Good day ladies and gentlemen and welcome to the second quarter 2010 ArvinMeritor, Incorporated earnings conference call. My name is Francine and I am your operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question and answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. We would now like to turn the presentation over to your host for today’s call, Mr. Brett Penzkofer, Senior Director, Investor Relations. Please proceed, sir.

Thank you, Francine. Good morning everyone and welcome to the ArvinMeritor second quarter 2010 earnings call. On the call today, we have Chip McClure, our Chairman, CEO, and President; and Jay Craig, our CFO. The slides accompanying today's call are available at www.arvinmeritor.com. We'll refer to the slides in our discussion this morning. The content of this conference call which we are recording is the property of ArvinMeritor Incorporated. It's protected by US and international copyright law and may not be rebroadcast without the express written consent of ArvinMeritor. We consider your continued participation to be your consent to our recording. Our discussion may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Let me refer you to slide two for a more complete disclosure of the risks that could affect our results. To the extent we refer to any non-GAAP measures in our call, you will find the reconciliation to GAAP in the slides on our website. Now, I'd like to turn the call over to Chip.

Thank you, Brett and good morning everyone. Now let’s turn to slide three to review some of our second quarter results. We are very pleased with the strong earnings performance reported in the second quarter. We benefited from ongoing strengthening and emerging markets and a slight improvement in commercial vehicle volumes in Europe. We’re proud of the year-over-year improvements we made especially in EBITDA and free cash flow generation. Sales in the second quarter were up $245 million or 25% from the same period last year. We achieved $64 million in EBITDA in the second quarter, double our performance in the same period last year. Most importantly, we were able to continue our consistent conversion of those earnings to cash. We also saw improvements in our year-over-year adjusted income from continuing operations which was $15 million, up $26 million from last year. We are $0.18 per share from continuing operations in the second quarter which was significantly better than last year when we reported a $0.15 loss. I'm extremely pleased to report that we generated $45 million in free cash flow this quarter. This is up from an outflow of $138 million in the second quarter of 2009. This represents our fourth consecutive quarter positive cash performance which demonstrates that we’re establishing the necessary discipline in driving cash flow generation. Now let’s turn to slide four. Some of our year-over-year results, we also experienced sequential improvements this quarter across all of our key financial performance metrics. Sales in the second quarter were $1.2 billion, up $61 million or 5% compared to last quarter. We are beginning to see a good upward sales trend across all our markets. South America is booming, India is back, China is at record levels, North America is steady and Europe is beginning to turnaround. EBITDA…

Thanks, Chip. As Chip mentioned earlier, we are pleased with the strong financial results accomplished by our global team this quarter. Most importantly, we have become much more consistent in our conversion of earnings to cash which as been a major area of focus throughout the organization. Slide nine compares our fiscal second quarter results to the outlook we provided last quarter. Both sales and adjusted EBITDA exceeded our expectations. Our adjusted income from continuing operations was $15 million compared to the breakeven levels we reported last quarter. There were $12 million of favorable discreet tax items included in these results and I will speak to them in more detail on slide 11. But overall, the structural cost reduction actions we took last year continued to provide the expected operating leverage on increasing revenue. We achieved positive free cash flow before factoring and restructuring, a $66 million despite our $33 million of semi annual bond interest payments made during the quarter. Our free cash flow was significantly higher than we expected as we continued to focus on working capital management and we’re partially assisted by the timing of our fiscal talent. Turning to the income statement on slide 10, we are into $0.18 per share of adjusted income from continuing operations in this second quarter. As compared by $0.15 loss for the same period last year. This result excludes $13 million of debt extinguishment losses associated with the tender offer for $175 million of our eight and three quarter percent notes which we completed in March. Also excluded from our adjusted results for two gains, $6 million dollar gain on full payoff of a note receivable that related to our sale of the emissions technologies business in 2007 and an $8 million benefit associated with the reversal of specific tax…

Thanks, Jay. Before we open the call to your questions, I’d like to reiterate that we are hopeful that the rebound we are beginning to see in many of our markets is a start of a turn around for our industry. After spending 2009, reacting to the downturn and implementing some very tough cost reductions to get the results we needed to ensure our future, I believe we are now stronger than ever. Our accomplishments in the second quarter underscore the strength of our core business and demonstrated the initiatives would be implemented our working. We have cash flexibility to grow and are well positioned to take forward advantage of a global market as they rebound. As we look ahead we’ll continue to focus on our priorities we align to you in December and these include a continued focus on cost management. Complete the sale of our light vehicle business which we are looking towards finishing sometime this calendar year. Successful execution during the rebound in our global markets, drive innovation by accelerating new products and advance fuel efficient technologies. Maintain our focus on sustainable profitable growth and continue to strengthen our balance sheet. As the global markets recover and we leverage the strength of our worldwide operations, we are confident that our business will continue to deliver positive results. Thank you. Now lets open up for questions.

