10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2019

☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File No. 1-15983

MERITOR, INC.

(Exact name of registrant as specified in its charter)

Indiana			38-3354643
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
2135 West Maple Road,	Troy,	Michigan	48084-7186
(Address of principal executive offices)			(Zip Code)

(248) 435-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1 Par Value	MTOR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Registration S-T during the preceding twelve months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒		Accelerated Filer	☐
Non-accelerated Filer	☐	(Do not check if a smaller reporting company)	Smaller Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

82,579,930 shares of Common Stock, $1.00 par value, of Meritor, Inc. were outstanding on July 30, 2019.

INDEX

			Page No.
PART I.	FINANCIAL INFORMATION:
	Item 1.	Financial Statements:
		Condensed Consolidated Statement of Operations - - Three and Nine Months Ended June 30, 2019 and 2018	3
		Condensed Consolidated Statement Of Comprehensive Income - - Three and Nine Months Ended June 30, 2019 and 2018	4
		Condensed Consolidated Balance Sheet - - June 30, 2019 and September 30, 2018	5
		Condensed Consolidated Statement of Cash Flows - -Nine Months Ended June 30, 2019 and 2018	6
		Condensed Consolidated Statement of Equity - - Three and Nine Months Ended June 30, 2019 and 2018	7
		Notes to Condensed Consolidated Financial Statements	9
	Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	52
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	72
	Item 4.	Controls and Procedures	74
PART II.	OTHER INFORMATION:
	Item 1.	Legal Proceedings	75
	Item 1A.	Risk Factors	75
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75
	Item 5.	Other Information	76
	Item 6.	Exhibits	78
Signatures			79

2

MERITOR, INC.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(in millions, except per share amounts)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2019			2018			2019			2018
	(Unaudited)
Sales	$	1,166		$	1,129		$	3,360		$	3,098
Cost of sales	(987		)	(959		)	(2,866		)	(2,625		)
GROSS MARGIN	179			170			494			473
Selling, general and administrative	(73		)	(76		)	(180		)	(218		)
Restructuring	1			(3		)	2			(6		)
Other operating expense, net	(3		)	—			(3		)	(12		)
OPERATING INCOME	104			91			313			237
Other income, net	10			9			30			24
Equity in earnings of affiliates	9			9			24			20
Interest expense, net	(14		)	(14		)	(43		)	(54		)
INCOME BEFORE INCOME TAXES	109			95			324			227
Provision for income taxes	(21		)	(26		)	(69		)	(131		)
INCOME FROM CONTINUING OPERATIONS	88			69			255			96
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax	1			(2		)	—			(3		)
NET INCOME	89			67			255			93
Less: Net income attributable to noncontrolling interests	(3		)	(3		)	(7		)	(8		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	86		$	64		$	248		$	85
NET INCOME (LOSS) ATTRIBUTABLE TO MERITOR, INC.
Net income from continuing operations	$	85		$	66		$	248		$	88
Income (Loss) from discontinued operations	1			(2		)	—			(3		)
Net income	$	86		$	64		$	248		$	85
BASIC EARNINGS (LOSS) PER SHARE
Continuing operations	$	1.02		$	0.76		$	2.96		$	1.00
Discontinued operations	0.01			(0.02		)	—			(0.03		)
Basic earnings per share	$	1.03		$	0.74		$	2.96		$	0.97
DILUTED EARNINGS (LOSS) PER SHARE
Continuing operations	$	0.99		$	0.73		$	2.86		$	0.96
Discontinued operations	0.01			(0.02		)	—			(0.03		)
Diluted earnings per share	$	1.00		$	0.71		$	2.86		$	0.93
Basic average common shares outstanding	83.0			87.2			83.7			88.1
Diluted average common shares outstanding	85.6			89.8			86.6			91.2

See Notes to Condensed Consolidated Financial Statements. Prior periods have been recast, see Note 20.

3

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in millions)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2019			2018			2019			2018
	(Unaudited)
Net income	$	89		$	67		$	255		$	93
Other comprehensive income (loss):
Foreign currency translation adjustments:
Attributable to Meritor, Inc.	(6		)	(52		)	(3		)	(46		)
Attributable to noncontrolling interest	(1		)	(2		)	—			(1		)
Pension and other postretirement benefit related adjustments	1			3			2			9
Unrealized gain (loss) on cash flow hedges	(2		)	1			(2		)	4
Other comprehensive loss, net of tax	(8		)	(50		)	(3		)	(34		)
Total comprehensive income	81			17			252			59
Less: Comprehensive income attributable to noncontrolling interest	(2		)	(1		)	(7		)	(7		)
Comprehensive income attributable to Meritor, Inc.	$	79		$	16		$	245		$	52

See Notes to Condensed Consolidated Financial Statements.

4

MERITOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions)

	June 30, 2019			September 30, 2018
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	111		$	115
Receivables, trade and other, net	625			588
Inventories	491			477
Other current assets	32			46
TOTAL CURRENT ASSETS	1,259			1,226
NET PROPERTY	481			483
GOODWILL	421			421
OTHER ASSETS	567			596
TOTAL ASSETS	$	2,728		$	2,726
LIABILITIES, MEZZANINE EQUITY AND EQUITY
CURRENT LIABILITIES:
Short-term debt	$	24		$	94
Accounts and notes payable	691			700
Other current liabilities	296			290
TOTAL CURRENT LIABILITIES	1,011			1,084
LONG-TERM DEBT	734			730
RETIREMENT BENEFITS	238			262
OTHER LIABILITIES	234			332
TOTAL LIABILITIES	2,217			2,408
COMMITMENTS AND CONTINGENCIES (See Note 21)
MEZZANINE EQUITY:
Convertible debt with cash settlement	1			1
EQUITY:
Common stock (June 30, 2019 and September 30, 2018, 103.9 and 102.2 shares issued and 82.6 and 84.9 shares outstanding, respectively)	104			102
Additional paid-in capital	798			787
Retained earnings	448			200
Treasury stock, at cost (June 30, 2019 and September 30, 2018, 21.4 and 17.3 shares, respectively)	(307		)	(236		)
Accumulated other comprehensive loss	(569		)	(566		)
Total equity attributable to Meritor, Inc.	474			287
Noncontrolling interests	36			30
TOTAL EQUITY	510			317
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY	$	2,728		$	2,726

See Notes to Condensed Consolidated Financial Statements.

5

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)

	Nine Months Ended June 30,
	2019			2018
	(Unaudited)
OPERATING ACTIVITIES
CASH PROVIDED BY OPERATING ACTIVITIES (See Note 11)	$	194		$	191
INVESTING ACTIVITIES
Capital expenditures	(63		)	(52		)
Proceeds from sale of equity method investment	—			250
Cash paid for acquisition of AA Gear & Manufacturing, Inc.	—			(36		)
Cash paid for investment in Transportation Power, Inc.	(6		)	(6		)
Proceeds from sale of a business	—			4
Proceeds from sale of assets	—			2
Proceeds from settlement of cross-currency swaps	17			—
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	(52		)	162
FINANCING ACTIVITIES
Borrowings and securitization	(46		)	(89		)
Redemption of notes	(24		)	(181		)
Deferred issuance costs	(4		)	—
Other financing activities	(2		)	(3		)
Net change in debt	(76		)	(273		)
Repurchase of common stock	(71		)	(63		)
CASH USED FOR FINANCING ACTIVITIES	(147		)	(336		)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1			(5		)
CHANGE IN CASH AND CASH EQUIVALENTS	(4		)	12
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	115			88
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	111		$	100

See Notes to Condensed Consolidated Financial Statements.

6

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(in millions)

(Unaudited)

	Three months ended June 30, 2019
	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Equity Attributable to Meritor, Inc.			Noncontrolling Interests		Total
Beginning Balance at March 31, 2019	$	104	$	793	$	362	$	(286	)	$	(562	)	$	411		$	34	$	445
Comprehensive income	—		—		86		—			(7		)	79			2		81
Equity based compensation expense	—		5		—		—			—			5			—		5
Repurchase of common stock	—		—		—		(21		)	—			(21		)	—		(21		)
Ending Balance at June 30, 2019	$	104	$	798	$	448	$	(307	)	$	(569	)	$	474		$	36	$	510
	Three months ended June 30, 2018
	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Equity Attributable to Meritor, Inc.			Noncontrolling Interests		Total
Beginning Balance at March 31, 2018	$	102	$	775	$	104	$	(169	)	$	(530	)	$	282		$	30	$	312
Comprehensive income (loss)	—		—		64		—			(48		)	16			1		17
Equity based compensation expense	—		4		—		—			—			4			—		4
Repurchase of common stock	—		—		—		(30		)	—			(30		)	—		(30		)
Ending Balance at June 30, 2018	$	102	$	779	$	168	$	(199	)	$	(578	)	$	272		$	31	$	303

7

MERITOR, INC.

	Nine months ended June 30, 2019
	Common Stock		Additional Paid-in Capital			Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Equity Attributable to Meritor, Inc.			Noncontrolling Interests			Total
Beginning Balance at September 30, 2018	$	102	$	787		$	200	$	(236	)	$	(566	)	$	287		$	30		$	317
Comprehensive income	—		—			248		—			(3		)	245			7			252
Equity based compensation expense	—		13			—		—			—			13			—			13
Vesting of equity based awards	2		(2		)	—		—			—			—			—			—
Repurchase of common stock	—		—			—		(71		)	—			(71		)	—			(71		)
Noncontrolling interest dividend	—		—			—		—			—			—			(1		)	(1		)
Ending Balance at June 30, 2019	$	104	$	798		$	448	$	(307	)	$	(569	)	$	474		$	36		$	510
	Nine months ended June 30, 2018
	Common Stock		Additional Paid-in Capital			Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Equity Attributable to Meritor, Inc.			Noncontrolling Interests			Total
Beginning Balance at October 1, 2017	$	101	$	765		$	83	$	(136	)	$	(545	)	$	268		$	27		$	295
Comprehensive income (loss)	—		—			85		—			(33		)	52			7			59
Equity based compensation expense	—		14			—		—			—			14			—			14
Vesting of equity based awards	1		(1		)	—		—			—			—			—			—
Repurchase of common stock	—		—			—		(63		)	—			(63		)	—			(63		)
Noncontrolling interest dividends	—		—			—		—			—			—			(1		)	(1		)
Other equity adjustments	—		1			—		—			—			1			(2		)	(1		)
Ending Balance at June 30, 2018	$	102	$	779		$	168	$	(199	)	$	(578	)	$	272		$	31		$	303

See Notes to Condensed Consolidated Financial Statements.

8

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

Meritor, Inc. (the "company" or "Meritor"), headquartered in Troy, Michigan, is a premier global supplier of a broad range of integrated systems, modules and components to original equipment manufacturers ("OEMs") and the aftermarket for the commercial vehicle, transportation and industrial sectors. The company serves commercial truck, trailer, military, bus and coach, construction and other industrial OEMs and certain aftermarkets. The Condensed Consolidated Financial Statements are those of the company and its consolidated subsidiaries.

Certain businesses are reported in discontinued operations in the Condensed Consolidated Statement of Operations, Condensed Consolidated Statement of Cash Flows and related notes for all periods presented. Additional information regarding discontinued operations is discussed in Note 5.

In the opinion of the company, the unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting solely of adjustments of a normal, recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. These statements should be read in conjunction with the company’s audited consolidated financial statements and notes thereto included in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018. The Condensed Consolidated Balance Sheet data as of September 30, 2018 was derived from audited financial statements but does not include all annual disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the three and nine months ended June 30, 2019 are not necessarily indicative of the results for the full year.

The company’s fiscal year ends on the Sunday nearest September 30, and its fiscal quarters generally end on the Sundays nearest December 31, March 31 and June 30. The third quarter of fiscal years 2019 and 2018 ended on June 30, 2019 and July 1, 2018, respectively. All year and quarter references relate to the company’s fiscal year and fiscal quarters, unless otherwise stated. For ease of presentation, September 30 and June 30 are used consistently throughout this report to represent the fiscal year end and third fiscal quarter end, respectively.

2. Earnings per Share

Basic earnings (loss) per share is calculated using the weighted average number of shares outstanding during each period. The diluted earnings (loss) per share calculation includes the impact of dilutive common stock options, restricted shares, restricted share units, performance share unit awards and convertible securities, if applicable.

A reconciliation of basic average common shares outstanding to diluted average common shares outstanding is as follows (in millions):

	Three Months Ended June 30,		Nine Months Ended June 30,
	2019	2018	2019	2018
Basic average common shares outstanding	83.0	87.2	83.7	88.1
Impact of restricted shares, restricted share units and performance share units	1.7	1.7	2.1	2.1
Impact of convertible notes	0.9	0.9	0.8	1.0
Diluted average common shares outstanding	85.6	89.8	86.6	91.2

In November 2018, the Board of Directors approved a grant of performance share units to all executives eligible to participate in the long-term incentive plan. Each performance share unit represents the right to receive one share of common stock or its cash equivalent upon achievement of certain performance and time vesting criteria. The fair value of each performance share unit was $16.50, which was the company’s share price on the grant date of December 1, 2018. The Board of Directors also approved a grant of 0.4 million restricted share units to these executives. The restricted share units vest at the earlier of three years from the date of grant or upon termination of employment with the company under certain circumstances. The fair value of each restricted share unit was $16.50, which was the company's share price on the grant date of December 1, 2018.

The actual number of performance share units that will vest depends upon the company’s performance relative to the established performance metrics for the three-year performance period of October 1, 2018 to September 30, 2021, measured at the end of the performance period. The number of performance share units that vest will depend on adjusted EBITDA margin and adjusted diluted earnings per share from continuing operations at the following weights: 50% associated with achieving an adjusted EBITDA

9

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

margin target and 50% associated with achieving an adjusted diluted earnings per share from continuing operations target. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.5 million performance share units.

In November 2015, the Board of Directors approved a grant of performance share units to all executives eligible to participate in the long-term incentive plan. Each performance share unit represents the right to receive one share of common stock or its cash equivalent upon achievement of certain performance and time vesting criteria. The fair value of each performance share unit was $10.51, which was the company’s share price on the grant date of December 1, 2015. The Board of Directors also approved a grant of 0.5 million restricted share units to these executives. The restricted share units vest at the earlier of three years from the date of grant or upon termination of employment with the company under certain circumstances. The fair value of each restricted share unit was $10.51, which was the company's share price on the grant date of December 1, 2015.

The actual number of performance share units that vested depended upon the company’s performance relative to the established performance metrics for the three-year performance period of October 1, 2015 to September 30, 2018, which was measured at the end of the performance period.

For the three and nine months ended June 30, 2019, the dilutive impact of previously issued restricted shares, restricted share units and performance share units was 1.7 million and 2.1 million shares, respectively. For the three and nine months ended June 30, 2018, the dilutive impact of previously issued restricted shares, restricted share units and performance share units was 1.7 million and 2.1 million shares, respectively. For the three and nine months ended June 30, 2019, compensation cost related to restricted shares, restricted share units and performance share units was $5 million and $13 million, respectively. For the three and nine months ended June 30, 2018, compensation cost related to restricted shares, restricted share units and performance share units was $4 million and $14 million, respectively.

For the three and nine months ended June 30, 2019, 0.9 million and 0.8 million shares, respectively, were included in the computation of diluted earnings per share, as the company's average stock price during these periods exceeded the conversion price for the 7.875 percent convertible notes due 2026. For the three and nine months ended June 30, 2018, 0.9 million and 1.0 million shares, respectively, were included in the computation of diluted earnings per share, as the company's average stock price during these periods exceeded the conversion price for the 7.875 percent convertible notes due 2026.

3. New Accounting Standards

Accounting standards implemented during fiscal year 2019

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, followed by various related amendments (ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, ASU 2016-20, ASU 2017-05, ASU 2017-06, ASU 2017-13, and ASU 2017-14) collectively referred to as "Topic 606", which requires companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service and requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The company adopted Topic 606 in the first quarter of the fiscal year beginning October 1, 2018. As a result, the company has changed its accounting policy for revenue recognition as detailed below.

The company applied Topic 606 using the modified retrospective approach (i.e., by recognizing the cumulative effect of initially applying Topic 606 as an adjustment to the opening balance of equity at October 1, 2018). Therefore, the comparative information has not been adjusted and continues to be reported under Topic 605. There was no adjustment to the opening balance of equity at October 1, 2018 as there was no significant impact to previously recorded revenue or expense. The guidance has been applied to all existing contracts at the date of initial application. The adoption of Topic 606 had an immaterial impact on our Condensed Consolidated Balance Sheet, Condensed Consolidated Statement of Operations, and Condensed Consolidated Statement of Cash Flows but did require enhanced disclosures to meet the new disclosure requirements; those enhanced disclosures are included in Note 4.

In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The guidance requires entities to only include the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses (together with other employee compensation costs). The other components of net benefit cost, including amortization of prior service cost/credit, are to be included in a separate line item(s) outside of any sub-total of operating income. ASU 2017-07 also provides guidance that only the service cost component of net benefit cost is eligible for capitalization. The revisions in this amendment

10

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

are to be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. The company adopted this standard in the first quarter of fiscal year 2019. Amounts previously reflected in Operating Income were reclassified to Other income (expense) in accordance with the provisions of ASU 2017-07. Refer to Note 20 for amounts that were reclassified.

In July 2018, the FASB issued ASU 2018-09, Codification Improvements. The amendments in this ASU result from the FASB’s standing project to address suggestions on the Accounting Standards Codification ("ASC") and to make other incremental improvements to GAAP. The amendments include changes to clarify the ASC or correct unintended application of guidance that is not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities.

Some of the amendments in this ASU were effective upon issuance. Others have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities, or are conforming amendments that have been made to recently issued guidance that is not yet effective that may require application of the transition and effective date guidance in the original ASU.

The company adopted certain amendments in this ASU in the first quarter of fiscal year 2019. Those certain amendments had effective dates for annual periods beginning after December 15, 2017, for public business entities. The amendments that were adopted in the first quarter of fiscal year 2019 did not have a material impact on the company's Condensed Consolidated Financial Statements. The company plans to implement the remaining amendments beginning October 1, 2019 and is currently evaluating the potential impact on its Condensed Consolidated Financial Statements.

The company also adopted the following ASUs during fiscal year 2019, none of which had a material impact on the Condensed Consolidated Financial Statements or financial statement disclosures:

ASU		Effective Date
2016-01	Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities	October 1, 2018
2016-15	Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)	October 1, 2018
2016-16	Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory	October 1, 2018
2016-18	Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)	October 1, 2018
2017-01	Business Combinations (Topic 805): Clarifying the Definition of a Business	October 1, 2018
2017-09	Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting	October 1, 2018
2017-10	Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services (a consensus of the FASB Emerging Issues Task Force)	October 1, 2018
2018-03	Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities	October 1, 2018
2018-04	Investments—Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273 (SEC Update)	October 1, 2018
2018-08	Not-For-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made	October 1, 2018

Accounting standards to be implemented

The following represent the standards that may result in a significant change in practice and/or have a significant financial impact on the company.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The update will require lessees to recognize a right-of-use asset and lease liability for substantially all leases. The standard is required to be adopted by public business entities in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted.

11

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2019, and is currently assessing the potential impact of this guidance on its accounting policies and its Condensed Consolidated Financial Statements. The company plans to implement this standard using the additional and optional transition method as provided by ASU 2018-11. Please see discussion of ASU 2018-11 below.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments, including accounts receivable. The ASU also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The amendments in this update are required to be adopted by public business entities in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The company is currently evaluating the potential impact of this guidance on its accounting policies and its Condensed Consolidated Financial Statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220). The guidance in ASU 2018-02 allows an entity to elect to reclassify the stranded tax effects related to the Tax Cuts and Jobs Act of 2017 ("U.S. tax reform") from accumulated other comprehensive income into retained earnings. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The company is currently evaluating the potential impact of this new guidance on its Condensed Consolidated Financial Statements.

In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842. The amendments in this ASU affect narrow aspects of the guidance issued in ASU 2016-02, Leases (Topic 842), which is not yet effective. The effective date and transition requirements for this ASU are the same as those for ASU 2016-02 as described above. Therefore, the company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2019 in connection with its planned implementation of ASU 2016-02 and is currently assessing the potential impact of this new guidance on its accounting policies and its Condensed Consolidated Financial Statements.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. The amendments in this ASU affect the guidance issued in ASU 2016-02, Leases (Topic 842), which is not yet effective. The amendments provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The amendments also provide lessors with a practical expedient to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component in certain circumstances. The effective date for this ASU are the same as those for ASU 2016-02 as described above. Therefore, the company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2019 in connection with its planned implementation of ASU 2016-02 and is currently assessing the potential impact of this new guidance on its accounting policies and its Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU add, modify, and eliminate certain disclosure requirements on fair value measurements in Topic 820. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Certain amendments should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. Others should be applied retrospectively. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The company is currently evaluating the potential impact of this new guidance on its Condensed Consolidated Financial Statements.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The amendments in this ASU affect a variety of Topics in the Codification (ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities; ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments; and ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities).

For the amendments in this ASU that are applicable to ASU 2016-01, which Meritor has adopted, the effective date is the first quarter of fiscal year 2021 with early adoption permitted. For the amendments in this ASU that are applicable to ASU 2016-13, which Meritor has not yet adopted, the effective date is the first quarter of fiscal year 2021. For the amendments in this ASU that

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(Unaudited)

are applicable to ASU 2017-12, which Meritor has adopted, the effective date is the first quarter of fiscal year 2020 with early adoption permitted. The company has not yet adopted any of these amendments and is currently evaluating the potential impact of this new guidance on its Condensed Consolidated Financial Statements.

4. Revenue

Revenue is measured based on the consideration to which the company expects to be entitled, and is presented net of any estimates of customer sales allowances, incentives, rebates, and returns. The company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the company from a customer, are excluded from revenue.

Shipping and handling costs associated with outbound freight after control of a product has transferred to a customer are accounted for as a fulfillment cost, as opposed to a distinct performance obligation, and are included in cost of sales.

Nature of goods and services

The following is a description of principal activities - separated by reportable segments - from which the company generates its revenue.

The Commercial Truck segment supplies drivetrain systems and components, including axles, drivelines and braking and suspension systems, primarily for medium- and heavy-duty trucks and other applications in North America, South America, Europe and Asia Pacific. This segment also includes the company's aftermarket businesses in Asia Pacific and South America.

The Aftermarket, Industrial and Trailer segment supplies axles, brakes, drivelines, suspension parts and other replacement parts to commercial vehicle and industrial aftermarket customers, primarily in North America and Europe. In addition, this segment supplies drivetrain systems and certain components, including axles, drivelines, brakes and suspension systems for military, construction, bus and coach, fire and emergency and other applications in North America and Europe. It also supplies a variety of undercarriage products and systems for trailer applications in North America.

Although the company may enter into long-term supply arrangements with its major customers, the prices and volumes are not fixed over the term of the arrangements and a contract does not exist under the scope of Topic 606 until prices and volumes are known. As such, individual customer releases or purchase orders represent the contract with the customer.

The company accounts for individual products and services separately if they are distinct (i.e., if a product or service is separately identifiable from other items and if a customer can benefit from it on its own or with other resources that are readily available to the customer). The company has identified certain performance obligations related to brake pad fitting and axle dressing where it is acting as an agent and, therefore, recognizes revenue on a net basis for satisfaction of those performance obligations.

The company recognizes revenue for the sale of goods at the point in time when the customer takes control of the goods. As such, revenue is recognized upon shipment of product and transfer of ownership to the customer. The amount of revenue recognized is based on the purchase order price and adjusted for variable consideration (i.e., customer sales allowances, incentives, rebates, and returns). Provisions for customer sales allowances, incentives, rebates, and returns are recorded as a reduction of sales at the time of revenue recognition based primarily on historical experience. The company’s payment terms with customers are customary and vary by customer and geography but typically range from 30 to 90 days.

The company provides warranties on some of its products. The company records estimated product warranty costs at the time of shipment of products to customers (see Note 16 and Note 17).

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(Unaudited)

Disaggregation of revenue

In the following tables, revenue is disaggregated for each of our operating segments by primary geographical market for the three and nine months ended June 30, 2019.

	Three Months Ended June 30, 2019
Primary Geographical Market	Commercial Truck		Aftermarket, Industrial and Trailer		Total
U.S.	$	419	$	278	$	697
Canada	—		18		18
Mexico	54		12		66
Total North America	473		308		781
Sweden	75		—		75
Italy	62		4		66
United Kingdom	40		3		43
Other Europe	3		16		19
Total Europe	180		23		203
Brazil	67		—		67
China	44		—		44
India	53		—		53
Other Asia-Pacific	18		—		18
Total sales	$	835	$	331	$	1,166

	Nine Months Ended June 30, 2019
Primary Geographical Market	Commercial Truck		Aftermarket, Industrial and Trailer		Total
U.S.	$	1,182	$	781	$	1,963
Canada	—		53		53
Mexico	151		35		186
Total North America	1,333		869		2,202
Sweden	223		—		223
Italy	178		13		191
United Kingdom	126		8		134
Other Europe	9		54		63
Total Europe	536		75		611
Brazil	180		—		180
China	129		—		129
India	172		—		172
Other Asia-Pacific	66		—		66
Total sales	$	2,416	$	944	$	3,360

Contract balances

As of June 30, 2019 and September 30, 2018, Trade receivables, net, which are included in Receivables, trade and other, net, on the Condensed Consolidated Balance Sheet, were $611 million and $566 million, respectively.

For the nine months ended June 30, 2019, the company had no material bad-debt expense and there were no material contract

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

assets, contract liabilities or deferred contract costs recorded on the Condensed Consolidated Balance Sheet as of June 30, 2019.

Contract costs

The company applies the practical expedient provided in Topic 606 and recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the company otherwise would have recognized is one year or less. The costs which are not capitalized are included in cost of sales.

5. Discontinued Operations

Results of discontinued operations are summarized as follows (in millions):

	Three Months Ended June 30,					Nine Months Ended June 30,
	2019		2018			2019		2018
Sales	$	—	$	—		$	—	$	—
Income (loss) before income taxes	$	1	$	(2	)	$	—	$	(4	)
Benefit from income taxes	—		—			—		1
Income (loss) from discontinued operations attributable to Meritor, Inc.	$	1	$	(2	)	$	—	$	(3	)

Loss from discontinued operations attributable to the company for the three and nine months ended June 30, 2018 was primarily related to environmental remediation and changes in estimates related to legal costs incurred in connection with a previously divested business.

6. Goodwill

In accordance with ASC Topic 350-20, "Intangibles—Goodwill and Other," goodwill is reviewed for impairment annually during the fourth quarter of the fiscal year or more frequently if certain indicators arise. If business conditions or other factors cause the operating results and cash flows of a reporting unit to decline, the company may be required to record impairment charges for goodwill at that time.

The company tests goodwill for impairment at a level of reporting referred to as a reporting unit, which is an operating segment or one level below an operating segment (referred to as a component). A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results of that component. When two or more components of an operating segment have similar economic characteristics, the components are aggregated and deemed a single reporting unit. An operating segment is deemed to be a reporting unit if all of its components are similar, if none of its components are a reporting unit, or if the segment comprises only a single component.

Acquisition of AA Gear & Manufacturing, Inc. Business

On April 30, 2018, the company acquired substantially all of the assets of AA Gear & Manufacturing, Inc. and its subsidiaries ("AAG") for a cash purchase price of approximately $35 million. The AAG acquisition was accounted for as a business combination. The company recorded goodwill in the amount of $12 million for the excess of consideration paid over the fair value of the individual assets acquired and liabilities assumed. This recorded goodwill consists largely of the synergies and economies of scale expected from combining the operations of the company and AAG. All of the goodwill was assigned to the Aftermarket, Industrial and Trailer reportable segment. All goodwill recognized is expected to be deductible for income tax purposes over the next 15 years.

Realignment of Reporting Units

As discussed in Note 23, the company realigned its operations in the second quarter of fiscal year 2019, resulting in a change to its reportable segments. The company’s reporting units did not change as a result of the change in reportable segments. The Commercial Truck segment contains one reporting unit. The Aftermarket, Industrial and Trailer segment contains four reporting units.

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(Unaudited)

A summary of the changes in the carrying value of goodwill by the company’s two reportable segments are presented below (in millions):

	Commercial Truck			Aftermarket, Industrial and Trailer			Total
Goodwill (1)	$	266		$	170		$	436
Accumulated impairment losses (1)	—			(15		)	(15		)
Beginning Balance at September 30, 2018 (1)	266			155			421
AAG measurement period adjustment (see Note 9)	—			3			3
Foreign currency translation	(3		)	—			(3		)
Ending Balance at June 30, 2019	$	263		$	158		$	421

⁽¹⁾ Amounts have been recast to reflect reportable segment changes (see Note 23).

7. Restructuring Costs

Restructuring reserves, primarily related to unpaid employee termination benefits, were $1 million at June 30, 2019 and $4 million at September 30, 2018. The changes in restructuring reserves for the nine months ended June 30, 2019 and 2018 are as follows (in millions):

	Employee Termination Benefits			Plant Shutdown & Other			Total
Beginning Balance at September 30, 2018	$	4		$	—		$	4
Activity during the period:
Charges to continuing operations	(2		)	—			(2		)
Cash payments – continuing operations	(2		)	—			(2		)
Other	1			—			1
Total restructuring reserves at June 30, 2019	1			—			1
Less: non-current restructuring reserves	—			—			—
Restructuring reserves – current, at June 30, 2019	$	1		$	—		$	1
Balance at September 30, 2017	$	5		$	1		$	6
Activity during the period:
Charges to continuing operations	6			—			6
Cash payments – continuing operations	(6		)	(1		)	(7		)
Total restructuring reserves at June 30, 2018	5			—			5
Less: non-current restructuring reserves	(1		)	—			(1		)
Restructuring reserves – current, at June 30, 2018	$	4		$	—		$	4

8. Income Taxes

For each interim reporting period, the company makes an estimate of the effective tax rate expected to be applicable for the full fiscal year pursuant to FASB ASC Topic 740-270, "Accounting for Income Taxes in Interim Periods." The rate so determined is used in providing for income taxes on a year-to-date basis. Jurisdictions with a projected loss for the year or an actual year-to-date loss where no tax benefit can be recognized are excluded from the estimated annual effective tax rate. The impact of including these jurisdictions on the quarterly effective rate calculation could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings versus annual projections.

Income tax expense (benefit) is allocated among continuing operations, discontinued operations and other comprehensive income ("OCI"). Such allocation is applied by tax jurisdiction, and in periods in which there is a pre-tax loss from continuing

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

operations and pre-tax income in another category, such as discontinued operations or OCI, income tax expense is allocated to the other sources of income, with a related benefit recorded in continuing operations.

On December 22, 2017, the U.S. government enacted the U.S. tax reform. The U.S. tax reform made broad and complex changes to the U.S. tax code that affected the company's fiscal year ended September 30, 2018, including, but not limited to, reducing the U.S. federal corporate tax rate and requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries. The U.S. tax reform reduced the federal corporate tax rate to 21 percent effective January 1, 2018.

The SEC staff issued Staff Accounting Bulletin ("SAB") 118, which provides guidance on accounting for the tax effects of the U.S. tax reform. SAB 118 provides a measurement period that should not extend beyond one year from the U.S. tax reform enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the U.S. tax reform for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the U.S. tax reform is incomplete but the company is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the U.S. tax reform.

Specifically, the company included discrete tax expense in its first quarter financial statements for fiscal year 2018 related to provisional amounts under SAB 118 for the impact of the revaluation of U.S. deferred tax assets and liabilities due to the federal income tax rate reduction from 35 percent to 21 percent. Additionally, the company estimated its liability and included provisional amounts for the one-time transition tax as a discrete tax expense. The company will elect to offset the liability associated with this transition tax by utilizing foreign tax credit carryovers. The revaluation of the deferred tax assets and the transition tax resulted in a non-cash charge of $77 million in the first quarter of fiscal year 2018. In the first quarter of fiscal year 2019, a $7 million income tax net benefit was recorded which consists of an income tax benefit of $11 million for refinement of the transition tax and $4 million income tax expense for refinement of other adjustments. In the third quarter of fiscal year 2019, a $2 million income tax benefit was recored to these other adjustments.

Tax expense related to the transition tax and rate change on net deferred tax assets and liabilities as of December 31, 2018 is now considered complete under SAB 118. Additionally, as of December 31, 2018, the company has accounted for the tax impacts related to the Global Intangible Low Tax Income ("GILTI"), Base Erosion Anti Abuse Tax ("BEAT") and Foreign Derived Intangible Income ("FDII") regimes as well as all other provisions of the U.S. tax reform that are effective in fiscal year 2019. The company has elected to treat GILTI as a period cost and, therefore, has not recognized deferred taxes for basis differences that may reverse as GILTI tax in future periods.

In evaluating the ability to recover its net deferred tax assets, the company utilizes a consistent approach which considers its historical operating results, including an assessment of the degree to which any gains or losses are driven by items that are unusual in nature, and tax planning strategies. In addition, the company reviews changes in near-term market conditions and other factors that impact future operating results. In fiscal year 2018, after sustained profitability and improved market conditions, the valuation allowance in Brazil was reversed. As of June 30, 2019, the company continues to maintain the valuation allowances in France, the U.K., and certain other jurisdictions, as the company believes the negative evidence that it will be able to recover these net deferred tax assets continues to outweigh the positive evidence. If, in the future, the company generates taxable income on a sustained basis, its conclusion regarding the need for valuation allowances in these jurisdictions could change.

For the three months ended June 30, 2019, the company had approximately $4 million of net pre-tax income compared to $7 million of net pre-tax income in the same period in fiscal year 2018 in tax jurisdictions in which tax expense (benefit) is not recorded.

For the nine months ended June 30, 2019, the company had approximately $12 million of net pre-tax income compared to $20 million of net pre-tax income in the same period in fiscal year 2018 in tax jurisdictions in which tax expense (benefit) is not recorded.

9. Acquisition and Divestiture

Acquisition of AxleTech Business

On July 26, 2019, the company acquired 100 percent of the voting equity interest of the AxleTech group companies for approximately $175 million in cash, subject to certain purchase price adjustments. The company funded the acquisition with the

17

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

term loan under the revolving credit agreement (see Note 18). The addition of AxleTech enhances Meritor’s growth platform with the addition of a complementary product portfolio that includes a full line of independent suspensions, axles, braking solutions and drivetrain components across the off-highway, defense, specialty and aftermarket markets. AxleTech will operate within Meritor’s Aftermarket, Industrial and Trailer segment. The amounts of revenue and earnings, fair value of identifiable net assets and related goodwill of AxleTech are unavailable and will be disclosed in the company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019.

Additionally, on July 29, 2019, the company approved a restructuring plan related to the integration of its acquisition of AxleTech. This restructuring plan is intended to realize certain targeted synergies following the acquisition, primarily from the elimination of cost overlap. With this restructuring plan, the Company expects to incur $11 million of total costs in the Aftermarket, Industrial and Trailer segment with approximately $7 million related to employee severance charges and approximately $4 million related to lease termination costs. Restructuring associated with severance actions are expected to be substantially completed by fiscal year 2020. The lease term expires in fiscal year 2023.

Acquisition of AAG Business

On April 30, 2018, the company acquired substantially all of the assets of AAG for a cash purchase price of approximately $35 million. AAG provides low-to-medium volume batch manufacturing for complex gear and shaft applications, as well as quick-turnaround prototyping solutions and emergency plant support. The AAG acquisition was accounted for as a business combination.

As of June 30, 2019, the company finalized all measurement period adjustments related to the AAG acquisition. Since completion of initial estimates in the fourth quarter of fiscal year 2018, the company recorded a $4 million decrease to finite lived intangible assets, a $1 million increase to accounts receivable and a $3 million increase to goodwill. The adjustments were made to reflect additional available information and updated valuation results. All goodwill resulting from the AAG acquisition was assigned to the Aftermarket, Industrial and Trailer reportable segment (see Note 6).

Divestiture of Meritor Huayang Vehicle Braking Company Ltd.

On February 7, 2018, Meritor completed the sale of its equity interest in Meritor Huayang Vehicle Braking Company Ltd. All assets and liabilities of the business were transferred at closing.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

10. Accounts Receivable Factoring and Securitization

The company has a U.S. accounts receivable securitization facility with PNC Bank and participates in various accounts receivable factoring programs, primarily with Nordea Bank for trade receivables from AB Volvo, as follows:

	Current Expiration	Total Facility Size as of 6/30/19				Utilized as of 6/30/19				Utilized as of 9/30/18
		EUR		USD		EUR		USD		EUR		USD
On-balance sheet arrangement
Committed U.S. accounts receivable securitization (1)	December 2021	N/A		$	110	N/A		$	3	N/A		$	57
Total on-balance sheet arrangement: (1)		N/A		$	110	N/A		$	3	N/A		$	57
Off-balance sheet arrangements
Committed Swedish factoring facility (2)(3)	March 2020	€	155	$	176	€	140	$	160	€	136	$	158
Committed U.S. factoring facility (2)	February 2023	N/A		75		N/A		70		45		53
Uncommitted U.K. factoring facility	February 2022	25		28		10		11		8		9
Uncommitted Italy factoring facility	June 2022	30		34		30		34		24		28
Other uncommitted factoring facilities (4)	None	N/A		N/A		18		19		11		12
Total off-balance sheet arrangements		€	210	$	313	€	198	$	294	€	224	$	260

⁽¹⁾ Availability subject to adequate eligible accounts receivable available for sale. The utilized amount includes $3 million and $11 million of letters of credit as of June 30, 2019 and September 30, 2018, respectively.

⁽²⁾ Actual amounts may exceed the bank's commitment at the bank's discretion.

⁽³⁾ The facility is backed by a 364-day liquidity commitment from Nordea Bank which extends through January 10, 2020.

⁽⁴⁾ There is no explicit facility size under the agreement, but the counterparty approves the purchase of receivable tranches at its discretion.

On-balance sheet arrangement

U.S. Securitization Facility: The company's U.S. accounts receivables securitization facility with PNC Bank is subject to a maximum permitted priority debt-to-EBITDA ratio as of the last day of each fiscal quarter under the facility of 2.25 to 1.00. Under this program, the company has the ability to sell an undivided percentage ownership interest in substantially all of its trade receivables (excluding the receivables due from AB Volvo and subsidiaries eligible for sale under the U.S. accounts receivable factoring facility) of certain U.S. subsidiaries to ArvinMeritor Receivables Corporation ("ARC"), a wholly-owned, special purpose subsidiary. ARC funds these purchases with borrowings from participating lenders under a loan agreement. This program also includes a letter of credit facility pursuant to which ARC may request the issuance of letters of credit issued for the company’s U.S. subsidiaries (originators) or their designees, which when issued will constitute a utilization of the facility for the amount of letters of credit issued. Amounts outstanding under this agreement are collateralized by eligible receivables purchased by ARC and are reported as short-term debt in the Condensed Consolidated Balance Sheet. This securitization program contains a cross default to the company's revolving credit facility. At certain times during any given month, the company may sell eligible accounts receivable under this program to fund intra-month working capital needs. In such months, the company would then typically utilize the cash received from customers throughout the month to repay the borrowings under the program. Accordingly, during any given month, the company may borrow under this program amounts exceeding the amounts shown as outstanding at fiscal quarter ends.

