ArvinMeritor: Last Roll of the Dice?

What are we to make of the news that ArvinMeritor has sold its Emissions Technologies Group to a bunch called One Equity Partners?

The company is best known – in truck terms – for its axle business. In Europe, it supplies both Iveco and Volvo, but, in recent times, it has been seen as being in the vanguard of emissions control technologies, with its ActiveClean plasma fuel reformer.This device separates or "reforms" diesel fuel drawn from the vehicle's fuel tank into hydrogen and carbon monoxide using electrically generated plasma. The hydrogen and carbon monoxide then are injected into the exhaust upstream of the catalytic elements in the emissions control after treatment system to reduce particulate matter and nitrous oxides (NOx). The mixture is used in conjunction with lean NOx trap catalysts to reduce NOx emissions, and, because the reformed hydrogen/carbon monoxide combination is more efficient, the system requires 50 percent less diesel fuel than equivalent NOx trap systems.I don’t pretend to understand a word of this, but the fact is that such technology seems to have a shelf life, and is mooted as being a big deal for EPA 10. So why get rid?Arguably, knocking out truck axles is a commodity business, and, as the OEMs get bigger and more vertical, then so it makes sense for them to take such work in house. ArvinMeritor has already been smacked around by Freightliner’s preference for its home grown axle, and it seems safe to assume that Volvo has also done some sums in terms of taking its Lindesberg-based operation back in house. So why is ArvinMeritor selling up? We assume that the ActiveClean business is included within this deal, meaning that AM is left with what looks to be a set of low-tech operations. A few of its OEM customers might well be forgiven for feeling a touch miffed as well.This all sounds rather like a money thing. It is difficult to believe that AM would have sold up – and, at $310 million, sold up on the cheap – unless it had to. There have been one or two rumours doing the rounds as far as the future of the Heavy Vehicle Systems business is concerned – think interest from India – and so we’re going to assume that the Chip McClure and co are beginning to feel the pinch. The trouble is, now that it has sold what is - in HVS Terms - arguably its biggest single potential asset, what remains of ArvinMeritor looks to be very ordinary indeed. Of course, it is entirely possible that, with the whole being less than the sum of the parts, this divestment is a precursor to the sale of the entire HVS business. ArvinMeritor's level of exposure to the NAFTA truck market is horrible, and it seems to be attempting to mitigate this by bumping up its aftermarket and Asian activities. But the sorry truth is that, as the truck business globalises, then so the role of the Tier 1 supplier is marginalised. Has ArvinMeritor reached a tipping point? Looks to be very near.