Thank you for standing by. And welcome to the ArvinMeritorFiscal 2007 Fourth Quarter Earnings Conference Call. At this time, allparticipants are in a listen-only mode. There will be a presentation followedby a question-and-answer session. (Operator Instructions) I must advice you that this conference is being recordedtoday, Wednesday, 14 November, 20007. I would now like to hand the conference over to yourspeaker, Terry Huch. Please go ahead.

Thank you, Amy. Good morning everyone and welcome to theArvinMeritor fourth quarter and full fiscal year 2007 earnings call. On thecall today we have Chip McClure, our Chairman and Chief Executive Officer andPresident, and Jim Donlon, our Chief Financial Officer. The sides accompanying today's call are available at www.arvinmeritor.com, we'll refer tothe slides in our discussion this morning. The content of this conference callis the property of ArvinMeritor it's protected by US International CopyrightLaw and may not be rebroadcast without the expressed written consent ofArvinMeritor. We consider your continued participation to be your consentthrough our recording. Our discussion will contain certain forward-lookingstatements as defined in the Private Securities Litigation Reform Act of 1995.Let me refer you to slide two in our fourth quarter earnings conference callpresentation for a more complete disclosure of the risks that could affect ourresults. Now, I'd like to turn the call over to Chip.

Thank you, Terry and good morning everyone. Thank you forjoining us today. First, I'll cover some of the highlights for the yearoutlined in slides three through eight and then I’ll turn the call over to Jimwho will review the details of our financial performance. As you read in this morning's earnings announcement forfiscal year 2007 we earned $0.53 per share from continuing operations beforespecial items. Despite the solid progress we are making in implementing ourstrategic initiatives we haven't delivered the financial results that we know acompany like ours is capable of achieving. We recognize issues facing ArvinMeritor and we are workinghard to address them. We are in the process of implementing aggressive actionthat will help us to turn the challenges we are facing into opportunities forthe future. The actions we are taking have just started to hit ourbottom line and I believe that we will begin to see more improvement by the endof our fiscal year. We however remain focused on putting capacity in place,improving our profitability and delivering the returns you expect from us goingforward. In the short-term, our results have been negatively impactedby continuing soft truck market in North America, as well as, a truck marketthat's been going through the roof in Europe. As we've told you on the last couple of earnings calls thecapacity issue in Europe primarily driven by the growth in Eastern Europe,stress our supply chain and increase our costs due to sourcing issues, premiumfreight and over time. We are taking actions by making the necessary capacityinvestments in our equipment and facilities, qualifying new suppliers inEastern Europe and Asia, and aggressively implementing lean manufacturingprograms that will improve the efficiency and robustness of our systems andplans. We also need to address some of the commercial issues we hadwith many of our customers. We are pleased that…

Thank you, Chip. I'm going to start with some of the incomestatement for the third quarter on slide nine and then I'll talk about the fullyear results. The fourth quarter came in pretty close to the revised guidancethat we provided on October 3rd. We said then that our results in the US would be adverselyaffected by the slower economy and that our results in Europe would suffer fromsupply and operational issues related to the continuing high volumes there. On the revenue line those factors largely offset each otherresulting in sales that were about equal to the year ago quarter. Gross marginfor the quarter declined by $9 million from there fourth quarter of 2006 to$118 million. SG&A was $40 million higher than last year and I will talkabout that in detail on the next chart. Equity and earnings of affiliates continues to grow.Interest expense was $22 million for the quarter, $6 million lower than lastyear. Income taxes were a benefit of $5 million for the quarter. And incomefrom continuing operations before special items was a loss of $4 millioncompared to income of $29 million last year. This resulted in a loss of $0.06per share. Slide ten explains the increase in SG&A in the fourthquarter. Initially the magnitude of the increase maybe a surprise but much ofit reflects the income statement binning of items that should be familiar toyou. The first category is performance plus costs. We've indicated all alongthat our expected performance plus costs savings to pay for the cost of theprogram in 2007. And they did, most of the savings have come through the costof sales line whereas the program costs hit the SG&A line. The consultingand staffing cost to get the program going were $12 million in the quarter. Theconsulting engagement and payments are essentially complete, so this amountwill…