Off-balance sheet arrangements 

Total costs associated with all of the off-balance sheet arrangements described above were $2 million and $1 million for the three months ended June 30, 2019 and 2018, respectively. Total costs associated with all of the off-balance sheet arrangements described above were $5 million and $3 million in the nine months ended June 30, 2019 and 2018, respectively, and are included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

11. Operating Cash Flows

The reconciliation of net income to cash flows provided by operating activities is as follows (in millions):

	Nine Months Ended June 30,
	2019			2018
OPERATING ACTIVITIES
Net income	$	255		$	93
Less: Loss from discontinued operations, net of tax	—			(3		)
Income from continuing operations	255			96
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization	64			64
Deferred income tax expense	27			92
Loss on debt extinguishment	—			8
Restructuring costs	(2		)	6
Asset impairment charges	1			2
Equity in earnings of affiliates	(24		)	(20		)
Pension and retiree medical income	(28		)	(23		)
Asbestos related liability remeasurement	(31		)	—
Other adjustments to income from continuing operations	13			13
Dividends received from equity method investments	14			9
Pension and retiree medical contributions	(12		)	(17		)
Restructuring payments	(2		)	(7		)
Changes in off-balance sheet accounts receivable securitization and factoring programs	41			65
Changes in receivables, inventories and accounts payable	(96		)	(136		)
Changes in other current assets and liabilities	(21		)	26
Changes in other assets and liabilities	(3		)	12
Operating cash flows provided by continuing operations	196			190
Operating cash flows provided by (used for) discontinued operations	(2		)	1
CASH PROVIDED BY OPERATING ACTIVITIES	$	194		$	191

12. Inventories

Inventories are stated at the lower of cost (using FIFO or average methods) or market (determined on the basis of estimated realizable values) and are summarized as follows (in millions):

	June 30, 2019		September 30, 2018
Finished goods	$	154	$	170
Work in process	42		41
Raw materials, parts and supplies	295		266
Total	$	491	$	477

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

13. Other Current Assets

     Other current assets are summarized as follows (in millions):

	June 30, 2019		September 30, 2018
Asbestos-related recoveries (see Note 21)	$	8	$	16
Prepaid and other	24		30
Other current assets	$	32	$	46

14. Net Property

     Net property is summarized as follows (in millions):

	June 30, 2019			September 30, 2018
Property at cost:
Land and land improvements	$	30		$	29
Buildings	228			228
Machinery and equipment	928			914
Company-owned tooling	136			130
Construction in progress	66			81
Total	1,388			1,382
Less: accumulated depreciation	(907		)	(899		)
Net property	$	481		$	483

15. Other Assets

     Other assets are summarized as follows (in millions):

	June 30, 2019		September 30, 2018
Investments in non-consolidated joint ventures	$	113	$	102
Asbestos-related recoveries (see Note 21)	57		76
Unamortized revolver debt issuance costs	8		7
Capitalized software costs, net	20		26
Deferred income tax assets, net	113		140
Assets for uncertain tax positions	52		53
Prepaid pension costs	166		152
Intangible assets (1)	13		18
Other	25		22
Other assets	$	567	$	596

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

⁽¹⁾  Primarily relates to customer relationships. As of June 30, 2019, the gross carrying value was $18 million and the accumulated amortization was $5 million. As of September 30, 2018, the gross carrying value was $22 million and the accumulated amortization was $4 million. The weighted average amortization periods for customer relationships is approximately 19 years.

The company holds a variable interest in a joint venture that is a variable interest entity ("VIE") accounted for under the equity method of accounting. The joint venture manufactures components for commercial vehicle applications primarily on behalf of the company. The variable interest relates to a supply arrangement between the company and the joint venture whereby the company supplies certain components to the joint venture on a cost-plus basis. The company is not the primary beneficiary of the joint venture, as the joint venture partner has shared or absolute control over key manufacturing operations, labor relationships, financing activities and certain other functions of the joint venture. Therefore, the company does not consolidate the joint venture. As of June 30, 2019 and September 30, 2018, the company’s investment in the joint venture was $68 million and $63 million, respectively.

TransPower

Meritor completed a $3 million investment in Transportation Power, Inc. ("TransPower") in each of the first and third quarters of fiscal year 2019. Investments of $3 million in TransPower were also made in each of the first and third quarters of fiscal year 2018. The company holds a variable interest in TransPower, a VIE. TransPower develops electrical drive solutions and supplies integrated drive systems, full electric truck solutions and energy-storage subsystems to major manufacturers of trucks, school buses, refuse vehicles and terminal tractors. The company is not the primary beneficiary of TransPower, as other owners have control over the significant activities of TransPower, including the development of intellectual property and manufacturing. Therefore, the company does not consolidate TransPower. As of June 30, 2019 and September 30, 2018, the company’s investment in TransPower was $12 million and $6 million, respectively, representing the company’s maximum exposure to loss.

16. Other Current Liabilities

     Other current liabilities are summarized as follows (in millions):

	June 30, 2019		September 30, 2018
Compensation and benefits	$	108	$	122
Income taxes	12		27
Taxes other than income taxes	17		25
Accrued interest	14		11
Product warranties	18		19
Environmental reserves (see Note 21)	8		8
Restructuring (see Note 7)	1		3
Asbestos-related liabilities (see Note 21)	9		18
Indemnity obligations	1		1
Accrued payable to Maremont (see Note 21)	48		—
Other	60		56
Other current liabilities	$	296	$	290

Compensation and benefits includes the current portion of pension and retiree medical liability, accrued incentive compensation, salary and wages and accrued vacation, holiday and sick leave pay.

22

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A summary of the changes in product warranties is as follows (in millions):

	Nine Months Ended June 30,
	2019			2018
Total product warranties – beginning of period	$	54		$	45
Accruals for product warranties	21			14
Payments	(18		)	(12		)
Change in estimates and other	(5		)	4
Total product warranties – end of period	52			51
Less: Non-current product warranties	(34		)	(33		)
Product warranties – current	$	18		$	18

17. Other Liabilities

Other liabilities are summarized as follows (in millions):

	June 30, 2019		September 30, 2018
Asbestos-related liabilities (see Note 21)	$	91	$	193
Restructuring (see Note 7)	—		1
Non-current deferred income tax liabilities	16		16
Liabilities for uncertain tax positions	48		48
Product warranties (see Note 16)	34		35
Environmental (see Note 21)	7		9
Indemnity obligations	8		9
Other	30		21
Other liabilities	$	234	$	332

18. Long-Term Debt

     Long-Term debt, net of discounts where applicable, is summarized as follows (in millions):

	June 30, 2019			September 30, 2018
3.25 percent convertible notes due 2037(1)(3)	$	319		$	318
4.0 percent convertible notes due 2027(1)(4)	—			24
7.875 percent convertible notes due 2026(1)(5)	22			22
6.25 percent notes due 2024(2)(6)	444			444
Capital lease obligation	7			7
Borrowings and securitization	—			46
Unamortized discount on convertible notes(7)	(34		)	(37		)
Subtotal	758			824
Less: current maturities	(24		)	(94		)
Long-term debt	$	734		$	730

⁽¹⁾ The 3.25 percent, 4.0 percent and 7.875 percent convertible notes contain a put and call feature, which allows for earlier redemption beginning in 2025, 2019 and 2020, respectively.

⁽²⁾ The 6.25 percent notes contain a call option, which allows for early redemption by Meritor.

⁽³⁾ The 3.25 percent convertible notes are presented net of $6 million and $7 million unamortized issuance costs as of June 30, 2019 and September 30, 2018, respectively.

⁽⁴⁾ The 4.0 percent convertible notes were presented net of unamortized issuance costs of an insignificant amount as of September 30, 2018.

23

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

⁽⁵⁾ The 7.875 percent convertible notes are presented net of unamortized issuance costs of an insignificant amount as of June 30, 2019 and September 30, 2018, and $1 million original issuance discount as of June 30, 2019 and September 30, 2018.

⁽⁶⁾ The 6.25 percent notes are presented net of $6 million unamortized issuance costs as of June 30, 2019 and September 30, 2018.

⁽⁷⁾ The carrying amount of the equity component related to convertible debt.

Repurchase of Debt Securities

On February 15, 2019, the company redeemed $19 million aggregate principal amount outstanding of the company's 4.0 percent senior convertible notes due 2027 ("the 4.0 Percent Convertible Notes") at a price of 100 percent of the accreted principal amount, plus accrued and unpaid interest. On June 7, 2019, the company redeemed the remaining $5 million aggregate principal amount outstanding of the 4.0 Percent Convertible Notes at a price equal to 100 percent of the accreted principal amount, plus accrued and unpaid interest. The 4.0 Percent Convertible Notes were classified as current as of September 30, 2018 as the securities were redeemable at the option of the holder on February 15, 2019, at a repurchase price in cash equal to 100 percent of the accreted principal amount of the securities to be repurchased, plus accrued and unpaid interest.

Current Classification of 7.875 Percent Convertible Notes

The 7.875 percent senior convertible notes due 2026 ("the 7.875 Percent Convertible Notes") were classified as current as of June 30, 2019 as the holders are entitled to convert all or a portion of their 7.875 Percent Convertible Notes at any time beginning July 1, 2019 and prior to the close of business on September 30, 2019 at a rate of 83.3333 shares of common stock per $1,000 principal amount at maturity of the 7.875 Percent Convertible Notes (representing a conversion price of approximately $12.00 per share). The 7.875 Percent Convertible Notes are convertible as the closing price of shares of the company's common stock for at least 20 trading days during the 30 consecutive trading-day period ending on June 28, 2019 was greater than 120 percent of the $12.00 conversion price associated with the 7.875 Percent Convertible Notes.

The 7.875 Percent Convertible Notes were classified as current as of September 30, 2018 as the holders were entitled to convert all or a portion of their 7.875 Percent Convertible Notes at any time beginning October 1, 2018 and prior to the close of business on December 31, 2018 at a rate of 83.3333 shares of common stock per $1,000 principal amount at maturity of the 7.875 Percent Convertible Notes (representing a conversion price of approximately $12.00 per share). The 7.875 Percent Convertible Notes were convertible as the closing price of shares of the company's common stock for at least 20 trading days during the 30 consecutive trading-day period ending on September 28, 2018 was greater than 120 percent of the $12.00 conversion price associated with the 7.875 Percent Convertible Notes.

The 7.875 Percent Convertible Notes surrendered for conversion, if any, would be settled in cash up to the principal amount at maturity of the 7.875 Percent Convertible Notes and cash, stock or a combination of cash and stock, at the company’s election, for the remainder of the conversion value of the 7.875 Percent Convertible Notes in excess of the principal amount at maturity and cash in lieu of any fractional shares, subject to and in accordance with the provisions of the indenture that governs the 7.875 Percent Convertible Notes.

As a result of the 7.875 Percent Convertible Notes becoming currently convertible for cash up to the principal amount of $23 million at the holder's option, $1 million of permanent equity was reclassified as mezzanine equity as of June 30, 2019 and September 30, 2018.

Revolving Credit Facility

On June 7, 2019, the company amended and restated its revolving credit facility. Pursuant to the revolving credit agreement as amended, the company has a $625 million revolving credit facility and a $175 million term loan facility, intended for the company's acquisition of AxleTech, that mature in June 2024 (with a springing maturity in November 2023 if the outstanding amount of the 6.25 percent notes due 2024 is greater than $75 million at that time). The availability under the revolving facility is dependent upon various factors, including performance against certain financial covenants as highlighted below.

The availability under the revolving credit facility is subject to certain financial covenants based on the ratio of the company’s priority debt (consisting principally of amounts outstanding under the revolving credit facility, the U.S. accounts receivable securitization and factoring programs, and third-party non-working capital foreign debt) to EBITDA. The company is required to maintain a total priority debt-to-EBITDA ratio, as defined in the agreement, of 2.25 to 1.00 or less as of the last day of each fiscal quarter throughout the term of the agreement.

24

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Borrowings under the revolving credit facility are subject to interest based on quoted LIBOR rates plus a margin and a commitment fee on undrawn amounts, both of which are based upon either the company’s current corporate credit rating or its total leverage ratio, as defined in the agreement. At June 30, 2019, the margin over LIBOR rate was 200 basis points and the commitment fee was 30 basis points. Overnight revolving credit loans are at the prime rate plus a margin of 100 basis points.

Certain of the company’s subsidiaries, as defined in the revolving credit agreement, irrevocably and unconditionally guarantee amounts outstanding under the revolving credit facility. Similar subsidiary guarantees are provided for the benefit of the holders of the publicly held notes outstanding under the company’s indentures (see Note 24).

At June 30, 2019 and September 30, 2018, there were no borrowings outstanding under the revolving credit facility. The amended and extended revolving credit facility includes $100 million of availability for the issuance of letters of credit. At June 30, 2019 and September 30, 2018, there were no letters of credit outstanding under the revolving credit facility.

Capital Leases

The company had $7 million of outstanding capital lease arrangements at both June 30, 2019 and September 30, 2018.

Letter of Credit Facilities

On February 21, 2014, the company entered into an arrangement to amend and restate the letter of credit facility with Citicorp USA, Inc., as administrative agent and issuing bank, and the other lenders party thereto. Under the terms of this amended credit agreement, which expired in March 2019, the company had the right to obtain the issuance, renewal, extension and increase of letters of credit up to an aggregate availability of $25 million. This facility contained covenants and events of default generally similar to those existing in the company’s public debt indentures. There were $1 million of letters of credit outstanding under this facility at September 30, 2018. On March 20, 2019, the company allowed this facility to expire. The letters of credit previously provided under this facility were replaced with letters of credit issued under the company’s U.S. accounts receivables securitization facility with PNC Bank. The company had another $12 million and $19 million of letters of credit outstanding through other letter of credit facilities as of June 30, 2019 and September 30, 2018, respectively.

Other

One of the company's consolidated joint ventures in China participates in a bills of exchange program to settle its obligations with its trade suppliers. These programs are common in China and generally require the participation of local banks. Under these programs, the company's joint venture issues notes payable through the participating banks to its trade suppliers. If the issued notes payable remain unpaid on their respective due dates, this could constitute an event of default under the company’s revolving credit facility if the defaulted amount exceeds $35 million per bank. As of June 30, 2019 and September 30, 2018, the company had $25 million and $22 million, respectively, outstanding under this program at more than one bank.

19. Financial Instruments

Fair values of financial instruments are summarized as follows (in millions):

	June 30, 2019				September 30, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	111	$	111	$	115	$	115
Short-term debt	24		51		94		116
Long-term debt	734		806		730		776
Foreign exchange forward contracts (other assets)	1		1		2		2
Foreign exchange forward contracts (other liabilities)	1		1		—		—
Foreign currency option contracts (other assets)	—		—		—		—
Cross-currency swaps (other assets)	—		—		6		6
Cross-currency swaps (other liabilities)	5		5		—		—

25

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table reflects the offsetting of derivative assets and liabilities (in millions):

	June 30, 2019			September 30, 2018
	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported
Derivative Assets
Foreign exchange forward contracts	1	—	1	2	—	2
Cross-currency swaps	—	—	—	6	—	6
Derivative Liabilities
Foreign exchange forward contracts	1	—	1	—	—	—
Cross-currency swaps	5	—	5	—	—	—

Fair Value

FASB guidance provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical instruments (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

• Level 1 inputs use quoted prices in active markets for identical instruments.

• Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar instruments in active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

• Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related instrument.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest priority level input that is significant to the valuation. The company's assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

Fair value of financial instruments by the valuation hierarchy at June 30, 2019 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	111	$	—	$	—
Short-term debt	—		49		2
Long-term debt	—		801		5
Foreign exchange forward contracts (other assets)	—		1		—
Foreign exchange forward contracts (other liabilities)	—		—		1
Foreign currency option contracts (other assets)	—		—		—
Cross-currency Swap (other assets)	—		—		—
Cross-currency swaps (other liabilities)	—		5		—

26

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Fair value of financial instruments by the valuation hierarchy at September 30, 2018 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	115	$	—	$	—
Short-term debt	—		114		2
Long-term debt	—		771		5
Foreign exchange forward contracts (other assets)	—		2		—
Foreign exchange forward contracts (other liabilities)	—		—		—
Foreign currency option contracts (other assets)	—		—		—
Cross-currency swap (other assets)	—		6		—

No transfers of assets between any of the Levels occurred during the three and nine months ended June 30, 2019 and 2018.

Cash and cash equivalents — The carrying value approximates fair value because of the short maturity of these instruments. The company did not have any cash equivalents as of June 30, 2019 or September 30, 2018.

     Short- and long-term debt — Fair values are based on transaction prices at public exchange for publicly traded debt. For debt instruments that are not publicly traded, fair values are based on interest rates that would be currently available to the company for issuance of similar types of debt instruments with similar terms and remaining maturities.

Foreign exchange forward contracts — The company uses foreign exchange forward purchase and sale contracts with terms of 18 months or less to hedge its exposure to changes in foreign currency exchange rates. As of June 30, 2019 and September 30, 2018, the notional amount of the company's foreign exchange contracts outstanding under its foreign currency cash flow hedging program was $118 million and $154 million, respectively. The fair value of foreign exchange forward contracts is based on a model which incorporates observable inputs including quoted spot rates, forward exchange rates and discounted future expected cash flows utilizing market interest rates with similar quality and maturity characteristics. For derivative instruments that are designated and qualify as cash flow hedges, changes in the fair value of the contracts is recorded in Accumulated Other Comprehensive Loss in the statement of shareholders’ equity and is recognized in operating income when the underlying forecasted transaction impacts earnings.

Foreign currency option contracts — The company uses option contracts to mitigate foreign exchange exposure on expected future Indian Rupee-denominated purchases. As of June 30, 2019 and September 30, 2018, the notional amount of the company's Indian rupee foreign exchange contracts outstanding was $114 million and $180 million, respectively. The company did not elect hedge accounting for these derivatives. Changes in fair value associated with these contracts are recorded in cost of sales in the Condensed Consolidated Statement of Operations.

The company uses option contracts to mitigate the risk of volatility in the translation of euro earnings to U.S. dollars. As of June 30, 2019, the notional amount of the company's euro option contracts outstanding was $12 million. As of September 30, 2018, there were no euro option contracts outstanding. These option contracts did not qualify for a hedge accounting election. Changes in fair value associated with these contracts are recorded in the Condensed Consolidated Statement of Operations in other income, net.

The company uses option contracts to mitigate the risk of volatility in the translation of Swedish krona to U.S. dollars. As of June 30, 2019, the notional amount of the company's Swedish krona option contracts outstanding was $18 million. As of September 30, 2018, there were no Swedish krona option contracts outstanding. These option contracts did not qualify for a hedge accounting election. Changes in fair value associated with these contracts are recorded in the Condensed Consolidated Statement of Operations in other income, net.

The company uses option contracts to mitigate foreign exchange exposure on expected future South Korean won-denominated purchases. As of June 30, 2019 and September 30, 2018, the notional amount of the company's South Korean won option contracts outstanding was $48 million and $41 million, respectively. The company did not elect hedge accounting for these derivatives. Changes in fair value associated with these contracts are recorded in cost of sales in the Condensed Consolidated Statement of Operations.

The company uses foreign currency option contracts to mitigate foreign currency exposure on expected future Brazilian real-denominated purchases. As of June 30, 2019, there were no Brazilian real option contracts outstanding. As of September 30, 2018, the notional amount of the company's Brazilian real option contracts outstanding was $16 million. The company did not elect

27

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

hedge accounting for these derivatives. Changes in fair value associated with these contracts are recorded in cost of sales in the Condensed Consolidated Statement of Operations.

The fair value of foreign currency option contracts is based on third-party proprietary models, which incorporate inputs at varying unobservable weights of quoted spot rates, market volatility, forward rates and time utilizing market instruments with similar quality and maturity characteristics.

Cross-currency swap contracts — The company uses cross-currency swap contracts to hedge a portion of its net investment in a foreign subsidiary against volatility in foreign exchange rates. These derivative instruments are designated and qualify as hedges of net investments in foreign operations using the spot method to assess effectiveness. Changes in fair values of the instruments are recognized in foreign currency translation adjustments, a component of other comprehensive income (loss) in the Condensed Consolidated Statement of Comprehensive Income (Loss), to offset the changes in the values of the net investments being hedged.

In the third quarter of fiscal year 2018, the company entered into multiple cross-currency swaps with a combined notional amount of $225 million, with maturities in May 2021. These swaps hedged a portion of the net investment in a certain European subsidiary against volatility in the euro/U.S. dollar foreign exchange rate.

In the third quarter of fiscal year 2019, the company unwound these cross-currency swaps and received proceeds of $19 million, $2 million of which related to net accrued interest receivable. The company also entered into multiple new cross-currency swaps with a combined notional amount of $225 million, with maturities in October 2022. As of both June 30, 2019 and September 30, 2018, the notional amount of the company's cross-currency swap contracts outstanding was $225 million. These swaps hedge a portion of the net investment in a certain European subsidiary against volatility in the euro/U.S. dollar foreign exchange rate.

The fair value of cross-currency swap contracts is based on a model which incorporates observable inputs, including quoted spot rates, forward exchange rates and discounted future expected cash flows, utilizing market interest rates with similar quality and maturity characteristics.

28

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

20. Retirement Benefit Liabilities

Retirement benefit liabilities consisted of the following (in millions):

	June 30, 2019			September 30, 2018
Retiree medical liability	$	79		$	86
Pension liability	163			182
Other	15			13
Subtotal	257			281
Less: current portion (included in compensation and benefits, Note 16)	(19		)	(19		)
Retirement benefits	$	238		$	262

The components of net periodic pension and retiree medical income included in continuing operations for the three months ended June 30 are as follows (in millions):

	2019						2018
	Pension			Retiree Medical			Pension			Retiree Medical
Interest cost	$	13		$	1		$	14		$	1
Assumed return on plan assets	(24		)	—			(25		)	—
Amortization of prior service costs	—			(9		)	—			(9		)
Recognized actuarial loss	6			4			7			5
Total income	$	(5	)	$	(4	)	$	(4	)	$	(3	)

The components of net periodic pension and retiree medical income included in continuing operations for the nine months ended June 30 are as follows (in millions):

	2019						2018
	Pension			Retiree Medical			Pension			Retiree Medical
Interest cost	$	40		$	2		$	41		$	2
Assumed return on plan assets	(73		)	—			(74		)	—
Amortization of prior service costs	—			(26		)	—			(26		)
Recognized actuarial loss	17			12			21			13
Total income	$	(16	)	$	(12	)	$	(12	)	$	(11	)

For the three months ended June 30, 2019 and 2018, the non-service cost components of the net periodic pension and Other Post-Employment Benefits ("OPEB") income were $9 million and $7 million, respectively, and are presented in other income. For the nine months ended June 30, 2019 and 2018, the non-service cost components of the net periodic pension and OPEB income were $28 million and $23 million, respectively, and are presented in other income. We used the practical expedient for retrospective presentation of the 2018 other expense components in this disclosure. Refer to Note 3 for additional details on the adoption of ASU 2017-07.

29

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

21. Contingencies

Environmental

    Federal, state and local requirements relating to the discharge of substances into the environment, the disposal of hazardous wastes and other activities affecting the environment have, and will continue to have, an impact on the operations of the company. The process of estimating environmental liabilities is complex and dependent upon evolving physical and scientific data at the sites, uncertainties as to remedies and technologies to be used and the outcome of discussions with regulatory agencies. The company records liabilities for environmental issues in the accounting period in which they are considered to be probable and the cost can be reasonably estimated. At environmental sites in which more than one potentially responsible party has been identified, the company records a liability for its allocable share of costs related to its involvement with the site, as well as an allocable share of costs related to insolvent parties or unidentified shares. At environmental sites in which Meritor is the only potentially responsible

party, the company records a liability for the total probable and estimable costs of remediation before consideration of recovery from insurers or other third parties.

     The company has been designated as a potentially responsible party at ten Superfund sites, excluding sites as to which the company’s records disclose no involvement or as to which the company’s liability has been finally determined. Superfund is a United States federal government program designed to fund the cleanup of sites contaminated with hazardous substances and pollutants. Management estimates the total reasonably possible costs the company could incur for the remediation of the ten Superfund sites at June 30, 2019 to be approximately $23 million, of which $11 million is probable and recorded as a liability. Included in reasonably possible amounts are estimates for certain remediation actions that may be required if current actions are deemed inadequate by the regulators.

     In addition to the Superfund sites, various other lawsuits, claims and proceedings have been asserted against the company, alleging violations of federal, state and local environmental protection requirements, or seeking remediation of alleged environmental impairments, principally at previously disposed-of properties. For these matters, management has estimated the total reasonably possible costs the company could incur at June 30, 2019 to be approximately $13 million, of which $4 million is probable and recorded as a liability.

     Included in the company’s environmental liabilities are costs for on-going operation, maintenance and monitoring at environmental sites in which remediation has been put into place. This liability is discounted using discount rates in the range of 2.25 to 3.00 percent and is approximately $13 million at June 30, 2019. The undiscounted estimate of these costs is approximately $14 million.

     The following are the components of the Superfund and non-Superfund environmental reserves (in millions):

	Superfund Sites			Non-Superfund Sites			Total
Beginning Balance at September 30, 2018	$	12		$	5		$	17
Payments and other	(3		)	(2		)	(5		)
Accruals	2			1			3
Ending Balance at June 30, 2019	$	11		$	4		$	15

Environmental reserves are included in Other Current Liabilities (see Note 16) and Other Liabilities (see Note 17) in the Condensed Consolidated Balance Sheet.

     The actual amount of costs or damages for which the company may be held responsible could materially exceed the foregoing estimates because of uncertainties, including the financial condition of other potentially responsible parties, the success of the remediation, discovery of new contamination and other factors that make it difficult to predict actual costs accurately. However, based on management’s assessment, after consulting with outside advisors that specialize in environmental matters, and subject to the difficulties inherent in estimating these future costs, the company believes that its expenditures for environmental capital investment and remediation necessary to comply with present regulations governing environmental protection and other expenditures for the resolution of environmental claims will not have a material effect on the company’s business, financial condition or results of operations. In addition, in future periods, new laws and regulations, changes in remediation plans, advances in technology and additional information about the ultimate clean-up remedies could significantly change the company’s estimates. Management cannot assess the possible effect of compliance with future requirements.

30

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In April 2016, the company was served with several complaints filed against the company and other defendants in the United States District Court for the Northern District of Mississippi. The complaints were amended in July 2016. These complaints allege damages, including diminution of property value, concealment/fraud and emotional distress resulting from alleged environmental pollution in and around a neighborhood in Grenada, Mississippi. Rockwell owned and operated a facility near the neighborhood from 1965 to 1985. The company filed answers to the complaints in July 2016. In May 2017, the company was served with a complaint filed against the company and other defendants by the Mississippi Attorney General in the Chancery Court of Grenada County, Mississippi. The complaint alleges that operations at the above-referenced Grenada facility caused contamination of off-site groundwater and surface waters. Subsequently, the company removed this action to the United States District Court for the Northern District of Mississippi. However, plaintiffs’ motion to remand the case to the Chancery Court was granted in March 2018. In April, May and July 2018, the company was served with additional property damage, personal injury and wrongful death lawsuits naming the company and others as defendants, which were brought by current and former residents of the same neighborhood. The company entered into settlement negotiations with plaintiffs and recorded an accrual in the second quarter of fiscal year 2019.

Asbestos

     Maremont Corporation ("Maremont"), a subsidiary of Meritor, manufactured friction products containing asbestos from 1953 through 1977, when it sold its friction product business. Arvin Industries, Inc., a predecessor of the company, acquired Maremont in 1986. Maremont and many other companies are defendants in suits brought by individuals claiming personal injuries as a result of exposure to asbestos-containing products.

Maremont had approximately 1,700 pending asbestos-related claims at September 30, 2018. 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. Plaintiffs’ lawyers often sue dozens or even hundreds of defendants in individual lawsuits, seeking damages against all named defendants irrespective of the disease or injury and irrespective of any causal connection with a particular product. For these reasons, the total number of claims filed is not necessarily the most meaningful factor in determining Maremont's asbestos-related liability.

Maremont Bankruptcy Filing: In the first quarter of fiscal year 2019, Maremont and its three wholly-owned subsidiaries, Maremont Exhaust Products, Inc., AVM, Inc., and Former Ride Control Operating Company, Inc., began to solicit votes from asbestos claimants in favor of a Joint Pre-Packaged Plan of Reorganization (the "Plan"). On January 18, 2019, the Plan was approved by voting asbestos claimants and, on January 22, 2019, Maremont and its subsidiaries voluntarily filed cases under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") seeking to implement the Plan through the Chapter 11 cases. Among other things, the Plan was intended to permanently resolve all current and future asbestos claims related to Maremont's historical asbestos-related activities through the creation of a trust pursuant to Section 524(g) of the U.S. Bankruptcy Code (the "524(g) Trust"). Meritor determined that the net amount of $51 million Maremont would be required to contribute to the 524(g) Trust according to the Plan represented Meritor's best estimate of Maremont's net asbestos liability. As a result, Meritor recognized $31 million of income related to remeasuring the Maremont net asbestos liability based on the terms of the Plan.

In the second quarter of fiscal 2019, Maremont and its subsidiaries were deconsolidated from the Condensed Consolidated Balance Sheet of the company as of January 22, 2019 and the results of Maremont’s operations were eliminated from the company’s consolidated results of operations beginning on that date as Maremont became subject to the control of a court. Deconsolidation had an insignificant impact on the Condensed Consolidated Statement of Operations. On a prospective basis, the company accounts for its investment in Maremont under the cost method. The fair value of this investment was zero at the date of deconsolidation. The company recorded $48 million in Other Current Liabilities, which represented Meritor’s best estimate of the contribution of cash and repayment of a loan to Maremont following Plan confirmation.

The Plan was confirmed by the U.S. Bankruptcy Court for the District of Delaware on May 17, 2019 and approved by the United States District Court for the District of Delaware on June 27, 2019. On July 9, 2019, the company contributed cash and repaid a loan to Maremont and Maremont funded the 524(g) Trust with such cash and its other assets, including its existing insurance policies. As a result, all current and future asbestos claims related to the Maremont’s historical asbestos-related activities have been channeled to the 524(g) Trust, which will process and satisfy all such claims going forward pursuant to its resolution and payment procedures.

Pending and Future Claims as of September 2018: Previously, Maremont engaged a third-party advisor with extensive experience in assessing asbestos-related liabilities to conduct a study to estimate its potential undiscounted liability for pending and future asbestos-related claims. Management continuously monitored the underlying claims data and experience, for the purpose of assessing the appropriateness of the assumptions used to estimate the liability.

31

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of September 30, 2018, the estimated range of equally likely possibilities of Maremont’s obligation for asbestos-related claims over the next 41 years was $107 million to $195 million. Based on the information contained in the actuarial study, and all other available information considered, Maremont concluded that no amount within the range of potential liability was more likely than any other and, therefore, recorded a liability at the low end of the range. Maremont recognized a liability for pending and future claims over the next 41 years of $107 million as of September 30, 2018.

Recoveries as of September 2018: Maremont had historically had insurance that reimburses a meaningful portion of the costs incurred defending against asbestos-related claims. The expected insurance receivable related to future asbestos-related liabilities was $24 million as of September 30, 2018.

     Rockwell International Corporation ("Rockwell") — ArvinMeritor, Inc. ("AM"), a predecessor of Meritor, along with many other companies, has also been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos used in certain components of Rockwell products many years ago. Liability for these claims was transferred at the time of the spin-off of the automotive business from Rockwell in 1997. There were approximately 1,400 pending active asbestos claims in lawsuits that name AM, together with many other companies, as defendants at June 30, 2019 and September 30, 2018.

A significant portion of the claims do not identify any Rockwell products or specify which of the claimants, if any, were exposed to asbestos attributable to Rockwell products, and past experience has shown that the vast majority of the claimants will likely never identify any of Rockwell products. Historically, AM has been dismissed from the vast majority of similar claims filed in the past with no payment to claimants. For those claimants who do show that they worked with Rockwell products, management nevertheless believes it has meritorious defenses, in substantial part due to the integrity of the products involved and the lack of any impairing medical condition on the part of many claimants.

Pending and Future Claims: The company engaged a third-party advisor with extensive experience in assessing asbestos-related liabilities to conduct a study to estimate its potential undiscounted liability for pending and future asbestos-related claims as of September 30, 2018. Management continuously monitors the underlying claims data and experience for the purpose of assessing the appropriateness of the assumptions used to estimate the liability.

As of September 30, 2018, the estimated probable range of equally likely possibilities of the company’s obligation for asbestos-related claims over the next 41 years is $103 million to $186 million. Based on the information contained in the actuarial study, and all other available information considered, management concluded that no amount within the range of potential liability was more likely than any other and, therefore, recorded a liability at the low end of the range. The company recognized a liability for pending and future claims over the next 41 years of $100 million as of June 30, 2019 and $103 million as of September 30, 2018.

Recoveries: AM has insurance coverage that management believes covers indemnity and defense costs, over and above self-insurance retentions, for a significant portion of these claims. The insurance receivables for Rockwell asbestos-related liabilities totaled $65 million and $68 million as of June 30, 2019 and September 30, 2018, respectively.

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 and recoveries for asbestos-related claims are subject to considerable uncertainty because such liabilities and recoveries are influenced by variables that are difficult to predict. The future litigation environment for Rockwell could change significantly from its past experience, due, for example, to changes in the mix of claims filed against Rockwell in terms of plaintiffs’ law firm, jurisdiction and disease; legislative or regulatory developments; the company’s approach to defending claims; or payments to plaintiffs from other defendants. Estimated recoveries are influenced by coverage issues among insurers and the continuing solvency of various insurance companies. If the assumptions with respect to the estimation period, the nature of pending claims, the cost to resolve claims and the amount of available insurance prove to be incorrect, the actual amount of liability for Rockwell asbestos-related claims, and the effect on the company, could differ materially from current estimates and, therefore, could have a material impact on the company’s financial condition and results of operations.

Indemnifications

The company has provided indemnities in conjunction with certain transactions, primarily divestitures. These indemnities address a variety of matters, which may include environmental, tax, asbestos and employment-related matters, and the periods of indemnification vary in duration.

   The company is not aware of any claims or other information that would give rise to material payments under such indemnification obligations.

32

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Other

In addition, various lawsuits, claims and proceedings, other than those specifically disclosed in the Condensed Consolidated Financial Statements, have been or may be instituted or asserted against the company, relating to the conduct of the company’s business, including those pertaining to product liability, warranty or recall claims, intellectual property, safety and health, contract and employment matters. Although the outcome of other 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 effect on the company’s business, financial condition, results of operations or cash flows. 

22. Shareholders' Equity

There were no dividends declared or paid in the first, second or third quarter of fiscal years 2019 and 2018. The payment of cash dividends and the amount of any dividend are subject to review and change at the discretion of the company's Board of Directors.

Common Stock and Debt Repurchase Authorizations

On July 26, 2019, the Board of Directors authorized the repurchase of up to $250 million of the company’s common stock from time to time through open market purchases, privately negotiated transactions or otherwise, subject to compliance with legal and regulatory requirements and the company’s debt covenants. This authorization supersedes the remaining authority under the prior November 2018 equity repurchase authorization described below.

On November 2, 2018, the Board of Directors authorized the repurchase of up to $200 million of the company's common stock and up to $100 million aggregate principal amount of any of the company's debt securities (including convertible debt securities), in each case from time to time through open market purchases, privately negotiated transactions or otherwise, subject to compliance with legal and regulatory requirements and the company's debt covenants. These repurchase authorizations superseded the remaining authority under the prior July 2016 repurchase authorizations described below. In the first quarter of fiscal year 2019, the company repurchased 3.0 million shares of common stock for $50 million (including commission costs) pursuant to the common stock repurchase authorization. In the third quarter of fiscal year 2019, the company repurchased 1.0 million shares of common stock for $21 million (including commission costs) pursuant to the common stock repurchase authorization. In the second quarter of fiscal year 2019, the company redeemed $19 million aggregate principal amount outstanding of the 4.0 Percent Convertible Notes pursuant to the debt repurchase authorization. In the third quarter of fiscal year 2019, the company redeemed the remaining $5 million aggregate principal amount of the outstanding 4.0 Percent Convertible Notes pursuant to the debt repurchase authorization. As of June 30, 2019, the amounts remaining available for repurchases were $130 million under this common stock repurchase authorization and $76 million under this debt repurchase authorization.

On July 21, 2016, the Board of Directors authorized the repurchase of up to $100 million of the company’s common stock and up to $150 million aggregate principal amount of any of the company’s debt securities (including convertible debt securities), in each case from time to time through open market purchases, privately negotiated transactions or otherwise, until September 30, 2019, subject to compliance with legal and regulatory requirements and the company's debt covenants. The repurchase program under the $100 million equity repurchase authorization was complete as of September 30, 2018. The amount remaining available for repurchases under the debt repurchase authorization was $50 million as of September 30, 2018.

33

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accumulated Other Comprehensive Loss ("AOCL")

The components of AOCL and the changes in AOCL by components, net of tax, for the three months ended June 30, 2019 and 2018 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Income (Loss) on cash flow hedges			Total
Balance at March 31, 2019	$	(87	)	$	(475	)	$	—		$	(562	)
Other comprehensive income before reclassification	(6		)	—			—			(6		)
Amounts reclassified from accumulated other comprehensive loss	—			1			(2		)	(1		)
Net current-period other comprehensive income	$	(6	)	$	1		$	(2	)	$	(7	)
Balance at June 30, 2019	$	(93	)	$	(474	)	$	(2	)	$	(569	)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(9	)	(a)
Actuarial losses	10			(a)
	1			Total before tax
	—			Tax benefit
Total reclassifications for the period	$	1		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 for additional details), which is recorded in other operating income (expense).

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Income (Loss) on cash flow hedges			Total
Balance at March 31, 2018	$	(35	)	$	(494	)	$	(1	)	$	(530	)
Other comprehensive income before reclassification	(52		)	—			1			(51		)
Amounts reclassified from accumulated other comprehensive loss	—			3			—			3
Net current-period other comprehensive income	$	(52	)	$	3		$	1		$	(48	)
Balance at June 30, 2018	$	(87	)	$	(491	)	$	—		$	(578	)

34

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(9	)	(b)
Actuarial losses	$	12		(b)
	3			Total before tax
	—			Tax benefit
Total reclassifications for the period	$	3		Net of tax
(b)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 for additional details), which is recorded in other operating income (expense).

The components of AOCL and the changes in AOCL by components, net of tax, for the nine months ended June 30, 2019 and 2018 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Income (Loss) on cash flow hedges			Total
Balance at September 30, 2018	$	(90	)	$	(476	)	$	—		$	(566	)
Other comprehensive income before reclassification	(3		)	(1		)	—			(4		)
Amounts reclassified from accumulated other comprehensive loss	—			3			(2		)	1
Net current-period other comprehensive income	$	(3	)	$	2		$	(2	)	$	(3	)
Balance at June 30, 2019	$	(93	)	$	(474	)	$	(2	)	$	(569	)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(26	)	(a)
Actuarial losses	29			(a)
	3			Total before tax
	—			Tax benefit
Total reclassifications for the period	$	3		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 for additional details), which is recorded in other operating income (expense).

35

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Income (Loss) on cash flow hedges			Total
Balance at September 30, 2017	$	(41	)	$	(500	)	$	(4	)	$	(545	)
Other comprehensive income before reclassification	(46		)	1			4			(41		)
Amounts reclassified from accumulated other comprehensive loss	—			8			—			8
Net current-period other comprehensive income	$	(46	)	$	9		$	4		$	(33	)
Balance at June 30, 2018	$	(87	)	$	(491	)	$	—		$	(578	)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(26	)	(a)
Actuarial losses	34			(a)
	8			Total before tax
	(1		)	Tax benefit
Total reclassifications for the period	$	7		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 for additional details), which is recorded in other operating income (expense).

23. Business Segment Information

The company defines its operating segments as components of its business where separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The company’s Chief Operating Decision Maker ("CODM") is the Chief Executive Officer.

In the second quarter of fiscal year 2019, the company realigned its operations resulting in a change to its operating and reportable segments. As of the second quarter of fiscal year 2019, the reportable segments are (1) Commercial Truck and (2) Aftermarket, Industrial and Trailer. Prior year reportable segment financial results have been recast for these changes.

      The company has two reportable segments at June 30, 2019, as follows:

• The Commercial Truck segment supplies drivetrain systems and components, including axles, drivelines and braking and suspension systems, primarily for medium- and heavy-duty trucks and other applications in North America, South America, Europe and Asia Pacific. This segment also includes the company's aftermarket businesses in Asia Pacific and South America.