(Operator Instructions). Our first question comes from the line of Patrick Archambault of Goldman Sachs.

My main question was just on Europe. I was hoping you guys could dwell into sort of what is driving some of the pick up in activity over there. Is it really just the fact that we cut into capacity just too much last year or are you seeing sort of underlying signs of demand as well that are kind of layered on there?

Patrick this is Chip, I would say it’s probably more the former. If you look back when they did the reduction obviously they reduced inventory significantly to some of the season inventory build but more recently are again we are kind of bifurcated between Northern Europe and Southern Europe. We are seeing some strengthening in Northern Europe and obviously we are filing some of the activities going in Southern Europe. So I think initially it was probably more the inventory build and then some pick up in the market. Then I think the third part in that really is when you look at exports and a lot of the European truck manufacturers have a strong presence primarily in South America. So I would say probably the third part of that is export where they have primarily focus in South America.

And then just on the North America side, I don’t know if you commented on it at the very beginning of the call. Can you tell us what are you guys seeing in terms of freight activity? Obviously we had a very strong March and has that been sort of sustained into April as far as you can tell?

Yes, we are seeing, I would call it kind of a marginal increase in that so yeah I would say marginally improving but still seeing some incremental increase that way.

Our next question comes from the line of Himanshu Patel from JPMorgan.

First just on the aftermarket business it looks like revenues were up but sequentially there was not a lot of profit improvement. Were most of the add backs on temporary cost cuts concentrated at that unit?

No, actually the temporary add backs were pretty much kind of across the board, when you look at the year-over-year comparison I think probably the big difference is there was a large slug of MRAP orders back year ago in this quarter which is often referred to this you got kind of different time that kind of peaks up and it did peak up last year this time which we are not seeing the same benefit of that at this time. But the other part of your question the temporary increases were essentially across boards through our merit.

What about sequentially, Chip? The business saw some revenue grow sequentially as well but there wasn’t a whole lot of EBITDA growth sequentially?

The sales both in aftermarket and the trailer operations in that segment were up slightly sequentially from Q1 to Q2.

I would say on some of that Himanshu, some of that were actually as I kind of indicated when you look at sales in Europe I think that starting to come back in the aftermarket side. And again we are seeing at both because of the seasonality but also improvement here in North America.

And then on LVS division Chip, can you give just give us a little bit more color since the last time you spoke on the conference call. I have the discussions with number of potential buyers advanced anymore, have the number of buyers either expanded or potentially being narrowed down. And then maybe one another question for Craig what the pension deficit for the entire company, how much of that is allocated to LVS?

Let me go inside of LVS and then let Jay kind of talk on the pension and the transaction is continuously indicated before and we are trying to target a transaction, be completed by the close of the calendar year, this year. Books are out, initial bridge are coming in as we speak. I think there is still a great deal of interest out there for either body systems as a whole or in several pieces. So there is a great deal of interest from another potential buyers out there and as I think we said in the last couple of calls, we really got to a point that the cost deteriorate is really the minimum. So we want to make sure that our work is at the proper accordance but with the objective of achieving the best possible outcome for our shareholders, customers and employees. So, we continue to move along and there continuous to be interest out there for us.

And how much on the pension question, we don’t break out between what is in the truck, what’s allocated to the truck in the light vehicle operations but just to give some color, the majority of it would be associated with commercial vehicle. We do have some European plans that are directly applicable to the light vehicle operations. But the majority of the US application is associated with the truck operations.

And our next question comes from the line of David Leiker from Robert W Baird.

It’s actually Keith Schicker on the line for David. I was wondering, I think last quarter when we talked about the sequential outlook we gave, we discussed pretax income as well as unreasonable to expect that in an environment of flat revenue in adjusted EBITDA. We can do flat pretax income again sequentially?