Thank you, Jim. Now let's turn to slide 21. In summary ArvinMeritoris aggressively implementing the right actions to ensure they are going forwardthe company will be better positioned to deliver value and provide solidreturns to our shareholders. I'm confident that we have the right business plan and weare building the right team to drive our company’s future success. First we have a winning business strategy includingcontinuing to refocus our business by dedicating our resources to businessesthat are core to our operations and offer the most attractive returns. To that end we divested our RollCoater, light vehicleaftermarket and emissions technology businesses. We are strengthening ourproduct portfolio and our global presence in a market that offer the highestgrowth opportunities. Our strategy is based on growing with a purpose and thatpurpose is to increase our profits and return value to our shareholders. We arealso aggressively executing initiatives that will better position of company tocapitalize in the upcoming rebound in the North American truck market. As wellas benefit from the robust truck market in Europe. We made strides in improving our global supply chain and wehave been making the necessary and much needed investments in our operations sowe can successfully manage higher demand and capacity levels in both of thesemarkets. We have implemented a strategic process that regularlyreviews and analyzes our product and business portfolio to achieve ourprofitable growth objectives. We are aligning with the right customers.Establishing better pricing disciplines and improving our platform mix. Second, we have been proactive in our efforts to driveperformance improvement initiatives throughout the organization and the actionswe’ve taken are paying off. As I mentioned earlier, our Performance Plus program hasbecome part of our culture and has helped us to change the way we operate anddrive the improvements we need to reduce costs and increase our profits. We are…

(Operator Instructions) Your first question comes from PeterNesvold of Bear Stearns. Please go ahead.

Good morning guys.

Good morning, Peter.

I have maybe a little about Europe. You know we've hearingtightness from multiple suppliers in OEMs, just trying to keep pace withdemands. Was there anything that you're able to do late in the year that mightwould show some kind of near-term benefit for instance one -- tier onesupplier, I know you didn't take any downtime frame since in August to catch upto the OEM customer. Anything like that you were able to do?

Yes. Absolutely. Peter, this is Chip, yes, we did the samething, the August shut down we worked throughout that and that obviously helpedwith a bit of a buffer there. I think the second thing is when you look at what Carstenand his teams have done in Europe. I've mentioned a little bit with theArvinMeritor Production System we are starting to see some of the benefits ofthe lean manufacturing there. So I think that was a second thing that we've been able toshow improvement essentially in all our facilities there. The third thing is wealso as I indicated have started developing new suppliers. Now obviously with the rapid increase in the volumerequirements there was some premium cost to bring this capacity on line andalso get the parts to our plant. So those were kind of three, if you -- well,short-term things that I think we will already start seeing the results from. And obviously, I think the most important thing is from alonger-term perspective is we actually spent a lot as far as investment infuture capacity and we are putting that in place as we speak.

Working down a -- working through a shutdown, an OEMshutdown makes a lot of sense, I can understand that that could be an immediatebenefit, it requalifying suppliers, I mean, that seems like that could takesometime. How, you know, changeable is that, don't you have to do durabletesting and get requalified by your OEM customer?

No. You are absolutely right. You’ve to do that and makesure you have got the right quality in place, so that doesn't come on quicklybut even with some of our existing suppliers and I think the other thing, is wework very closely with our customers because again, as you look at it, I thinkour customers too the significant ramp up with the opening of Eastern Europemore I think caught them by surprise too. So as we went through the balance of the year we were ableto work much closer with them, as far as, schedules also to make sure that wecould -- if you would level it out of schedule a bit, so the suppliers weactually looked at, at least initially the once that were already certifiedsuppliers. But as we look going forward since we’ve indicated in thelast couple of calls we do continue to see significant growth increase bothnext year and the year beyond that we are putting things in place to qualifythese new suppliers. So those become more than the medium-term solutions. Butit's more of the existing suppliers that we are doing it with.

And I didn’t see anything -- forgive me if I overlooked,expectations for segment EBITDA margins in '08. I mean, where do you seecommercial vehicle trending versus LVS, LVS has been a pleasant surprise thatit's starting to trend up here or continuing to trend up?

Yes. Obviously, if you look at that in a general sense Ithink the improvement in LVS has resulted in some of the restructuring thattook place in the past and obviously with CVS as the volumes come back on as weare able to get capacity in place in Europe and then with what we expect theincrease in volume here in North America, we do anticipate some increase going forwardreally into the second half of the year.

And then last question, when I look at what you've gonethrough in the last couple of quarters whether it's environment, etceteraexecution to some degree. You've had tightness in Europe, you've had a realdifficult North America Class 8 market, which is hopefully starts to reverse 12months out and you are going through some restructuring. I mean Chip, are you willing at this point to call fourthquarter here an EPS bottom with positive profitability going forward and itsounds like the cash flow versus a big cash flow drain this year at least isbreak even next year?