• The Aftermarket, Industrial and Trailer segment supplies axles, brakes, drivelines, suspension parts and other replacement parts to commercial vehicle and industrial aftermarket customers, primarily in North America and Europe. In addition, this segment supplies drivetrain systems and certain components, including axles, drivelines, brakes and suspension systems for military, construction, bus and coach, fire and emergency and other applications in North America and Europe. It also supplies a variety of undercarriage products and systems for trailer applications in North America.

     Segment adjusted EBITDA is defined as income (loss) from continuing operations before interest expense, income taxes, depreciation and amortization, non-controlling interests in consolidated joint ventures, loss on sale of receivables, restructuring expense, asset impairment charges and other special items as determined by management. Segment adjusted EBITDA excludes unallocated legacy and corporate income (expense), net. The company uses segment adjusted EBITDA as the primary basis for the CODM to evaluate the performance of each of its reportable segments.

     The accounting policies of the segments are the same as those applied in the Condensed Consolidated Financial Statements, except for the use of segment adjusted EBITDA. The company may allocate certain common costs, primarily corporate functions,

36

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

between the segments differently than the company would for stand alone financial information prepared in accordance with GAAP. These allocated costs include expenses for shared services such as information technology, finance, communications, legal and human resources. The company does not allocate interest expense and certain legacy and other corporate costs not directly associated with the segment.

     Segment information is summarized as follows (in millions):

	Commercial Truck		Aftermarket, Industrial and Trailer		Eliminations			Total
Three Months Ended June 30, 2019
External Sales	$	835	$	331	$	—		$	1,166
Intersegment Sales	34		9		(43		)	—
Total Sales	$	869	$	340	$	(43	)	$	1,166
Three Months Ended June 30, 2018 (1)
External Sales	$	819	$	310	$	—		$	1,129
Intersegment Sales	35		9		(44		)	—
Total Sales	$	854	$	319	$	(44	)	$	1,129
	Commercial Truck		Aftermarket, Industrial and Trailer		Eliminations			Total
Nine Months Ended June 30, 2019
External Sales	$	2,416	$	944				$	3,360
Intersegment Sales	108		28		(136		)	—
Total Sales	$	2,524	$	972	$	(136	)	$	3,360
Nine Months Ended June 30, 2018 (1)
External Sales	$	2,254	$	844	$	—		$	3,098
Intersegment Sales	102		25		(127		)	—
Total Sales	$	2,356	$	869	$	(127	)	$	3,098

⁽¹⁾ Amounts for the three and nine months ended June 30, 2018 have been recast to reflect reportable segment changes.

37

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2019			2018 (3)			2019			2018 (3)
Segment adjusted EBITDA:
Commercial Truck	$	93		$	100		$	258		$	263
Aftermarket, Industrial and Trailer	54			38			146			108
Segment adjusted EBITDA	147			138			404			371
Unallocated legacy and corporate expense, net (1)	(1		)	(3		)	—			(15		)
Interest expense, net	(14		)	(14		)	(43		)	(54		)
Provision for income taxes	(21		)	(26		)	(69		)	(131		)
Depreciation and amortization	(21		)	(22		)	(64		)	(64		)
Noncontrolling interests	(3		)	(3		)	(7		)	(8		)
Loss on sale of receivables	(2		)	(1		)	(5		)	(3		)
Asset impairment charges	(1		)	—			(1		)	(2		)
Restructuring	1			(3		)	2			(6		)
Asbestos related liability remeasurement (2)	—			—			31			—
Income from continuing operations attributable to Meritor, Inc.	$	85		$	66		$	248		$	88

⁽¹⁾  Unallocated legacy and corporate income (expense), net represents items that are not directly related to the company's business segments. These items primarily include asbestos-related charges and settlements, pension and retiree medical costs associated with sold businesses, and other legacy costs for environmental and product liability.

⁽²⁾ The nine months ended June 30, 2019 includes $31 million related to the remeasurement of the Maremont asbestos liability based on the Maremont prepackaged plan of reorganization.

⁽³⁾  Amounts for the three and nine months ended June 30, 2018 have been recast to reflect reportable segment changes.

	June 30, 2019			September 30, 2018 (3)
Segment Assets:
Commercial Truck	$	1,846		$	1,764
Aftermarket, Industrial and Trailer	609			589
Total segment assets	2,455			2,353
Corporate (1)	567			633
Less: Accounts receivable sold under off-balance sheet factoring programs (2)	(294		)	(260		)
Total assets	$	2,728		$	2,726

⁽¹⁾  Corporate assets consist primarily of cash, deferred income taxes and prepaid pension costs.

⁽²⁾  At June 30, 2019 and September 30, 2018, segment assets include $294 million and $260 million, respectively, of accounts receivable sold under off-balance sheet accounts receivable factoring programs (see Note 10). These sold receivables are included in segment assets as the CODM reviews segment assets inclusive of these balances.

⁽³⁾  Amounts as of September 30, 2018 have been recast to reflect reportable segment changes, including the reallocation of goodwill.

38

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

24. Supplemental Guarantor Condensed Consolidating Financial Statements

Rule 3-10 of Regulation S-X requires that separate financial information for issuers and guarantors of registered securities be filed in certain circumstances. Certain of the company's 100-percent-owned subsidiaries, as defined in the credit agreement (the "Guarantors"), irrevocably and unconditionally guarantee amounts outstanding under the senior secured revolving credit facility on a joint and several basis. Similar subsidiary guarantees were provided for the benefit of the holders of the notes outstanding under the company's indentures (see Note 18).

In lieu of providing separate audited financial statements for Meritor, Inc. (the "Parent") and Guarantors, the company has included the accompanying condensed consolidating financial statements as permitted by Regulation S-X Rules 3-10. These condensed consolidating financial statements are presented on the equity method. Under this method, the investments in subsidiaries are recorded at cost and adjusted for the Parent's share of the subsidiary's cumulative results of operations, capital contributions and distribution and other equity changes. The Guarantors are combined in the condensed consolidating financial statements.

39

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In millions)

(Unaudited)

	Three Months Ended June 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	696		$	470		$	—		$	1,166
Subsidiaries	—			24			46			(70		)	—
Total sales	—			720			516			(70		)	1,166
Cost of sales	(17		)	(599		)	(441		)	70			(987		)
GROSS MARGIN	(17		)	121			75			—			179
Selling, general and administrative	(30		)	(28		)	(15		)	—			(73		)
Restructuring	—			1			—			—			1
Other operating expense, net	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(50		)	94			60			—			104
Other income (expense), net	14			(2		)	(2		)	—			10
Equity in earnings of affiliates	—			6			3			—			9
Interest income (expense), net	(32		)	11			7			—			(14		)
INCOME (LOSS) BEFORE INCOME TAXES	(68		)	109			68			—			109
Benefit (provision) for income taxes	19			(18		)	(22		)	—			(21		)
Equity income from continuing operations of subsidiaries	134			37			—			(171		)	—
INCOME FROM CONTINUING OPERATIONS	85			128			46			(171		)	88
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax	1			—			—			—			1
NET INCOME	86			128			46			(171		)	89
Less: Net income attributable to noncontrolling interests	—			—			(3		)	—			(3		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	86		$	128		$	43		$	(171	)	$	86

40

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Three Months Ended June 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	86		$	128		$	46		$	(171	)	$	89
Other comprehensive loss, net of tax	(7		)	(2		)	(3		)	4			(8		)
Total comprehensive income	79			126			43			(167		)	81
Less: Comprehensive income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
Comprehensive income attributable to Meritor, Inc.	$	79		$	126		$	41		$	(167	)	$	79

41

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In millions)

(Unaudited)

	Three Months Ended June 30, 2018 (1)
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	629		$	500		$	—		$	1,129
Subsidiaries	—			40			61			(101		)	—
Total sales	—			669			561			(101		)	1,129
Cost of sales	(20		)	(559		)	(481		)	101			(959		)
GROSS MARGIN	(20		)	110			80			—			170
Selling, general and administrative	(30		)	(27		)	(19		)	—			(76		)
Restructuring	(2		)	(1		)	—			—			(3		)
OPERATING INCOME (LOSS)	(52		)	82			61			—			91
Other income (expense), net	28			(15		)	(4		)	—			9
Equity in earnings of affiliates	—			6			3			—			9
Interest income (expense), net	(26		)	6			6			—			(14		)
INCOME (LOSS) BEFORE INCOME TAXES	(50		)	79			66			—			95
Benefit (provision) for income taxes	7			(13		)	(20		)	—			(26		)
Equity income from continuing operations of subsidiaries	109			39			—			(148		)	—
INCOME FROM CONTINUING OPERATIONS	66			105			46			(148		)	69
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(2		)	(2		)	(2		)	4			(2		)
NET INCOME	64			103			44			(144		)	67
Less: Net income attributable to noncontrolling interests	—			—			(3		)	—			(3		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	64		$	103		$	41		$	(144	)	$	64

⁽¹⁾ Prior period has been recast, see Note 20.

42

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Three Months Ended June 30, 2018
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	64		$	103		$	44		$	(144	)	$	67
Other comprehensive loss, net of tax	(48		)	(57		)	(8		)	63			(50		)
Total comprehensive income	16			46			36			(81		)	17
Less: Comprehensive income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
Comprehensive income attributable to Meritor, Inc.	$	16		$	46		$	35		$	(81	)	$	16

43

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In millions)

(Unaudited)

	Nine Months Ended June 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,962		$	1,398		$	—		$	3,360
Subsidiaries	—			84			154			(238		)	—
Total sales	—			2,046			1,552			(238		)	3,360
Cost of sales	(48		)	(1,723		)	(1,333		)	238			(2,866		)
GROSS MARGIN	(48		)	323			219			—			494
Selling, general and administrative	(83		)	(85		)	(12		)	—			(180		)
Restructuring	—			1			1			—			2
Other operating expense, net	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(134		)	239			208			—			313
Other income (expense), net	64			(11		)	(23		)	—			30
Equity in earnings of affiliates	—			16			8			—			24
Interest income (expense), net	(97		)	35			19			—			(43		)
INCOME (LOSS) BEFORE INCOME TAXES	(167		)	279			212			—			324
Benefit (provision) for income taxes	50			(52		)	(67		)	—			(69		)
Equity income from continuing operations of subsidiaries	365			86			—			(451		)	—
INCOME FROM CONTINUING OPERATIONS	248			313			145			(451		)	255
LOSS FROM DISCONTINUED OPERATIONS, net of tax	—			—			—			—			—
NET INCOME	248			313			145			(451		)	255
Less: Net income attributable to noncontrolling interests	—			—			(7		)	—			(7		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	248		$	313		$	138		$	(451	)	$	248

44

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Nine Months Ended June 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	248		$	313		$	145		$	(451	)	$	255
Other comprehensive loss, net of tax	(3		)	(9		)	(11		)	20			(3		)
Total comprehensive income	245			304			134			(431		)	252
Less: Comprehensive income attributable to noncontrolling interests	—			—			(7		)	—			(7		)
Comprehensive income attributable to Meritor, Inc.	$	245		$	304		$	127		$	(431	)	$	245

45

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In millions)

(Unaudited)

	Nine Months Ended June 30, 2018 (1)
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,663		$	1,435		$	—		$	3,098
Subsidiaries	—			107			159			(266		)	—
Total sales	—			1,770			1,594			(266		)	3,098
Cost of sales	(57		)	(1,477		)	(1,357		)	266			(2,625		)
GROSS MARGIN	(57		)	293			237			—			473
Selling, general and administrative	(90		)	(74		)	(54		)	—			(218		)
Restructuring	(2		)	(2		)	(2		)	—			(6		)
Other operating expense, net	(10		)	(1		)	(1		)	—			(12		)
OPERATING INCOME (LOSS)	(159		)	216			180			—			237
Other income (expense), net	70			(10		)	(36		)	—			24
Equity in earnings of affiliates	—			14			6			—			20
Interest income (expense), net	(91		)	21			16			—			(54		)
INCOME (LOSS) BEFORE INCOME TAXES	(180		)	241			166			—			227
Provision for income taxes	(8		)	(75		)	(48		)	—			(131		)
Equity income from continuing operations of subsidiaries	276			100			—			(376		)	—
INCOME FROM CONTINUING OPERATIONS	88			266			118			(376		)	96
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(3		)	(2		)	(2		)	4			(3		)
NET INCOME	85			264			116			(372		)	93
Less: Net income attributable to noncontrolling interests	—			—			(8		)	—			(8		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	85		$	264		$	108		$	(372	)	$	85

⁽¹⁾ Prior period has been recast, see Note 20.

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MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Nine Months Ended June 30, 2018
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	85		$	264		$	116		$	(372	)	$	93
Other comprehensive income (loss), net of tax	(33		)	(45		)	6			38			(34		)
Total comprehensive income	52			219			122			(334		)	59
Less: Comprehensive income attributable to noncontrolling interests	—			—			(7		)	—			(7		)
Comprehensive income attributable to Meritor, Inc.	$	52		$	219		$	115		$	(334	)	$	52

47

MERITOR, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

(In millions)

(Unaudited)

	June 30, 2019
	Parent		Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	27	$	5		$	79	$	—		$	111
Receivables trade and other, net	3		81			541		—			625
Inventories	—		260			231		—			491
Other current assets	4		11			17		—			32
TOTAL CURRENT ASSETS	34		357			868		—			1,259
NET PROPERTY	21		240			220		—			481
GOODWILL	—		254			167		—			421
OTHER ASSETS	147		189			231		—			567
INVESTMENTS IN SUBSIDIARIES	4,188		960			—		(5,148		)	—
TOTAL ASSETS	$	4,390	$	2,000		$	1,486	$	(5,148	)	$	2,728
CURRENT LIABILITIES:
Short-term debt	$	23	$	—		$	1	$	—		$	24
Accounts and notes payable	54		292			345		—			691
Other current liabilities	144		65			87		—			296
TOTAL CURRENT LIABILITIES	221		357			433		—			1,011
LONG-TERM DEBT	730		—			4		—			734
RETIREMENT BENEFITS	218		—			20		—			238
INTERCOMPANY PAYABLE (RECEIVABLE)	2,691		(2,856		)	165		—			—
OTHER LIABILITIES	55		118			61		—			234
MEZZANINE EQUITY	1		—			—		—			1
EQUITY ATTRIBUTABLE TO MERITOR, INC.	474		4,381			767		(5,148		)	474
NONCONTROLLING INTERESTS	—		—			36		—			36
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY	$	4,390	$	2,000		$	1,486	$	(5,148	)	$	2,728

48

MERITOR, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

(In millions)

(Unaudited)

	September 30, 2018
	Parent		Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	24	$	6		$	85	$	—		$	115
Receivables trade and other, net	2		62			524		—			588
Inventories	—		242			235		—			477
Other current assets	6		12			28		—			46
TOTAL CURRENT ASSETS	32		322			872		—			1,226
NET PROPERTY	24		241			218		—			483
GOODWILL	—		250			171		—			421
OTHER ASSETS	179		182			235		—			596
INVESTMENTS IN SUBSIDIARIES	3,583		855			—		(4,438		)	—
TOTAL ASSETS	$	3,818	$	1,850		$	1,496	$	(4,438	)	$	2,726
CURRENT LIABILITIES:
Short-term debt	$	47	$	—		$	47	$	—		$	94
Accounts and notes payable	64		297			339		—			700
Other current liabilities	77		71			142		—			290
TOTAL CURRENT LIABILITIES	188		368			528		—			1,084
LONG-TERM DEBT	726		—			4		—			730
RETIREMENT BENEFITS	241		—			21		—			262
INTERCOMPANY PAYABLE (RECEIVABLE)	2,325		(2,640		)	315		—			—
OTHER LIABILITIES	50		124			158		—			332
MEZZANINE EQUITY	1		—			—		—			1
EQUITY ATTRIBUTABLE TO MERITOR, INC.	287		3,998			440		(4,438		)	287
NONCONTROLLING INTERESTS	—		—			30		—			30
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY	$	3,818	$	1,850		$	1,496	$	(4,438	)	$	2,726

49

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In millions)

(Unaudited)

	Nine Months Ended June 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY OPERATING ACTIVITIES	$	8		$	32		$	154		$	—	$	194
INVESTING ACTIVITIES
Capital expenditures	(2		)	(32		)	(29		)	—		(63		)
Cash paid for investment in Transportation Power, Inc.	(6		)	—			—			—		(6		)
Proceeds from settlement of cross-currency swaps	17			—			—			—		17
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	9			(32		)	(29		)	—		(52		)
FINANCING ACTIVITIES
Borrowings and securitization	—			—			(46		)	—		(46		)
Redemption of notes	(24		)	—			—			—		(24		)
Deferred issuance costs	(4		)	—			—			—		(4		)
Repurchase of common stock	(71		)	—			—			—		(71		)
Intercompany advances	86			—			(86		)	—		—
Other financing activities	(1		)	(1		)	—			—		(2		)
CASH USED FOR FINANCING ACTIVITIES	(14		)	(1		)	(132		)	—		(147		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	3			(1		)	(6		)	—		(4		)
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	24			6			85			—		115
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	27		$	5		$	79		$	—	$	111

50

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In millions)

(Unaudited)

	Nine Months Ended June 30, 2018
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR)        OPERATING ACTIVITIES	$	(26	)	$	31		$	186		$	—	$	191
INVESTING ACTIVITIES
Capital expenditures	(3		)	(25		)	(24		)	—		(52		)
Proceeds from sale of a business	4			—			—			—		4
Proceeds from prior year sale of equity method investment	250			—			—			—		250
Cash paid for investment in Transportation Power, Inc.	(6		)	—			—			—		(6		)
Cash paid for acquisition of AA Gear & Manufacturing, Inc.	(36		)	—			—			—		(36		)
Proceeds from sale of assets	—			—			2			—		2
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	209			(25		)	(22		)	—		162
FINANCING ACTIVITIES
Borrowings and securitization	—			—			(89		)	—		(89		)
Redemption of notes	(181		)	—			—			—		(181		)
Repurchase of common stock	(63		)	—			—			—		(63		)
Intercompany advances	67			—			(67		)	—		—
Other financing activities	(1		)	(2		)	—			—		(3		)
CASH USED FOR FINANCING ACTIVITIES	(178		)	(2		)	(156		)	—		(336		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			(5		)	—		(5		)
CHANGE IN CASH AND CASH EQUIVALENTS	5			4			3			—		12
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	10			3			75			—		88
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	15		$	7		$	78		$	—	$	100

Basis of Presentation

Certain information and footnote disclosures normally included in financial statements prepared in conformity with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. As of June 30, 2019 and September 30, 2018, Parent-only obligations included $224 million and $248 million of pension and retiree medical benefits, respectively (see Note 20). All debt is debt of the Parent other than $5 million and $51 million at June 30, 2019 and September 30, 2018, respectively (see Note 18), and is primarily related to U.S. accounts receivable securitization and capital lease obligations. There were $29 million of cash dividends paid to the Parent by subsidiaries and investments accounted for by the equity method for the nine months ended June 30, 2019 and June 30, 2018, respectively.

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MERITOR, INC.

Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations

OVERVIEW

Meritor, Inc. (the "company," "our," "we" or "Meritor"), headquartered in Troy, Michigan, is a premier global supplier of a broad range of integrated systems, modules and components to original equipment manufacturers ("OEMs") and the aftermarket for the commercial vehicle, transportation and industrial sectors. The company serves commercial truck, trailer, military, bus and coach, construction, and other industrial OEMs and certain aftermarkets. Meritor common stock is traded on the New York Stock Exchange under the ticker symbol MTOR.

3rd Quarter Fiscal Year 2019 Results

Our sales for the third quarter of fiscal year 2019 were $1,166 million, an increase compared to $1,129 million in the same period in the prior fiscal year. The increase in sales was driven by higher truck production, primarily in North America, partially offset by the strengthening of the U.S. dollar against most currencies.

Net income attributable to Meritor for the third quarter of fiscal year 2019 was $86 million compared to $64 million in the same period in the prior fiscal year. Higher net income year over year was primarily attributable to conversion on increased revenue and lower income tax expense.

Adjusted EBITDA (see Non-GAAP Financial Measures below) for the third quarter of fiscal year 2019 was $146 million compared to $135 million in the same period in the prior fiscal year. Our adjusted EBITDA margin (see Non-GAAP Financial Measures below) in the third quarter of fiscal year 2019 was 12.5 percent compared to 12.0 percent in the same period in the prior fiscal year. The increase in adjusted EBITDA and adjusted EBITDA margin year over year was driven primarily by conversion on higher revenue and the impact of Aftermarket pricing actions implemented earlier this year, partially offset by higher material costs.

Net income from continuing operations attributable to the company for the third quarter of fiscal year 2019 was $85 million compared to $66 million in the same period in the prior fiscal year. Adjusted income from continuing operations attributable to the company (see Non-GAAP Financial Measures below) for the third quarter of fiscal year 2019 was $103 million compared to $80 million in the same period in the prior fiscal year.

Cash provided by operating activities was $143 million in the third quarter of fiscal year 2019 compared to $119 million in the third quarter of fiscal year 2018. Higher earnings helped drive cash flow performance in the third quarter of fiscal year 2019.

Equity Repurchase Authorization

On July 26, 2019, our Board of Directors authorized the repurchase of up to $250 million of our common stock from time to time through open market purchases, privately negotiated transactions or otherwise, subject to compliance with legal and regulatory requirements and our debt covenants. This authorization supersedes the remaining authority under the prior November 2018 equity repurchase authorization described below.

In the third quarter of fiscal year 2019, we repurchased 1.0 million shares of our common stock for $21 million (including commission costs) pursuant to the November 2018 equity repurchase authorization described in the Liquidity section below. The amount remaining available for repurchases under that repurchase authorization was $130 million as of June 30, 2019.

Acquisition of AxleTech Business

On July 26, 2019, we acquired 100 percent of AxleTech's shares for approximately $175 million in cash, subject to certain purchase price adjustments. The addition of AxleTech enhances our growth platform with the addition of a complementary product portfolio that includes a full line of independent suspensions, axles, braking solutions and drivetrain components across the off-highway, defense, specialty and aftermarket markets.

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MERITOR, INC.

Trends and Uncertainties

     Industry Production Volumes

     The following table reflects estimated on-highway commercial truck production volumes for selected original equipment markets for the three and nine months ended June 30, 2019 and 2018 based on available sources and management’s estimates.

	Three Months Ended June 30,		Percent		Nine Months Ended June 30,		Percent
	2019	2018	Change		2019	2018	Change
Estimated Commercial Truck production (in thousands):
North America, Heavy-Duty Trucks	93	78	19	%	266	218	22	%
North America, Medium-Duty Trucks	77	72	7	%	212	194	9	%
North America, Trailers	86	81	6	%	250	227	10	%
Western Europe, Heavy- and Medium-Duty Trucks	125	124	1	%	392	367	7	%
South America, Heavy- and Medium-Duty Trucks	31	25	24	%	85	74	15	%
India, Heavy- and Medium-Duty Trucks	110	113	(3	)%	343	342	—	%

North America:

During the fourth quarter of fiscal year 2019, we expect production volumes to remain relatively consistent with the levels

experienced in the first nine months of fiscal year 2019.

Western Europe:

During the fourth quarter of fiscal year 2019, we expect production volumes in Western Europe to decrease slightly from the

levels experienced in the first nine months of fiscal year 2019, due to the normal impact of the European summer holidays.

South America:

During the fourth quarter of fiscal year 2019, we expect production volumes to remain relatively consistent with the levels

experienced in the first nine months of fiscal year 2019.

China:

During the fourth quarter of fiscal year 2019, we expect production volumes to decrease from the levels experienced in the

first nine months of fiscal year 2019.

India:

During the fourth quarter of fiscal year 2019, we expect production volumes to decrease from the levels experienced in the

first nine months of fiscal year 2019.

Industry-Wide Issues

Our business continues to address a number of challenging industry-wide issues, including the following:

• Uncertainty around the global market outlook;

• Volatility in price and availability of steel, components and other commodities;

• Potential for disruptions in the financial markets and their impact on the availability and cost of credit;

• Volatile energy and transportation costs;

• Impact of currency exchange rate volatility; and

• Consolidation and globalization of OEMs and their suppliers.

Other

Other significant factors that could affect our results and liquidity include:

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MERITOR, INC.

• Significant contract awards or losses of existing contracts or failure to negotiate acceptable terms in contract renewals;

• Ability to successfully launch a significant number of new products, including potential product quality issues, and obtain new business;

• Ability to manage possible adverse effects on European markets or our European operations, or financing arrangements related thereto, following the United Kingdom's decision to exit the European Union, or in the event one or more other countries exit the European monetary union;

• Ability to further implement planned productivity, cost reduction, and other margin improvement initiatives;

• Ability to successfully execute and implement strategic initiatives;

• Ability to work with our customers to manage rapidly changing production volumes;

• Ability to recover, and timing of recovery of, steel price and other cost increases from our customers;

• Any unplanned extended shutdowns or production interruptions by us, our customers or our suppliers;

• A significant deterioration or slowdown in economic activity in the key markets in which we operate;

• Competitively driven price reductions to our customers;

• Potential price increases from our suppliers;

• Additional restructuring actions and the timing and recognition of restructuring charges, including any actions associated with prolonged softness in markets in which we operate;

• Higher-than-planned warranty expenses, including the outcome of known or potential recall campaigns;

• Uncertainties of asbestos claim, environmental and other legal proceedings, the long-term solvency of our insurance carriers, and the potential for higher-than-anticipated costs resulting from environmental liabilities, including those related to site remediation;

• Significant pension costs; and

• Restrictive government actions (such as restrictions on transfer of funds and trade protection measures, including import and export duties, quotas and customs duties and tariffs).

NON-GAAP FINANCIAL MEASURES

In addition to the results reported in accordance with accounting principles generally accepted in the United States ("GAAP"), we have provided information regarding non-GAAP financial measures. These non-GAAP financial measures include adjusted income (loss) from continuing operations attributable to the company, adjusted diluted earnings (loss) per share from continuing operations, adjusted EBITDA, adjusted EBITDA margin, segment adjusted EBITDA, segment adjusted EBITDA margin, free cash flow and net debt.

     Adjusted income (loss) from continuing operations attributable to the company and adjusted diluted earnings (loss) per share from continuing operations are defined as reported income (loss) from continuing operations and reported diluted earnings (loss) per share from continuing operations before restructuring expenses, asset impairment charges, non-cash tax expense related to the use of deferred tax assets in jurisdictions with net operating loss carry forwards or tax credits, and other special items as determined by management. Adjusted EBITDA is defined as income (loss) from continuing operations before interest, income taxes, depreciation and amortization, non-controlling interests in consolidated joint ventures, loss on sale of receivables, restructuring expenses, asset impairment charges and other special items as determined by management. Adjusted EBITDA margin is defined as adjusted EBITDA divided by consolidated sales from continuing operations. Segment adjusted EBITDA is defined as income (loss) from continuing operations before interest expense, income taxes, depreciation and amortization, noncontrolling interests in consolidated joint ventures, loss on sale of receivables, restructuring expense, asset impairment charges and other special items as determined by management. Segment adjusted EBITDA excludes unallocated legacy and corporate expense (income), net. Segment adjusted EBITDA margin is defined as segment adjusted EBITDA divided by consolidated sales from continuing operations, either in the aggregate or by segment as applicable. Free cash flow is defined as cash flows provided by (used for) operating activities less capital expenditures. Net debt is defined as total debt less cash and cash equivalents.

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MERITOR, INC.

     Management believes these non-GAAP financial measures are useful to both management and investors in their analysis of the company's financial position and results of operations. In particular, adjusted EBITDA, adjusted EBITDA margin, segment adjusted EBITDA, segment adjusted EBITDA margin, adjusted income (loss) from continuing operations attributable to the company and adjusted diluted earnings (loss) per share from continuing operations are meaningful measures of performance to investors as they are commonly utilized to analyze financial performance in our industry, perform analytical comparisons, benchmark performance between periods and measure our performance against externally communicated targets.

Free cash flow is used by investors and management to analyze our ability to service and repay debt and return value directly to shareholders. Net debt over adjusted EBITDA is a specific financial measure in our current M2019 plan used to measure the company’s leverage in order to assist management in its assessment of appropriate allocation of capital.

Management uses the aforementioned non-GAAP financial measures for planning and forecasting purposes, and segment adjusted EBITDA is also used as the primary basis for the Chief Operating Decision Maker ("CODM") to evaluate the performance of each of our reportable segments.

Our Board of Directors uses adjusted EBITDA margin, free cash flow, adjusted diluted earnings (loss) per share from continuing operations and net debt over adjusted EBITDA as key metrics to determine management’s performance under our performance-based compensation plans.

     Adjusted income (loss) from continuing operations attributable to the company, adjusted diluted earnings (loss) per share from continuing operations, adjusted EBITDA, adjusted EBITDA margin, segment adjusted EBITDA and segment adjusted EBITDA margin should not be considered a substitute for the reported results prepared in accordance with GAAP and should not be considered as an alternative to net income as an indicator of our financial performance. Free cash flow should not be considered a substitute for cash provided by (used for) operating activities, or other cash flow statement data prepared in accordance with GAAP, or as a measure of financial position or liquidity. In addition, this non-GAAP cash flow measure does not reflect cash used to repay debt or cash received from the divestitures of businesses or sales of other assets and thus does not reflect funds available for investment or other discretionary uses. Net debt should not be considered a substitute for total debt as reported on the balance sheet. These non-GAAP financial measures, as determined and presented by the company, may not be comparable to related or similarly titled measures reported by other companies. Set forth below are reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.

Adjusted income from continuing operations attributable to the company and adjusted diluted earnings per share from continuing operations are reconciled to Income from continuing operations attributable to the company and Diluted earnings per share from continuing operations below (in millions, except per share amounts).

	Three Months Ended June 30,						Nine Months Ended June 30,
	2019			2018			2019			2018
Income from continuing operations attributable to the company	$	85		$	66		$	248		$	88
Loss on debt extinguishment	—			—			—			8
Restructuring	(1		)	3			(2		)	6
Asset impairment charges, net of noncontrolling interests	1			—			1			2
Non-cash tax expense (1)	20			12			47			26
U.S. tax reform impacts (2)	(2		)	1			(9		)	77
Asbestos related liability remeasurement (3)	—			—			(31		)	—
Income tax expense (benefits) (4)	—			(2		)	6			(4		)
Adjusted income from continuing operations attributable to the company	$	103		$	80		$	260		$	203
Diluted earnings per share from continuing operations	$	0.99		$	0.73		$	2.86		$	0.96
Impact of adjustments on diluted earnings per share	0.21			0.16			0.14			1.27
Adjusted diluted earnings per share from continuing operations	$	1.20		$	0.89		$	3.00		$	2.23

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MERITOR, INC.

⁽¹⁾ Represents tax expense related to the use of deferred tax assets in jurisdictions with net operating loss carry forwards or tax credits.

⁽²⁾ The nine months ended June 30, 2019 includes $12 million of non-cash tax benefit related to the one time deemed repatriation of accumulated foreign earnings and $3 million of non-cash tax expense related to other adjustments. The nine months ended June 30, 2018 includes $43 million of non-cash tax expense related to the revaluation of our deferred tax assets and liabilities as a result of the U.S. tax reform and $34 million of non-cash tax expense related to the one time deemed repatriation of accumulated foreign earnings.

⁽³⁾ The nine months ended June 30, 2019 includes $31 million related to the remeasurement of the Maremont net asbestos liability based on the Maremont prepackaged plan of reorganization.

⁽⁴⁾ The nine months ended June 30, 2019 includes $6 million of income tax expense related to the remeasurement of the Maremont net asbestos liability based on the Maremont prepackaged plan of reorganization.

Free cash flow is reconciled to cash provided by operating activities below (in millions).

	Three Months Ended June 30,						Nine Months Ended June 30,
	2019			2018			2019			2018
Cash provided by operating activities	$	143		$	119		$	194		$	191
Capital expenditures	(19		)	(17		)	(63		)	(52		)
Free cash flow	$	124		$	102		$	131		$	139

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Adjusted EBITDA and segment adjusted EBITDA are reconciled to net income attributable to Meritor, Inc. below (dollars in millions).

	Three Months Ended June 30,						Nine Months Ended June 30,
	2019			2018			2019			2018
Net income attributable to Meritor, Inc.	$	86		$	64		$	248		$	85
Loss (income) from discontinued operations, net of tax, attributable to Meritor, Inc.	(1		)	2			—			3
Income from continuing operations, net of tax, attributable to Meritor, Inc.	$	85		$	66		$	248		$	88
Interest expense, net	14			14			43			54
Provision for income taxes	21			26			69			131
Depreciation and amortization	21			22			64			64
Noncontrolling interests	3			3			7			8
Loss on sale of receivables	2			1			5			3
Asset impairment charges	1			—			1			2
Asbestos related liability remeasurement	—			—			(31		)	—
Restructuring	(1		)	3			(2		)	6
Adjusted EBITDA	$	146		$	135		$	404		$	356
Adjusted EBITDA margin (1)	12.5		%	12.0		%	12.0		%	11.5		%
Unallocated legacy and corporate expense, net (2)	1			3			—			15
Segment adjusted EBITDA	$	147		$	138		$	404		$	371
Commercial Truck (3)
Segment adjusted EBITDA	$	93		$	100		$	258		$	263
Segment adjusted EBITDA margin (4)	10.7		%	11.7		%	10.2		%	11.2		%
Aftermarket, Industrial and Trailer (3)
Segment adjusted EBITDA	$	54		$	38		$	146		$	108
Segment adjusted EBITDA margin (4)	15.9		%	11.9		%	15.0		%	12.4		%

⁽¹⁾ Adjusted EBITDA margin equals adjusted EBITDA divided by consolidated sales from continuing operations.

⁽²⁾ Unallocated legacy and corporate expense (income), net represents items that are not directly related to the company's business segments. These items primarily include asbestos-related charges and settlements, pension and retiree medical costs associated with sold businesses, and other legacy costs for environmental and product liability.

⁽³⁾ Amounts for the three and nine months ended June 30, 2018 have been recast to reflect reportable segment changes.

⁽⁴⁾ Segment adjusted EBITDA margin equals segment adjusted EBITDA divided by consolidated sales from continuing operations, either in the aggregate or by segment as applicable

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Net debt is reconciled to total debt and adjusted EBITDA is reconciled to net income attributable to Meritor, Inc. below (dollars in millions).

	June 30, 2019			September 30, 2018
Short-term debt	$	24		$	94
Long-term debt	734			730
Total debt	758			824
Less: Cash and cash equivalents	(111		)	(115		)
Net debt	$	647		$	709

	Twelve Months Ended(1)			Twelve Months Ended
	June 30, 2019			September 30, 2018
Net income attributable to Meritor, Inc.	$	280		$	117
Loss from discontinued operations, net of tax, attributable to Meritor, Inc.	—			3
Income from continuing operations, net of tax, attributable to Meritor, Inc.	$	280		$	120
Interest expense, net	56			67
Provision for income taxes	87			149
Depreciation and amortization	84			84
Noncontrolling interests	8			9
Loss on sale of receivables	7			5
Asset impairment charges	2			3
Asbestos related liability remeasurement	(31		)	—
Asbestos related items	25			25
Pension settlement loss	6			6
Restructuring costs	(2		)	6
Adjusted EBITDA	$	522		$	474
Net debt over adjusted EBITDA	1.2			1.5

⁽¹⁾ Trailing-twelve-month period ended June 30, 2019 is used to measure the company's leverage in order to assist management in its assessment of appropriate allocation of capital as part of our current M2019 plan and is also used to assess management's performance under one of our performance-based compensation plans.

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Results of Operations

Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018

   Sales

The following table reflects total company and business segment sales for the three months ended June 30, 2019 and 2018 (dollars in millions). The reconciliation is intended to reflect the trend in business segment sales and to illustrate the impact that changes in foreign currency exchange rates, volumes and other factors had on sales. Business segment sales include intersegment sales.

	Three Months Ended June 30,									Dollar Change Due To
	2019		2018 (1)		Dollar Change			% Change		Currency			Volume/ Other
Sales:
Commercial Truck
North America	$	473	$	431	$	42		10	%	$	—		$	42
Europe	180		196		(16		)	(8	)%	(11		)	(5		)
South America	67		55		12			22	%	(7		)	19
China	44		53		(9		)	(17	)%	(3		)	(6		)
India	53		58		(5		)	(9	)%	(1		)	(4		)
Other	18		26		(8		)	(31	)%	(1		)	(7		)
Total External Sales	$	835	$	819	$	16		2	%	$	(23	)	$	39
Intersegment Sales	34		35		(1		)	(3	)%	(3		)	2
Total Sales	$	869	$	854	$	15		2	%	$	(26	)	$	41
Aftermarket, Industrial and Trailer
North America	$	308	$	279	$	29		10	%	$	(1	)	$	30
Europe	23		31		(8		)	(26	)%	(1		)	(7		)
Total External Sales	$	331	$	310	$	21		7	%	$	(2	)	$	23
Intersegment Sales	9		9		—			—	%	(2		)	2
Total Sales	$	340	$	319	$	21		7	%	$	(4	)	$	25
Total External Sales	$	1,166	$	1,129	$	37		3	%	$	(25	)	$	62

⁽¹⁾ Amounts for the three months ended June 30, 2018 have been recast to reflect reportable segment changes.

Commercial Truck sales were $869 million in the third quarter of fiscal year 2019, up 2 percent compared to the third quarter of fiscal year 2018. The increase in sales was driven primarily by increased production in North America, partially offset by the strengthening of the U.S. dollar against most currencies.

Aftermarket, Industrial and Trailer sales were $340 million in the third quarter of fiscal year 2019, up 7 percent compared to the third quarter of fiscal year 2018. Higher sales were driven by increased industrial volumes and pricing actions within our Aftermarket business.

Cost of Sales and Gross Profit

     Cost of sales primarily represents materials, labor and overhead production costs associated with the company’s products and production facilities. Cost of sales for the three months ended June 30, 2019 was $987 million compared to $959 million in the same period in the prior fiscal year, representing an increase of 3 percent, primarily driven by increased volumes. Total cost of sales was 84.6 and 84.9 percent of sales for the three-month periods ended June 30, 2019 and 2018, respectively.

     The following table summarizes significant factors contributing to the changes in costs of sales during the third quarter of fiscal year 2019 compared to the same quarter in the prior year (in millions):

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	Cost of Sales
Three Months Ended June 30, 2018 (1)	$	959
Volume, mix and other, net	60
Foreign exchange	(32		)
Three Months Ended June 30, 2019	$	987

⁽¹⁾ Amounts for the three months ended June 30, 2018 have been recast for ASU 2017-07, Compensation Retirement Benefits (Topic 715). $7 million was reclassified out of Cost of goods sold and into Non-operating income (expense).

     Changes in the components of cost of sales year over year are summarized as follows (in millions):

	Change in Cost of Sales
Higher material costs	$	38
Lower labor and overhead costs	(8		)
Other, net	(2		)
Total change in costs of sales	$	28

Material costs represent the majority of our cost of sales and include raw materials, composed primarily of steel, and purchased components. Material costs for the three months ended June 30, 2019 increased $38 million compared to the same period in the prior fiscal year primarily due to higher volumes and higher year-over-year steel prices.

Labor and overhead costs decreased by $8 million compared to the same period in the prior fiscal year.

Gross margin was $179 million and $170 million for the three-month periods ended June 30, 2019 and 2018, respectively. Gross margin as a percentage of sales was 15.4 and 15.1 percent for the three-month periods ended June 30, 2019 and 2018, respectively. Gross margin as a percentage of sales increased primarily due to conversion on higher revenue which was partially offset by higher material costs.

