The auto industry's newest supplier has targeted the vehicle undercarriage as its initial strategy in helping double annual sales from $7.5 billion this year to $15 billion within five years.
ArvinMeritor Inc. completes its merger as new shares in the company (symbol: ARM) begin a week of uninspired trading on the New York Stock Exchange. Shares began Monday at $16.69 and rose to $18 in the first day, then proceeded to fall throughout the rest of the week, closing Thursday slightly below the initial offering price.
The dismal stock performance is probably no surprise for Chairman and Chief Executive Larry Yost, who had long complained as the Meritor chief that his company's stock has been “terribly undervalued.” A stock buyback, Mr. Yost says at the ArvinMeritor launch last week, is a high priority.
The Troy, MI, company's first product target is the undercarriage, which has been a key part of Meritor's sales in the heavy vehicle drivetrain market. And with Arvin's expertise in ride control and exhaust systems, the new company is gearing up to provide significant modular capabilities.
ArvinMeritor says it will be able to supply more than 60% of the content for such corner modules. Mr. Yost pegs the global corner module market at about $2 billion.
The corner module could consist of Arvin's shock absorbers and struts and Meritor's sway bars, springs and wheels. Outsourcing is necessary for brake and knuckle components, which perhaps could figure in to acquisitions the company intends to make. ArvinMeritor also is considering getting into the light axle business, a company source says.
Carrying the undercarriage strategy to an extreme, the source says ArvinMeritor could include hydroformed underfloor panels, corner modules, exhaust systems and even wheels. “It could be like a rolling chassis,” the source says.
By way of innovation, ArvinMeritor earlier introduced the dual exhaust system made of titanium for the high-performance Corvette Z06. The superlight system is 44% (18 lbs.) lighter than stainless steel. The company will supply a low-volume titanium exhaust system for a customer in Europe within three years, the source says.