Obviously, as I look at this we do see improvement goingforward from this fourth quarter and I think we are doing if you will brick bybrick both on the LVS side and CVS side, as far as internal -- as far as, thecost reduction improvements. I think also as you look at additional volume coming on andthen clearly the third part being with the market improving that way. Soclearly do see improvement as we go throughout 2008.

Okay. Thank you. I'll jump back in queue.

Thanks, Peter.

Your next question comes from Brian Johnson of LehmanBrothers. Please go ahead.

Two questions, what are you doing any progress on balancingthe operational characteristic of the CVS business, so you don't need a GoldyLocks operational environment to make money, you can make money on the down andas well as, the overall in particularly in Europe, when do we see the benefitof these plants closures?

Brian it is Chip again. And yes, one of the things that weare looking to do as part of our ArvinMeritor production system in addition tothe lean implementation is to first right size our manufacturing footprint butthen make our manufacturing footprint more flexible so that as we look atdifferent volume increases in different markets. And you know, we've got to go flexible and we are actuallydoing some of that now if you will to help support production in Europe withsome of the capacity in other parts of the world. As I look at it going forward and as we do put thisadditional capacity in place we want to make sure that one it's flexible enoughto be able support capacity requirements in any market in the world. But the second thing and as from a production point of view,I think the other thing from a product point of view is where appropriate andagain, we have to be sensitive to customer requirements and market demands incertain, the product requirements in certain geographic markets is to providethat flexibility so that it's, markets go through peaks and troughs and theother markets are going the other way we have the capacity in place to be ableto do that on more of a global basis. So we are doing that, we are seeing a little bit of that nowand we envision more of that in the future.

Okay. Second question is, could you give more color on LVSin particular why the EBITDA margins went down despite being of course normalseasonality but despite being a decent revenue upturn?

Well, I think a lot of it you just hit right on Brian isreally the seasonality that way. What I really look at, if I look at the fullyear trends it's clearly heading in the right direction. As you know --indicated in our comments we still see more opportunity that going forward. SoI would really say that a lot of it was just based on the seasonality at thispoint.

Okay. But still versus last quarter last year it's down 170basis points same quarter '06, is that business mix, is that something going onin apertures?

Actually I would say that some of it was, as we look at someof the improvements we are making in some of our businesses within the SG&Aarena Jim had talked about restructuring and those kind of things. Some of theshort-term actually we are doing for the long-term investment opportunity --return opportunities.

Okay. Thanks.

Yes.

Your next question comes from Jairam Nathan of Banc ofAmerica. Please go ahead.

Thanks. Can you give us an update on your backlog, I thinkyou said $1.2 billion ’07 to ’09 at December of last year, can you update us tothat and also you mentioned, can you tell us how much of that hit '07?

I would just say that, we are not giving out various backlogwe have a series of business wins that we've achieved, but we have not beentracking backlog numbers. At one point in time, I believe that we may havecommented that there was at that time maybe two at that time, but that's notsomething that we provide regular guidance on.

Okay. And my next question is on the trailer business. Itlooks like you have a production estimate of 305,000 units in 2008, that kindof comes to like 25,000 a month and it looks like you are running much lowerthan that currently. So are you expecting like a big improvement there nextyear?

Yes, we are. When you look at it normally trailers andtrucks tends to go counter cyclical in some of this and the regionalexpectation, as we know there was a buy head in 2006 for trucks and probablyless trailers being bought that way. And obviously, it's kind of gone flat this year. So ourexpectation is, yes it will be going up this next year because there reallyhasn't been that investment therefore for last couple of years.

Okay. And on the Performance Plus plan, is the kind of, canyou -- is there focus more on commercial vehicles. Or is it just kind of, howshould we think about that within segments?

No, Jai it's cross the board. When you look at it, as wetalked in the past performance plus the six pillars with three pillars of costreduction and as an example a part o that on the manufacturing side as far asArvinMeritor production system, we are putting the lean process in all ourplants. I've been a plants recently in China and in Europe and herein United States and I can tell you that in all the facilities whether it'sLVS, CVS or it's here in North America, Europe or Asia Pacific we are puttingthe same processes in place that way. On the material optimization side or DMO is refer to it theactions are being done both in the LVS and CVS side to address that and thenobviously the overhead being that way. So the only one, I think is unique to one business unit orthe other is the sixth pillar if you will of Performance Plus which on therevenue side is commercial vehicle after market which obviously is specific toCVS but the others are across the board.

All right. Thank you.

Your next question comes from John Murphy of Merrill Lynch.Please go ahead.

Good morning, guys.

Good morning, John.