Other Income Statement Items

     Selling, general and administrative expenses ("SG&A") for the three months ended June 30, 2019 and 2018 are summarized as follows (dollars in millions):

	Three Months Ended
	June 30, 2019					June 30, 2018					Increase (Decrease)
SG&A	Amount			% of sales		Amount			% of sales		Amount			% of sales
Loss on sale of receivables	$	(2	)	(0.2	)%	$	(1	)	(0.1	)%	$	1		0.1 pts
Short and long-term variable compensation	(16		)	(1.4	)%	(16		)	(1.4	)%	—			0.0 pts
Asbestos related expense, net of asbestos related insurance recoveries	—			—	%	(3		)	(0.3	)%	(3		)	(0.3) pts
All other SG&A	(55		)	(4.7	)%	(56		)	(4.9	)%	(1		)	(0.2) pts
Total SG&A	$	(73	)	(6.3	)%	$	(76	)	(6.7	)%	$	(3	)	(0.4) pts

We recognized $3 million related to previous cash settlements with insurance companies for recoveries of defense and indemnity costs associated with asbestos liabilities in the third quarter of fiscal year 2018, which is included in Asbestos-related expense, net of asbestos-related insurance recoveries (see Note 21 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report).

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Other operating expense was $3 million in the third quarter of fiscal year 2019 and insignificant in the third quarter of fiscal year 2018. During the three months ended June 30, 2019, these costs primarily related to environmental remediation.

Operating income increased by $13 million from $91 million in the third quarter of fiscal year 2018 to $104 million in the same period in fiscal year 2019. Key items affecting operating income are discussed above.

Non-operating income increased by $1 million from $9 million in the third quarter of fiscal year 2018 to $10 million in the same period in fiscal year 2019. Amounts for the three months ended June 30, 2018 have been recast for ASU 2017-07, Compensation Retirement Benefits (Topic 715). For the three months ended June 30, 2018, $7 million was reclassified out of Cost of goods sold and into Non-operating income.

Equity in earnings of affiliates was $9 million in the third quarter of fiscal years 2019 and 2018.

Interest expense, net was $14 million in the third quarter of fiscal years 2019 and 2018.

Provision for income taxes was $21 million in the third quarter of fiscal year 2019 compared to $26 million in the same period in the prior fiscal year. Higher pre-tax income during the third quarter of fiscal year 2019 compared to the same quarter in the prior year was offset by a reduction in the current year annualized effective tax rate. Additionally, we recorded a $4 million tax charge related to a tax accrual recorded in the third quarter of fiscal year 2018, that did not repeat.

Income from continuing operations (before noncontrolling interests) was $88 million in the third quarter of fiscal year 2019 compared to $69 million in the third quarter of fiscal year 2018. The reasons for the increase are discussed above.

Net income attributable to Meritor, Inc. was $86 million in the third quarter of fiscal year 2019 compared to $64 million in the third quarter of fiscal year 2018. The various factors affecting net income are discussed above.

Segment Adjusted EBITDA and Segment Adjusted EBITDA Margins

     The following table reflects segment adjusted EBITDA and segment adjusted EBITDA margins for the three months ended June 30, 2019 and 2018 (dollars in millions).

	Segment adjusted EBITDA							Segment adjusted EBITDA margins
	Three Months Ended June 30,							Three Months Ended June 30,
	2019		2018 (1)		Change			2019		2018 (1)		Change
Commercial Truck	$	93	$	100	$	(7	)	10.7	%	11.7	%	(1.0) pts
Aftermarket, Industrial and Trailer	54		38		16			15.9	%	11.9	%	4.0 pts
Segment adjusted EBITDA	$	147	$	138	$	9		12.6	%	12.2	%	0.4 pts

⁽¹⁾ Amounts for the three months ended June 30, 2018 have been recast to reflect reportable segment changes.

     Significant items impacting year-over-year segment adjusted EBITDA include the following (in millions):

	Commercial Truck			Aftermarket, Industrial and Trailer			TOTAL
Segment adjusted EBITDA– Quarter ended June 30, 2018 (1)	$	100		$	38		$	138
Lower pension and retiree medical expense, net	1			—			1
Impact of foreign currency exchange rates	(5		)	(1		)	(6		)
Volume, mix, pricing and other	(3		)	17			14
Segment adjusted EBITDA – Quarter ended June 30, 2019	$	93		$	54		$	147

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⁽¹⁾ Amounts for the three months ended June 30, 2018 have been recast to reflect reportable segment changes.

Commercial Truck segment adjusted EBITDA was $93 million in the third quarter of fiscal year 2019, down $7 million from the same period in the prior fiscal year. Segment adjusted EBITDA margin decreased from 11.7 percent in the third quarter of fiscal year 2018 to 10.7 percent in the third quarter of fiscal year 2019. The decrease in segment adjusted EBITDA and segment adjusted EBITDA margin were driven primarily by higher material costs, partially offset by the conversion on higher revenue. We continue to incur these layered capacity costs, but they are trending to be less than we have incurred in the past. Segment adjusted EBITDA was also unfavorably impacted by the strengthening of the U.S. dollar against most currencies.

     Aftermarket, Industrial and Trailer segment adjusted EBITDA was $54 million in the third quarter of fiscal year 2019, up $16 million from the same period in the prior fiscal year. Segment adjusted EBITDA margin increased from 11.9 percent in the third quarter of fiscal year 2018 to 15.9 percent in the third quarter of fiscal year 2019. The increase in segment adjusted EBITDA and segment adjusted EBITDA margin was driven primarily by pricing actions within our Aftermarket business.

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Nine Months Ended June 30, 2019 Compared to Nine Months Ended June 30, 2018

   Sales

The following table reflects total company and business segment sales for the nine months ended June 30, 2019 and 2018 (dollars in millions). The reconciliation is intended to reflect the trend in business segment sales and to illustrate the impact that changes in foreign currency exchange rates, volumes and other factors had on sales. Business segment sales include intersegment sales.

	Nine Months Ended June 30,									Dollar Change Due To
	2019		2018 (1)		Dollar Change			% Change		Currency			Volume/ Other
Sales:
Commercial Truck
North America	$	1,333	$	1,122	$	211		19	%	$	—		$	211
Europe	536		567		(31		)	(5	)%	(35		)	4
South America	180		162		18			11	%	(24		)	42
China	129		149		(20		)	(13	)%	(8		)	(12		)
India	172		172		—			—	%	(13		)	13
Other	66		82		(16		)	(20	)%	(3		)	(13		)
Total External Sales	$	2,416	$	2,254	$	162		7	%	$	(83	)	$	245
Intersegment Sales	108		102		6			6	%	(11		)	17
Total Sales	$	2,524	$	2,356	$	168		7	%	$	(94	)	$	262
Aftermarket, Industrial and Trailer
North America	$	869	$	752	$	117		16	%	$	(3	)	$	120
Europe	75		92		(17		)	(18	)%	(4		)	(13		)
Total External Sales	$	944	$	844	$	100		12	%	$	(7	)	$	107
Intersegment Sales	28		25		3			12	%	(5		)	8
Total Sales	$	972	$	869	$	103		12	%	$	(12	)	$	115
Total External Sales	$	3,360	$	3,098	$	262		8	%	$	(90	)	$	352

⁽¹⁾ Amounts for the nine months ended June 30, 2018 have been recast to reflect reportable segment changes.

Commercial Truck sales were $2,524 million in the first nine months of fiscal year 2019, up 7 percent compared to the first nine months of fiscal year 2018. The increase in sales was driven primarily by higher truck production in North America and increased market share, partially offset by the strengthening of the U.S. dollar against most currencies.

Aftermarket, Industrial and Trailer sales were $972 million in the first nine months of fiscal year 2019, up 12 percent compared to the first nine months of fiscal year 2018. Higher sales were driven by increased volumes across North America and pricing actions within our Aftermarket business.

Cost of Sales and Gross Profit

     Cost of sales primarily represents materials, labor and overhead production costs associated with the company’s products and production facilities. Cost of sales for the nine months ended June 30, 2019 was $2,866 million compared to $2,625 million in the same period in the prior fiscal year, representing an increase of 9 percent, primarily driven by increased volumes. Total cost of sales was 85.3 and 84.7 percent of sales for the nine-month periods ended June 30, 2019 and 2018, respectively.

     The following table summarizes significant factors contributing to the changes in costs of sales during the first nine months of fiscal year 2019 compared to the same quarter in the prior year (in millions):

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	Cost of Sales
Nine Months Ended June 30, 2018 (1)	$	2,625
Volume, mix and other, net	332
Foreign exchange	(91		)
Nine Months Ended June 30, 2019	$	2,866

⁽¹⁾ Amounts for the nine months ended June 30, 2018 have been recast for ASU 2017-07, Compensation Retirement Benefits (Topic 715). $22 million was reclassified out of Cost of goods sold and into Non-operating income (expense).

     Changes in the components of cost of sales year over year are summarized as follows (in millions):

	Change in Cost of Sales
Higher material costs	$	229
Higher labor and overhead costs	13
Other, net	(1		)
Total change in costs of sales	$	241

Material costs represent the majority of our cost of sales and include raw materials, composed primarily of steel, and purchased components. Material costs for the nine months ended June 30, 2019 increased $229 million compared to the same period in the prior fiscal year primarily due to higher volumes and higher year-over-year steel prices.

Labor and overhead costs increased $13 million compared to the same period in the prior fiscal year primarily due to higher volumes.

Gross margin was $494 million and $473 million for the nine-month periods ended June 30, 2019 and 2018, respectively. Gross margin, as a percentage of sales, was 14.7 and 15.3 percent for the nine-month periods ended June 30, 2019 and 2018, respectively. Gross margin as a percentage of sales decreased primarily due to higher freight and other layered capacity costs driven by significant production levels, which more than offset the impact of conversion on higher revenue.

Other Income Statement Items

     SG&A for the nine months ended June 30, 2019 and 2018 are summarized as follows (dollars in millions):

	Nine Months Ended
	June 30, 2019					June 30, 2018 (1)					Increase (Decrease)
SG&A	Amount			% of sales		Amount			% of sales		Amount			% of sales
Loss on sale of receivables	$	(5	)	(0.1	)%	$	(3	)	(0.1	)%	$	2		0.0 pts
Short and long-term variable compensation	(37		)	(1.1	)%	(43		)	(1.4	)%	(6		)	(0.3) pts
Asbestos related expense, net of asbestos related insurance recoveries	—			—	%	(7		)	(0.2	)%	(7		)	(0.2) pts
Q1 Asbestos related liability remeasurement	31			0.9	%	—			—	%	(31		)	(0.9) pts
All other SG&A	(169		)	(5.1	)%	(165		)	(5.3	)%	4			(0.2) pts
Total SG&A	$	(180	)	(5.4	)%	$	(218	)	(7.0	)%	$	(38	)	(1.6) pts

⁽¹⁾ Amounts for the nine months ended June 30, 2018 have been recast for ASU 2017-07, Compensation Retirement Benefits (Topic 715).

We recognized $31 million related to remeasuring the Maremont asbestos liability based on the Maremont plan of reorganization in the first quarter of fiscal year 2019 (see Note 21 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report). We recognized $7 million related to previous cash settlements with insurance companies for recoveries of defense and indemnity costs associated with asbestos liabilities in the first nine months of fiscal year 2018, which is included in

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Asbestos-related expense, net of asbestos-related insurance recoveries (see Note 21 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report).

All other SG&A, which represents normal selling, general and administrative expense, increased year over year, primarily due to investments made throughout fiscal year 2019 to support plan growth initiatives.

Other operating expense was $3 million in the first nine months of fiscal year 2019. Other operating expense was $12 million in the first nine months of fiscal year 2018. During the nine months ended June 30, 2019 and June 30, 2018, these costs primarily related to environmental remediation.

Operating income increased by $76 million from $237 million in the first nine months of fiscal year 2018 to $313 million in the same period in fiscal year 2019. Key items affecting operating income are discussed above.

Non-operating income increased by $6 million from $24 million in the first nine months of fiscal year 2018 to $30 million in the same period in fiscal year 2019. The increase was driven primarily by lower pension and retiree medical expense in the current year. Amounts for the nine months ended June 30, 2018 have been recast for ASU 2017-07, Compensation Retirement Benefits (Topic 715). For the nine months ended June 30, 2018, $22 million was reclassified out of Cost of goods sold and $1 million was reclassified out of SG&A and into Non-operating income.

Equity in earnings of affiliates increased by $4 million from $20 million in the first nine months of fiscal year 2018 to $24 million in the same period in fiscal year 2019. The increase was primarily attributable to higher earnings across all our joint ventures.

Interest expense, net decreased by $11 million from $54 million in the first nine months of fiscal year 2018 to $43 million in the same period in fiscal year 2019. The decrease in Interest expense was primarily attributable to the loss on debt extinguishment of $8 million recognized in the first quarter of fiscal year 2018 that did not repeat, as well as the benefits from the cross-currency swaps entered into during the third quarter of fiscal year 2018.

Provision for income taxes was $69 million in the first nine months of fiscal year 2019 compared to $131 million in the same period in the prior fiscal year. The nine months ended June 30, 2018 included $43 million of non-cash tax expense related to the remeasurement of our deferred tax attributes as a result of the U.S. tax reform and $34 million of non-cash tax expense related to the one-time deemed repatriation of accumulated foreign earnings, which had no cash impact due to the use of foreign tax credits. For the nine months ended June 30, 2019, a $12 million non-cash tax benefit was recorded to reduce the liability for the refinement of the one-time deemed repatriation. Also impacting the first nine months of fiscal year 2019 was a $6 million non-cash income tax expense adjustment related to the remeasurement of the Maremont asbestos liability. Also impacting the third quarter of fiscal year 2019 was stronger earnings in certain jurisdictions that do not have a tax valuation allowance compared to the prior year.

Income from continuing operations (before noncontrolling interests) was $255 million in the first nine months of fiscal year 2019 compared to $96 million in the first nine months of fiscal year 2018. The reasons for the increase are discussed above.

Net income attributable to Meritor, Inc. was $248 million in the first nine months of fiscal year 2019 compared to $85 million in the first nine months of fiscal year 2018. The various factors affecting net income are discussed above.

Segment Adjusted EBITDA and Segment Adjusted EBITDA Margins

     The following table reflects segment adjusted EBITDA and segment adjusted EBITDA margins for the nine months ended June 30, 2019 and 2018 (dollars in millions).

	Segment adjusted EBITDA							Segment adjusted EBITDA margins
	Nine Months Ended June 30,							Nine Months Ended June 30,
	2019		2018 (1)		Change			2019		2018 (1)		Change
Commercial Truck	$	258	$	263	$	(5	)	10.2	%	11.2	%	(1.0) pts
Aftermarket, Industrial and Trailer	146		108		38			15.0	%	12.4	%	2.6 pts
Segment adjusted EBITDA	$	404	$	371	$	33		12.0	%	12.0	%	0.0 pts

⁽¹⁾ Amounts for the nine months ended June 30, 2018 have been recast to reflect reportable segment changes.

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     Significant items impacting year-over-year segment adjusted EBITDA include the following (in millions):

	Commercial Truck			Aftermarket, Industrial and Trailer			TOTAL
Segment adjusted EBITDA– Nine months ended June 30, 2018 (1)	$	263		$	108		$	371
Higher earnings from unconsolidated affiliates	4			—			4
Lower pension and retiree medical expense, net	2			1			3
Impact of foreign currency exchange rates	(14		)	(4		)	(18		)
Volume, mix, pricing and other	3			41			44
Segment adjusted EBITDA – Nine months ended June 30, 2019	$	258		$	146		$	404

⁽¹⁾ Amounts for the nine months ended June 30, 2018 have been recast to reflect reportable segment changes.

Commercial Truck segment adjusted EBITDA was $258 million in the first nine months of fiscal year 2019, down $5 million from the same period in the prior fiscal year. Segment adjusted EBITDA margin decreased from 11.2 percent for the first nine months of fiscal year 2018 to 10.2 percent in the first nine months of fiscal year 2019. The decrease in segment adjusted EBITDA and segment adjusted EBITDA margin was driven primarily by higher net steel, freight and other layered capacity costs, partially offset by conversion on higher revenue and continued material performance. Segment adjusted EBITDA was also unfavorably impacted by the strengthening of the U.S. dollar against most currencies.

     Aftermarket, Industrial and Trailer segment adjusted EBITDA was $146 million in the first nine months of fiscal year 2019, up $38 million from the same period in the prior fiscal year. Segment adjusted EBITDA margin increased from 12.4 percent in the first nine months of fiscal year 2018 to 15.0 percent in the first nine months of fiscal year 2019. The increase in segment adjusted EBITDA and segment adjusted EBITDA margin was driven primarily by pricing actions within our Aftermarket business.

Financial Condition

Cash Flows (in millions)

	Nine Months Ended June 30,
	2019			2018
OPERATING CASH FLOWS
Income from continuing operations	$	255		$	96
Depreciation and amortization	64			64
Deferred income tax expense	27			92
Loss on debt extinguishment	—			8
Restructuring costs	(2		)	6
Asset impairment charges	1			2
Equity in earnings of affiliates	(24		)	(20		)
Pension and retiree medical income	(28		)	(23		)
Asbestos related liability remeasurement	(31		)	—
Dividends received from equity method investments	14			9
Pension and retiree medical contributions	(12		)	(17		)
Restructuring payments	(2		)	(7		)
Changes in receivables, inventories and accounts payable	(96		)	(136		)
Changes in off-balance sheet accounts receivable factoring	41			65
Changes in other current assets and liabilities	(21		)	26
Changes in other assets and liabilities	(3		)	12
Other, net	13			13
Cash flows provided by continuing operations	196			190
Cash flows provided by (used for) discontinued operations	(2		)	1
CASH PROVIDED BY OPERATING ACTIVITIES	$	194		$	191

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     Cash provided by operating activities in the first nine months of fiscal year 2019 was $194 million compared to $191 million in the same period of fiscal year 2018.

	Nine Months Ended June 30,
	2019			2018
INVESTING CASH FLOWS
Capital expenditures	$	(63	)	$	(52	)
Proceeds from sale of equity method investment	—			250
Cash paid for acquisition of AA Gear & Manufacturing, Inc.	—			(36		)
Proceeds from sale of a business	—			4
Proceeds from settlement of cross-currency swaps	17			—
Cash paid for investment in Transportation Power, Inc.	(6		)	(6		)
Proceeds from sale of assets	—			2
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	$	(52	)	$	162

     Cash used for investing activities was $52 million in the first nine months of fiscal year 2019 compared to cash provided by investing activities of $162 million in the same period in fiscal year 2018. The decrease in cash provided by investing activities was driven by $250 million of proceeds received in the first quarter of fiscal year 2018 from the sale of our interest in Meritor WABCO Vehicle Control Systems ("Meritor WABCO") in the fourth quarter of fiscal year 2017 that did not repeat.

	Nine Months Ended June 30,
	2019			2018
FINANCING CASH FLOWS
Borrowings and securitization	$	(46	)	$	(89	)
Redemption of notes	(24		)	(181		)
Deferred issuance costs	(4		)	—
Other financing activities	(2		)	(3		)
Net change in debt	(76		)	(273		)
Repurchase of common stock	(71		)	(63		)
CASH USED FOR FINANCING ACTIVITIES	$	(147	)	$	(336	)

     Cash used for financing activities was $147 million in the first nine months of fiscal year 2019 compared to $336 million in the same period of fiscal year 2018. The decrease in cash used for financing activities is primarily related to the redemption of our 6.75 percent notes due 2021 (the "6.75 Percent Notes") in the first quarter of fiscal year 2018, that did not repeat. In the first quarter of fiscal year 2018, we utilized $185 million to redeem $175 million principal amount of the 6.75 Percent Notes. The decrease in cash used for financing activities was also driven by outstanding borrowings against our revolving credit and securitization facilities, partially offset by the repurchase of 3.0 million shares of common stock for $50 million (including commission costs) in the first quarter of fiscal year 2019 (see Note 22 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report), the repurchase of 1.0 million shares of common stock for $21 million (including commission costs) in the third quarter of fiscal year 2019, the redemption of $19 million aggregate principal amount outstanding of our 4.0 percent senior convertible notes due 2027 (the "4.0 Percent Convertible Notes") at a price of 100 percent of the accreted principal amount, plus accrued and unpaid interest, in the second quarter of fiscal year 2019 and the redemption of $5 million aggregate principal amount outstanding of the 4.0 Percent Convertible Notes at a price of 100 percent of the accreted principal amount, plus accrued and unpaid interest, in the third quarter of fiscal year 2019.

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Liquidity

Our outstanding debt, net of discounts and unamortized debt issuance costs, where applicable, is summarized in the table below (in millions).

	June 30, 2019			September 30, 2018
Fixed-rate debt securities	$	444		$	444
Fixed-rate convertible notes	341			364
Unamortized discount on convertible notes	(34		)	(37		)
Other borrowings	7			53
Total debt	$	758		$	824

Overview – Our principal operating and capital requirements are for working capital needs, capital expenditure requirements, debt service requirements, funding of pension and retiree medical costs and restructuring and product development programs. We expect fiscal year 2019 capital expenditures for our business segments to be approximately $105 million.

     We generally fund our operating and capital needs with cash on hand, cash flows from operations, our various accounts receivable securitization and factoring arrangements and availability under our revolving credit facility. Cash in excess of local operating needs is generally used to reduce amounts outstanding, if any, under our revolving credit facility or U.S. accounts receivable securitization program. Our ability to access additional capital in the long term will depend on availability of capital markets and pricing on commercially reasonable terms, as well as our credit profile at the time we are seeking funds. We continuously evaluate our capital structure to ensure the most appropriate and optimal structure and may, from time to time, retire, repurchase, exchange or redeem outstanding indebtedness or common equity, issue new equity or debt securities or enter into new lending arrangements if conditions warrant.

In December 2017, we filed a shelf registration statement with the Securities and Exchange Commission ("SEC"), registering an indeterminate amount of debt and/or equity securities that we may offer in one or more offerings on terms to be determined at the time of sale. 

     We believe our current financing arrangements provide us with the financial flexibility required to maintain our operations and fund future growth, including actions required to improve our market share and further diversify our global operations, through the term of our revolving credit facility, which matures in June 2024.

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     Sources of liquidity as of June 30, 2019, in addition to cash on hand, are as follows (in millions):

	Total Facility Size		Utilized as of 6/30/19		Readily Available as of 6/30/19		Current Expiration
On-balance sheet arrangements:
Revolving credit facility (1)	$	625	$	—	$	625	June 2024 (1)
Committed U.S. accounts receivable securitization (2)	110		3		107		December 2021
Total on-balance sheet arrangements	$	735	$	3	$	732
Off-balance sheet arrangements: (2)
Committed Swedish factoring facility (3)	$	176	$	160	$	—	March 2020
Committed U.S. factoring facility (3)	75		70		—		February 2023
Uncommitted U.K. factoring facility	28		11		—		February 2022
Uncommitted Italy factoring facility	34		34		—		June 2022
Other uncommitted factoring facilities (4)	N/A		19		N/A		None
Total off-balance sheet arrangements	313		294		—
Total available sources	$	1,048	$	297	$	732

⁽¹⁾  The availability under the revolving credit facility is subject to a priority debt-to-EBITDA ratio covenant. The facility will expire in November 2023 if the outstanding amount of the 6.25 percent notes due 2024 is greater than $75 million at that time.

⁽²⁾  Availability subject to adequate eligible accounts receivable available for sale.

⁽³⁾  Actual amounts may exceed the bank's commitment at the bank's discretion.

⁽⁴⁾  There is no explicit facility size under the agreement, but the counterparty approves the purchase of receivable tranches at its discretion.

Cash and Liquidity Needs – At June 30, 2019, we had $111 million in cash and cash equivalents, of which $30 million was held in jurisdictions outside of the U.S. that, if repatriated, could result in withholding taxes. It is our intent to reinvest those cash balances in our foreign operations as we expect to meet our liquidity needs in the U.S. through ongoing cash flows from operations in the U.S., external borrowings or both.

Our availability under the revolving credit facility is subject to a priority debt-to-EBITDA ratio covenant, as defined in the credit agreement, which may limit our borrowings under such agreement as of each quarter end. As long as we are in compliance with this covenant as of the quarter end, we have full availability under the revolving credit facility every other day during the quarter. Our future liquidity is subject to a number of factors, including access to adequate funding under our revolving credit facility, access to other borrowing arrangements such as factoring or securitization facilities, vehicle production schedules and customer demand. Even taking into account these and other factors, management expects to have sufficient liquidity to fund our operating requirements through the term of our revolving credit facility. At June 30, 2019, we were in compliance with this covenant under our credit agreement.

Equity Repurchase Authorization – On July 21, 2016, our Board of Directors authorized the repurchase of up to $100 million of our common stock from time to time through open market purchases, privately negotiated transactions or otherwise, until September 30, 2019, subject to compliance with legal and regulatory requirements and our debt covenants. During the second quarter of fiscal year 2018, we repurchased 1.4 million shares of common stock for $33 million (including commission costs) pursuant to this authorization. During the third quarter of fiscal year 2018, we repurchased 1.4 million shares of common stock for $30 million (including commission costs) pursuant to this authorization. During the fourth quarter of fiscal year 2018, we repurchased 1.7 million shares of our common stock for $37 million (including commission costs) pursuant to this authorization. The repurchases under this authorization were complete as of September 30, 2018.

On November 2, 2018, our Board of Directors authorized the repurchase of up to $200 million of our common stock from time to time through open market purchases, privately negotiated transactions or otherwise, subject to compliance with legal and regulatory requirements and our debt covenants. This repurchase authorization superseded the prior July 2016 equity repurchase authorization. In the first quarter of fiscal year 2019, we repurchased 3.0 million shares of common stock for $50 million (including commission costs) pursuant to this repurchase authorization. In the third quarter of fiscal year 2019, we repurchased 1.0 million shares of common stock for $21 million (including commission costs) pursuant to this authorization. The amount remaining available for repurchases under this repurchase authorization was $130 million as of June 30, 2019.

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On July 26, 2019, our Board of Directors authorized the repurchase of up to $250 million of our common stock from time to time through open market purchases, privately negotiated transactions or otherwise, subject to compliance with legal and regulatory requirements and our debt covenants. This authorization supersedes the remaining authority under the prior November 2018 equity repurchase authorization described above.

Debt Repurchase Authorization – On July 21, 2016, our Board of Directors authorized the repurchase of up to $150 million aggregate principal amount of any of our debt securities (including convertible debt securities) from time to time through open market purchases, privately negotiated transactions or otherwise until September 30, 2019, subject to compliance with legal and regulatory requirements and our debt covenants. The amount remaining available for repurchases under this authorization was $50 million as of September 30, 2018.

On November 2, 2018, our Board of Directors authorized the repurchase of up to $100 million aggregate principal amount of any of our debt securities (including convertible debt securities) from time to time through open market purchases, privately negotiated transactions or otherwise, subject to compliance with legal and regulatory requirements and our debt covenants. This repurchase authorization supersedes the prior July 2016 debt repurchase authorization. The amount remaining available for repurchases under this repurchase authorization was $76 million as of June 30, 2019.

Redemption of 6.75 Percent Notes - On September 28, 2017, we redeemed $100 million of the outstanding $275 million aggregate principal amount of the 6.75 Percent Notes at a price of $1,033.75 per $1,000 of principal amount, plus accrued and unpaid interest. As a result, a loss on debt extinguishment of $5 million was recorded in the Condensed Consolidated Statement of Operations within Interest expense, net during fiscal year 2017. The redemption was made pursuant to the July 2016 debt repurchase authorization (see Note 22 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report).

On November 2, 2017, we redeemed the remaining $175 million aggregate principal amount outstanding of the 6.75 Percent Notes at a price of $1,033.75 per $1,000 of principal amount, plus accrued and unpaid interest. As a result, a loss on debt extinguishment of $8 million was recorded in the Condensed Consolidated Statement of Operations within Interest expense, net. The redemption was made pursuant to a special authorization from the Board of Directors in connection with the sale of Meritor WABCO.

Redemption of 4.0 Percent Notes - On February 15, 2019, we redeemed $19 million aggregate principal amount outstanding of the 4.0 Percent Convertible Notes at a price of 100 percent of the accreted principal amount, plus accrued and unpaid interest. On June 7, 2019, we redeemed the remaining $5 million aggregate principal amount outstanding of the 4.0 Percent Convertible Notes at a price equal to 100 percent of the accreted principal amount, plus accrued and unpaid interest. The 4.0 Percent Convertible Notes were classified as current as of September 30, 2018 as the securities were redeemable at the option of the holder on February 15, 2019, at a repurchase price in cash equal to 100 percent of the accreted principal amount of the securities to be repurchased, plus accrued and unpaid interest.

Revolving Credit Facility – On June 7, 2019, we amended and restated our revolving credit facility. Pursuant to the revolving credit agreement, as amended, we have a $625 million revolving credit facility and a $175 million term loan facility intended for our acquisition of AxleTech that mature in June 2024 (with a springing maturity in November 2023 if the outstanding amount of the 6.25 percent Notes is greater than $75 million).

 The availability under the revolving credit facility is subject to certain financial covenants based on the ratio of our priority debt (consisting principally of amounts outstanding under the revolving credit facility, U.S. accounts receivable securitization and factoring programs, and third-party non-working capital foreign debt) to EBITDA. We are required to maintain a total priority debt-to-EBITDA ratio, as defined in the agreement, of 2.25 to 1.00 or less as of the last day of each fiscal quarter throughout the term of the agreement. At June 30, 2019, we were in compliance with all covenants under the revolving credit facility with a ratio of approximately 0.2x for the priority debt-to-EBITDA ratio covenant.

  Borrowings under the revolving credit facility are subject to interest based on quoted LIBOR rates plus a margin and a commitment fee on undrawn amounts, both of which are based upon either our current corporate credit rating or our total leverage ratio, as defined in the agreement. At June 30, 2019, the margin over LIBOR rate was 200 basis points and the commitment fee was 30 basis points. Overnight revolving credit loans are at the prime rate plus a margin of 100 basis points.

Certain of our subsidiaries, as defined in the revolving credit agreement, irrevocably and unconditionally guarantee amounts outstanding under the revolving credit facility. Similar subsidiary guarantees are provided for the benefit of the holders of the publicly-held notes outstanding under our indentures (see Note 24 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report).

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At June 30, 2019 and September 30, 2018, there were no borrowings outstanding under the revolving credit facility. The amended and extended revolving credit facility includes $100 million of availability for the issuance of letters of credit. At June 30, 2019 and September 30, 2018, there were no letters of credit outstanding under the revolving credit facility.

U.S. Securitization Program – As of September 30, 2018, the U.S. accounts receivable securitization facility size was $100 million. On October 4, 2018, we entered into an amendment that increased the size of the facility to $110 million and extended its expiration date to December 2021. The maximum permitted priority debt-to-EBITDA ratio as of the last day of each fiscal quarter under the facility is 2.25 to 1.00. This program is provided by PNC Bank, National Association, as Administrator and Purchaser, and the other Purchasers and Purchaser Agents party to the agreement from time to time (participating lenders). Under this program, we have the ability to sell an undivided percentage ownership interest in substantially all of our trade receivables (excluding the receivables due from AB Volvo and subsidiaries eligible for sale under the U.S. accounts receivable factoring facility) of certain U.S. subsidiaries to ArvinMeritor Receivables Corporation ("ARC"), a wholly-owned, special purpose subsidiary. ARC funds these purchases with borrowings from participating lenders under a loan agreement. This program also includes a letter of credit facility pursuant to which ARC may request the issuance of letters of credit for our U.S. subsidiaries (originators) or their designees, which when issued will constitute a utilization of the facility for the amount of letters of credit issued. Amounts outstanding under this agreement are collateralized by eligible receivables purchased by ARC and are reported as short-term debt in the consolidated balance sheet. As of June 30, 2019, there were no borrowings outstanding under this program, and $3 million of letters of credit were issued. As of September 30, 2018, $46 million was outstanding under this program, and $11 million of letters of credit were issued. This securitization program contains a cross default to our revolving credit facility. As of June 30, 2019, we were in compliance with all covenants under our credit agreement (see Note 18 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report). At certain times during any given month, we may sell eligible accounts receivable under this program to fund intra-month working capital needs. In such months, we would then typically utilize the cash received from our customers throughout the month to repay the borrowings under the program. Accordingly, during any given month, we may borrow under this program in amounts exceeding the amounts shown as outstanding at fiscal year ends.

Capital Leases – We had $7 million of outstanding capital lease arrangements at both June 30, 2019 and September 30, 2018.

Other – One of our consolidated joint ventures in China participates in a bills of exchange program to settle its obligations with its trade suppliers. These programs are common in China and generally require the participation of local banks. Under these programs, our joint venture issues notes payable through the participating banks to its trade suppliers. If the issued notes payable remain unpaid on their respective due dates, this could constitute an event of default under our revolving credit facility if the defaulted amount exceeds $35 million per bank. As of June 30, 2019 and September 30, 2018, we had $25 million and $22 million, respectively, outstanding under this program at more than one bank.

Credit Ratings – At July 30, 2019, our Standard & Poor’s corporate credit rating and senior unsecured credit rating were BB and BB-, respectively, and our Moody’s Investors Service corporate credit rating and senior unsecured credit rating were Ba3 and B1, respectively. Any lowering of our credit ratings could increase our cost of future borrowings and could reduce our access to capital markets and result in lower trading prices for our securities.

Off-Balance Sheet Arrangements

     Accounts Receivable Factoring Arrangements – We participate in accounts receivable factoring programs with a total amount utilized at June 30, 2019 of $294 million, of which $230 million was attributable to committed factoring facilities involving the sale of AB Volvo accounts receivables. The remaining amount of $64 million was related to factoring by certain of our European subsidiaries under uncommitted factoring facilities with financial institutions. The receivables under all of these programs are sold at face value and are excluded from the consolidated balance sheet. Total facility size, utilized amounts, readily available amounts and expiration dates for each of these programs are shown in the table above under Liquidity.

The Swedish facility is backed by a 364-day liquidity commitment from Nordea Bank, which was renewed through January 10, 2020. Commitments under all of our factoring facilities are subject to standard terms and conditions for these types of arrangements (including, in the case of the U.K. and Italy commitments, a sole discretion clause whereby the bank retains the right to not purchase receivables, which has not been invoked since the inception of the respective programs).

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     Letter of Credit Facilities – On February 21, 2014, we entered into an arrangement to amend and restate the letter of credit facility with Citicorp USA, Inc., as administrative agent and issuing bank, and the other lenders party thereto. Under the terms of this amended credit agreement, which expired in March 2019, we had the right to obtain the issuance, renewal, extension and increase of letters of credit up to an aggregate availability of $25 million. This facility contained covenants and events of default generally similar to those existing in our public debt indentures. There were $1 million of letters of credit outstanding under this facility at September 30, 2018. On March 20, 2019, we allowed this facility to expire. The letters of credit previously provided under this facility were replaced with letters of credit issued under our U.S. accounts receivable securitization facility with PNC Bank. There were $8 million of letters of credit outstanding through other letter of credit facilities as of June 30, 2019 and September 30, 2018, respectively.

Contingencies

Contingencies related to environmental, asbestos and other matters are discussed in Note 21 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report.

Critical Accounting Policies

Our significant accounting policies are consistent with those described in Note 2 to our consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2018 (the "2018 Form 10-K"). Our critical accounting estimates are consistent with those described in Item 7 of our 2018 Form 10-K.

New Accounting Pronouncements

New Accounting Pronouncements are discussed in Note 3 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to certain global market risks, including foreign currency exchange risk and interest rate risk associated with our debt.

As a result of our substantial international operations, we are exposed to foreign currency risks that arise from our normal business operations, including in connection with our transactions that are denominated in foreign currencies. In addition, we translate sales and financial results denominated in foreign currencies into U.S. dollars for purposes of our Condensed Consolidated Financial Statements. As a result, appreciation of the U.S. dollar against these foreign currencies generally will have a negative impact on our reported revenues and operating income while depreciation of the U.S. dollar against these foreign currencies will generally have a positive effect on reported revenues and operating income.

We use foreign currency forward contracts to minimize the earnings exposures arising from foreign currency exchange risk on foreign currency purchases and sales. Gains and losses on the underlying foreign currency exposures are partially offset with gains and losses on the foreign currency forward contracts. Under this cash flow hedging program, we designate the foreign currency contracts as cash flow hedges of underlying foreign currency forecasted purchases and sales. Changes in the fair value of these contracts are recorded in Accumulated other comprehensive loss in the Condensed Consolidated Statement of Equity and is recognized in operating income when the underlying forecasted transaction impacts earnings. These contracts generally mature within 18 months.

We use cross-currency swap contracts to hedge a portion of our net investment in a foreign subsidiary against volatility in foreign exchange rates. These derivative instruments are designated and qualify as hedges of net investments in foreign operations. Settlements and changes in fair values of the instruments are recognized in foreign currency translation adjustments, a component of other comprehensive income (loss) in the Condensed Consolidated Statement of Comprehensive Income, to offset the changes in the values of the net investments being hedged.

In the third quarter of fiscal year 2018, we entered into multiple cross-currency swaps. These swaps hedged a portion of the net investment in a certain European subsidiary against volatility in the euro/U.S. dollar foreign exchange rate. In the third quarter of fiscal year 2019, the company unwound these cross-currency swaps and received proceeds of $19 million, $2 million of which related to net accrued interest receivable. The company also entered into multiple new cross-currency swaps with a combined notional amount of $225 million. These swaps hedge a portion of the net investment in a certain European subsidiary against volatility in the euro/U.S. dollar foreign exchange rate. They mature in October 2022.

Interest rate risk relates to the gain/increase or loss/decrease we could incur in our debt balances and interest expense associated with changes in interest rates. To manage this risk, we enter into interest rate swaps from time to time to economically convert portions of our fixed-rate debt into floating rate exposure, ensuring that the sensitivity of the economic value of debt falls within our corporate risk tolerances. It is our policy not to enter into derivative instruments for speculative purposes, and therefore, we hold no derivative instruments for trading purposes.

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Included below is a sensitivity analysis to measure the potential gain (loss) in the fair value of financial instruments with exposure to market risk (in millions). The model assumes a 10% hypothetical change (increase or decrease) in exchange rates and instantaneous, parallel shifts of 50 basis points in interest rates.

Market Risk

	Assuming a 10% Increase in Rates			Assuming a 10% Decrease in Rates			Increase (Decrease) in
Foreign Currency Sensitivity:
Forward contracts in USD (1)	$	2.6		$	(2.6	)	Fair Value
Forward contracts in Euro (1)	(2.6		)	2.6			Fair Value
Foreign currency denominated debt (2)	0.5			(0.5		)	Fair Value
Foreign currency option contracts in USD	1.0			0.5			Fair Value
Foreign currency option contracts in Euro	(0.3		)	4.5			Fair Value
Cross-currency swaps	(26.3		)	26.3			Fair Value
	Assuming a 50 BPS Increase in Rates			Assuming a 50  BPS Decrease in Rates			Increase (Decrease) in
Interest Rate Sensitivity:
Debt – fixed rate (3)	$	(33.1	)	$	35.3		Fair Value
Debt – variable rate	—			—			Cash flow

(1)Includes only the risk related to the derivative instruments and does not include the risk related to the underlying exposure. The analysis assumes overall derivative instruments and debt levels remain unchanged for each hypothetical scenario.

(2)At June 30, 2019, the fair value of outstanding foreign currency denominated debt was $5 million. A 10% decrease in quoted currency exchange rates would result in a decrease of $1 million in foreign currency denominated debt. At June 30, 2019, a 10% increase in quoted currency exchange rates would result in an increase of $1 million in foreign currency denominated debt.

(3) At June 30, 2019, the fair value of outstanding debt was $857 million. A 50 basis points decrease in quoted interest rates would result in an increase of $35 million in the fair value of fixed rate debt. A 50 basis points increase in quoted interest rates would result in a decrease of $33 million in the fair value of fixed rate debt.

