Estimates Asbestos Related Liabilities at US$71 Million ------------------------------------------------------- Published November 01, 2002 ArvinMeritor had accrued approximately $71 million for contingent asbestos-related liabilities, and recorded assets of $60 million for probable recoveries from third parties and insurance as of September 30, 2001. Various other lawsuits, claims and proceedings have been or may be instituted or asserted against ArvinMeritor or its subsidiaries relating to the conduct of its business, including those pertaining to product liability, intellectual property, environmental, safety and health, and employment matters. Included in these matters are claims for alleged asbestos-related personal injuries, which arose from products manufactured prior to 1977 by a subsidiary acquired by Arvin in 1986. During fiscal years 1996 through 2001, ArvinMeritor and its predecessors paid asbestos-related claims of approximately $40 million, substantially all of which were reimbursed by insurance. Prior to February 1, 2001, the Center for Claims Resolution handled the processing and settlement of asbestos claims on its behalf, and it shared in the payment of defense costs and settlements of the asbestos claims with other CCR members. Several members of the CCR have filed for bankruptcy protection, and these members have failed, or may fail, to pay certain financial obligations with respect to settlements that were reached while they were CCR members. The Company expects to be subject to claims for payment of a portion of the defaulted shares and an estimate of this payment has been included in the recorded reserves. Arvin and its insurers are engaged in proceedings to determine whether existing insurance coverage should reimburse any potential liability related to this issue. The outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to ArvinMeritor and for amounts in excess of the foregoing estimates. However, based on management's evaluation of matters which are pending or asserted, after consulting with Vernon G. Baker, II Esq., ArvinMeritor's General Counsel, the Company believes the disposition of such matters will not have a material adverse effect on its financial statements. Maremont Corporation, a subsidiary of the company, and many other companies are defendants in suits brought by individuals claiming personal injuries as a result of exposure to asbestos-containing products. Maremont manufactured friction products containing asbestos from 1953 through 1977, when it sold its friction product business. Arvin acquired Maremont in 1986. During fiscal years 1996 through 2001, Maremont paid approximately $40 million to address asbestos-related claims, substantially all of which were reimbursed by insurance. The unbilled committed settlements reserve relates to committed settlements that Maremont agreed to pay when Maremont participated in the Center for Claims Resolution. Maremont shared in the payments of defense and indemnity costs of asbestos-related claims with other CCR members. The CCR handled the resolution and processing of asbestos claims on behalf of its members until February 1, 2001, when it was reorganized and discontinued negotiating shared settlements. Since that time, Maremont has hired its own litigation counsel and is committed to examining the merits of each asbestos-related claim. In addition, Maremont now utilizes Peterson Asbestos Claims Enterprise for claims processing and insurance invoicing. Maremont had approximately 34,700 and 27,500 pending asbestos-related claims at June 30, 2002 and September 30, 2001, respectively. Although Maremont has been named in these cases, in the cases where actual injury has been alleged, very few claimants have established that a Maremont product caused their injuries. For purposes of establishing reserves for pending asbestos-related claims, Maremont estimates its defense costs and indemnity based on the history and nature of filed claims to date and Maremont's experience since February 1, 2001. Several former members of the CCR have filed for bankruptcy protection, and these members have failed, or may fail, to pay certain financial obligations with respect to settlements that were reached while they were CCR members. Maremont is subject to claims for payment of a portion of these defaulted member shares. In an effort to resolve the affected settlements, Maremont has entered into negotiations with plaintiffs' attorneys, and an estimate of Maremont's obligation for the shortfall is included in the total asbestos-related reserves. In addition, Maremont and its insurers are engaged in legal proceedings to determine whether existing insurance coverage should reimburse any potential liability related to this issue. Maremont has insurance that reimburses a substantial portion of the costs incurred defending against asbestos-related claims. The coverage also reimburses Maremont for any indemnity paid on those claims. The coverage is provided by several insurance carriers based on the insurance agreements in place. Based on its assessment of the history and nature of filed claims to date, and of Maremont's insurance carriers, management believes that existing insurance coverage is adequate to cover substantially all costs relating to pending and future asbestos-related claims. The amounts recorded for the asbestos-related reserves and recoveries from insurance companies are based upon assumptions and estimates derived from currently known facts. All such estimates of liabilities for asbestos-related claims are subject to considerable uncertainty because such liabilities are influenced by variables that are difficult to predict. If the assumptions with respect to the nature of pending claims, the cost to resolve claims and the amount of available insurance prove to be incorrect, the actual amount of Maremont's liability for asbestos-related claims, and the effect on the company, could differ materially from current estimates. Maremont has not accrued reserves for unknown claims that may be asserted against it in the future. Maremont does not have sufficient information to make a reasonable estimate of its potential liability for asbestos-related claims that may be asserted against Maremont in the future. Various other lawsuits, claims and proceedings have been or may be instituted or asserted against the company, relating to the conduct of its business, including those pertaining to product liability, intellectual property, safety and health, and employment matters. Although the outcome of litigation cannot be predicted with certainty, and some lawsuits, claims or proceedings may be disposed of unfavorably to the company, management believes the disposition of matters that are pending will not have a material adverse effect on the company's business, financial condition or results of operations. COMPANY PROFILE ArvinMeritor, Inc. (NYSE: ARM) 2135 W. Maple Rd. Troy, MI 48084-7186 Phone: 248-435-1000 Fax: 248-435-1393 http://www.arvinmeritor.com Employees : 33,000 Revenues : $ 6,805,000,000.00 Net Income : $ 35,000,000.00 Assets : $ 4,362,000,000.00 Liabilities : $ 3,711,000,000.00 Asbestos Assets : $ 60,000,000.00 Asbestos Liabilities : $ 71,000,000.00 As of September 30, 2001 Description: Formerly Meritor Automotive, ArvinMeritor was formed when Meritor acquired Arvin Industries. The company makes components for commercial vehicles (axles, brakes, transmissions, and clutches) as well as for light vehicles (door, roof, exhaust, and suspension systems). ArvinMeritor also offers light vehicle aftermarket products such as mufflers, filters (Purolator), and shock absorbers (Gabriel). The company sells private-label aftermarket parts through retailers such as Pep Boys. DaimlerChrysler (and its Freightliner heavy truck subsidiary) accounts for about 15% of sales.