In your position having a high class problem of too muchvolume and if we think about your forecast for North America in 2008, you knowin 210 and 230 sounds like it's probably it might be, I mean a little bitoptimistic. I'm just wondering as we deviate from that forecast on thedown side and potentially maybe even optimistically on the upside. How do youthink your capacity right now in North America is set up to handle that? I meanclearly, you are looking at lean capacity going forward. But how far long areyou in that flexibility in North America specifically?

Yes. Well, first of all when I look at it, if I go back toone of the slide Jim had quarter-to-quarter, if you look at the first couple ofquarters I think we are very much in line with everybody else as far as what'shappening in the next couple of quarters. I think the real question, which Ithink is part of what you are getting to is where it is for Q3 and Q4. And as we've kind of indicated there's still a lot ofuncertainty there and I think we are, kind of right in the middle that way. Asyou look at the capacity things and we indicated that one of the investments wejust announced was in Monterrey, Mexico, which is adding to make sure that weare prepared again within our manufacturing footprint here in North America forthe rebound that we do expect in the latter part of next year and into 2009. So if you look at it short term the next couple of quarters,I think we are very much inline with everybody else that's out there on that. Ithink there's some question to ask, what's going to happen in Q3 and Q4 and Ishould mention that we internally continue to develop downsize scenarios to beprepared for any eventuality that may come out. And then in the meantime looking beyond that for the reboundthat is expected the capacity is being put in place and I think the bestindication of that is what we just announced in Monterrey, Mexico.

But, Jim you're comfortable with the first quarter at 45,000units and you feel like you can handle 50% more than that with that capacitywithout running into premium freight and overtime at this point?

I am confident with what's taking place in the firstquarter, yes.

Okay. And if we think about the Cadence of the $75 billionin cost saves in 2008, what is the Cadence of that? Is it back-end loaded or isit evenly smooth through the year?

It's smooth all the way through the year and as Jim I thinkindicated in his comment Cadence it's already been implemented but it'sthroughout the year.

Great. Thank you very much.

Okay. Thank you, John.

Your next question comes from Jonathan Steinmetz from MorganStanley. Please go ahead.

Right. Thanks, good morning everyone.

Good morning, Jonathan.

A couple questions, first, from a macro perspective on thecommercial vehicle side in North America are you seeing any increase in sort ofthe price reduction that your customers are asking for versus where we were acouple of years ago with the strong volumes? And this is an industry that has not been as notoriouslytough for those as the light vehicle side. Just wondering as a customer comesunder pressure have you any give -- give any of that back?

We have not seen any difference and what we have seen inyears past and I think the other thing is from our end and again part of theother I have seen a Performance Plus thing is, as we look at our product lineprofitability, I think we are much more databased on that. So, no, I am notseeing a change in that and I think we have the data now to have the discussionwith our customers.

Okay. At this point.

Okay. North America and in Europe.

Okay. I just want quick housekeeping. Jim, do you have theD&A by segment? I just want to try and get to an EBIT number by segment?

We have that, maybe after the call, maybe Terry or I couldgive you a follow-up.

Okay. I'd appreciate that. Thank you. That's all for today.

Thank you.

Your next question comes from Brett Hoselton of KeyBanc.Please go ahead.

Good morning, gentlemen.

Good morning Brett.

Let's see. I know that the program that you're running, thePerformance Plus program that you're running has a number of different steps. Iguess, I would call it, an idea generation, implementation, those types ofthings. I guess what I'm wondering is can you provide some sense of how you'reprogressing in each of those steps in terms of what you originally anticipatedversus what you are seeing, you are able to achieve at this point in time?

Yes. Brett, this is Chip. You're right. I mean, you look atthat we do have the different levels, we track that and we have a very rigorousprocess as part of our PMO or program management office to track that and as wehad indicated there has been hundreds, well more than 1,000 ideas that havebeen generated and we are now into the stages, now taking it forward to theexecution part of that into the business units. So as we look at that we will continue to generate ideas. Wehave groups that do that but the more important thing is implementing them andgetting them translated to the bottom line. If you look at the various entitiesas I said before we have three pillars of cost reductions, one is material, oneis manufacturing and one is overhead. If I look at in that order, manufacturing, I think Jim hadkind of walked you through some of the manufacturing restructuring that we havedone within that and the plant closures and that obviously is probably thelongest term one just because as you know to write size your manufacturingfootprint and to restructuring plants takes time and we are showing savingsfrom now up to 2012 on that. The ones that are within manufacturing will show moreimmediate results, which as I had indicated would envision even in Europe withthe leaning manufacturing side, I think that there is, we are already beginningto see some results on that on the lean side. So on the manufacturing side, lean, we are already startedto see improvement, the manufacturing restructuring again is probably thelonger term one. On the materials side as we've indicated, that is in process.A number of the items have already been implemented but that will continuethroughout this year and into next year and overhead kind of the same way.