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Item 4. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the "Exchange Act"), management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2019. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of June 30, 2019, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in the company’s internal control over financial reporting that occurred during the quarter ended June 30, 2019 that materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

In connection with the rule, the company continues to review and document its disclosure controls and procedures, including the company’s internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and ensuring that the company’s systems evolve with the business.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Except as set forth in Note 21 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report on Form 10-Q, there have been no material developments in legal proceedings involving the company or its subsidiaries since those reported in the company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018, as amended.

Item 1A. Risk Factors

There have been no material changes in risk factors involving the company or its subsidiaries from those previously disclosed in the company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018 and the company's Quarterly Report on Form 10-Q for the period ended December 31, 2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer repurchases

The table below sets forth information with respect to purchases made by or on behalf of us of shares of our common stock during the three months ended June 30, 2019:

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
April 1- 30, 2019	—	$	—	—	$	150,060,376
May 1- 31, 2019	726,473	$	20.44	726,473	$	135,213,780
June 1- 30, 2019	273,527	$	20.66	273,527	$	129,562,852
Total	1,000,000			1,000,000		129,562,852

(1) On November 2, 2018, the Board of Directors authorized the repurchase of up to $200 million of the company's common stock and up to $100 million aggregate principal amount of any of the company's debt securities (including convertible debt securities), in each case from time to time through open market purchases, privately negotiated transactions or otherwise, subject to compliance with legal and regulatory requirements and the company's debt covenants. On July 26, 2019, the Board of Directors authorized the repurchase of up to $250 million of the company’s common stock from time to time through open market purchases, privately negotiated transactions or otherwise, subject to compliance with legal and regulatory requirements and the company’s debt covenants. This authorization supersedes the remaining authority under the prior November 2018 equity repurchase authorization.

     The independent trustee of our 401(k) plans purchases shares in the open market to fund investments by employees in our common stock, one of the investment options available under such plans, and any matching contributions in company stock we provide under certain of such plans. In addition, our stock incentive plans permit payment of an option exercise price by means of cashless exercise through a broker and permit the satisfaction of the minimum statutory tax obligations upon exercise of options and the vesting of restricted stock units through stock withholding. There were no shares withheld in the third quarter of fiscal 2019 to satisfy tax obligations for exercise of options. In addition, our stock incentive plans also permit the satisfaction of tax obligations upon the vesting of restricted stock through stock withholding. There were no shares withheld in the third quarter of fiscal 2019 to satisfy tax obligations upon the vesting of restricted shares. The company does not believe such purchases or transactions described above are issuer repurchases for the purposes of this Item 2 of Part II of this Quarterly Report on Form 10-Q.

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Item 5. Other Information

Cautionary Statement

This Quarterly Report on Form 10-Q contains statements relating to future results of the company (including certain projections and business trends) that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "estimate," "should," "are likely to be," "will" and similar expressions. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to reliance on major OEM customers and possible negative outcomes from contract negotiations with our major customers, including failure to negotiate acceptable terms in contract renewal negotiations and our ability to obtain new customers; the outcome of actual and potential product liability, warranty and recall claims; our ability to successfully manage rapidly changing volumes in the commercial truck markets and work with our customers to manage demand expectations in view of rapid changes in production levels; global economic and market cycles and conditions; availability and sharply rising costs of raw materials, including steel, and our ability to manage or recover such costs; our ability to manage possible adverse effects on European markets or our European operations, or financing arrangements related thereto following the United Kingdom's decision to exit the European Union or, in the event one or more other countries exit the European monetary union; risks inherent in operating abroad (including foreign currency exchange rates, restrictive government actions regarding trade, implications of foreign regulations relating to pensions and potential disruption of production and supply due to terrorist attacks or acts of aggression); risks related to our joint ventures; rising costs of pension benefits; the ability to achieve the expected benefits of strategic initiatives and restructuring actions; our ability to successfully integrate the products and technologies of Fabco Holdings, Inc., AA Gear Mfg., Inc. and AxleTech and future results of such acquisitions, including their generation of revenue and their being accretive; the demand for commercial and specialty vehicles for which we supply products; whether our liquidity will be affected by declining vehicle production in the future; OEM program delays; demand for and market acceptance of new and existing products; successful development and launch of new products; labor relations of our company, our suppliers and customers, including potential disruptions in supply of parts to our facilities or demand for our products due to work stoppages; the financial condition of our suppliers and customers, including potential bankruptcies; possible adverse effects of any future suspension of normal trade credit terms by our suppliers; potential impairment of long-lived assets, including goodwill; potential adjustment of the value of deferred tax assets; competitive product and pricing pressures; the amount of our debt; our ability to continue to comply with covenants in our financing agreements; our ability to access capital markets; credit ratings of our debt; the outcome of existing and any future legal proceedings, including any proceedings or related liabilities with respect to environmental, asbestos-related, or other matters; possible changes in accounting rules; and other substantial costs, risks and uncertainties, including but not limited to those detailed herein and from time to time in other filings of the company with the SEC. These forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law.

Restructuring Plan

On July 29, 2019, the company approved a restructuring plan related to the integration of its acquisition of AxleTech. This restructuring plan is intended to realize certain targeted synergies following the acquisition, primarily from the elimination of cost overlap. With this restructuring plan, the Company expects to incur $11 million of total costs in the Aftermarket, Industrial and Trailer segment with approximately $7 million related to employee severance charges and approximately $4 million related to lease termination costs. Restructuring associated with severance actions are expected to be substantially completed by fiscal year 2020. The lease term expires in fiscal year 2023.

Amended and Restated By-laws

On July 29, 2019, the Board of Directors approved an amendment and restatement of the company’s Amended and Restated By-Laws to implement shareholder “proxy access” provisions. Under the proxy access by-law contained in the company’s Amended and Restated By-Laws, an eligible shareholder (or qualifying group of up to 20 shareholders) owning at least 3% of the company’s outstanding common stock continuously for at least three years may generally nominate qualifying director candidates, and require that the company include such shareholder’s or group of shareholders’ proxy access director nominees in the company’s proxy materials for an annual meeting of shareholders, constituting up to the greater of two candidates or 20% of the Board, provided that such shareholders and their director nominees satisfy the requirements specified in the Amended and Restated By-Laws. Proxy access will be available to the company’s shareholders for the first time in connection with the company’s annual meeting of shareholders in 2020 and is subject to the additional eligibility, procedural and disclosure requirements set forth in the Amended and Restated By-Laws. For the 2020 annual meeting of shareholders, proxy access nomination notices are required to be submitted on or after September 26, 2019 and on or before October 26, 2019.

76

MERITOR, INC.

In connection with the adoption of the proxy access provisions described above, the Amended and Restated By-Laws were also amended to update the advance notice and related by-law provisions concerning shareholder notices of business to be brought before meetings of shareholders, including covered proposals and nominations. These updates, among other things, address required supplements and updates to shareholder notices, the submission of completed questionnaires, representations and agreements, and the required disclosures and categories of information to be included in a compliant notice, including notices applicable to shareholder director nominees.  The preceding summary of amendments to the company’s Amended and Restated By-Laws is qualified in its entirety by reference to the Amended and Restated By-Laws, which are attached hereto as Exhibit 3-b-1 and are incorporated herein by reference.

77

MERITOR, INC.

Item 6. Exhibits

3-a	Amended and Restated Articles of Incorporation of Meritor, filed as Exhibit 3-a to Meritor’s Annual Report on Form 10-K for the fiscal year ended September 27, 2015, is incorporated herein by reference.
3-b-1**	Redline Amended and Restated By-laws of Meritor effective July 29, 2019
3-b-2**	Amended and Restated By-laws of Meritor effective July 29, 2019
10-a	Fourth Amendment and Restatement Agreement relating to Fourth Amended and Restated Credit Agreement, dated as of June 7, 2019, among Meritor, ArvinMeritor Finance Ireland (“AFI”), the financial institutions party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, filed as Exhibit 10-a to Meritor’s Current Report on Form 8-K filed on June 10, 2019, is incorporated herein by reference.
10-b	Agreement and Plan of Merger dated as of May 3, 2019 by and among Meritor, Inc., Janus Merger Sub, LLC, CAX Parent, LLC, and Carlyle Equity Opportunity GP, L.P., solely in its capacity as Holder Representative, filed as Exhibit 10-a to Meritor’s Current Report on Form 8-K filed on May 8, 2019, is incorporated herein by reference.
31-a**	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act
31-b**	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act
32-a**	Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350
32-b**	Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350
101.INS	XBRL INSTANCE DOCUMENT
101.SCH	XBRL TAXONOMY EXTENSION SCHEMA
101.PRE	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
101.LAB	XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.CAL	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF	XBRL TAXONOMY EXTENSION DEFINITION LINKBASE

** Filed herewith.

78

MERITOR, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		MERITOR, INC.
Date:	July 31, 2019	By:	/s/	April Miller Boise
				April Miller Boise
				Senior Vice President, Chief Legal Officer and Corporate Secretary
				(For the registrant)
Date:	July 31, 2019	By:	/s/	Paul D. Bialy
				Paul D. Bialy
				Vice President, Chief Accounting Officer
Date:	July 31, 2019	By:	/s/	Carl D. Anderson
				Carl D. Anderson
				Senior Vice President, Chief Financial Officer

79

EX-3.B-1

Exhibit 3-b-1

AMENDED AND RESTATED BY-LAWS

OF

MERITOR, INC.

(As of November 30, 2016July 29, 2019)

ARTICLE I

OFFICE

SECTION 1.1. Registered Office. The registered office of Meritor, Inc. (the “Corporation”) in the State of Indiana shall be in the City of Indianapolis, County of Marion.

SECTION 1.2. Principal Business Office. The principal business office of the Corporation shall be in the City of Troy, County of Oakland, in the State of Michigan.

SECTION 1.3. Other Offices. The Corporation may also have an office or offices at such other place or places either in or outside the State of Indiana as the Board of Directors may from time to time determine or the business of the Corporation requires.

ARTICLE 2

MEETING OF SHAREHOLDERS

SECTION 2.1. Place of Meetings. Each meeting of shareholders of the Corporation shall be held at such place, in or outside of the State of Indiana, as the Board of Directors may designate in the notice of such meeting, but if no such designation is made, then at the principal business office of the Corporation.

SECTION 2.2. Annual Meetings. An annual meeting of shareholders for the purpose of electing directors and transacting such other business as may properly be brought before the meeting, notice of which was given in the notice of meeting, shall be held on a date and time as the Board of Directors may determine.

If for any reason any annual meeting shall not be held at the time herein provided, the same may be held at any time thereafter, upon notice as hereinafter provided, or the business thereof may be transacted at any special meeting of shareholders called for that purpose.

The Board of Directors may, upon public notice given prior to the scheduled meeting date, postpone, for as long as and to the extent permitted by the Indiana Business Corporation Law, as amended (the “Act”), any previously scheduled annual or special meeting of shareholders.

SECTION 2.3. Special Meetings. Special meetings of shareholders, unless otherwise required by statute and subject to the rights of holders of any class of Preferred Stock of the Corporation, may be called only by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies (the “Whole Board”). Business transacted at any special meeting shall be confined to the purpose or purposes stated in the notice of such special meeting. Meetings may be held without notice if all shareholders entitled to vote are present or if notice is waived by those not present.

SECTION 2.4. Notice of Shareholders' Meetings. Notice of each meeting of shareholders, whether annual or special, stating the date, time and place, and, in the case of special meetings, the purpose or purposes for which such meeting is called, shall be mailed, postage prepaid, to each shareholder entitled to vote thereat, at the shareholder's address as it appears on the records of the Corporation, not less than 10 nor more than 60 days before the date of the meeting unless otherwise prescribed by statute. Notice of any adjourned meeting of shareholders shall not be required to be given, except when expressly required by law.

SECTION 2.5. Record Dates.

(a)    In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of shares or for the purpose of any other lawful action, the Board of Directors may designate a date as the record date which, for purposes of a meeting of shareholders or other event requiring shareholder action, shall not be more than 70 nor less than 10 days before the date of such meeting or event.

(b)    If a record date has not been fixed as provided in the preceding paragraph (a), then:

(i)    The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders of the Corporation shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and

(ii)    The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

(c)    Only those who shall be shareholders of record on the record date so fixed as aforesaid shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend or other distribution, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding the transfer of any shares on the books of the Corporation after the applicable record date;; provided, however, the Board of Directors may fix a new record date for any adjourned meeting and shall fix a new record date if a meeting is adjourned to a date more than 120 days after the date originally fixed for the meeting.

SECTION 2.6. List of Shareholders. The Secretary of the Corporation shall, from information obtained from the transfer agent, prepare and make, before each meeting of shareholders, an alphabetical list of shareholders entitled to vote thereat, arranged by voting group, showing the address and number of shares registered in the name of each shareholder. Such list shall be open to the examination of any such shareholder or such shareholder's agent or attorney authorized in writing (“shareholder agent”), for any purpose germane to the meeting, during ordinary business hours, for a period of at least 5 days prior to the meeting for which the list was prepared and continuing through the meeting, either at a place in the city where the meeting is being held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. Such list shall be produced and kept at the time and place of meeting during the whole time thereof for inspection by any such shareholder or shareholder agent who is present. The stock ledger shall be the only evidence as to who are the shareholders entitled to examine the stock ledger, the list referred to in this section or the books of the Corporation, or to vote in person or by proxy at any meeting of shareholders.

SECTION 2.7. Quorum and Adjournments. At each meeting of shareholders, the holders of a majority of the voting power of the shares of the Corporation entitled to vote, present in person or by proxy, shall constitute a quorum of shareholders for all purposes unless the presence of a larger proportion is required by statute or by the Corporation's Articles of Incorporation (the “Articles of Incorporation”), and, in such cases, the presence of the proportion so required shall constitute a quorum. Whether or not there is such a quorum, the Chairman of the meeting or the shareholders present in person or by proxy constituting a majority of the shares present may adjourn the meeting from time to time without notice other than an announcement at the meeting. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting, and only those shareholders entitled to vote at the meeting as originally called shall be entitled to vote at any adjournment or adjournments thereof. The absence from any meeting of the number of shareholders required by law or by the Articles of Incorporation or by these By-Laws for action upon any given matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if the number of shareholders required in respect of such other matter or matters shall be present.

SECTION 2.8. Voting by Shareholders; Proxies. Except as otherwise provided by law, the Articles of Incorporation or these By‑Laws, each shareholder entitled to vote shall at every meeting of the shareholders have one vote for each share entitled to vote held by such shareholder. Any vote on shares may be given by the shareholder entitled thereto in person or by proxy appointed by an instrument in writing, subscribed (or transmitted by electronic means and authenticated as provided by law) by such shareholder or by the shareholder's attorney thereunto authorized, and delivered to the Secretary; provided, however, that no proxy shall be voted after 11 months from its date unless the proxy provides for a shorter or longer period. Except as otherwise set forth in the Articles of Incorporation with respect to the right of the holders of any class or series of Preferred Stock to elect additional directors under specified circumstances, election of directors at all meetings of shareholders at which directors are to be elected shall be by a plurality of the votes cast for the election of directors at the meeting. If a quorum exists, action on a matter (other than the election of directors) submitted to shareholders entitled to vote thereon at any meeting shall be approved if the votes cast favoring the action exceed the votes cast opposing the action, unless a greater number of affirmative votes is required by law, the Articles of Incorporation or these By-Laws.

SECTION 2.8A. Participation in Meetings by Means of Conference or Similar Communications. Any shareholder may participate in an annual or special meeting of shareholders by or through use of any means of communications by which all shareholders participating may simultaneously hear each other during the meeting.

A shareholder participating in such a meeting by this means is deemed to be present at the meeting.

SECTION 2.9. Conduct of Business.

(a)    Presiding Officer. The Chairman of the Board of Directors shall preside as Chairman of shareholder meetings and shall determine the order and conduct of business and all matters of procedure at such meetings. The Chairman shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the shareholders will vote at the meeting. In the absence of the Chairman, the Chief Executive Officer and President shall assume the duties of the Chairman of the shareholder meeting specified in this paragraph (a) of Section 2.9. If each of the Chairman and the Chief Executive Officer and President is absent, a director or an officer of the Corporation chosen by the Board of Directors shall assume the duties of the Chairman of the shareholder meeting specified in this paragraph (a) of Section 2.9.

(b)    Secretary. The Secretary, or, in his or her absence, an Assistant Secretary, shall act as Secretary at all meetings of the shareholders. In the absence from any such meeting of the Secretary and the Assistant Secretaries, the Chairman of the shareholder meeting may appoint any person to act as Secretary of the meeting.

(c)    Annual Meetings of Shareholders.

(i)    Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders (A) pursuant to the Corporation's notice of meeting, (B) by or at the direction of the Board of Directors or (C) by any shareholder of the Corporation who was a shareholder of record at the time of giving of notice provided for in this Section 2.9, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.9.

(ii)    For nominations or other business to be properly brought before any annual meeting by a shareholder pursuant to clause (C) of paragraph (c)(i) of this Section 2.9, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation, and such other business must otherwise be a proper matter for shareholder action. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for

the giving of a shareholder's notice as described above. Such shareholder's notice shall set forth (A) as to each person whom the shareholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; (C) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (x) the name and address of such shareholder, as they appear on the Corporation's books, and of such beneficial owner and (y) the class and number of shares of the Corporation which are owned beneficially and of record by such shareholder and such beneficial owner.

(iii)    Notwithstanding anything in the second sentence of paragraph (c)(ii) of this Section 2.9 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 100 days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice required by this Section 2.9 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which public announcement is first made by the Corporation.

(iv)    Notwithstanding anything in the second sentence of paragraph (c)(ii) of this Section 2.9 to the contrary, in the event that any person nominated by the Board of Directors for election as a director (other than a person nominated to fill a vacancy created by the death of a director) was not a director or nominee named (A) in the Corporation's proxy statement for the preceding annual meeting or (B) in a public announcement made by the Corporation at least 100 days prior to the first anniversary of the preceding year's annual meeting (a “New Nominee”), a shareholder's notice required by this Section 2.9 shall also be considered timely, but only with respect to nominees for election as director equal in number to the number of New Nominees, if it is delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which public announcement is first made by the Corporation of the election or nomination of such New Nominee to the Board of Directors.

(d    (v)    In addition, to be considered timely, a shareholder’s notice shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is ten (10) days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than ten (10) days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight (8)

days prior to the date for the meeting or any adjournment or postponement thereof in the case of the update and supplement required to be made as of ten (10) days prior to the meeting or any adjournment or postponement thereof. The obligation to update and supplement as set forth in this paragraph or any other Section of these By-Laws shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a shareholder, extend any applicable deadlines hereunder or under any other provision of these By-Laws or enable or be deemed to permit a shareholder who has previously submitted notice hereunder or under any other provision of these By-Laws to amend or update any proposal or to submit any new proposal, including by changing or adding nominees, matters, business and or resolutions proposed to be brought before a meeting of the shareholders.

(d)    Inclusion of Shareholder Director Nominations in the Corporation’s Proxy Materials.

(i)    Subject to the terms and conditions set forth in these By-Laws, the Corporation shall include in its proxy statement for an annual meeting of shareholders the name, together with the Required Information (as defined below), of any person nominated for election (the “Shareholder Nominee”) to the Board of Directors by a shareholder or group of shareholders that satisfy the requirements of this paragraph (d) of Section 2.9, including qualifying as an Eligible Shareholder (as defined in paragraph (v) below) and that expressly elects at the time of providing the written notice required by this paragraph (v) of Section 2.9 (a “Proxy Access Notice”) to have its nominee included in the Corporation’s proxy materials pursuant to this paragraph (d) of Section 2.9.

(ii)    For purposes of this Section 2.9, the “Required Information” that the Corporation will include in its proxy statement is: (i) the information concerning the Shareholder Nominee and the Eligible Shareholder that the Corporation determines is required to be disclosed in the Corporation’s proxy statement by the regulations promulgated under Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and (ii) if the Eligible Shareholder so elects, a Statement (as defined in paragraph (d)(vii) below). The Corporation shall also include the name of the Shareholder Nominee in its proxy card. For the avoidance of doubt, and any other provision of these By-Laws notwithstanding, the Corporation may in its sole discretion solicit against, and include in the proxy statement (and other proxy materials) its own statements or other information relating to, any Eligible Shareholder and/or Shareholder Nominee, including any information provided to the Corporation with respect to the foregoing.

(iii)    To be timely, a shareholder’s Proxy Access Notice must be delivered to the principal executive offices of the Corporation within the time periods applicable to shareholder notices of nominations pursuant to paragraph (c)(ii) of this Section 2.9 of these By-Laws. In no event shall any adjournment or postponement of an annual meeting, the date of which has been announced by the Corporation, commence a new time period for the giving of a Proxy Access Notice.

(iv)    The number of Shareholder Nominees (including Shareholder Nominees that were submitted by an Eligible Shareholder for inclusion in the Corporation’s proxy materials pursuant to this paragraph (d) of Section 2.9 but either are subsequently withdrawn or that the Board of Directors decides to nominate as Board of Directors’ nominees) appearing in the Corporation’s proxy materials with respect to an annual meeting of shareholders shall not exceed the greater of (x) two (2) and (y) the largest whole number that does not exceed twenty percent

(20%) of the number of directors in office as of the last day on which a Proxy Access Notice may be delivered in accordance with the procedures set forth in this paragraph (d) of Section 2.9 (such greater number, the “Permitted Number”); provided, however, that the Permitted Number shall be reduced by:

(A)    the number of such director candidates for which the Corporation shall have received one or more valid shareholder notices nominating director candidates pursuant to paragraph (c) of this Section 2.9 (but not paragraph (d)) of these By-laws;

(B)    the number of directors in office or director candidates that in either case will be included in the Corporation’s proxy materials with respect to such annual meeting as an unopposed (by the Corporation) nominee pursuant to an agreement, arrangement or other understanding with a shareholder or group of shareholders (other than any such agreement, arrangement or understanding entered into in connection with an acquisition of voting stock, by such shareholder or group of shareholders, from the Corporation), other than any such director referred to in this clause (B) who at the time of such annual meeting will have served as a director continuously, as a nominee of the Board of Directors, for at least two (2) terms; and

(C)    the number of directors in office that will be included in the Corporation’s proxy materials with respect to such annual meeting for whom access to the Corporation’s proxy materials was previously provided pursuant to this paragraph (d) of this Section 2.9, other than any such director referred to in this clause (C) who at the time of such annual meeting will have served as a director continuously, as a nominee of the Board of Directors, for at least two (2) terms;

provided, further, that in no circumstance shall the Permitted Number exceed the number of directors to be elected at the applicable annual meeting as noticed by the Corporation and in the event the Board of Directors resolves to reduce the size of the Board of Directors effective on or prior to the date of the annual meeting, the Permitted Number shall be calculated based on the number of directors in office as so reduced. An Eligible Shareholder submitting more than one Shareholder Nominee for inclusion in the Corporation’s proxy statement pursuant to this paragraph (d) of Section 2.9 shall rank such Shareholder Nominees based on the order that the Eligible Shareholder desires such Shareholder Nominees to be selected for inclusion in the Corporation’s proxy statement and include such specified rank in its Proxy Access Notice. If the number of Shareholder Nominees pursuant to this paragraph (d) of Section 2.9 for an annual meeting of shareholders exceeds the Permitted Number, then the highest ranking qualifying Shareholder Nominee from each Eligible Shareholder will be selected by the Corporation for inclusion in the proxy statement until the Permitted Number is reached, going in order of the amount (largest to smallest) of the ownership position as disclosed in each Eligible Shareholder’s Proxy Access Notice. If the Permitted Number is not reached after the highest ranking Shareholder Nominee from each Eligible Shareholder has been selected, this selection process will continue as many times as necessary, following the same order each time, until the Permitted Number is reached.

(v)    An “Eligible Shareholder” is one or more shareholders of record who own and have owned, or are acting on behalf of one or more beneficial owners who own and have owned (in each case as defined above), in each case continuously for at least three (3) years as of both the date that the Proxy Access Notice is received by the Corporation pursuant to this paragraph (d) of Section 2.9, and as of the record date for determining shareholders eligible to

vote at the annual meeting, at least three percent (3%) of the aggregate voting power of the voting stock (the “Proxy Access Request Required Shares”), and who continue to own the Proxy Access Request Required Shares at all times between the date such Proxy Access Notice is received by the Corporation and the date of the applicable annual meeting; provided that the aggregate number of shareholders, and, if and to the extent that a shareholder is acting on behalf of one or more beneficial owners, of such beneficial owners, whose stock ownership is counted for the purpose of satisfying the foregoing ownership requirement shall not exceed twenty (20). Two or more collective investment funds that are part of the same family of funds by virtue of being under common management and investment control, under common management and sponsored primarily by the same employer or a “group of investment companies” (as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended) (a “Qualifying Fund”) shall be treated as one shareholder for the purpose of determining the aggregate number of shareholders in this paragraph (d)(v); provided that each fund included within a Qualifying Fund otherwise meets the requirements set forth in this paragraph (d) of Section 2.9. No shares may be attributed to more than one group constituting an Eligible Shareholder under this paragraph (d) of Section 2.9 (and, for the avoidance of doubt, no shareholder may be a member of more than one group constituting an Eligible Shareholder). A record holder acting on behalf of one or more beneficial owners will not be counted separately as a shareholder with respect to the shares owned by beneficial owners on whose behalf such record holder has been directed in writing to act, but each such beneficial owner will be counted separately, subject to the other provisions of this paragraph (d)(v), for purposes of determining the number of shareholders whose holdings may be considered as part of an Eligible Shareholder’s holdings. For the avoidance of doubt, Proxy Access Request Required Shares will qualify as such if and only if the beneficial owner of such shares as of the date of the Proxy Access Notice has itself individually beneficially owned such shares continuously for the three-year (3-year) period ending on that date and through the other applicable dates referred to above (in addition to the other applicable requirements being met).

(vi)    No later than the final date when a Proxy Access Notice pursuant to this paragraph (d) of Section 2.9 may be timely delivered to the Secretary, an Eligible Shareholder (including each Constituent Holder) must provide the following information in writing to the Secretary:

(A)     with respect to each Constituent Holder, the name and address of, and number of shares of voting stock owned by, such person;

(B)    one or more written statements from the record holder of the shares (and from each intermediary through which the shares are or have been held during the requisite three-year (3-year) holding period) verifying that, as of a date within seven (7) days prior to the date the Proxy Access Notice is delivered to the Corporation, such person owns, and has owned continuously for the preceding three (3) years, the Proxy Access Request Required Shares, and such person’s agreement to provide:

(I)     within ten (10) days after the record date for the annual meeting, written statements from the record holder and intermediaries verifying such person’s continuous ownership of the Proxy Access Request Required Shares through the record date, together with any additional information reasonably requested to verify such person’s ownership of the Proxy Access Request Required Shares; and

(II)    immediate notice if the Eligible Shareholder ceases to own any of the Proxy Access Request Required Shares prior to the date of the applicable annual meeting of shareholders;

(C)    the information contemplated by paragraph (f)(i), (iii) and (iv) of this Section 2.9 of these By-Laws (with references to a “shareholder” therein to include such Eligible Shareholder (including each Constituent Holder));

(D)    a representation that such person:

(I)     acquired the Proxy Access Request Required Shares in the ordinary course of business and not with the intent to change or influence control of the Corporation, and does not have any such intent;

(II)    has not nominated and will not nominate for election to the Board of Directors at the annual meeting any person other than the Shareholder Nominee(s) being nominated pursuant to this paragraph (d) Section 2.9;

(III)    has not engaged and will not engage in, and has not been and will not be a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the annual meeting other than its Shareholder Nominee(s) or a nominee of the Board of Directors;

(IV)    will not distribute to any shareholder any form of proxy for the annual meeting other than the form distributed by the Corporation; and

(V)    will provide facts, statements and other information in all communications with the Corporation and its shareholders that are and will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and will otherwise comply with all applicable laws, rules and regulations in connection with any actions taken pursuant to this paragraph (d) of Section 2.9;

(E)    in the case of a nomination by a group of shareholders that together is such an Eligible Shareholder, the designation by all group members of one group member that is authorized to act on behalf of all members of the nominating shareholder group with respect to the nomination and matters related thereto, including withdrawal of the nomination; and

(F)    an undertaking that such person agrees to:

(I)    assume all liability stemming from, and indemnify and hold harmless the Corporation and each of its directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its directors, officers or employees arising out of any legal or regulatory violation arising out of the Eligible Shareholder’s communications with the shareholders of the Corporation or out of the information that the Eligible Shareholder (including such person) provided to the Corporation;

(II)    promptly provide to the Corporation such other information as the Corporation may reasonably request; and

(III)    file with the Securities and Exchange Commission any solicitation by the Eligible Shareholder of shareholders of the Corporation relating to the annual meeting at which the Shareholder Nominee will be nominated.

In addition, no later than the final date when a nomination pursuant to this paragraph (d) of Section 2.9 may be delivered to the Corporation, a Qualifying Fund whose share ownership is counted for purposes of qualifying as an Eligible Shareholder must provide to the Secretary documentation reasonably satisfactory to the Board of Directors that demonstrates that the funds included within the Qualifying Fund satisfy the definition thereof. In order to be considered timely, any information required by this paragraph (d) of Section 2.9 to be provided to the Corporation must be supplemented (by delivery to the Secretary): (1) no later than ten (10) days following the record date for the applicable annual meeting, to disclose the foregoing information as of such record date; and (2) no later than eight (8) days before the annual meeting, to disclose the foregoing information as of the date that is no earlier than ten (10) days prior to such annual meeting. For the avoidance of doubt, the requirement to update and supplement such information shall not permit any Eligible Shareholder or other person to change or add any proposed Shareholder Nominee or be deemed to cure any defects or limit the remedies (including, without limitation, under these By-Laws) available to the Corporation relating to any defect.

(vii)    The Eligible Shareholder may provide to the Secretary, at the time the information required by this paragraph (d) of Section 2.9 is originally provided, a written statement for inclusion in the Corporation’s proxy statement for the annual meeting, not to exceed five hundred (500) words, in support of the candidacy of such Eligible Shareholder’s Shareholder Nominee (the “Statement”). Notwithstanding anything to the contrary contained in this paragraph (d) of Section 2.9, the Corporation may omit from its proxy materials any information or Statement that it, in good faith, believes is materially false or misleading, omits to state any material fact, or would violate any applicable law or regulation.

(viii)    No later than the final date when a nomination pursuant to this paragraph (d) of Section 2.9 may be delivered to the Corporation, each Shareholder Nominee must provide the completed and signed questionnaire, representation, agreement required by Section 2.10 of these By-Laws:

(A)    provide an executed agreement, in a form deemed satisfactory by the Board of Directors or its designee (which form shall be provided by the Corporation reasonably promptly upon written request of a shareholder), that such Shareholder Nominee consents to being named in the Corporation’s proxy statement and form of proxy card (and will not agree to be named in any other person’s proxy statement or form of proxy card with respect to the Corporation) as a nominee and intends to serve as a director of the Corporation for the entire term if elected;

(B)    complete, sign and submit all questionnaires, representations and agreements required by these By-Laws or of the Corporation’s directors generally; and

(C)    provide such additional information as necessary to permit the Board of Directors to determine: (a) if any of the matters referred to in paragraph (d)(x) below

apply; (b) if such Shareholder Nominee has any direct or indirect relationship with the Corporation other than those relationships that have been deemed categorically immaterial pursuant to the Corporation’s Corporate Governance Guidelines; or (c) is or has been subject to any event specified in Rule 506(d)(1) of Regulation D (or any successor rule) under the Securities Act of 1933 or Item 401(f) of Regulation S-K (or any successor rule) under the Exchange Act, without reference to whether the event is material to an evaluation of the ability or integrity of such Shareholder Nominee.

In the event that any information or communications provided by the Eligible Shareholder (or any Constituent Holder) or the Shareholder Nominee to the Corporation or its shareholders ceases to be true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, each Eligible Shareholder or Shareholder Nominee, as the case may be, shall promptly notify the Secretary of any defect in such previously provided information and of the information that is required to correct any such defect; it being understood for the avoidance of doubt that providing any such notification shall not be deemed to cure any such defect or limit the remedies (including, without limitation, under these By-Laws) available to the Corporation relating to any such defect.

(ix)    Any Shareholder Nominee who is included in the Corporation’s proxy materials for a particular annual meeting of shareholders but either (1) withdraws from or becomes ineligible or unavailable for election at that annual meeting (other than by reason of such Shareholder Nominee’s disability or other health reason) or (2) does not receive votes cast in favor of the Shareholder Nominee’s election of at least twenty-five (25) percent of the shares represented in person or by proxy at the annual meeting will be ineligible to be a Shareholder Nominee pursuant to this paragraph (d) of Section 2.9 for the next two (2) annual meetings. Any Shareholder Nominee who is included in the Corporation’s proxy statement for a particular annual meeting of shareholders, but subsequently is determined not to satisfy the eligibility requirements of this paragraph (d) of Section 2.9 or any other provision of these By-Laws, the Articles of Incorporation or any applicable regulation any time before the annual meeting of shareholders, will not be eligible for election at the relevant annual meeting of shareholders.

(x)    The Corporation shall not be required to include, pursuant to this paragraph (d) of Section 2.9, a Shareholder Nominee in its proxy materials for any annual meeting of shareholders, or, if the proxy statement already has been filed, to allow the nomination of (or vote with respect to) a Shareholder Nominee (and may declare such nomination ineligible), notwithstanding that proxies in respect of such vote may have been received by the Corporation:

(A)    who is not independent under the listing standards of the principal U.S. exchange upon which the common stock of the Corporation is listed, any applicable rules of the Securities and Exchange Commission and any publicly disclosed standards used by the Board of Directors in determining and disclosing independence of the Corporation’s directors;

(B)    whose service as a member of the Board of Directors would violate or cause the Corporation to be in violation of these By-Laws, the Articles of Incorporation, the rules and listing standards of the principal U.S. exchange upon which the common stock of the Corporation is traded, or any applicable law, rule or regulation;

(C)    who is or has been, within the past three (3) years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, as amended, or who is a subject of a pending criminal proceeding, has been convicted in a criminal proceeding within the past ten (10) years or is subject to an order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act;

(D)    if the Eligible Shareholder (or any Constituent Holder) or applicable Shareholder Nominee otherwise breaches or fails to comply in any material respect with its obligations pursuant to this paragraph (d) of Section 2.9 or any agreement, representation or undertaking required by this paragraph; or

(E)    if the Eligible Shareholder ceases to be an Eligible Shareholder for any reason, including, but not limited to, not owning the Proxy Access Request Required Shares through the date of the applicable annual meeting.

Clauses (A), (B), and (C) and, to the extent related to a breach or failure by the Shareholder Nominee, clause (D), will result in the exclusion from the proxy materials pursuant to this paragraph (d) of Section 2.9 of the specific Shareholder Nominee to whom the ineligibility applies, or, if the proxy statement already has been filed, the ineligibility of such Shareholder Nominee to be nominated; provided, however, that clause (E) and, to the extent related to a breach or failure by an Eligible Shareholder (or any Constituent Holder), clause (D) will result in the voting stock owned by such Eligible Shareholder (or Constituent Holder) being excluded from the Proxy Access Request Required Shares (and, if as a result the Proxy Access Notice shall no longer have been filed by an Eligible Shareholder, the exclusion from the proxy materials pursuant to this paragraph (d) of Section 2.9 of all of the applicable shareholder’s Shareholder Nominees from the applicable annual meeting of shareholders or, if the proxy statement has already been filed, the ineligibility of all of such shareholder’s Shareholder Nominees to be nominated).

(e)    Special Meetings of Shareholders. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the Corporation's notice of meeting (A) by or at the direction of the Board of Directors or (B) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this Section 2.9, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.9. Nominations by shareholders of persons for election to the Board of Directors may be made at such a special meeting of shareholders if the shareholder's notice required by paragraph (c)(ii) of this Section 2.9 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the date on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a shareholder's notice as described above.

(e    (f)    Disclosure Requirements.To be in proper form, a shareholder’s notice pursuant to this Section 2.9 must include the following, as applicable:

(i)    As to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal, as applicable, is made, a shareholder’s notice must set forth: (A) the name and address of such shareholder, as they appear on the Corporation’s books, of such beneficial owner, if any, and of their respective affiliates or associates or others acting in concert therewith; (B) (1) the class or series and number of shares of the Corporation which are, directly or indirectly, owned beneficially and of record by such shareholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith, (2) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived, in whole or in part, from the value of any class or series of shares of the Corporation, or any derivative or synthetic arrangement having the characteristics of a long position in any class or series of shares of the Corporation, or any contract, derivative, swap or other transaction or series of transactions designed to produce economic benefits and risks that correspond substantially to the ownership of any class or series of shares of the Corporation, including due to the fact that the value of such contract, derivative, swap or other transaction or series of transactions is determined by reference to the price, value or volatility of any class or series of shares of the Corporation, whether or not such instrument, contract or right shall be subject to settlement in the underlying class or series of shares of the Corporation, through the delivery of cash or other property, or otherwise, and without regard to whether the shareholder of record, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith, may have entered into transactions that hedge or mitigate the economic effect of such instrument, contract or right, or any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation (any of the foregoing, a “Derivative Instrument”) directly or indirectly owned beneficially by such shareholder, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith, (3) any proxy, contract, arrangement, understanding or relationship pursuant to which such shareholder, such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith has any right to vote any class or series of shares of the Corporation, (4) any agreement, arrangement, understanding, relationship or otherwise, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, involving such shareholder, such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith, directly or indirectly, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of any class or series of the shares of the Corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such shareholder, such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith with respect to any class or series of the shares of the Corporation, or which provides, directly or indirectly, the opportunity to profit or share in any profit derived from any decrease in the price or value of any class or series of the shares of the Corporation (any of the foregoing, a “Short Interest”), (5) any rights to dividends on the shares of the Corporation owned beneficially by such shareholder, such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith that are separated or separable from the underlying shares of the Corporation, (6) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such shareholder, such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith is a general partner or, directly or indirectly, beneficially owns an interest in a general

partner of such general or limited partnership, (7) any performance-related fees (other than an asset-based fee) that such shareholder, such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith is entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, including, without limitation, any such interests held by members of the immediate family sharing the same household of such shareholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith, (8) any significant equity interests or any Derivative Instruments or Short Interests in any principal competitor of the Corporation held by such shareholder, such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith and (9) any direct or indirect interest of such shareholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement); (iii) all information that would be required to be set forth in a Schedule 13D filed pursuant to Rule 13d-1(a) or an amendment pursuant to Rule 13d-2(a) if such a statement were required to be filed under the Exchange Act and the rules and regulations promulgated thereunder by such shareholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith, if any; and (C) any other information relating to such shareholder, such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith, if any, that would be required to be disclosed in a proxy statement and form or proxy or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder;

(ii)    If the notice includes any business other than a nomination of a director or directors that the shareholder proposes to bring before the meeting, a shareholder’s notice must, in addition to the matters set forth in subsection (i) above, also set forth: (A) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest of such shareholder, such beneficial owner and each of their respective affiliates or associates or others acting in concert therewith, if any, in such business; (B) the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such proposal or business includes a proposal to amend the By-Laws of the Corporation, the text of the proposed amendment); and (C) a description of all agreements, arrangements and understandings between such shareholder, such beneficial owner and each of their respective affiliates or associates or others acting in concert therewith, if any, and any other person or persons (including their names) in connection with the proposal of such business by such shareholder;

(iii)    As to each individual, if any, whom the shareholder proposes to nominate for election or reelection to the Board of Directors, a shareholder’s notice must, in addition to the matters set forth in subsection (i) above, also set forth: (A) all information relating to such individual that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such individual’s written consent to being named in the proxy statement as a nominee and written statement of intent to serve as a director for the full term if elected); (B) if directors are to be elected at such meeting for terms ending at different annual meetings, the annual meeting at which the term for which such person is being nominated ends;

and (C) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three (3) years, and any other material relationships, between or among such shareholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the shareholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule, and the nominee were a director or executive officer of such registrant; and

(iv)    With respect to each individual, if any, whom the shareholder proposes to nominate for election or reelection to the Board of Directors, a shareholder’s notice must, in addition to the matters set forth in subsections (i) and (iii) above, also include the completed and signed questionnaire, representation, agreement required by Section 2.10 of these By-Laws. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable shareholder’s understanding of the independence, or lack thereof, of such nominee. Notwithstanding anything to the contrary, only persons who are nominated in accordance with the procedures set forth in these By-Laws, including, without limitation, Sections 2.9 and 2.10 hereof, shall be eligible for election as directors.

