ArvinMeritor to split off car unit

By David Bailey

DETROIT (Reuters) - ArvinMeritor Inc (ARM.N: Quote, Profile, Research) said on Tuesday it plans to spin off its automotive parts business from its larger trucking group in a move it hopes will improve the focus of each unit, sending its shares up 6 percent.

The truck business, with $4.2 billion per year of sales, will continue to be called ArvinMeritor under the plan, which calls for a 100 percent spin-off of the $2.2 billion-per-year car parts business to shareholders under the name Arvin Innovation Inc.

The planned split comes eight years after Arvin and Meritor merged to form an auto and truck parts supplier with annual sales of $7.5 billion to broaden its focus and better compete in what was a consolidating industry.

ArvinMeritor hopes to complete the split within a year. The plan does not require shareholder approval, though it needs certain tax rulings and regulatory approvals, it said. It will provide more financial details on the proposal later in May.

"In the end, we will have two multibillion-dollar companies that are market-leading companies ... with stronger competitive positions because there will be clarity and a focus in the businesses," ArvinMeritor Chief Executive Chip McClure said.

ArvinMeritor's board approved the plan to go forward with a spin-off on Monday. The company also needs approval from unions in North America and Europe, though unions represent a relatively small share of its workers worldwide.

McClure said in an interview that the decision on the split was a culmination of ArvinMeritor's three-year restructuring in which it closed unprofitable plants and shed its emissions unit, replacement auto parts business and other operations.

ArvinMeritor, like other U.S. vehicle parts suppliers, has been contending with production cuts by U.S.-based automakers and rising costs for raw materials such as steel, as well as the cyclical downturn in the North American truck market.