And I apologize, I'm out of the office here so I am going toask you question that I guess I should know the answer to. But we providedguidance of $1.40 to $1.60 I think it was about a month ago or so, what wereyour Class 8 heavy truck production expectations in your fiscal year '08 atthat time?

We were on the range, Brett, of -- what we said at that timewas an earlier estimate was going to be adjusted downward and what we werelooking toward was the $2.35 to $2.55 for the calendar year. But for our fiscalyear that represents as I said earlier, about $220 or thereabouts.

So you only made, I guess, what would be considered -- itsounds like your Class 8 truck production forecast versus where you were amonth ago is basically in line with your expectations?

Yes. We are roughly in that same ballpark of where we wereon October 3rd.

Okay. Thank you so much, gentlemen.

Okay. Thanks Brett.

Your next question comes from Frank Jarman of Goldman Sachs.

Thanks guys. Just a couple of follow-up questions on thefree cash flow. You know pension and medical contributions net of expense wasnegative $71 million this year. For FY08 what should I think about that shakingout towards?

Because we are in much better position now on our pensions,we are now looking for a lower amount for 2008 and we would actually bethinking of it equal to or maybe even slightly lower than what the expenselevel would be for 2008.

Okay. And then in terms of the EBITDA guidance that you guysgave, the $385 to $405, does that include a certain amount from equity andearnings of affiliates?

Yes, it does.

Okay. How much, should I just sort of straight line what youdid in FY07 of about $34 million?

I would say plus or minus a little bit. We have several ofthe affiliates that are doing well and I actually think that there will beactually a little bit more income from the affiliates as we go towards nextyear, but I don't say that it would be a huge change. Also we have to take out the minority interest for ones thatare on a different line. So we have to kind of take both into account at thesame time.

Got it. Then…

But they are all doing quite well.

Yes. And then I guess just one other question on the freecash flow. You talked about our working capital should be a positive. You knowif I include that pension and medical and even if it's maybe a little bit of alower contribution and also this equity and earnings of affiliates, it lookslike working capitals going to have to be pretty positive to get you guys backto sort of free cash flow positive. Is that, means numbers, it looks like it's going to be atleast $100 million positive, is that a number that you're comfortable with?

From our perspective we are not looking at it to be thathigh a level. We are expecting some increases, some improvements as youconstantly work on working capital. But we are not up at the range of roughly$100. But we do expect some positive improvements. I would say maybe on theorder of one-third or half of that.

Okay. And then just last question I had is. It's on theincome statement. Yes, you guys did a good job of giving us a walk on theSG&A special items from a year ago to 4Q this year. On the income statement, I noticed you called out $14million of other items, which are product disruptions, supplierreorganizations, environmental remediation, severance and other, is there anyway you could just give me a little bit more color there in terms of flushingout that $14 million number?

I'm not sure I'm tracking with you on the 14. So I don'twant to respond to something I'm not quite sure of here.

Okay. It's in the total EBITDA before special items, $49million reconciliation to the income from continuing operations of $23 million-- negative $23 million. Yes, this other with the footnote.

We are looking for that page.

Towards the end of the press release.

Yes. Okay. I think I know which one you're referring to. It'sabout on the order of half of that is various tax stuff and on the order ofhalf of it was supplier bankruptcy stuff.

Okay. And what was on the first half. I'm sorry. Imisunderstood you.

You're asking about the $14 on the page there?

Yes.

Okay. That includes product disruption, supplierreorganizations, environmental remediation, severance and other and I'm sayingthat included in that is about, half of that had to do with supplierreorganizations and disruptions caused by that supplier reorganization and theother half of it came from the other items there.

Okay. Great. That's all I had. Thanks, guys.

All right. Thank you for everyone's questions. We've reachedthe top of the hour and we welcome your calls to follow-up. And this is the endof the call. You can disconnect at this time. Thank you.

Ladies and gentlemen, that does conclude our conference fortoday. For those of you wishing to review this conference, the replay facilitycan be access by dialing in the UK. For country code press 44-145-255-0000. For UK free call, please dial 0-800-953-1533. For UK localcall, please dial 0-845-245-5205. Free call US please dial 1-866-247-4222. Thereservation number for this conference is 20982262 followed by the hash key.Thank you for participating. You may now disconnect.