I think that’s to be expected probably after pretax. The biggest change as I mentioned in reviewing the slide this just pretax items. So they are below the line items are not expected to repeat in the third quarter. So the after tax number will be then be down because of that.

Okay. And then can you just walk me through the rationale and the strategic basis for removing the production facility in China?

Yeah, actually because one is, for me the capacity; two is, it’s a little further in country a little bit more so obviously it gives us a better access to a number of other but both current and potential customers and; three, it gives us good access for future tactical people both on the manufacturing side and the engineering side.

Would you expect any temporary impact on financial results as you’re moving things, how does that going work from business perspective of your company, right now?

I don’t anticipate anything significant on that. I mean because we’re going to do this in a measured approach, we got people and the good news there is, we got the infrastructure in place that they can be people can move fairly easy that way. So, I do not anticipate a significant impact that way.

And our next question comes from the line of Brett Hoselton from KeyBanc.

Let’s say, going back to slide 11, Jay and I was hoping that you could and I apologize I got distracted at this point but can you talk a little bit about what items you do not anticipate occurring in the third quarter versus the second quarter?

Sure. On chart 11, that would be the third and fourth line from the top. So, the reversal of the valuation allowances and the lines label is other $8 million and $12 million respectively if we do not expect to recur.

Now in terms of contribution margins, 20% to 25%, we go sequentially forward, I know that you basically said we think we got a 25% contribution margin but we have some of these costs. As we look forward, is your expectation that you are hoping to convert at that 20% to 25% regardless of the additional or any additional cost rolling into the income statement or is there some other cost that you anticipate kind of coming online?

As I mentioned in the presentation, we think we’ve reached the full run rate on the temporary cost reductions. We should not see any incremental amount coming in, in the future quarters. Now if you recall we did have a place for holder back in the December conference for some additional incremental investments. So, we may see some of that in the future as we go forward but I don’t think that should have a significant impact.

And then finally commodities cost steel price is seeing some up tick here. What are your thoughts on the impact of commodities going forward? Do you see that’s being a significant headwind, do you see that is something it’s manageable, something you can pass on to your customers. What’s your outlook for commodity cost?

We surely believe that’s manageable and if we do expect the rapid increases that are being seen in iron ore and scrap metal, it will have some impact on us but just a slight impact and that’s just related to the like effect in terms of us receiving those higher price goods and then passing along those higher prices through our contractual agreements with our end customers.

Our next question comes from the line of Brian Johnson from Barclays Capital.

I want to turn to a more strategic topic. Can you give us maybe Chip a summary of the competitive position in some of the more attractive faster growing markets particularly China, India and South America. Both as it relates to the current axle competitors on the light commercial vehicle side entrance coming over from the light vehicle side American axle meant met some initiatives on its call and then just the general attitude of the OEMs towards in-sourcing versus outsourcing as they are looking at a rebalance and continued growth in some of these markets?

Let me start in Brazil and we did recently just announced additional investment to support MAN down there in a plant Resende which to me is kind of fact to one of your earlier questions asked about the increase in Europe. I think it’s a great indication of this type between European OEMs and the markets in South America; we want three suppliers that are going to the new supplier part that they are setting up there. So as I look at that I think we are very well positioned and the important thing is in all three of these markets I will talk about Brazil and in China; we’ve been in these markets grow long period of time and I mean a matter of decades not just a couple of years. So I think that does position us well and clearly between our wholly owned facility down in Brazil and our joint venture is down there. We are very well positioned and the great deal of that business is outsourced and we are major producer on that both on the axle side which is in our wholly owned facility and then suspensions and brakes which are in our joint ventures with the Randon group down there. So we are well positioned there and I think the best indication that’s the most recent announcement on what we are able to do support MAN and down in the plant Resende. If I go to China, our real strength there is in the off-highway side and if you look at that in off-highway we’ve had a very successful operations in Xuzhou with XCMG who is a very significant off-highway producer of equipment over there and that’s been a very successful joint venture and we have mentioned the fact that I think back…

Ladies and gentlemen that concludes Q&A portion of our presentation. I would now like to turn the call back over to Brett Penzkofer

Thank you very much for your time this morning. If you have any further questions, please feel free to contact myself or your communications contact. Thank you.

Ladies and gentlemen, we thank you for you participation in today’s conference. This concludes our presentation, you may now disconnect. Have a great day.