(g) General.

(i)    Except where the terms of any class or series of Preferred Stock of the Corporation require the election of one or more directors by the holders of such Preferred Stock voting as a single class and except as provided in Section 3.3 of these By-Laws, only such persons who are nominated in accordance with the procedures set forth in this Section 2.9 shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.9. Except as otherwise provided by law, the Articles of Incorporation of these By-Laws, the person presiding at the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed in accordance with the procedures set forth in this Section 2.9 and, if any nomination or business proposed is not in compliance with this Section 2.9, to declare that such defective nomination or proposal shall be disregarded.

(ii)    For purposes of this Section 2.9, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(iii)    Notwithstanding the foregoing provisions of this Section 2.9, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.9. Nothing in this Section 2.9 shall be deemed to affect any rights of (x) shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or

(y) holders of any series of Preferred Stock to elect directors under specified circumstances. Subject to Rule 14a-8 under the Exchange Act and paragraph (d) of this Section 2.9, nothing in these By-laws shall be construed to permit any shareholder, or give any shareholder the right, to include or have disseminated or described in the Corporation’s proxy statement any nomination of director or directors or any other business proposal, statement or communication.

SECTION 2.10.SECTION 2.10. Submission of Questionnaire, Representation and Agreement. To be eligible to be a nominee of any shareholder for election or reelection as a director of the Corporation, a person must deliver (in accordance with the time periods prescribed for delivery of notice under Section 2.9 of these By-Laws) to the Secretary at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such individual and the background of any other person or entity on whose behalf, directly or indirectly, the nomination is being made (which questionnaire shall be provided to the requesting shareholder by the Secretary following written request), and a written representation and agreement (in the form provided by the Secretary to the requesting shareholder following written request) that such individual:

(a)    is not and will not become a party to: (i) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation, and (ii) any Voting Commitment that could limit or interfere with such individual’s ability to comply, if elected as a director of the corporation, with such individual’s fiduciary duties under applicable law; (b) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein;

(b)    agrees to promptly provide to the Corporation such other information as the Corporation may reasonably request;

(c)    in such individual’s personal capacity and on behalf of any person or entity on whose behalf, directly or indirectly, the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply, with all applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation publicly disclosed from time to time.

SECTION 2.11.Inspectors. There shall be appointed by the Board of Directors, before each meeting of shareholders, two inspectors of the vote. Such inspectors shall first take and subscribe an oath or affirmation faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of their ability. If two inspectors are not appointed in advance of any such meeting by the Board of Directors or one or both appointed inspectors fail or refuse to act, then one or both inspectors, as the case may be, shall be appointed for the meeting by the person presiding thereat. Such inspectors shall be responsible for tallying and certifying the vote taken on any matter at each meeting which is required to be tallied and certified by them in the resolution of the Board of Directors appointing them or the appointment of the person presiding at such meeting as the case may be. Except as otherwise provided by these By-Laws or the laws of the State of Indiana, such inspectors shall also decide all questions touching upon the qualification of voters, the validity of proxies and ballots, and the acceptance and rejection of

votes. In the case of a tie vote by the inspectors on any question, the person presiding at the meeting shall decide such question. The Board of Directors shall have the authority to make rules establishing presumptions as to the validity and sufficiency of proxies.

ARTICLE 3

DIRECTORS

SECTION 3.1. Number. Subject to the rights of the holders of any class or series of Preferred Stock to elect additional directors under specified circumstances, the number of directors shall be set, and from time to time may be increased or decreased to the extent provided for in the Articles of Incorporation, exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the Whole Board. A director need not be a shareholder.

SECTION 3.2. Chairman of the Board of Directors. The Chairman of the Board of Directors shall be elected from among the directors, shall preside at all meetings of the shareholders and of the Board, and shall have such other powers and duties as from time to time may be prescribed by the Board. The Chairman of the Board shall perform all duties incidental to his or her office which may be required by law and all such other duties as are properly required of him or her by the Board of Directors. The Chairman may not serve as the Chief Executive Officer and President.

SECTION 3.3.    Vacancies. Except where the terms of any class or series of Preferred Stock of the Corporation require the election of one or more directors by the holders of such Preferred Stock voting as a single class and except to the extent the Board of Directors determines otherwise, vacancies occurring on the Board of Directors and newly-created directorships resulting from any increase in the number of directors may be filled only by the affirmative vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and any director so chosen shall hold office for a term expiring at the annual meeting of shareholders at which the term of office of the class of directors to which such director has been elected expires and until his or her successor is duly elected and qualified or until the earlier of his or her death, resignation or removal in a manner permitted by statute or these By-Laws. No decrease in the number of authorized directors constituting the Whole Board shall shorten the term of any incumbent director.

SECTION 3.4. Powers. The property, affairs and business of the Corporation shall be managed by the Board of Directors which may exercise all powers of the Corporation and do all lawful acts and things not by statute or by the Articles of Incorporation or these By-Laws directed or required to be exercised or done by the shareholders.

SECTION 3.5. Place of Meetings. The place of any meeting of the Board of Directors may be either in or outside the State of Indiana as the Board may from time to time determine or as shall be specified or fixed in the respective notices or waivers of notice thereof.

SECTION 3.6. Annual Meetings. Annual meetings of the Board of Directors shall be held each year on the same day as the shareholder's annual meeting for such year, at the time and place determined by the Board of Directors. Notice of such meeting need not be given. Such

meeting may be held at any other time or place which shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors.

SECTION 3.7 Regular Meetings. Regular meetings of the Board of Directors shall be held at the dates, times and places designated by the Board of Directors from time to time. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day not a legal holiday. Notice of regular meetings need not be given.

SECTION 3.8. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board; and shall be called by the Chairman of the Board or the Secretary upon the written request of three directors of the Corporation.

SECTION 3.9. Notice of Special Meetings. Notice of each special meeting of the Board of Directors shall be given to each director. The notice shall state the principal purpose or purposes of the meeting.

SECTION 3.10. Quorum. Except as provided in Section 3.3, a whole number of directors equal to at least a majority of the Whole Board shall constitute a quorum for the transaction of business at all meetings of the Board of Directors, and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors unless otherwise provided by law, the Articles of Incorporation or these By‑Laws. If a quorum shall not be present at any meeting of the Board of Directors, the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. Notice of any adjourned meeting need not be given. The directors shall act only as a board and the individual directors shall have no power as such.

SECTION 3.11. Informal Action. Unless otherwise restricted by statute, the Articles of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all directors or by all members of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors or of such committee.

SECTION 3.12. Attendance by Conference Telephone. Members of the Board of Directors or any committee designated by the Board of Directors may participate in a meeting of such Board of Directors or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

SECTION 3.13. Order of Business. At all meetings of the Board of Directors, business shall be transacted in the order determined by the Board.

SECTION 3.14. Resignations. Any director of the Corporation may resign at any time by giving written notice to the Chairman of the Board or the Secretary of the Corporation. The resignation of any director shall take effect at the time of the receipt of such notice or at any later

time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 3.15. Committees.

(a)    The Board of Directors may from time to time, in its discretion, by resolution passed by a majority of the Whole Board, designate, and appoint, from the directors, committees of one or more persons which shall have and may exercise such lawfully delegable powers and duties conferred or authorized by the resolutions of designation and appointment.

(b)    Each member of a committee shall continue in office until a director to succeed him or her shall have been elected and shall have qualified, or until he or she ceases to be a director or until he or she shall have resigned or shall have been removed in the manner hereinafter provided. Any vacancy in a committee shall be filled by the vote of a majority of the Whole Board at any regular or special meeting thereof.

(c)    The Board of Directors may, by resolution passed by a majority of the Whole Board, designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.

(d)    Unless otherwise provided by the Board of Directors, each committee shall appoint a chairman. Each committee shall keep a record of its acts and proceedings and report the same from time to time to the Board of Directors.

(e)    Any regular or alternate member of a committee may resign at any time by giving written notice to the Chairman of the Board or the Secretary of the Corporation. Such resignation shall take effect at the time of the receipt of such notice or at any later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

(f)    Any regular or alternate member of a committee may be removed with or without cause at any time by resolution passed by a majority of the Whole Board at any regular or special meeting.

(g)    Regular meetings of each committee, of which no notice shall be necessary, shall be held on such days and at such places as the chairman of the committee shall determine or as shall be fixed by a resolution passed by a majority of all the members of such committee. Special meetings of each committee will be called by the Secretary at the request of any two members of such committee (or the sole member, if a committee of one), or in such other manner as may be determined by the committee. Notice of each special meeting of a committee shall be mailed to each member thereof at least two days before the meeting or shall be given personally or by telephone or other electronic transmission at least one day before the meeting. Every such notice shall state the time and place, but need not state the purposes of the meeting. No notice of any meeting of a committee shall be required to be given to any alternate.

(h)    Unless the Board of Directors shall provide otherwise, the presence of a majority of the total membership of any committee of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of such committee and the act of a majority of those present shall be necessary and sufficient for the taking of any action thereat.

SECTION 3.16. Compensation of Directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and at each meeting of a committee of the Board of Directors of which they are members. Unless otherwise provided in these By-Laws, the Board of Directors shall have the authority to fix compensation of all directors for their services to the Corporation as directors and for their services to the Corporation as regular or alternate members of committees of the Board of Directors.

SECTION 3.17. Removal. Subject to the rights of the holders of any class or series of Preferred Stock, any director or the entire Board of Directors may be removed from office at any time, but only for cause and only by the affirmative vote by the holders of at least 80 percent of the voting power of all of the then outstanding shares of capital stock of the Corporation entitled to vote at an election of directors, voting together as a single class.

SECTION 3.18. Board Structure. The Corporation elects not to be governed by Section 23-1-33-6(c) of the Act.

ARTICLE 4

NOTICES

SECTION 4.1. Notices. Notices to directors and shareholders shall be in writing and delivered personally or mailed to their addresses appearing on the records of the Corporation or, if to directors, by telegram, cable, telephone, telecopy, facsimile, other electronic transmission, wireless or a nationally recognized overnight delivery service or personally. Notice to directors by mail shall be given at least five days before the meeting. Notice to directors by telegram, cable, telephone, telecopy, facsimile, other electronic transmission, wireless or personal delivery shall be given a reasonable time before the meeting, but in no event less than two days before the meeting. Notice by mail shall be deemed to be given when mailed to the director at his or her address appearing on the records of the Corporation. Notice by telegram or cable shall be deemed to be given when the telegram or cable addressed to the director at his or her address appearing on the records of the Corporation is delivered to the telegraph company. Notice by telephone, telecopy, facsimile, other electronic transmission or wireless shall be deemed to be given when transmitted by telephone, telecopy, facsimile, other electronic transmission or wireless to the number, electronic address or wireless call designation appearing on the records of the Corporation for the director (regardless of whether the director shall have personally received such telephone call or wireless message);; provided confirmation of transmission shall be made promptly by telegram or cable in the manner specified above.

SECTION 4.2. Waiver of Notice. Whenever any notice is required, a waiver thereof signed by the person entitled to such notice and filed with the minutes or corporate records, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance of any person at any meeting of shareholders or directors shall constitute a waiver of notice of such meeting, except when such person attends only for the express purpose of objecting, at the beginning of the meeting (or in the case of a director's meeting, promptly upon such director's arrival), to the transaction of any business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

ARTICLE 5

OFFICERS

SECTION 5.1. Designation; Number; Election. The Board of Directors shall elect the officers of the Corporation. Such officers shall be a Chief Executive Officer and President, one or more Vice Presidents as the Board of Directors shall determine from time to time, a Controller, a Treasurer and a Secretary.

In addition to any officer elected by the Board of Directors, the Board of Directors or the Chief Executive Officer and President, at any time, may appoint and remove such additional officers and agents as the Board of Directors or the Chief Executive Officer and President may determine from time to time. Such persons shall have such authority, and perform such duties as provided in these By‑Laws or as the Board of Directors or the Chief Executive Officer and President may from time to time prescribe. The Board of Directors or the Chief Executive Officer and President may from time to time authorize any officer to appoint and remove agents and employees and to prescribe their powers and duties.

One person may hold more than one office at the same time provided the duties of such officers as prescribed by these By-Laws may be properly and consistently performed by one person; provided, however, that the Chief Executive Officer may not serve as the Chairman and the Chairman must be “independent” as determined pursuant to the provisions of the New York Stock Exchange Listed Company Manual.

SECTION 5.2. Term of Office; Removal; Resignations; Vacancies. The term of each officer shall be for one year and continue until his or her successor is chosen and qualified or until the earlier of his or her death, resignation or removal, except that any such officer elected by the Board of Directors, excluding the Chief Executive Officer and President, at any time, may be suspended by the Chief Executive Officer and President until the Board of Directors convenes, and any such officer, including the Chief Executive Officer and President, may be removed at any time by the affirmative vote of a majority of the members of the Whole Board.

All appointed officers, agents and representatives of the Corporation shall hold office only during the pleasure of the Board of Directors or the officer appointing them.

Any officer elected by the Board of Directors may resign at any time by giving written notice to the Chairman of the Board, the Chief Executive Officer and President or the Secretary. Any other officer may resign at any time by giving written notice to the Chairman of the Board or the Chief Executive Officer and President. Any such resignation shall take effect at the date of receipt of such notice or at any later time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

A vacancy in any office because of death, resignation, removal or otherwise shall be filled for the unexpired portion of the term in the manner provided in these By‑Laws for regular election or appointment to such office.

SECTION 5.3. Compensation of Officers. The Board of Directors or the compensation committee of the Board of Directors shall have the authority to fix compensation of all officers elected by the Board. The Chief Executive Officer and President and/or such officer as the Chief

Executive Officer and President may designate shall have the authority to fix compensation of all other officers of the Corporation.

SECTION 5.4. Chief Executive Officer and President. The Chief Executive Officer and President shall, subject to the general oversight of the Board of Directors, be responsible for the day-to-day management and overall charge of the administration and operation of the Corporation’s business and the general supervision of the policies and affairs of the Corporation. He or she shall report to the Board of Directors directly.

He or she shall (a) see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect or otherwise implemented; (b) have the power to appoint officers for any division who, as such, shall not be officers of the Corporation; (c) in the absence or disability of the Chairman, preside at meetings of the Board of Directors and perform such other duties of the Chairman as may be assigned to him or her by the Board of Directors; and (d) have such other powers and perform such other duties as may be prescribed by the Board of Directors or provided in these By-Laws.

In the absence or disability of the Chairman and the Chief Executive Officer and President, on assembling for a regular or special meeting of the Board of Directors, the directors shall choose another member of the Board of Directors or another officer in attendance to preside at such meeting.

SECTION 5.5. Vice Presidents. Each Vice President shall have the powers and duties prescribed in these By-Laws or assigned to him or her by the Board of Directors or the Chief Executive Officer and President. The Board of Directors or the Chief Executive Officer and President may designate one or more of such Vice Presidents as executive, senior or assistant Vice Presidents.

SECTION 5.6. Controller. Subject to control and supervision by the Chief Executive Officer and President and the Board of Directors, the Controller shall be in charge of the accounts of the Corporation and its subsidiaries; maintain adequate records of all assets, liabilities and business transactions; and have the other powers and duties prescribed by these By-Laws or by the Board of Directors or the Chief Executive Officer and President, and the usual powers and duties pertaining to his or her office.

SECTION 5.7. Assistant Controllers. The Assistant Controllers shall have the powers and duties prescribed by these By-Laws or assigned by the Controller. In the absence or disability of the Controller, they shall have all his or her other powers and duties.

SECTION 5.8 Treasurer. Subject to control and supervision by the Chief Executive Officer and President and the Board of Directors, the Treasurer shall have charge of and shall be responsible for the receipt, disbursement and safekeeping of all funds and securities of the Corporation (and shall deposit all such funds in the name of the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of these By-Laws), propose financial policies, negotiate loans, be responsible for the maintenance of proper insurance coverages and from time to time and whenever requested to do so, render statements of the condition of the finances of the Corporation to the Board of Directors; and have the other powers and duties prescribed by these By-Laws or by the Board of Directors or the

Chief Executive Officer and President, and the usual powers and duties pertaining to his or her office.

SECTION 5.9. Assistant Treasurers. The Assistant Treasurers shall have the powers and duties prescribed by these By-Laws or assigned by the Treasurer. In the absence of the Treasurer, they shall have all his or her other powers and duties.

SECTION 5.10. Secretary. Subject to control and supervision by the Board of Directors and the Chief Executive Officer and President, the Secretary shall attend and record proceedings of meetings of shareholders, the Board of Directors and any committee of the Board of Directors; keep or cause to be kept in books provided for such purpose such records of proceedings; and have the other powers and duties prescribed by these By-Laws or by the Board of Directors or the Chief Executive Officer and President, and have the usual powers and duties pertaining to his or her office, including having custody of the corporate seal, if any, and affixing it to all documents as required to attest the same.

SECTION 5.11. Assistant Secretaries. The Assistant Secretaries shall have the powers and duties prescribed by these By-Laws or assigned by the Secretary. In the absence or disability of the Secretary, they shall have all his or her powers and duties.

SECTION 5.12. Certain Agreements. The Board of Directors shall have power to authorize or direct the proper officers of the Corporation, on behalf of the Corporation, to enter into valid and binding agreements in respect of employment, incentive or deferred compensation, stock options, and similar or related matters, notwithstanding the fact that a person with whom the Corporation so contracts may be a member of its Board of Directors. Any such agreement may validly and lawfully bind the Corporation for a term of more than one year, in accordance with its terms, notwithstanding the fact that one of the elements of any such agreement may involve the employment by the Corporation of an officer, as such, for such term.

ARTICLE 6

CONDUCT OF BUSINESS

SECTION 6.1. Contracts; Loans. The Board of Directors, except as in these By-Laws otherwise provided, may authorize any officer, employee or agent of the Corporation to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances.

No loan shall be contracted on behalf of the Corporation and no negotiable paper shall be issued in its name, unless authorized by the Board of Directors.

SECTION 6.2. Checks. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, employee or employees, of the Corporation as shall from time to time be determined in accordance with authorization of the Board of Directors.

SECTION 6.3. Banking. All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the

Board of Directors may from time to time designate, or as may be designated by any officer or officers of the Corporation to whom such power may be delegated by the Board, and for the purpose of such deposit the officers and employees who have been authorized to do so in accordance with the determinations of the Board may endorse, assign and deliver checks, drafts, and other orders for the payment of money which are payable to the order of the Corporation.

SECTION 6.4. Voting of Stock. Except as otherwise provided in these By‑Laws or in the Articles of Incorporation, and unless otherwise provided by resolution of the Board of Directors, the Chief Executive Officer and President or any other officer elected by the Board of Directors may from time to time appoint an attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation to cast the votes which the Corporation may be entitled to cast as a shareholder or otherwise in any other corporation any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporation, or to consent in writing to any action by such other corporation, and may instruct the person or persons so appointed as to the manner of casting such vote or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as he or she may deem necessary or proper in the premises.

ARTICLE 7

SHARE CERTIFICATES AND THEIR TRANSFER

SECTION 7.1. Share Certificates. Certificates for shares of the Corporation shall be in such form as shall be approved by the Board of Directors and shall be signed by the Chief Executive Officer and President or a Vice President, and by the Secretary or any Assistant Secretary, and shall not be valid unless so signed. Such certificates shall be appropriately numbered in order of issue, by class and series, and contain the name of the registered holder, the number of shares and the date of issue. If such certificates are countersigned (a) by a transfer agent other than the Corporation or its employee, or (b) by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile.

In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he, she or it were such officer, transfer agent or registrar at the date of issue.

The Board of Directors may by resolution or resolutions provide that some or all of any or all classes or series of the shares of stock of the Corporation shall be uncertificated shares. Notwithstanding the preceding sentence, every holder of uncertificated shares, upon request, shall be entitled to receive from the Corporation a certificate representing the number of shares registered in such shareholder's name on the books of the Corporation.

During any period when more than one class of shares of the Corporation is authorized, there shall be set forth on the face or back of certificates issued to represent each class or series of shares, a statement that the Corporation will furnish without charge to each shareholder who so requests, the designation, preferences and relative, participating, optional or other special rights of

each class of shares or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

SECTION 7.2. Transfer of Shares. Upon surrender to the Corporation or a transfer agent of the Corporation by the holder of record or by such person's attorney or other duly constituted representative of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, as the Corporation may reasonably require, it shall be the duty of the Corporation and such transfer agent to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction on the books of the Corporation. No certificate shall be issued in exchange for any certificate until the former certificate for the same number of shares of the same class and series shall have been surrendered and canceled, except as provided in Section 7.4.

SECTION 7.3. Regulations. The Board of Directors shall have authority to make rules and regulations concerning the issue, transfer and registration of certificates for shares of the Corporation and concerning the registration of pledges of uncertificated shares.

SECTION 7.4. Lost, Stolen and Destroyed Certificates. The Corporation may issue a new certificate or certificates for shares or may register uncertificated shares, if then authorized by the Board of Directors, in place of any issued certificate alleged to have been lost, stolen or destroyed upon such terms and conditions as the Board of Directors may prescribe.

SECTION 7.5. Record Ownership; Registered Shareholders. A record of the name and address of each holder of the shares of the Corporation, the number of shares held by such shareholder, the number or numbers of any share certificate or certificates issued to such shareholder and the number of shares represented thereby, and the date of issuance of the shares held by such shareholder shall be made on the Corporation's books. The Corporation shall be entitled to treat the holder of record (according to the books of the Corporation) of any share or shares (including any holder registered in a book‑entry or direct registration system maintained by the Corporation or a transfer agent or a registrar designated by the Board of Directors) as the holder in fact thereof and owner for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not the Corporation shall have express or other notice thereof, except as expressly provided by applicable law.

SECTION 7.6. Transfer Agents and Registrars. The Board of Directors may from time to time appoint a transfer agent and a registrar in one or more cities, may require all certificates evidencing shares of the Corporation to bear the signatures of a transfer agent and a registrar, may provide that such certificates shall be transferable in more than one city, and may provide for the functions of transfer agent and registrar to be combined in one agency.

ARTICLE 8

INDEMNIFICATION

SECTION 8.1. Litigation Brought By Third Parties. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, formal or informal (other than an action by or in the right of the Corporation) (an “Action”) by

reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation (a “Corporate Person”), or is or was serving at the request of the Corporation as a director, officer, employee, agent, partner, trustee or member or in another authorized capacity (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under this Section 8.1) (collectively, an “Authorized Capacity”) of or for another corporation, unincorporated association, business trust, estate, partnership, joint venture, individual, trust, employee benefit plan, or other legal entity, whether or not organized or formed for profit (collectively, “Another Entity”), against expenses (including attorneys' fees), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such Action (“Expenses”) if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any Action by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe his or her conduct was unlawful.

SECTION 8.2. Litigation by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any Action by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a Corporate Person, or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity against Expenses actually and reasonably incurred by him or her in connection with that defense or settlement of such Action if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or willful misconduct in the performance of his or her duty to the Corporation unless and only to the extent that a court of equity or the court in which such Action was pending shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court of equity or other court shall deem proper.

SECTION 8.3. Successful Defense. To the extent that a person who is or was a Corporate Person or serving at the request of the Corporation in an Authorized Capacity of or for Another Entity has been successful on the merits or otherwise in defense of any Action, referred to in Section 8.1 and 8.2 of this Article 8, or in defense of any claim, issue or matter therein, he or she shall be indemnified against Expenses actually and reasonably incurred by or on behalf of him or her in connection therewith. If any such person is not wholly successful in any such Action but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters therein, the Corporation shall indemnify such person against all Expenses actually and reasonably incurred by or on behalf of such person in connection with each claim, issue or matter that is successfully resolved. For purposes of this Section 8.3 and without limitation, the termination of any claim, issue or matter by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Notwithstanding any other provision of this section, to the extent any person is a witness in, but not a party to, any Action, whether civil, criminal, administrative or investigative, by

reason of the fact that such person is or was a Corporate Person or serving at the request of the Corporation in an Authorized Capacity of or for Another Entity, he or she shall be indemnified against all Expenses actually and reasonably incurred by or on behalf of him or her in connection therewith.

SECTION 8.4. Determination of Conduct.

(a) Any indemnification under Section 8.1 or 8.2 of this Article 8 (unless ordered by a court) shall be made by the Corporation only upon a determination that indemnification of the person is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 8.1 or 8.2. Such determination shall be made (1) if a Change of Control (as hereinafter defined) shall not have occurred, (A) by the Board of Directors by a majority vote of a quorum consisting of the Disinterested Directors (as hereinafter defined) or, if such a quorum cannot be obtained, by majority vote of a committee duly designated by the Board of Directors consisting solely of two (2) or more Disinterested Directors or (B) if there are no Disinterested Directors or, even if there are Disinterested Directors and a majority of such Disinterested Directors so directs, by (i) Independent Counsel (as hereinafter defined) in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, or (ii) the shareholders of the Corporation;; provided, however, that shares owned by or voted under the control of directors who are at the time not Disinterested Directors may not be voted on the determination; or (2) if a Change of Control shall have occurred, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, unless the claimant shall request that such determination be made by or at the direction of the Board of Directors, in which case it shall be made in accordance with clause (1) of this sentence. Any claimant shall be entitled to be indemnified against the Expenses actually and reasonably incurred by such claimant in cooperating with the person or entity making the determination of entitlement to indemnification (irrespective of the determination as to the claimant's entitlement to indemnification) and, to the extent successful, in connection with any litigation or arbitration with respect to such claim or the enforcement thereof.

(b)    If a Change of Control shall not have occurred, or if a Change of Control shall have occurred and a director, officer, employee or agent requests pursuant to clause (2) of the second sentence in Section 8.4(a) that the determination whether the claimant is entitled to indemnification be made by or at the direction of the Board of Directors, the claimant shall be conclusively presumed to have been determined pursuant to Section 8.4(a) to be entitled to indemnification if (1)(a) within fifteen days after the next regularly scheduled meeting of the Board of Directors following receipt by the Corporation of the request therefor, the Board of Directors shall not have resolved by majority vote of the Disinterested Directors to submit such determination to (i) Independent Counsel for its determination or (ii) the shareholders for their determination at the next annual meeting, or any special meeting that may be held earlier, after such receipt, and (b) within sixty days after receipt by the Corporation of the request therefor (or within ninety days after such receipt if the Board of Directors in good faith determines that additional time is required by it for the determination and, prior to expiration of such sixty‑day period, notifies the claimant thereof), the Board of Directors shall not have made the determination by a majority vote of the Disinterested Directors, or (2) after a resolution of the Board of Directors, timely made pursuant to clause (1)(a)(ii) above, to submit the determination to the shareholders, the shareholders meeting at which the determination is to be made shall not have been held on or before the date prescribed (or on or before a later date, not to exceed sixty days beyond the original date, to which such meeting may have been postponed or adjourned on

good cause by the Board of Directors acting in good faith); provided, however, that this sentence shall not apply if the claimant has misstated or failed to state a material fact in connection with his or her request for indemnification. Such presumed determination that a claimant is entitled to indemnification shall be deemed to have been made (I) at the end of the sixty‑day or ninety‑day period (as the case may be) referred to in clause (1)(b) of the immediately preceding sentence or (II) if the Board of Directors has resolved on a timely basis to submit the determination to the shareholders, on the last date within the period prescribed by law for holding such shareholders meeting (or a postponement or adjournment thereof as permitted above).

SECTION 8.5. Advance Payment. Expenses incurred in defending an Action shall be paid by the Corporation in advance of the final disposition of such Action to a director or officer, promptly after receipt of a request therefor stating in reasonable detail the expenses incurred, and to an employee or agent as authorized by the Board of Directors; provided that in each case (a) the Corporation shall have received an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation hereunder, (b) the indemnitee furnishes the Corporation a written affirmation of his or her good faith belief that he or she has satisfied the standard of conduct in Section 8.1 or 8.2 and (c) a determination is made by those making the decision pursuant to Section 8.4 that the facts then known would not preclude indemnification under these By-Laws.

SECTION 8.6. Procedures for Determination. The Board of Directors shall establish reasonable procedures for the submission of claims for indemnification hereunder, determination of the entitlement of any person thereto and review of any such determination. Such procedures shall be set forth in an appendix to these By‑Laws and shall be deemed for all purposes to be a part hereof.

SECTION 8.7. By-Law Not Exclusive. The indemnification provided by this Article 8 shall not be deemed exclusive of any other rights to which any person may be entitled under any by-law, agreement, vote of shareholders or Disinterested Directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, agent or participant and shall inure to the benefit of the heirs, executors and administrators of such a person. Notwithstanding any amendment, alteration or repeal of this section or any of its provisions, or of any of the procedures established by the Board of Directors pursuant to Section 8.6, any person who is or was a Corporate Person, or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity, shall be entitled to indemnification in accordance with the provisions hereof and thereof with respect to any action taken or omitted prior to such amendment, alteration or repeal except to the extent otherwise required by law.

SECTION 8.8. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a Corporate Person or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article or the Business Corporation Law of the State of Indiana.

SECTION 8.9. Effect of Invalidity. The invalidity or unenforceability of any provision of this Article 8 shall not affect the validity or enforceability of the remaining provisions of this Article 8.

SECTION 8.10. Definitions. For purposes of this Article 8:

(a) “Change of Control” means a change of control of the Corporation at any time after the effective time of the merger of Arvin Industries, Inc. with and into the Corporation of a nature that would be required to be reported in a proxy statement pursuant to Section 14(a) of the Exchange Act or in a Form 8-K pursuant to Section 13 of the Exchange Act (or in any similar form or schedule under either of those provisions or any successor provision), whether or not the Corporation is then subject to such reporting requirement; provided, however, that, without limitation, a Change of Control shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d‑3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities without the prior approval of at least two‑thirds of the members of the Board of Directors in office immediately prior to such person attaining such percentage interest; (ii) the Corporation is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors immediately thereafter; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any director whose election became effective prior to or at the time of the merger of Arvin Industries, Inc. with and into the Corporation and any new director whose election or nomination for election by the Corporation's shareholders was approved by a vote of at least two‑thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors.

(b    (b)    “Constituent Holder” shall mean any shareholder, collective investment fund included within a Qualifying Fund (as defined in paragraph (d)(v) of Section 2.9) or beneficial holder whose stock ownership is counted for the purpose of qualifying as holding the Proxy Access Request Required Shares (as defined in paragraph (d)(v) of Section 2.9) or qualifying as an Eligible Shareholder (as defined in paragraph (d)(v) of Section 2.9).

(c)    “the Corporation” shall include, in addition to the surviving or resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify a director, officer, employee or agent of such constituent corporation, or any director, officer, employee or agent of such constituent corporation who is or was serving at the request of such constituent corporation as a director, officer, employee or agent of Another Entity shall stand in the same position under the provisions of this Article 8 with respect to the surviving or resulting corporation as he or she would have with respect to such constituent corporation if its separate existence had continued.

(ed)    “Disinterested Director” means a director of the Corporation who is not and was not a party to an action, suit or proceeding in respect of which indemnification is sought by a director, officer, employee or agent.

(de)    “Independent Counsel” means a law firm, or a member of a law firm, that (i) is experienced in matters of corporation law; (ii) neither presently is, nor in the past five years has been, retained to represent the Corporation, the director, officer, employee or agent claiming indemnification or any other party to the Action giving rise to a claim for indemnification under this section, in any matter material to the Corporation, the claimant or any such other party; and (iii) would not, under applicable standards of professional conduct then prevailing, have a conflict of interest in representing either the Corporation or such director, officer, employee or agent in an action to determine the Corporation's or such person's rights under this Article 8.

SECTION 8.11. Actions Against the Corporation. No indemnification shall be payable to an officer, director, employee or agent pursuant to this Article 8 with respect to any action against the Corporation commenced by such officer, director, employee or agent unless the Board of Directors shall have authorized the commencement thereof or unless and to the extent that this Article 8 or the procedures established pursuant to Section 8.6 shall specifically provide for indemnification of expenses relating to the enforcement of rights under this Article 8 and such procedures.

SECTION 8.12. Change in Law. Notwithstanding the foregoing provisions of Article 8, the Corporation shall indemnify any person who is or was a Corporate Person or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity to the full extent permitted by the Act or by any other applicable law, as may from time to time be in effect.

ARTICLE 9

GENERAL

SECTION 9.1. Dividends. Subject to any provisions of any applicable statute or of the Articles of Incorporation, dividends may be declared upon the capital stock of the Corporation by the Board of Directors at any regular or special meeting thereof; and such dividends may be paid in cash, property or shares of the Corporation.

SECTION 9.2. Fiscal Year. The fiscal year of the Corporation shall be the fifty-two or fifty-three week period beginning on the Monday following the Sunday closest to the last day of September of each year and ending on the Sunday closest to the last day of September of the following year.

SECTION 9.3. Severability. If any provision of these By-Laws, or its application thereof to any person or circumstances, is held invalid, the remainder of these By- Laws and the application of such provision to other persons or circumstances shall not be affected thereby.

SECTION 9.4. Amendments. These By-Laws may be amended, added to, rescinded or repealed only by an affirmative vote of at least a majority of the directors then in office at any meeting of the Board of Directors.

SECTION 9.5     Control Shares. Chapter 42 of the Indiana Business Corporation Law (IBCL § 23-1-42-1 et. seq.) shall not apply to the acquisition of shares of voting stock of the Corporation.

APPENDIXPROCEDURES FOR SUBMISSION AND
DETERMINATION OF CLAIMS FOR INDEMNIFICATION
PURSUANT TO ARTICLE 8 OF THE BY‑LAWS.

SECTION 1. Purpose. The Procedures for Submission and Determination of Claims for Indemnification Pursuant to Article 8 of the By-Laws (the “Procedures”) are to implement the provisions of Article 8 of the By-Laws of the Corporation (the “By-Laws”) in compliance with the requirement of Section 8.6 thereof.

SECTION 2. Definitions. For purposes of these Procedures:

(A) All terms that are defined in Article 8 of the By-Laws shall have the meanings ascribed to them therein when used in these Procedures unless otherwise defined herein.

(B) “Expenses” include all reasonable attorneys' fees, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in, a Proceeding; and shall also include such retainers as counsel may reasonably require in advance of undertaking the representation of an indemnitee in a Proceeding.

(C) “Indemnitee” includes any person who was or is, or is threatened to be made, a witness in or a party to any Proceeding by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under Article 8 of the By-Laws) of another corporation or of any partnership, joint venture, trust, employee benefit plan or other enterprise.

(D) “Proceeding” includes any action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative, except one initiated by an Indemnitee unless the Board of Directors shall have authorized the commencement thereof.

SECTION 3. Submission and Determination of Claims.

(A) To obtain indemnification or advancement of Expenses under Article 8 of the By-Laws, an Indemnitee shall submit to the Secretary of the Corporation a written request therefor, including therein or therewith such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to permit a determination as to whether and what extent the Indemnitee is entitled to indemnification or advancement of Expenses, as the case may be. The Secretary shall, promptly upon

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receipt of a request for indemnification, advise the Board of Directors thereof in writing if a determination in accordance with Section 8.4 of the By-Laws is required.

(B) Upon written request by an Indemnitee for indemnification pursuant to Section 3(A) hereof, a determination with respect to the Indemnitee's entitlement thereto in the specific case, if required by the By-Laws, shall be made in accordance with Section 8.4 of the By-Laws, and, if it is so determined that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within ten days after such determination. The Indemnitee shall cooperate with the person, persons or entity making such determination, with respect to the Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination.

(C) If entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8.4 of the By-Laws, the Independent Counsel shall be selected as provided in this Section 3(C). The Independent Counsel shall be selected by the Board of Directors by majority vote of a quorum consisting of Disinterested Directors, or, if such a quorum cannot be obtained, by majority vote of a committee duly designated by the Board of Directors consisting solely of two or more Disinterested Directors, or, if such a quorum cannot be obtained and such a committee cannot be designated, by a majority vote of the full Board of Directors (in which selection Directors who are not Disinterested Directors may participate), and the Corporation shall give written notice to the Indemnitee advising the Indemnitee of the identity of the Independent Counsel so selected. The Indemnitee may, within seven days after such written notice of selection shall have been given, deliver to the Corporation a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Article 8 of the By-Laws, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is made, the Independent Counsel so selected may not serve as Independent Counsel unless and until a court has determined that such objection is without merit. If, within twenty days after the next regularly scheduled Board of Directors meeting following submission by the Indemnitee of a written request for indemnification pursuant to Section 3(A) hereof, no Independent Counsel shall have been selected and not objected to, either the Corporation or the Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Indemnitee to the selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom an objection is favorably resolved or the person so appointed shall act as Independent Counsel under Section 8.4 of the By-Laws. The Corporation shall pay any and all reasonable fees and expenses (including without limitation any advance retainers reasonably required by counsel) of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 8.4 of the By-Laws, and the Corporation shall pay all reasonable fees and expenses (including without limitation any advance retainers reasonably required by counsel) incident to the procedures of Section 8.4 of the By-Laws and this Section 3(C), regardless of the manner in which Independent Counsel was selected or appointed. Upon the delivery of its opinion pursuant to Article 8 of the By-

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Laws or, if earlier, the due commencement of any judicial proceeding or arbitration pursuant to Section 4(A)(3) of these Procedures, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

(D) If a Change of Control shall have occurred, in making a determination with respect to entitlement to indemnification under the By-Laws, the person, persons or entity making such determination shall presume that an Indemnitee is entitled to indemnification under the By-Laws if the Indemnitee has submitted a request for indemnification in accordance with Section 3(A) hereof, and the Corporation shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.

SECTION 4. Review and Enforcement of Determination.

(A) In the event that (1) advancement of Expenses is not timely made pursuant to Section 8.5 of the By-Laws, (2) payment of indemnification is not made pursuant to Section 8.3 of the By-Laws within ten days after receipt by the Corporation of written request therefor, (3) a determination is made pursuant to Section 8.4 of the By-Laws that an Indemnitee is not entitled to indemnification under the By-Laws, (4) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8.4 of the By-Laws and such determination shall not have been made and delivered in a written opinion within ninety days after receipt by the Corporation of the written request for indemnification, or (5) payment of indemnification is not made within ten days after a determination has been made pursuant to Section 8.4 of the By-Laws that an Indemnitee is entitled to indemnification or within ten days after such determination is deemed to have been made pursuant to Section 8.4 of the By-Laws, the Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Indiana, or in any other court of competent jurisdiction, of the Indemnitee's entitlement to such indemnification or advancement of Expenses. Alternatively, the Indemnitee, at his or her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. The Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within one year following the date on which the Indemnitee first has the right to commence such proceeding pursuant to this Section 4(A). The Corporation shall not oppose the Indemnitee's right to seek any such adjudication or award in arbitration.

(B) In the event that a determination shall have been made pursuant to Section 8.4 of the By-Laws that an Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 4 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and the Indemnitee shall not be prejudiced by reason of that adverse determination. If a Change of Control shall have occurred, the Corporation shall have the burden of proving in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

(C) If a determination shall have been made or deemed to have been made pursuant to Section 8.4 of the By-Laws that an Indemnitee is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding or

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arbitration commenced pursuant to this Section 4, absent (1) a misstatement or omission of a material fact in connection with the Indemnitee's request for indemnification, or (2) a prohibition of such indemnification under applicable law.

