fresh thinking that we need,” Martens says.

The change that’s coming in personal transportation, he says, requires technical solutions that are entrepreneurial in nature. He points to Tesla Motors Inc., the electric sports car maker, as an example.

Martens says by the middle of the next decade, 25% to 35% of the vehicles on the road will have hybrid powertrains. “So let’s get on with it. The technology is going to take off at a rate that we couldn’t anticipate even three or four years ago.”

He says these new vehicles will feature lightweight materials and be more like aircraft than cars, and may be manufactured with different processes.

Private equity can help fund new ideas and business directions, but he says the best Tier 1s are succeeding on their own, thanks to sophisticated technical products that can be sold worldwide in high volumes and manufactured with a low cost base.

BorgWarner Inc. and Johnson Controls Inc. are examples of such companies in the U.S. In Europe, he singles out Mahle GmbH, a global producer of castings used for precision engine components. In Asia, Martens says S&T Daewoo Co. Ltd. is a standout. Even though it is just coming out of bankruptcy, it has technology-based solutions that are applicable worldwide.

So far, Martens says, Arvin Innovation has increased engineering investments to deliver products aimed at improving vehicle fuel economy and performance, including lightweight composite coil and glass products and new electronics systems.

“If we don’t rise to the challenge, someone else will,” he says. “From the OEM perspective, it’s a tremendous challenge. But from the Tier 1 perspective, it’s pure opportunity.”