(D) The Corporation shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the procedures and presumptions of these Procedures are not valid, binding and enforceable, and shall stipulate in any such judicial proceeding or arbitration that the Corporation is bound by all the provisions of these Procedures.

(E) In the event that an Indemnitee, pursuant to this Section 4, seeks to enforce the Indemnitee's rights under, or to recover damages for breach of, Article 8 of the By-Laws or these Procedures in a judicial proceeding or arbitration, the Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all expenses (of the types described in the definition of Expenses in Section 2 of these Procedures) actually and reasonably incurred in such judicial proceeding or arbitration, but only if the Indemnitee prevails therein. If it shall be determined in such judicial proceeding or arbitration that the Indemnitee is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the expenses incurred by the Indemnitee in connection with such judicial proceeding or arbitration shall be appropriately prorated.

SECTION 5. Amendments. These Procedures may be amended at any time and from time to time in the same manner as any By‑Law of the Corporation in accordance with the Articles of Incorporation, the By-Laws and the Act; provided, however, that, notwithstanding any amendment, alteration or repeal of these Procedures or any provision hereof, any Indemnitee shall be entitled to utilize these Procedures with respect to any claim for indemnification arising out of any action taken or omitted prior to such amendment, alteration or repeal except to the extent otherwise required by law.

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EX-3.B-2

Exhibit 3-b-2

AMENDED AND RESTATED BY-LAWS

OF

MERITOR, INC.

(As of July 29, 2019)

ARTICLE I

OFFICE

SECTION 1.1. Registered Office. The registered office of Meritor, Inc. (the “Corporation”) in the State of Indiana shall be in the City of Indianapolis, County of Marion.

SECTION 1.2. Principal Business Office. The principal business office of the Corporation shall be in the City of Troy, County of Oakland, in the State of Michigan.

SECTION 1.3. Other Offices. The Corporation may also have an office or offices at such other place or places either in or outside the State of Indiana as the Board of Directors may from time to time determine or the business of the Corporation requires.

ARTICLE 2

MEETING OF SHAREHOLDERS

SECTION 2.1. Place of Meetings. Each meeting of shareholders of the Corporation shall be held at such place, in or outside of the State of Indiana, as the Board of Directors may designate in the notice of such meeting, but if no such designation is made, then at the principal business office of the Corporation.

SECTION 2.2. Annual Meetings. An annual meeting of shareholders for the purpose of electing directors and transacting such other business as may properly be brought before the meeting, notice of which was given in the notice of meeting, shall be held on a date and time as the Board of Directors may determine.

If for any reason any annual meeting shall not be held at the time herein provided, the same may be held at any time thereafter, upon notice as hereinafter provided, or the business thereof may be transacted at any special meeting of shareholders called for that purpose.

The Board of Directors may, upon public notice given prior to the scheduled meeting date, postpone, for as long as and to the extent permitted by the Indiana Business Corporation Law, as amended (the “Act”), any previously scheduled annual or special meeting of shareholders.

SECTION 2.3. Special Meetings. Special meetings of shareholders, unless otherwise required by statute and subject to the rights of holders of any class of Preferred Stock of the Corporation, may be called only by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies (the “Whole Board”). Business transacted at any special meeting shall be confined to the purpose or purposes stated in the notice of such special meeting. Meetings may be held without notice if all shareholders entitled to vote are present or if notice is waived by those not present.

SECTION 2.4. Notice of Shareholders' Meetings. Notice of each meeting of shareholders, whether annual or special, stating the date, time and place, and, in the case of special meetings, the purpose or purposes for which such meeting is called, shall be mailed, postage prepaid, to each shareholder entitled to vote thereat, at the shareholder's address as it appears on the records of the Corporation, not less than 10 nor more than 60 days before the date of the meeting unless otherwise prescribed by statute. Notice of any adjourned meeting of shareholders shall not be required to be given, except when expressly required by law.

SECTION 2.5. Record Dates.

(a)    In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of shares or for the purpose of any other lawful action, the Board of Directors may designate a date as the record date which, for purposes of a meeting of shareholders or other event requiring shareholder action, shall not be more than 70 nor less than 10 days before the date of such meeting or event.

(b)    If a record date has not been fixed as provided in the preceding paragraph (a), then:

(i)    The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders of the Corporation shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and

(ii)    The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

(c)    Only those who shall be shareholders of record on the record date so fixed as aforesaid shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend or other distribution, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding the transfer of any shares on the books of the Corporation after the applicable record date; provided, however, the Board of Directors may fix a new record date for any adjourned meeting and shall fix a new record date if a meeting is adjourned to a date more than 120 days after the date originally fixed for the meeting.

SECTION 2.6. List of Shareholders. The Secretary of the Corporation shall, from information obtained from the transfer agent, prepare and make, before each meeting of shareholders, an alphabetical list of shareholders entitled to vote thereat, arranged by voting group, showing the address and number of shares registered in the name of each shareholder. Such list shall be open to the examination of any such shareholder or such shareholder's agent or attorney authorized in writing (“shareholder agent”), for any purpose germane to the meeting, during ordinary business hours, for a period of at least 5 days prior to the meeting for which the list was prepared and continuing through the meeting, either at a place in the city where the meeting is being held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. Such list shall be produced and kept at the time and place of meeting during the whole time thereof for inspection by any such shareholder or shareholder agent who is present. The stock ledger shall be the only evidence as to who are the shareholders entitled to examine the stock ledger, the list referred to in this section or the books of the Corporation, or to vote in person or by proxy at any meeting of shareholders.

SECTION 2.7. Quorum and Adjournments. At each meeting of shareholders, the holders of a majority of the voting power of the shares of the Corporation entitled to vote, present in person or by proxy, shall constitute a quorum of shareholders for all purposes unless the presence of a larger proportion is required by statute or by the Corporation's Articles of Incorporation (the “Articles of Incorporation”), and, in such cases, the presence of the proportion so required shall constitute a quorum. Whether or not there is such a quorum, the Chairman of the meeting or the shareholders present in person or by proxy constituting a majority of the shares present may adjourn the meeting from time to time without notice other than an announcement at the meeting. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting, and only those shareholders entitled to vote at the meeting as originally called shall be entitled to vote at any adjournment or adjournments thereof. The absence from any meeting of the number of shareholders required by law or by the Articles of Incorporation or by these By-Laws for action upon any given matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if the number of shareholders required in respect of such other matter or matters shall be present.

SECTION 2.8. Voting by Shareholders; Proxies. Except as otherwise provided by law, the Articles of Incorporation or these By‑Laws, each shareholder entitled to vote shall at every meeting of the shareholders have one vote for each share entitled to vote held by such shareholder. Any vote on shares may be given by the shareholder entitled thereto in person or by proxy appointed by an instrument in writing, subscribed (or transmitted by electronic means and authenticated as provided by law) by such shareholder or by the shareholder's attorney thereunto authorized, and delivered to the Secretary; provided, however, that no proxy shall be voted after 11 months from its date unless the proxy provides for a shorter or longer period. Except as otherwise set forth in the Articles of Incorporation with respect to the right of the holders of any class or series of Preferred Stock to elect additional directors under specified circumstances, election of directors at all meetings of shareholders at which directors are to be elected shall be by a plurality of the votes cast for the election of directors at the meeting. If a quorum exists, action on a matter (other than the election of directors) submitted to shareholders entitled to vote thereon at any meeting shall be approved if the votes cast favoring the action exceed the votes cast opposing the action, unless a greater number of affirmative votes is required by law, the Articles of Incorporation or these By-Laws.

SECTION 2.8A. Participation in Meetings by Means of Conference or Similar Communications. Any shareholder may participate in an annual or special meeting of shareholders by or through use of any means of communications by which all shareholders participating may simultaneously hear each other during the meeting.

A shareholder participating in such a meeting by this means is deemed to be present at the meeting.

SECTION 2.9. Conduct of Business.

(a)    Presiding Officer. The Chairman of the Board of Directors shall preside as Chairman of shareholder meetings and shall determine the order and conduct of business and all matters of procedure at such meetings. The Chairman shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the shareholders will vote at the meeting. In the absence of the Chairman, the Chief Executive Officer and President shall assume the duties of the Chairman of the shareholder meeting specified in this paragraph (a) of Section 2.9. If each of the Chairman and the Chief Executive Officer and President is absent, a director or an officer of the Corporation chosen by the Board of Directors shall assume the duties of the Chairman of the shareholder meeting specified in this paragraph (a) of Section 2.9.

(b)    Secretary. The Secretary, or, in his or her absence, an Assistant Secretary, shall act as Secretary at all meetings of the shareholders. In the absence from any such meeting of the Secretary and the Assistant Secretaries, the Chairman of the shareholder meeting may appoint any person to act as Secretary of the meeting.

(c)    Annual Meetings of Shareholders.

(i)    Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders (A) pursuant to the Corporation's notice of meeting, (B) by or at the direction of the Board of Directors or (C) by any shareholder of the Corporation who was a shareholder of record at the time of giving of notice provided for in this Section 2.9, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.9.

(ii)    For nominations or other business to be properly brought before any annual meeting by a shareholder pursuant to clause (C) of paragraph (c)(i) of this Section 2.9, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation, and such other business must otherwise be a proper matter for shareholder action. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a shareholder's notice as described above.

(iii)    Notwithstanding anything in the second sentence of paragraph (c)(ii) of this Section 2.9 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 100 days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice required by this Section 2.9 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which public announcement is first made by the Corporation.

(iv)    Notwithstanding anything in the second sentence of paragraph (c)(ii) of this Section 2.9 to the contrary, in the event that any person nominated by the Board of Directors for election as a director (other than a person nominated to fill a vacancy created by the death of a director) was not a director or nominee named (A) in the Corporation's proxy statement for the preceding annual meeting or (B) in a public announcement made by the Corporation at least 100 days prior to the first anniversary of the preceding year's annual meeting (a “New Nominee”), a shareholder's notice required by this Section 2.9 shall also be considered timely, but only with respect to nominees for election as director equal in number to the number of New Nominees, if it is delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which public announcement is first made by the Corporation of the election or nomination of such New Nominee to the Board of Directors.

(v)    In addition, to be considered timely, a shareholder’s notice shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is ten (10) days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than ten (10) days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight (8) days prior to the date for the meeting or any adjournment or postponement thereof in the case of the update and supplement required to be made as of ten (10) days prior to the meeting or any adjournment or postponement thereof. The obligation to update and supplement as set forth in this paragraph or any other Section of these By-Laws shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a shareholder, extend any applicable deadlines hereunder or under any other provision of these By-Laws or enable or be deemed to permit a shareholder who has previously submitted notice hereunder or under any other provision of these By-Laws to amend or update any proposal or to submit any new proposal, including by changing or adding nominees, matters, business and or resolutions proposed to be brought before a meeting of the shareholders.

(d)    Inclusion of Shareholder Director Nominations in the Corporation’s Proxy Materials.

(i)    Subject to the terms and conditions set forth in these By-Laws, the Corporation shall include in its proxy statement for an annual meeting of shareholders the name, together with the Required Information (as defined below), of any person nominated for election (the “Shareholder Nominee”) to the Board of Directors by a shareholder or group of shareholders

that satisfy the requirements of this paragraph (d) of Section 2.9, including qualifying as an Eligible Shareholder (as defined in paragraph (v) below) and that expressly elects at the time of providing the written notice required by this paragraph (v) of Section 2.9 (a “Proxy Access Notice”) to have its nominee included in the Corporation’s proxy materials pursuant to this paragraph (d) of Section 2.9.

(ii)    For purposes of this Section 2.9, the “Required Information” that the Corporation will include in its proxy statement is: (i) the information concerning the Shareholder Nominee and the Eligible Shareholder that the Corporation determines is required to be disclosed in the Corporation’s proxy statement by the regulations promulgated under Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and (ii) if the Eligible Shareholder so elects, a Statement (as defined in paragraph (d)(vii) below). The Corporation shall also include the name of the Shareholder Nominee in its proxy card. For the avoidance of doubt, and any other provision of these By-Laws notwithstanding, the Corporation may in its sole discretion solicit against, and include in the proxy statement (and other proxy materials) its own statements or other information relating to, any Eligible Shareholder and/or Shareholder Nominee, including any information provided to the Corporation with respect to the foregoing.

(iii)    To be timely, a shareholder’s Proxy Access Notice must be delivered to the principal executive offices of the Corporation within the time periods applicable to shareholder notices of nominations pursuant to paragraph (c)(ii) of this Section 2.9 of these By-Laws. In no event shall any adjournment or postponement of an annual meeting, the date of which has been announced by the Corporation, commence a new time period for the giving of a Proxy Access Notice.

(iv)    The number of Shareholder Nominees (including Shareholder Nominees that were submitted by an Eligible Shareholder for inclusion in the Corporation’s proxy materials pursuant to this paragraph (d) of Section 2.9 but either are subsequently withdrawn or that the Board of Directors decides to nominate as Board of Directors’ nominees) appearing in the Corporation’s proxy materials with respect to an annual meeting of shareholders shall not exceed the greater of (x) two (2) and (y) the largest whole number that does not exceed twenty percent (20%) of the number of directors in office as of the last day on which a Proxy Access Notice may be delivered in accordance with the procedures set forth in this paragraph (d) of Section 2.9 (such greater number, the “Permitted Number”); provided, however, that the Permitted Number shall be reduced by:

(A)    the number of such director candidates for which the Corporation shall have received one or more valid shareholder notices nominating director candidates pursuant to paragraph (c) of this Section 2.9 (but not paragraph (d)) of these By-laws;

(B)    the number of directors in office or director candidates that in either case will be included in the Corporation’s proxy materials with respect to such annual meeting as an unopposed (by the Corporation) nominee pursuant to an agreement, arrangement or other understanding with a shareholder or group of shareholders (other than any such agreement, arrangement or understanding entered into in connection with an acquisition of voting stock, by such shareholder or group of shareholders, from the Corporation), other than any such director referred to in this clause (B) who at the time of such annual meeting will have served as a director continuously, as a nominee of the Board of Directors, for at least two (2) terms; and

(C)    the number of directors in office that will be included in the Corporation’s proxy materials with respect to such annual meeting for whom access to the Corporation’s proxy materials was previously provided pursuant to this paragraph (d) of this Section 2.9, other than any such director referred to in this clause (C) who at the time of such annual meeting will have served as a director continuously, as a nominee of the Board of Directors, for at least two (2) terms;

provided, further, that in no circumstance shall the Permitted Number exceed the number of directors to be elected at the applicable annual meeting as noticed by the Corporation and in the event the Board of Directors resolves to reduce the size of the Board of Directors effective on or prior to the date of the annual meeting, the Permitted Number shall be calculated based on the number of directors in office as so reduced. An Eligible Shareholder submitting more than one Shareholder Nominee for inclusion in the Corporation’s proxy statement pursuant to this paragraph (d) of Section 2.9 shall rank such Shareholder Nominees based on the order that the Eligible Shareholder desires such Shareholder Nominees to be selected for inclusion in the Corporation’s proxy statement and include such specified rank in its Proxy Access Notice. If the number of Shareholder Nominees pursuant to this paragraph (d) of Section 2.9 for an annual meeting of shareholders exceeds the Permitted Number, then the highest ranking qualifying Shareholder Nominee from each Eligible Shareholder will be selected by the Corporation for inclusion in the proxy statement until the Permitted Number is reached, going in order of the amount (largest to smallest) of the ownership position as disclosed in each Eligible Shareholder’s Proxy Access Notice. If the Permitted Number is not reached after the highest ranking Shareholder Nominee from each Eligible Shareholder has been selected, this selection process will continue as many times as necessary, following the same order each time, until the Permitted Number is reached.

(v)    An “Eligible Shareholder” is one or more shareholders of record who own and have owned, or are acting on behalf of one or more beneficial owners who own and have owned (in each case as defined above), in each case continuously for at least three (3) years as of both the date that the Proxy Access Notice is received by the Corporation pursuant to this paragraph (d) of Section 2.9, and as of the record date for determining shareholders eligible to vote at the annual meeting, at least three percent (3%) of the aggregate voting power of the voting stock (the “Proxy Access Request Required Shares”), and who continue to own the Proxy Access Request Required Shares at all times between the date such Proxy Access Notice is received by the Corporation and the date of the applicable annual meeting; provided that the aggregate number of shareholders, and, if and to the extent that a shareholder is acting on behalf of one or more beneficial owners, of such beneficial owners, whose stock ownership is counted for the purpose of satisfying the foregoing ownership requirement shall not exceed twenty (20). Two or more collective investment funds that are part of the same family of funds by virtue of being under common management and investment control, under common management and sponsored primarily by the same employer or a “group of investment companies” (as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended) (a “Qualifying Fund”) shall be treated as one shareholder for the purpose of determining the aggregate number of shareholders in this paragraph (d)(v); provided that each fund included within a Qualifying Fund otherwise meets the requirements set forth in this paragraph (d) of Section 2.9. No shares may be attributed to more than one group constituting an Eligible Shareholder under this paragraph (d) of Section 2.9 (and, for the avoidance of doubt, no shareholder may be a member of more than one group constituting an Eligible Shareholder). A record holder acting on behalf of one or more beneficial owners will not be counted separately as a shareholder with respect to the

shares owned by beneficial owners on whose behalf such record holder has been directed in writing to act, but each such beneficial owner will be counted separately, subject to the other provisions of this paragraph (d)(v), for purposes of determining the number of shareholders whose holdings may be considered as part of an Eligible Shareholder’s holdings. For the avoidance of doubt, Proxy Access Request Required Shares will qualify as such if and only if the beneficial owner of such shares as of the date of the Proxy Access Notice has itself individually beneficially owned such shares continuously for the three-year (3-year) period ending on that date and through the other applicable dates referred to above (in addition to the other applicable requirements being met).

(vi)    No later than the final date when a Proxy Access Notice pursuant to this paragraph (d) of Section 2.9 may be timely delivered to the Secretary, an Eligible Shareholder (including each Constituent Holder) must provide the following information in writing to the Secretary:

(A)     with respect to each Constituent Holder, the name and address of, and number of shares of voting stock owned by, such person;

(B)    one or more written statements from the record holder of the shares (and from each intermediary through which the shares are or have been held during the requisite three-year (3-year) holding period) verifying that, as of a date within seven (7) days prior to the date the Proxy Access Notice is delivered to the Corporation, such person owns, and has owned continuously for the preceding three (3) years, the Proxy Access Request Required Shares, and such person’s agreement to provide:

(I)     within ten (10) days after the record date for the annual meeting, written statements from the record holder and intermediaries verifying such person’s continuous ownership of the Proxy Access Request Required Shares through the record date, together with any additional information reasonably requested to verify such person’s ownership of the Proxy Access Request Required Shares; and

(II)    immediate notice if the Eligible Shareholder ceases to own any of the Proxy Access Request Required Shares prior to the date of the applicable annual meeting of shareholders;

(C)    the information contemplated by paragraph (f)(i), (iii) and (iv) of this Section 2.9 of these By-Laws (with references to a “shareholder” therein to include such Eligible Shareholder (including each Constituent Holder));

(D)    a representation that such person:

(I)     acquired the Proxy Access Request Required Shares in the ordinary course of business and not with the intent to change or influence control of the Corporation, and does not have any such intent;

(II)    has not nominated and will not nominate for election to the Board of Directors at the annual meeting any person other than the Shareholder Nominee(s) being nominated pursuant to this paragraph (d) Section 2.9;

(III)    has not engaged and will not engage in, and has not been and will not be a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the annual meeting other than its Shareholder Nominee(s) or a nominee of the Board of Directors;

(IV)    will not distribute to any shareholder any form of proxy for the annual meeting other than the form distributed by the Corporation; and

(V)    will provide facts, statements and other information in all communications with the Corporation and its shareholders that are and will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and will otherwise comply with all applicable laws, rules and regulations in connection with any actions taken pursuant to this paragraph (d) of Section 2.9;

(E)    in the case of a nomination by a group of shareholders that together is such an Eligible Shareholder, the designation by all group members of one group member that is authorized to act on behalf of all members of the nominating shareholder group with respect to the nomination and matters related thereto, including withdrawal of the nomination; and

(F)    an undertaking that such person agrees to:

(I)    assume all liability stemming from, and indemnify and hold harmless the Corporation and each of its directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its directors, officers or employees arising out of any legal or regulatory violation arising out of the Eligible Shareholder’s communications with the shareholders of the Corporation or out of the information that the Eligible Shareholder (including such person) provided to the Corporation;

(II)    promptly provide to the Corporation such other information as the Corporation may reasonably request; and

(III)    file with the Securities and Exchange Commission any solicitation by the Eligible Shareholder of shareholders of the Corporation relating to the annual meeting at which the Shareholder Nominee will be nominated.

In addition, no later than the final date when a nomination pursuant to this paragraph (d) of Section 2.9 may be delivered to the Corporation, a Qualifying Fund whose share ownership is counted for purposes of qualifying as an Eligible Shareholder must provide to the Secretary documentation reasonably satisfactory to the Board of Directors that demonstrates that the funds included within the Qualifying Fund satisfy the definition thereof. In order to be considered timely, any information required by this paragraph (d) of Section 2.9 to be provided to the Corporation must be supplemented (by delivery to the Secretary): (1) no later than ten (10) days following the record date for the applicable annual meeting, to disclose the foregoing information as of such record date; and (2) no later than eight (8) days before the annual meeting, to disclose the foregoing information as of the date that is no earlier than ten (10) days prior to such annual meeting. For the avoidance of doubt, the requirement to update and supplement such

information shall not permit any Eligible Shareholder or other person to change or add any proposed Shareholder Nominee or be deemed to cure any defects or limit the remedies (including, without limitation, under these By-Laws) available to the Corporation relating to any defect.

(vii)    The Eligible Shareholder may provide to the Secretary, at the time the information required by this paragraph (d) of Section 2.9 is originally provided, a written statement for inclusion in the Corporation’s proxy statement for the annual meeting, not to exceed five hundred (500) words, in support of the candidacy of such Eligible Shareholder’s Shareholder Nominee (the “Statement”). Notwithstanding anything to the contrary contained in this paragraph (d) of Section 2.9, the Corporation may omit from its proxy materials any information or Statement that it, in good faith, believes is materially false or misleading, omits to state any material fact, or would violate any applicable law or regulation.

(viii)    No later than the final date when a nomination pursuant to this paragraph (d) of Section 2.9 may be delivered to the Corporation, each Shareholder Nominee must provide the completed and signed questionnaire, representation, agreement required by Section 2.10 of these By-Laws:

(A)    provide an executed agreement, in a form deemed satisfactory by the Board of Directors or its designee (which form shall be provided by the Corporation reasonably promptly upon written request of a shareholder), that such Shareholder Nominee consents to being named in the Corporation’s proxy statement and form of proxy card (and will not agree to be named in any other person’s proxy statement or form of proxy card with respect to the Corporation) as a nominee and intends to serve as a director of the Corporation for the entire term if elected;

(B)    complete, sign and submit all questionnaires, representations and agreements required by these By-Laws or of the Corporation’s directors generally; and

(C)    provide such additional information as necessary to permit the Board of Directors to determine: (a) if any of the matters referred to in paragraph (d)(x) below apply; (b) if such Shareholder Nominee has any direct or indirect relationship with the Corporation other than those relationships that have been deemed categorically immaterial pursuant to the Corporation’s Corporate Governance Guidelines; or (c) is or has been subject to any event specified in Rule 506(d)(1) of Regulation D (or any successor rule) under the Securities Act of 1933 or Item 401(f) of Regulation S-K (or any successor rule) under the Exchange Act, without reference to whether the event is material to an evaluation of the ability or integrity of such Shareholder Nominee.

In the event that any information or communications provided by the Eligible Shareholder (or any Constituent Holder) or the Shareholder Nominee to the Corporation or its shareholders ceases to be true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, each Eligible Shareholder or Shareholder Nominee, as the case may be, shall promptly notify the Secretary of any defect in such previously provided information and of the information that is required to correct any such defect; it being understood for the avoidance of doubt that providing any such notification shall not be deemed to cure any such defect or limit the remedies (including, without limitation, under these By-Laws) available to the Corporation relating to any such defect.

(ix)    Any Shareholder Nominee who is included in the Corporation’s proxy materials for a particular annual meeting of shareholders but either (1) withdraws from or becomes ineligible or unavailable for election at that annual meeting (other than by reason of such Shareholder Nominee’s disability or other health reason) or (2) does not receive votes cast in favor of the Shareholder Nominee’s election of at least twenty-five (25) percent of the shares represented in person or by proxy at the annual meeting will be ineligible to be a Shareholder Nominee pursuant to this paragraph (d) of Section 2.9 for the next two (2) annual meetings. Any Shareholder Nominee who is included in the Corporation’s proxy statement for a particular annual meeting of shareholders, but subsequently is determined not to satisfy the eligibility requirements of this paragraph (d) of Section 2.9 or any other provision of these By-Laws, the Articles of Incorporation or any applicable regulation any time before the annual meeting of shareholders, will not be eligible for election at the relevant annual meeting of shareholders.

(x)    The Corporation shall not be required to include, pursuant to this paragraph (d) of Section 2.9, a Shareholder Nominee in its proxy materials for any annual meeting of shareholders, or, if the proxy statement already has been filed, to allow the nomination of (or vote with respect to) a Shareholder Nominee (and may declare such nomination ineligible), notwithstanding that proxies in respect of such vote may have been received by the Corporation:

(A)    who is not independent under the listing standards of the principal U.S. exchange upon which the common stock of the Corporation is listed, any applicable rules of the Securities and Exchange Commission and any publicly disclosed standards used by the Board of Directors in determining and disclosing independence of the Corporation’s directors;

(B)    whose service as a member of the Board of Directors would violate or cause the Corporation to be in violation of these By-Laws, the Articles of Incorporation, the rules and listing standards of the principal U.S. exchange upon which the common stock of the Corporation is traded, or any applicable law, rule or regulation;

(C)    who is or has been, within the past three (3) years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, as amended, or who is a subject of a pending criminal proceeding, has been convicted in a criminal proceeding within the past ten (10) years or is subject to an order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act;

(D)    if the Eligible Shareholder (or any Constituent Holder) or applicable Shareholder Nominee otherwise breaches or fails to comply in any material respect with its obligations pursuant to this paragraph (d) of Section 2.9 or any agreement, representation or undertaking required by this paragraph; or

(E)    if the Eligible Shareholder ceases to be an Eligible Shareholder for any reason, including, but not limited to, not owning the Proxy Access Request Required Shares through the date of the applicable annual meeting.

Clauses (A), (B), and (C) and, to the extent related to a breach or failure by the Shareholder Nominee, clause (D), will result in the exclusion from the proxy materials pursuant to this paragraph (d) of Section 2.9 of the specific Shareholder Nominee to whom the

ineligibility applies, or, if the proxy statement already has been filed, the ineligibility of such Shareholder Nominee to be nominated; provided, however, that clause (E) and, to the extent related to a breach or failure by an Eligible Shareholder (or any Constituent Holder), clause (D) will result in the voting stock owned by such Eligible Shareholder (or Constituent Holder) being excluded from the Proxy Access Request Required Shares (and, if as a result the Proxy Access Notice shall no longer have been filed by an Eligible Shareholder, the exclusion from the proxy materials pursuant to this paragraph (d) of Section 2.9 of all of the applicable shareholder’s Shareholder Nominees from the applicable annual meeting of shareholders or, if the proxy statement has already been filed, the ineligibility of all of such shareholder’s Shareholder Nominees to be nominated).

(e)    Special Meetings of Shareholders. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the Corporation's notice of meeting (A) by or at the direction of the Board of Directors or (B) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this Section 2.9, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.9. Nominations by shareholders of persons for election to the Board of Directors may be made at such a special meeting of shareholders if the shareholder's notice required by paragraph (c)(ii) of this Section 2.9 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the date on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a shareholder's notice as described above.

(f)    Disclosure Requirements. To be in proper form, a shareholder’s notice pursuant to this Section 2.9 must include the following, as applicable:

(i)    As to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal, as applicable, is made, a shareholder’s notice must set forth: (A) the name and address of such shareholder, as they appear on the Corporation’s books, of such beneficial owner, if any, and of their respective affiliates or associates or others acting in concert therewith; (B) (1) the class or series and number of shares of the Corporation which are, directly or indirectly, owned beneficially and of record by such shareholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith, (2) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived, in whole or in part, from the value of any class or series of shares of the Corporation, or any derivative or synthetic arrangement having the characteristics of a long position in any class or series of shares of the Corporation, or any contract, derivative, swap or other transaction or series of transactions designed to produce economic benefits and risks that correspond substantially to the ownership of any class or series of shares of the Corporation, including due to the fact that the value of such contract, derivative, swap or other transaction or series of transactions is determined by reference

to the price, value or volatility of any class or series of shares of the Corporation, whether or not such instrument, contract or right shall be subject to settlement in the underlying class or series of shares of the Corporation, through the delivery of cash or other property, or otherwise, and without regard to whether the shareholder of record, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith, may have entered into transactions that hedge or mitigate the economic effect of such instrument, contract or right, or any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation (any of the foregoing, a “Derivative Instrument”) directly or indirectly owned beneficially by such shareholder, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith, (3) any proxy, contract, arrangement, understanding or relationship pursuant to which such shareholder, such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith has any right to vote any class or series of shares of the Corporation, (4) any agreement, arrangement, understanding, relationship or otherwise, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, involving such shareholder, such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith, directly or indirectly, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of any class or series of the shares of the Corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such shareholder, such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith with respect to any class or series of the shares of the Corporation, or which provides, directly or indirectly, the opportunity to profit or share in any profit derived from any decrease in the price or value of any class or series of the shares of the Corporation (any of the foregoing, a “Short Interest”), (5) any rights to dividends on the shares of the Corporation owned beneficially by such shareholder, such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith that are separated or separable from the underlying shares of the Corporation, (6) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such shareholder, such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith is a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership, (7) any performance-related fees (other than an asset-based fee) that such shareholder, such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith is entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, including, without limitation, any such interests held by members of the immediate family sharing the same household of such shareholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith, (8) any significant equity interests or any Derivative Instruments or Short Interests in any principal competitor of the Corporation held by such shareholder, such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith and (9) any direct or indirect interest of such shareholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement); (iii) all information that would be required to be set forth in a Schedule 13D filed pursuant to Rule 13d-1(a) or an amendment pursuant to Rule 13d-2(a) if such a statement were required to be filed under the Exchange Act and the rules and regulations promulgated thereunder by such shareholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith, if any; and (C) any other information relating to such shareholder, such beneficial owner or any of their respective affiliates

or associates or others acting in concert therewith, if any, that would be required to be disclosed in a proxy statement and form or proxy or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder;

(ii)    If the notice includes any business other than a nomination of a director or directors that the shareholder proposes to bring before the meeting, a shareholder’s notice must, in addition to the matters set forth in subsection (i) above, also set forth: (A) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest of such shareholder, such beneficial owner and each of their respective affiliates or associates or others acting in concert therewith, if any, in such business; (B) the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such proposal or business includes a proposal to amend the By-Laws of the Corporation, the text of the proposed amendment); and (C) a description of all agreements, arrangements and understandings between such shareholder, such beneficial owner and each of their respective affiliates or associates or others acting in concert therewith, if any, and any other person or persons (including their names) in connection with the proposal of such business by such shareholder;

(iii)    As to each individual, if any, whom the shareholder proposes to nominate for election or reelection to the Board of Directors, a shareholder’s notice must, in addition to the matters set forth in subsection (i) above, also set forth: (A) all information relating to such individual that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such individual’s written consent to being named in the proxy statement as a nominee and written statement of intent to serve as a director for the full term if elected); (B) if directors are to be elected at such meeting for terms ending at different annual meetings, the annual meeting at which the term for which such person is being nominated ends; and (C) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three (3) years, and any other material relationships, between or among such shareholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the shareholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule, and the nominee were a director or executive officer of such registrant; and

(iv)    With respect to each individual, if any, whom the shareholder proposes to nominate for election or reelection to the Board of Directors, a shareholder’s notice must, in addition to the matters set forth in subsections (i) and (iii) above, also include the completed and signed questionnaire, representation, agreement required by Section 2.10 of these By-Laws. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable

shareholder’s understanding of the independence, or lack thereof, of such nominee. Notwithstanding anything to the contrary, only persons who are nominated in accordance with the procedures set forth in these By-Laws, including, without limitation, Sections 2.9 and 2.10 hereof, shall be eligible for election as directors.

(g) General.

(i)    Except where the terms of any class or series of Preferred Stock of the Corporation require the election of one or more directors by the holders of such Preferred Stock voting as a single class and except as provided in Section 3.3 of these By-Laws, only such persons who are nominated in accordance with the procedures set forth in this Section 2.9 shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.9. Except as otherwise provided by law, the Articles of Incorporation of these By-Laws, the person presiding at the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed in accordance with the procedures set forth in this Section 2.9 and, if any nomination or business proposed is not in compliance with this Section 2.9, to declare that such defective nomination or proposal shall be disregarded.

(ii)    For purposes of this Section 2.9, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(iii)    Notwithstanding the foregoing provisions of this Section 2.9, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.9. Nothing in this Section 2.9 shall be deemed to affect any rights of (x) shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (y) holders of any series of Preferred Stock to elect directors under specified circumstances. Subject to Rule 14a-8 under the Exchange Act and paragraph (d) of this Section 2.9, nothing in these By-laws shall be construed to permit any shareholder, or give any shareholder the right, to include or have disseminated or described in the Corporation’s proxy statement any nomination of director or directors or any other business proposal, statement or communication.

SECTION 2.10. Submission of Questionnaire, Representation and Agreement. To be eligible to be a nominee of any shareholder for election or reelection as a director of the Corporation, a person must deliver (in accordance with the time periods prescribed for delivery of notice under Section 2.9 of these By-Laws) to the Secretary at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such individual and the background of any other person or entity on whose behalf, directly or indirectly, the nomination is being made (which questionnaire shall be provided to the requesting shareholder by the Secretary following written request), and a written representation and agreement (in the form provided by the Secretary to the requesting shareholder following written request) that such individual:

(a)    is not and will not become a party to: (i) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to

how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation, and (ii) any Voting Commitment that could limit or interfere with such individual’s ability to comply, if elected as a director of the corporation, with such individual’s fiduciary duties under applicable law; (b) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein;

(b)    agrees to promptly provide to the Corporation such other information as the Corporation may reasonably request;

(c)    in such individual’s personal capacity and on behalf of any person or entity on whose behalf, directly or indirectly, the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply, with all applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation publicly disclosed from time to time.

SECTION 2.11. Inspectors. There shall be appointed by the Board of Directors, before each meeting of shareholders, two inspectors of the vote. Such inspectors shall first take and subscribe an oath or affirmation faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of their ability. If two inspectors are not appointed in advance of any such meeting by the Board of Directors or one or both appointed inspectors fail or refuse to act, then one or both inspectors, as the case may be, shall be appointed for the meeting by the person presiding thereat. Such inspectors shall be responsible for tallying and certifying the vote taken on any matter at each meeting which is required to be tallied and certified by them in the resolution of the Board of Directors appointing them or the appointment of the person presiding at such meeting as the case may be. Except as otherwise provided by these By-Laws or the laws of the State of Indiana, such inspectors shall also decide all questions touching upon the qualification of voters, the validity of proxies and ballots, and the acceptance and rejection of votes. In the case of a tie vote by the inspectors on any question, the person presiding at the meeting shall decide such question. The Board of Directors shall have the authority to make rules establishing presumptions as to the validity and sufficiency of proxies.

ARTICLE 3

DIRECTORS

SECTION 3.1. Number. Subject to the rights of the holders of any class or series of Preferred Stock to elect additional directors under specified circumstances, the number of directors shall be set, and from time to time may be increased or decreased to the extent provided for in the Articles of Incorporation, exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the Whole Board. A director need not be a shareholder.

SECTION 3.2. Chairman of the Board of Directors. The Chairman of the Board of Directors shall be elected from among the directors, shall preside at all meetings of the shareholders and of the Board, and shall have such other powers and duties as from time to time may be prescribed by the Board. The Chairman of the Board shall perform all duties incidental to

his or her office which may be required by law and all such other duties as are properly required of him or her by the Board of Directors. The Chairman may not serve as the Chief Executive Officer and President.

SECTION 3.3.    Vacancies. Except where the terms of any class or series of Preferred Stock of the Corporation require the election of one or more directors by the holders of such Preferred Stock voting as a single class and except to the extent the Board of Directors determines otherwise, vacancies occurring on the Board of Directors and newly-created directorships resulting from any increase in the number of directors may be filled only by the affirmative vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and any director so chosen shall hold office for a term expiring at the annual meeting of shareholders at which the term of office of the class of directors to which such director has been elected expires and until his or her successor is duly elected and qualified or until the earlier of his or her death, resignation or removal in a manner permitted by statute or these By-Laws. No decrease in the number of authorized directors constituting the Whole Board shall shorten the term of any incumbent director.

SECTION 3.4. Powers. The property, affairs and business of the Corporation shall be managed by the Board of Directors which may exercise all powers of the Corporation and do all lawful acts and things not by statute or by the Articles of Incorporation or these By-Laws directed or required to be exercised or done by the shareholders.

SECTION 3.5. Place of Meetings. The place of any meeting of the Board of Directors may be either in or outside the State of Indiana as the Board may from time to time determine or as shall be specified or fixed in the respective notices or waivers of notice thereof.

SECTION 3.6. Annual Meetings. Annual meetings of the Board of Directors shall be held each year on the same day as the shareholder's annual meeting for such year, at the time and place determined by the Board of Directors. Notice of such meeting need not be given. Such meeting may be held at any other time or place which shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors.

SECTION 3.7 Regular Meetings. Regular meetings of the Board of Directors shall be held at the dates, times and places designated by the Board of Directors from time to time. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day not a legal holiday. Notice of regular meetings need not be given.

SECTION 3.8. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board; and shall be called by the Chairman of the Board or the Secretary upon the written request of three directors of the Corporation.

SECTION 3.9. Notice of Special Meetings. Notice of each special meeting of the Board of Directors shall be given to each director. The notice shall state the principal purpose or purposes of the meeting.

SECTION 3.10. Quorum. Except as provided in Section 3.3, a whole number of directors equal to at least a majority of the Whole Board shall constitute a quorum for the

transaction of business at all meetings of the Board of Directors, and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors unless otherwise provided by law, the Articles of Incorporation or these By‑Laws. If a quorum shall not be present at any meeting of the Board of Directors, the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. Notice of any adjourned meeting need not be given. The directors shall act only as a board and the individual directors shall have no power as such.

SECTION 3.11. Informal Action. Unless otherwise restricted by statute, the Articles of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all directors or by all members of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors or of such committee.

SECTION 3.12. Attendance by Conference Telephone. Members of the Board of Directors or any committee designated by the Board of Directors may participate in a meeting of such Board of Directors or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

SECTION 3.13. Order of Business. At all meetings of the Board of Directors, business shall be transacted in the order determined by the Board.

SECTION 3.14. Resignations. Any director of the Corporation may resign at any time by giving written notice to the Chairman of the Board or the Secretary of the Corporation. The resignation of any director shall take effect at the time of the receipt of such notice or at any later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 3.15. Committees.

(a)    The Board of Directors may from time to time, in its discretion, by resolution passed by a majority of the Whole Board, designate, and appoint, from the directors, committees of one or more persons which shall have and may exercise such lawfully delegable powers and duties conferred or authorized by the resolutions of designation and appointment.

(b)    Each member of a committee shall continue in office until a director to succeed him or her shall have been elected and shall have qualified, or until he or she ceases to be a director or until he or she shall have resigned or shall have been removed in the manner hereinafter provided. Any vacancy in a committee shall be filled by the vote of a majority of the Whole Board at any regular or special meeting thereof.

(c)    The Board of Directors may, by resolution passed by a majority of the Whole Board, designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.

(d)    Unless otherwise provided by the Board of Directors, each committee shall appoint a chairman. Each committee shall keep a record of its acts and proceedings and report the same from time to time to the Board of Directors.

(e)    Any regular or alternate member of a committee may resign at any time by giving written notice to the Chairman of the Board or the Secretary of the Corporation. Such resignation shall take effect at the time of the receipt of such notice or at any later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

(f)    Any regular or alternate member of a committee may be removed with or without cause at any time by resolution passed by a majority of the Whole Board at any regular or special meeting.

(g)    Regular meetings of each committee, of which no notice shall be necessary, shall be held on such days and at such places as the chairman of the committee shall determine or as shall be fixed by a resolution passed by a majority of all the members of such committee. Special meetings of each committee will be called by the Secretary at the request of any two members of such committee (or the sole member, if a committee of one), or in such other manner as may be determined by the committee. Notice of each special meeting of a committee shall be mailed to each member thereof at least two days before the meeting or shall be given personally or by telephone or other electronic transmission at least one day before the meeting. Every such notice shall state the time and place, but need not state the purposes of the meeting. No notice of any meeting of a committee shall be required to be given to any alternate.

(h)    Unless the Board of Directors shall provide otherwise, the presence of a majority of the total membership of any committee of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of such committee and the act of a majority of those present shall be necessary and sufficient for the taking of any action thereat.

SECTION 3.16. Compensation of Directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and at each meeting of a committee of the Board of Directors of which they are members. Unless otherwise provided in these By-Laws, the Board of Directors shall have the authority to fix compensation of all directors for their services to the Corporation as directors and for their services to the Corporation as regular or alternate members of committees of the Board of Directors.

SECTION 3.17. Removal. Subject to the rights of the holders of any class or series of Preferred Stock, any director or the entire Board of Directors may be removed from office at any time, but only for cause and only by the affirmative vote by the holders of at least 80 percent of the voting power of all of the then outstanding shares of capital stock of the Corporation entitled to vote at an election of directors, voting together as a single class.

SECTION 3.18. Board Structure. The Corporation elects not to be governed by Section 23-1-33-6(c) of the Act.

ARTICLE 4

NOTICES

SECTION 4.1. Notices. Notices to directors and shareholders shall be in writing and delivered personally or mailed to their addresses appearing on the records of the Corporation or, if to directors, by telegram, cable, telephone, telecopy, facsimile, other electronic transmission, wireless or a nationally recognized overnight delivery service or personally. Notice to directors by mail shall be given at least five days before the meeting. Notice to directors by telegram, cable, telephone, telecopy, facsimile, other electronic transmission, wireless or personal delivery shall be given a reasonable time before the meeting, but in no event less than two days before the meeting. Notice by mail shall be deemed to be given when mailed to the director at his or her address appearing on the records of the Corporation. Notice by telegram or cable shall be deemed to be given when the telegram or cable addressed to the director at his or her address appearing on the records of the Corporation is delivered to the telegraph company. Notice by telephone, telecopy, facsimile, other electronic transmission or wireless shall be deemed to be given when transmitted by telephone, telecopy, facsimile, other electronic transmission or wireless to the number, electronic address or wireless call designation appearing on the records of the Corporation for the director (regardless of whether the director shall have personally received such telephone call or wireless message); provided confirmation of transmission shall be made promptly by telegram or cable in the manner specified above.

SECTION 4.2. Waiver of Notice. Whenever any notice is required, a waiver thereof signed by the person entitled to such notice and filed with the minutes or corporate records, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance of any person at any meeting of shareholders or directors shall constitute a waiver of notice of such meeting, except when such person attends only for the express purpose of objecting, at the beginning of the meeting (or in the case of a director's meeting, promptly upon such director's arrival), to the transaction of any business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

ARTICLE 5

OFFICERS

SECTION 5.1. Designation; Number; Election. The Board of Directors shall elect the officers of the Corporation. Such officers shall be a Chief Executive Officer and President, one or more Vice Presidents as the Board of Directors shall determine from time to time, a Controller, a Treasurer and a Secretary.

In addition to any officer elected by the Board of Directors, the Board of Directors or the Chief Executive Officer and President, at any time, may appoint and remove such additional officers and agents as the Board of Directors or the Chief Executive Officer and President may determine from time to time. Such persons shall have such authority, and perform such duties as provided in these By‑Laws or as the Board of Directors or the Chief Executive Officer and President may from time to time prescribe. The Board of Directors or the Chief Executive Officer and President may from time to time authorize any officer to appoint and remove agents and employees and to prescribe their powers and duties.

One person may hold more than one office at the same time provided the duties of such officers as prescribed by these By-Laws may be properly and consistently performed by one person; provided, however, that the Chief Executive Officer may not serve as the Chairman and the Chairman must be “independent” as determined pursuant to the provisions of the New York Stock Exchange Listed Company Manual.

SECTION 5.2. Term of Office; Removal; Resignations; Vacancies. The term of each officer shall be for one year and continue until his or her successor is chosen and qualified or until the earlier of his or her death, resignation or removal, except that any such officer elected by the Board of Directors, excluding the Chief Executive Officer and President, at any time, may be suspended by the Chief Executive Officer and President until the Board of Directors convenes, and any such officer, including the Chief Executive Officer and President, may be removed at any time by the affirmative vote of a majority of the members of the Whole Board.

All appointed officers, agents and representatives of the Corporation shall hold office only during the pleasure of the Board of Directors or the officer appointing them.

Any officer elected by the Board of Directors may resign at any time by giving written notice to the Chairman of the Board, the Chief Executive Officer and President or the Secretary. Any other officer may resign at any time by giving written notice to the Chairman of the Board or the Chief Executive Officer and President. Any such resignation shall take effect at the date of receipt of such notice or at any later time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

A vacancy in any office because of death, resignation, removal or otherwise shall be filled for the unexpired portion of the term in the manner provided in these By‑Laws for regular election or appointment to such office.

SECTION 5.3. Compensation of Officers. The Board of Directors or the compensation committee of the Board of Directors shall have the authority to fix compensation of all officers elected by the Board. The Chief Executive Officer and President and/or such officer as the Chief Executive Officer and President may designate shall have the authority to fix compensation of all other officers of the Corporation.

SECTION 5.4. Chief Executive Officer and President. The Chief Executive Officer and President shall, subject to the general oversight of the Board of Directors, be responsible for the day-to-day management and overall charge of the administration and operation of the Corporation’s business and the general supervision of the policies and affairs of the Corporation. He or she shall report to the Board of Directors directly.

He or she shall (a) see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect or otherwise implemented; (b) have the power to appoint officers for any division who, as such, shall not be officers of the Corporation; (c) in the absence or disability of the Chairman, preside at meetings of the Board of Directors and perform such other duties of the Chairman as may be assigned to him or her by the Board of Directors; and (d) have such other powers and perform such other duties as may be prescribed by the Board of Directors or provided in these By-Laws.

In the absence or disability of the Chairman and the Chief Executive Officer and President, on assembling for a regular or special meeting of the Board of Directors, the directors shall choose another member of the Board of Directors or another officer in attendance to preside at such meeting.

SECTION 5.5. Vice Presidents. Each Vice President shall have the powers and duties prescribed in these By-Laws or assigned to him or her by the Board of Directors or the Chief Executive Officer and President. The Board of Directors or the Chief Executive Officer and President may designate one or more of such Vice Presidents as executive, senior or assistant Vice Presidents.

SECTION 5.6. Controller. Subject to control and supervision by the Chief Executive Officer and President and the Board of Directors, the Controller shall be in charge of the accounts of the Corporation and its subsidiaries; maintain adequate records of all assets, liabilities and business transactions; and have the other powers and duties prescribed by these By-Laws or by the Board of Directors or the Chief Executive Officer and President, and the usual powers and duties pertaining to his or her office.

SECTION 5.7. Assistant Controllers. The Assistant Controllers shall have the powers and duties prescribed by these By-Laws or assigned by the Controller. In the absence or disability of the Controller, they shall have all his or her other powers and duties.

SECTION 5.8 Treasurer. Subject to control and supervision by the Chief Executive Officer and President and the Board of Directors, the Treasurer shall have charge of and shall be responsible for the receipt, disbursement and safekeeping of all funds and securities of the Corporation (and shall deposit all such funds in the name of the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of these By-Laws), propose financial policies, negotiate loans, be responsible for the maintenance of proper insurance coverages and from time to time and whenever requested to do so, render statements of the condition of the finances of the Corporation to the Board of Directors; and have the other powers and duties prescribed by these By-Laws or by the Board of Directors or the Chief Executive Officer and President, and the usual powers and duties pertaining to his or her office.

SECTION 5.9. Assistant Treasurers. The Assistant Treasurers shall have the powers and duties prescribed by these By-Laws or assigned by the Treasurer. In the absence of the Treasurer, they shall have all his or her other powers and duties.

SECTION 5.10. Secretary. Subject to control and supervision by the Board of Directors and the Chief Executive Officer and President, the Secretary shall attend and record proceedings of meetings of shareholders, the Board of Directors and any committee of the Board of Directors; keep or cause to be kept in books provided for such purpose such records of proceedings; and have the other powers and duties prescribed by these By-Laws or by the Board of Directors or the Chief Executive Officer and President, and have the usual powers and duties pertaining to his or her office, including having custody of the corporate seal, if any, and affixing it to all documents as required to attest the same.

SECTION 5.11. Assistant Secretaries. The Assistant Secretaries shall have the powers and duties prescribed by these By-Laws or assigned by the Secretary. In the absence or disability of the Secretary, they shall have all his or her powers and duties.

SECTION 5.12. Certain Agreements. The Board of Directors shall have power to authorize or direct the proper officers of the Corporation, on behalf of the Corporation, to enter into valid and binding agreements in respect of employment, incentive or deferred compensation, stock options, and similar or related matters, notwithstanding the fact that a person with whom the Corporation so contracts may be a member of its Board of Directors. Any such agreement may validly and lawfully bind the Corporation for a term of more than one year, in accordance with its terms, notwithstanding the fact that one of the elements of any such agreement may involve the employment by the Corporation of an officer, as such, for such term.

ARTICLE 6

CONDUCT OF BUSINESS

SECTION 6.1. Contracts; Loans. The Board of Directors, except as in these By-Laws otherwise provided, may authorize any officer, employee or agent of the Corporation to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances.

No loan shall be contracted on behalf of the Corporation and no negotiable paper shall be issued in its name, unless authorized by the Board of Directors.

SECTION 6.2. Checks. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, employee or employees, of the Corporation as shall from time to time be determined in accordance with authorization of the Board of Directors.

SECTION 6.3. Banking. All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may from time to time designate, or as may be designated by any officer or officers of the Corporation to whom such power may be delegated by the Board, and for the purpose of such deposit the officers and employees who have been authorized to do so in accordance with the determinations of the Board may endorse, assign and deliver checks, drafts, and other orders for the payment of money which are payable to the order of the Corporation.

SECTION 6.4. Voting of Stock. Except as otherwise provided in these By‑Laws or in the Articles of Incorporation, and unless otherwise provided by resolution of the Board of Directors, the Chief Executive Officer and President or any other officer elected by the Board of Directors may from time to time appoint an attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation to cast the votes which the Corporation may be entitled to cast as a shareholder or otherwise in any other corporation any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporation, or to consent in writing to any action by such other corporation, and may instruct the person or persons so appointed as to the manner of casting such vote or giving such consent, and may execute or cause to be executed in the name and on behalf

of the Corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as he or she may deem necessary or proper in the premises.

ARTICLE 7

SHARE CERTIFICATES AND THEIR TRANSFER

SECTION 7.1. Share Certificates. Certificates for shares of the Corporation shall be in such form as shall be approved by the Board of Directors and shall be signed by the Chief Executive Officer and President or a Vice President, and by the Secretary or any Assistant Secretary, and shall not be valid unless so signed. Such certificates shall be appropriately numbered in order of issue, by class and series, and contain the name of the registered holder, the number of shares and the date of issue. If such certificates are countersigned (a) by a transfer agent other than the Corporation or its employee, or (b) by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile.

In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he, she or it were such officer, transfer agent or registrar at the date of issue.

The Board of Directors may by resolution or resolutions provide that some or all of any or all classes or series of the shares of stock of the Corporation shall be uncertificated shares. Notwithstanding the preceding sentence, every holder of uncertificated shares, upon request, shall be entitled to receive from the Corporation a certificate representing the number of shares registered in such shareholder's name on the books of the Corporation.

During any period when more than one class of shares of the Corporation is authorized, there shall be set forth on the face or back of certificates issued to represent each class or series of shares, a statement that the Corporation will furnish without charge to each shareholder who so requests, the designation, preferences and relative, participating, optional or other special rights of each class of shares or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

SECTION 7.2. Transfer of Shares. Upon surrender to the Corporation or a transfer agent of the Corporation by the holder of record or by such person's attorney or other duly constituted representative of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, as the Corporation may reasonably require, it shall be the duty of the Corporation and such transfer agent to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction on the books of the Corporation. No certificate shall be issued in exchange for any certificate until the former certificate for the same number of shares of the same class and series shall have been surrendered and canceled, except as provided in Section 7.4.

SECTION 7.3. Regulations. The Board of Directors shall have authority to make rules and regulations concerning the issue, transfer and registration of certificates for shares of the Corporation and concerning the registration of pledges of uncertificated shares.

SECTION 7.4. Lost, Stolen and Destroyed Certificates. The Corporation may issue a new certificate or certificates for shares or may register uncertificated shares, if then authorized by the Board of Directors, in place of any issued certificate alleged to have been lost, stolen or destroyed upon such terms and conditions as the Board of Directors may prescribe.

SECTION 7.5. Record Ownership; Registered Shareholders. A record of the name and address of each holder of the shares of the Corporation, the number of shares held by such shareholder, the number or numbers of any share certificate or certificates issued to such shareholder and the number of shares represented thereby, and the date of issuance of the shares held by such shareholder shall be made on the Corporation's books. The Corporation shall be entitled to treat the holder of record (according to the books of the Corporation) of any share or shares (including any holder registered in a book‑entry or direct registration system maintained by the Corporation or a transfer agent or a registrar designated by the Board of Directors) as the holder in fact thereof and owner for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not the Corporation shall have express or other notice thereof, except as expressly provided by applicable law.

SECTION 7.6. Transfer Agents and Registrars. The Board of Directors may from time to time appoint a transfer agent and a registrar in one or more cities, may require all certificates evidencing shares of the Corporation to bear the signatures of a transfer agent and a registrar, may provide that such certificates shall be transferable in more than one city, and may provide for the functions of transfer agent and registrar to be combined in one agency.

ARTICLE 8

INDEMNIFICATION

SECTION 8.1. Litigation Brought By Third Parties. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, formal or informal (other than an action by or in the right of the Corporation) (an “Action”) by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation (a “Corporate Person”), or is or was serving at the request of the Corporation as a director, officer, employee, agent, partner, trustee or member or in another authorized capacity (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under this Section 8.1) (collectively, an “Authorized Capacity”) of or for another corporation, unincorporated association, business trust, estate, partnership, joint venture, individual, trust, employee benefit plan, or other legal entity, whether or not organized or formed for profit (collectively, “Another Entity”), against expenses (including attorneys' fees), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such Action (“Expenses”) if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any Action by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the

best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe his or her conduct was unlawful.

SECTION 8.2. Litigation by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any Action by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a Corporate Person, or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity against Expenses actually and reasonably incurred by him or her in connection with that defense or settlement of such Action if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or willful misconduct in the performance of his or her duty to the Corporation unless and only to the extent that a court of equity or the court in which such Action was pending shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court of equity or other court shall deem proper.

SECTION 8.3. Successful Defense. To the extent that a person who is or was a Corporate Person or serving at the request of the Corporation in an Authorized Capacity of or for Another Entity has been successful on the merits or otherwise in defense of any Action, referred to in Section 8.1 and 8.2 of this Article 8, or in defense of any claim, issue or matter therein, he or she shall be indemnified against Expenses actually and reasonably incurred by or on behalf of him or her in connection therewith. If any such person is not wholly successful in any such Action but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters therein, the Corporation shall indemnify such person against all Expenses actually and reasonably incurred by or on behalf of such person in connection with each claim, issue or matter that is successfully resolved. For purposes of this Section 8.3 and without limitation, the termination of any claim, issue or matter by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Notwithstanding any other provision of this section, to the extent any person is a witness in, but not a party to, any Action, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a Corporate Person or serving at the request of the Corporation in an Authorized Capacity of or for Another Entity, he or she shall be indemnified against all Expenses actually and reasonably incurred by or on behalf of him or her in connection therewith.

SECTION 8.4. Determination of Conduct.

(a) Any indemnification under Section 8.1 or 8.2 of this Article 8 (unless ordered by a court) shall be made by the Corporation only upon a determination that indemnification of the person is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 8.1 or 8.2. Such determination shall be made (1) if a Change of Control (as hereinafter defined) shall not have occurred, (A) by the Board of Directors by a majority vote of a quorum consisting of the Disinterested Directors (as hereinafter defined) or, if such a quorum cannot be obtained, by majority vote of a committee duly designated by the Board of Directors consisting solely of two (2) or more Disinterested Directors or (B) if there are no Disinterested Directors or, even if there are Disinterested Directors and a majority of such

Disinterested Directors so directs, by (i) Independent Counsel (as hereinafter defined) in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, or (ii) the shareholders of the Corporation; provided, however, that shares owned by or voted under the control of directors who are at the time not Disinterested Directors may not be voted on the determination; or (2) if a Change of Control shall have occurred, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, unless the claimant shall request that such determination be made by or at the direction of the Board of Directors, in which case it shall be made in accordance with clause (1) of this sentence. Any claimant shall be entitled to be indemnified against the Expenses actually and reasonably incurred by such claimant in cooperating with the person or entity making the determination of entitlement to indemnification (irrespective of the determination as to the claimant's entitlement to indemnification) and, to the extent successful, in connection with any litigation or arbitration with respect to such claim or the enforcement thereof.

(b)    If a Change of Control shall not have occurred, or if a Change of Control shall have occurred and a director, officer, employee or agent requests pursuant to clause (2) of the second sentence in Section 8.4(a) that the determination whether the claimant is entitled to indemnification be made by or at the direction of the Board of Directors, the claimant shall be conclusively presumed to have been determined pursuant to Section 8.4(a) to be entitled to indemnification if (1)(a) within fifteen days after the next regularly scheduled meeting of the Board of Directors following receipt by the Corporation of the request therefor, the Board of Directors shall not have resolved by majority vote of the Disinterested Directors to submit such determination to (i) Independent Counsel for its determination or (ii) the shareholders for their determination at the next annual meeting, or any special meeting that may be held earlier, after such receipt, and (b) within sixty days after receipt by the Corporation of the request therefor (or within ninety days after such receipt if the Board of Directors in good faith determines that additional time is required by it for the determination and, prior to expiration of such sixty‑day period, notifies the claimant thereof), the Board of Directors shall not have made the determination by a majority vote of the Disinterested Directors, or (2) after a resolution of the Board of Directors, timely made pursuant to clause (1)(a)(ii) above, to submit the determination to the shareholders, the shareholders meeting at which the determination is to be made shall not have been held on or before the date prescribed (or on or before a later date, not to exceed sixty days beyond the original date, to which such meeting may have been postponed or adjourned on good cause by the Board of Directors acting in good faith); provided, however, that this sentence shall not apply if the claimant has misstated or failed to state a material fact in connection with his or her request for indemnification. Such presumed determination that a claimant is entitled to indemnification shall be deemed to have been made (I) at the end of the sixty‑day or ninety‑day period (as the case may be) referred to in clause (1)(b) of the immediately preceding sentence or (II) if the Board of Directors has resolved on a timely basis to submit the determination to the shareholders, on the last date within the period prescribed by law for holding such shareholders meeting (or a postponement or adjournment thereof as permitted above).

SECTION 8.5. Advance Payment. Expenses incurred in defending an Action shall be paid by the Corporation in advance of the final disposition of such Action to a director or officer, promptly after receipt of a request therefor stating in reasonable detail the expenses incurred, and to an employee or agent as authorized by the Board of Directors; provided that in each case (a) the Corporation shall have received an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation hereunder, (b) the indemnitee furnishes the

Corporation a written affirmation of his or her good faith belief that he or she has satisfied the standard of conduct in Section 8.1 or 8.2 and (c) a determination is made by those making the decision pursuant to Section 8.4 that the facts then known would not preclude indemnification under these By-Laws.

SECTION 8.6. Procedures for Determination. The Board of Directors shall establish reasonable procedures for the submission of claims for indemnification hereunder, determination of the entitlement of any person thereto and review of any such determination. Such procedures shall be set forth in an appendix to these By‑Laws and shall be deemed for all purposes to be a part hereof.

SECTION 8.7. By-Law Not Exclusive. The indemnification provided by this Article 8 shall not be deemed exclusive of any other rights to which any person may be entitled under any by-law, agreement, vote of shareholders or Disinterested Directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, agent or participant and shall inure to the benefit of the heirs, executors and administrators of such a person. Notwithstanding any amendment, alteration or repeal of this section or any of its provisions, or of any of the procedures established by the Board of Directors pursuant to Section 8.6, any person who is or was a Corporate Person, or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity, shall be entitled to indemnification in accordance with the provisions hereof and thereof with respect to any action taken or omitted prior to such amendment, alteration or repeal except to the extent otherwise required by law.

SECTION 8.8. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a Corporate Person or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article or the Business Corporation Law of the State of Indiana.

SECTION 8.9. Effect of Invalidity. The invalidity or unenforceability of any provision of this Article 8 shall not affect the validity or enforceability of the remaining provisions of this Article 8.

SECTION 8.10. Definitions. For purposes of this Article 8:

(a) “Change of Control” means a change of control of the Corporation at any time after the effective time of the merger of Arvin Industries, Inc. with and into the Corporation of a nature that would be required to be reported in a proxy statement pursuant to Section 14(a) of the Exchange Act or in a Form 8-K pursuant to Section 13 of the Exchange Act (or in any similar form or schedule under either of those provisions or any successor provision), whether or not the Corporation is then subject to such reporting requirement; provided, however, that, without limitation, a Change of Control shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d‑3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then

outstanding securities without the prior approval of at least two‑thirds of the members of the Board of Directors in office immediately prior to such person attaining such percentage interest; (ii) the Corporation is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors immediately thereafter; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any director whose election became effective prior to or at the time of the merger of Arvin Industries, Inc. with and into the Corporation and any new director whose election or nomination for election by the Corporation's shareholders was approved by a vote of at least two‑thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors.

(b)    “Constituent Holder” shall mean any shareholder, collective investment fund included within a Qualifying Fund (as defined in paragraph (d)(v) of Section 2.9) or beneficial holder whose stock ownership is counted for the purpose of qualifying as holding the Proxy Access Request Required Shares (as defined in paragraph (d)(v) of Section 2.9) or qualifying as an Eligible Shareholder (as defined in paragraph (d)(v) of Section 2.9).

(c)    “the Corporation” shall include, in addition to the surviving or resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify a director, officer, employee or agent of such constituent corporation, or any director, officer, employee or agent of such constituent corporation who is or was serving at the request of such constituent corporation as a director, officer, employee or agent of Another Entity shall stand in the same position under the provisions of this Article 8 with respect to the surviving or resulting corporation as he or she would have with respect to such constituent corporation if its separate existence had continued.

(d)    “Disinterested Director” means a director of the Corporation who is not and was not a party to an action, suit or proceeding in respect of which indemnification is sought by a director, officer, employee or agent.

(e)    “Independent Counsel” means a law firm, or a member of a law firm, that (i) is experienced in matters of corporation law; (ii) neither presently is, nor in the past five years has been, retained to represent the Corporation, the director, officer, employee or agent claiming indemnification or any other party to the Action giving rise to a claim for indemnification under this section, in any matter material to the Corporation, the claimant or any such other party; and (iii) would not, under applicable standards of professional conduct then prevailing, have a conflict of interest in representing either the Corporation or such director, officer, employee or agent in an action to determine the Corporation's or such person's rights under this Article 8.

SECTION 8.11. Actions Against the Corporation. No indemnification shall be payable to an officer, director, employee or agent pursuant to this Article 8 with respect to any action against the Corporation commenced by such officer, director, employee or agent unless the Board of Directors shall have authorized the commencement thereof or unless and to the extent that this Article 8 or the procedures established pursuant to Section 8.6 shall specifically provide for indemnification of expenses relating to the enforcement of rights under this Article 8 and such procedures.

SECTION 8.12. Change in Law. Notwithstanding the foregoing provisions of Article 8, the Corporation shall indemnify any person who is or was a Corporate Person or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity to the full extent permitted by the Act or by any other applicable law, as may from time to time be in effect.

ARTICLE 9

GENERAL

SECTION 9.1. Dividends. Subject to any provisions of any applicable statute or of the Articles of Incorporation, dividends may be declared upon the capital stock of the Corporation by the Board of Directors at any regular or special meeting thereof; and such dividends may be paid in cash, property or shares of the Corporation.

SECTION 9.2. Fiscal Year. The fiscal year of the Corporation shall be the fifty-two or fifty-three week period beginning on the Monday following the Sunday closest to the last day of September of each year and ending on the Sunday closest to the last day of September of the following year.

SECTION 9.3. Severability. If any provision of these By-Laws, or its application thereof to any person or circumstances, is held invalid, the remainder of these By- Laws and the application of such provision to other persons or circumstances shall not be affected thereby.

SECTION 9.4. Amendments. These By-Laws may be amended, added to, rescinded or repealed only by an affirmative vote of at least a majority of the directors then in office at any meeting of the Board of Directors.

SECTION 9.5     Control Shares. Chapter 42 of the Indiana Business Corporation Law (IBCL § 23-1-42-1 et. seq.) shall not apply to the acquisition of shares of voting stock of the Corporation.

APPENDIXPROCEDURES FOR SUBMISSION AND
DETERMINATION OF CLAIMS FOR INDEMNIFICATION
PURSUANT TO ARTICLE 8 OF THE BY‑LAWS.

SECTION 1. Purpose. The Procedures for Submission and Determination of Claims for Indemnification Pursuant to Article 8 of the By-Laws (the “Procedures”) are to implement the provisions of Article 8 of the By-Laws of the Corporation (the “By-Laws”) in compliance with the requirement of Section 8.6 thereof.

SECTION 2. Definitions. For purposes of these Procedures:

(A) All terms that are defined in Article 8 of the By-Laws shall have the meanings ascribed to them therein when used in these Procedures unless otherwise defined herein.

(B) “Expenses” include all reasonable attorneys' fees, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in, a Proceeding; and shall also include such retainers as counsel may reasonably require in advance of undertaking the representation of an indemnitee in a Proceeding.

(C) “Indemnitee” includes any person who was or is, or is threatened to be made, a witness in or a party to any Proceeding by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under Article 8 of the By-Laws) of another corporation or of any partnership, joint venture, trust, employee benefit plan or other enterprise.

(D) “Proceeding” includes any action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative, except one initiated by an Indemnitee unless the Board of Directors shall have authorized the commencement thereof.

SECTION 3. Submission and Determination of Claims.

(A) To obtain indemnification or advancement of Expenses under Article 8 of the By-Laws, an Indemnitee shall submit to the Secretary of the Corporation a written request therefor, including therein or therewith such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to permit a determination as to whether and what extent the Indemnitee is entitled to indemnification or advancement of Expenses, as the case may be. The Secretary shall, promptly upon receipt of a request for indemnification, advise the Board of Directors thereof in writing if a determination in accordance with Section 8.4 of the By-Laws is required.

(B) Upon written request by an Indemnitee for indemnification pursuant to Section 3(A) hereof, a determination with respect to the Indemnitee's entitlement thereto in the specific case, if required by the By-Laws, shall be made in accordance with Section 8.4 of the By-Laws, and, if it is so determined that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within ten days after such determination. The Indemnitee shall cooperate with the person, persons or entity making such determination, with respect to the Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination.

(C) If entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8.4 of the By-Laws, the Independent Counsel shall be selected as provided in this Section 3(C). The Independent Counsel shall be selected by the Board of Directors by majority vote of a quorum consisting of Disinterested Directors, or, if such a quorum cannot be obtained, by majority vote of a committee duly designated by the Board of Directors consisting solely of two or more Disinterested Directors, or, if such a quorum cannot be obtained and such a committee cannot be designated, by a majority vote of the full Board of Directors (in which selection Directors who are not Disinterested Directors may participate), and the Corporation shall give written notice to the Indemnitee advising the Indemnitee of the identity of the Independent Counsel so selected. The Indemnitee may, within seven days after such written notice of selection shall have been given, deliver to the Corporation a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Article 8 of the By-Laws, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is made, the Independent Counsel so selected may not serve as Independent Counsel unless and until a court has determined that such objection is without merit. If, within twenty days after the next regularly scheduled Board of Directors meeting following submission by the Indemnitee of a written request for indemnification pursuant to Section 3(A) hereof, no Independent Counsel shall have been selected and not objected to, either the Corporation or the Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Indemnitee to the selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom an objection is favorably resolved or the person so appointed shall act as Independent Counsel under Section 8.4 of the By-Laws. The Corporation shall pay any and all reasonable fees and expenses (including without limitation any advance retainers reasonably required by counsel) of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 8.4 of the By-Laws, and the Corporation shall pay all reasonable fees and expenses (including without limitation any advance retainers reasonably required by counsel) incident to the procedures of Section 8.4 of the By-Laws and this Section 3(C), regardless of the manner in which Independent Counsel was selected or appointed. Upon the delivery of its opinion pursuant to Article 8 of the By-Laws or, if earlier, the due commencement of any judicial proceeding or arbitration pursuant to Section 4(A)(3) of these Procedures, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

(D) If a Change of Control shall have occurred, in making a determination with respect to entitlement to indemnification under the By-Laws, the person, persons or entity making such determination shall presume that an Indemnitee is entitled to indemnification under the By-Laws if the Indemnitee has submitted a request for indemnification in accordance with Section 3(A) hereof, and the Corporation shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.

SECTION 4. Review and Enforcement of Determination.

(A) In the event that (1) advancement of Expenses is not timely made pursuant to Section 8.5 of the By-Laws, (2) payment of indemnification is not made pursuant to Section 8.3 of the By-Laws within ten days after receipt by the Corporation of written request therefor, (3) a determination is made pursuant to Section 8.4 of the By-Laws that an Indemnitee is not entitled to indemnification under the By-Laws, (4) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8.4 of the By-Laws and such determination shall not have been made and delivered in a written opinion within ninety days after receipt by the Corporation of the written request for indemnification, or (5) payment of indemnification is not made within ten days after a determination has been made pursuant to Section 8.4 of the By-Laws that an Indemnitee is entitled to indemnification or within ten days after such determination is deemed to have been made pursuant to Section 8.4 of the By-Laws, the Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Indiana, or in any other court of competent jurisdiction, of the Indemnitee's entitlement to such indemnification or advancement of Expenses. Alternatively, the Indemnitee, at his or her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. The Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within one year following the date on which the Indemnitee first has the right to commence such proceeding pursuant to this Section 4(A). The Corporation shall not oppose the Indemnitee's right to seek any such adjudication or award in arbitration.

(B) In the event that a determination shall have been made pursuant to Section 8.4 of the By-Laws that an Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 4 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and the Indemnitee shall not be prejudiced by reason of that adverse determination. If a Change of Control shall have occurred, the Corporation shall have the burden of proving in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

(C) If a determination shall have been made or deemed to have been made pursuant to Section 8.4 of the By-Laws that an Indemnitee is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 4, absent (1) a misstatement or omission of a material fact in connection with the Indemnitee's request for indemnification, or (2) a prohibition of such indemnification under applicable law.

(D) The Corporation shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the procedures and presumptions of these Procedures are not valid, binding and enforceable, and shall stipulate in any such judicial proceeding or arbitration that the Corporation is bound by all the provisions of these Procedures.

(E) In the event that an Indemnitee, pursuant to this Section 4, seeks to enforce the Indemnitee's rights under, or to recover damages for breach of, Article 8 of the By-Laws or these Procedures in a judicial proceeding or arbitration, the Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all expenses (of the types described in the definition of Expenses in Section 2 of these Procedures) actually and reasonably incurred in such judicial proceeding or arbitration, but only if the Indemnitee prevails therein. If it shall be determined in such judicial proceeding or arbitration that the Indemnitee is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the expenses incurred by the Indemnitee in connection with such judicial proceeding or arbitration shall be appropriately prorated.

SECTION 5. Amendments. These Procedures may be amended at any time and from time to time in the same manner as any By‑Law of the Corporation in accordance with the Articles of Incorporation, the By-Laws and the Act; provided, however, that, notwithstanding any amendment, alteration or repeal of these Procedures or any provision hereof, any Indemnitee shall be entitled to utilize these Procedures with respect to any claim for indemnification arising out of any action taken or omitted prior to such amendment, alteration or repeal except to the extent otherwise required by law.

EX-31.A

Exhibit 31-a

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO

RULE 13a-14(a) UNDER THE EXCHANGE ACT

I, Jeffrey A. Craig, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Meritor, Inc. for the quarterly period ended June 30, 2019;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 31, 2019

/s/ Jeffrey A. Craig

Jeffrey A. Craig

President, Chief Executive Officer

EX-31.B

Exhibit 31-b

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO

RULE 13a-14(a) UNDER THE EXCHANGE ACT

I, Carl D. Anderson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Meritor, Inc. for the quarterly period ended June 30, 2019;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 31, 2019

/s/ Carl D. Anderson

Carl D. Anderson

Senior Vice President, Chief Financial Officer

EX-32.A

Exhibit 32-a

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO RULE

13a-14(b) UNDER THE EXCHANGE ACT AND 18 U.S.C. SECTION 1350

(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

As required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, I, Jeffrey A. Craig, hereby certify that:

1. The Quarterly Report of Meritor, Inc. on Form 10-Q for the quarterly period ended June 30, 2019 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, and

2. The information contained in that report fairly presents, in all material respects, the financial condition and results of operations of Meritor, Inc.

/s/ Jeffrey A. Craig

Jeffrey A. Craig

President, Chief Executive Officer

Date: July 31, 2019

EX-32.B

Exhibit 32-b

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

RULE 13a-14(b) UNDER THE EXCHANGE ACT AND 18 U.S.C. SECTION 1350

(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

As required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, I, Carl D. Anderson, hereby certify that:

1. The Quarterly Report of Meritor, Inc. on Form 10-Q for the quarterly period ended June 30, 2019 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, and

2. The information contained in that report fairly presents, in all material respects, the financial condition and results of operations of Meritor, Inc.

/s/ Carl D. Anderson

Carl D. Anderson

Senior Vice President, Chief Financial Officer

Date: July 31, 2019

XML

COVER PAGE - shares	9 Months Ended
	Jun. 30, 2019	Jul. 30, 2019
Cover page.
Document type	10-Q
Document quarterly report	true
Document period end date	Jun. 30, 2019
Document transition report	false
Commission file no.	1-15983
Entity registrant name	MERITOR, INC.
Entity incorporation, state or country code	IN
I.R.S. employer identification no.	38-3354643
Address of principal executive offices, line 1	2135 West Maple Road,
Address of principal executive offices, city or town	Troy,
Address of principal executive offices, state	MI
Zip code	48084-7186
City area code	248
Local phone number	435-1000
Title of 12(b) security	Common Stock, $1 Par Value
Trading symbol	MTOR
Security exchange name	NYSE
Entity current reporting status	Yes
Entity interactive data current	Yes
Entity filer category	Large Accelerated Filer
Entity small business	false
Entity emerging growth company	false
Entity shell company	false
Entity common stock, shares outstanding		82,579,930
Amendment flag	false
Entity central index key	0001113256
Current fiscal year end date	--09-30
Document fiscal year focus	2019
Document fiscal period focus	Q3

XML

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Sales	$ 1,166	$ 1,129	$ 3,360	$ 3,098
Cost of sales	(987)	(959)	(2,866)	(2,625)
GROSS MARGIN	179	170	494	473
Selling, general and administrative	(73)	(76)	(180)	(218)
Restructuring	1	(3)	2	(6)
Other operating expense, net	(3)	0	(3)	(12)
OPERATING INCOME (LOSS)	104	91	313	237
Other income, net	10	9	30	24
Equity in earnings of affiliates	9	9	24	20
Interest income (expense), net	(14)	(14)	(43)	(54)
INCOME (LOSS) BEFORE INCOME TAXES	109	95	324	227
Benefit (provision) for income taxes	(21)	(26)	(69)	(131)
INCOME FROM CONTINUING OPERATIONS	88	69	255	96
LOSS FROM DISCONTINUED OPERATIONS, net of tax	1	(2)	0	(3)
NET INCOME	89	67	255	93
Less: Net income attributable to noncontrolling interests	(3)	(3)	(7)	(8)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	86	64	248	85
NET INCOME (LOSS) ATTRIBUTABLE TO MERITOR, INC.
Net income from continuing operations	85	66	248	88
Income (Loss) from discontinued operations	1	(2)	0	(3)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$ 86	$ 64	$ 248	$ 85
BASIC EARNINGS (LOSS) PER SHARE
Continuing operations (in usd per share)	$ 1.02	$ 0.76	$ 2.96	$ 1.00
Discontinued operations (in usd per share)	0.01	(0.02)	0	(0.03)
Basic earnings per share (in usd per share)	1.03	0.74	2.96	0.97
DILUTED EARNINGS (LOSS) PER SHARE
Continuing operations (in usd per share)	0.99	0.73	2.86	0.96
Discontinued operations (in usd per share)	0.01	(0.02)	0	(0.03)
Diluted earnings per share (in usd per share)	$ 1.00	$ 0.71	$ 2.86	$ 0.93
Basic average common shares outstanding (in shares)	83.0	87.2	83.7	88.1
Diluted average common shares outstanding (in shares)	85.6	89.8	86.6	91.2

XML

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net income	$ 89	$ 67	$ 255	$ 93
Foreign currency translation adjustments:
Attributable to Meritor, Inc.	(6)	(52)	(3)	(46)
Attributable to noncontrolling interest	(1)	(2)	0	(1)
Pension and other postretirement benefit related adjustments	1	3	2	9
Unrealized gain (loss) on cash flow hedges	(2)	1	(2)	4
Other comprehensive loss, net of tax	(8)	(50)	(3)	(34)
Total comprehensive income	81	17	252	59
Less: Comprehensive income attributable to noncontrolling interest	(2)	(1)	(7)	(7)
Comprehensive income attributable to Meritor, Inc.	$ 79	$ 16	$ 245	$ 52

XML

CONDENSED CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
CURRENT ASSETS:
Cash and cash equivalents	$ 111	$ 115
Receivables trade and other, net	625	588
Inventories	491	477
Other current assets	32	46
TOTAL CURRENT ASSETS	1,259	1,226
NET PROPERTY	481	483
GOODWILL	421	421
OTHER ASSETS	567	596
TOTAL ASSETS	2,728	2,726
CURRENT LIABILITIES:
Short-term debt	24	94
Accounts and notes payable	691	700
Other current liabilities	296	290
TOTAL CURRENT LIABILITIES	1,011	1,084
LONG-TERM DEBT	734	730
RETIREMENT BENEFITS	238	262
OTHER LIABILITIES	234	332
TOTAL LIABILITIES	2,217	2,408
COMMITMENTS AND CONTINGENCIES (See Note 21)
MEZZANINE EQUITY:
Convertible debt with cash settlement	1	1
EQUITY:
Common stock (June 30, 2019 and September 30, 2018, 103.9 and 102.2 shares issued and 82.6 and 84.9 shares outstanding, respectively)	104	102
Additional paid-in capital	798	787
Retained earnings	448	200
Treasury stock, at cost (June 30, 2019 and September 30, 2018, 21.4 and 17.3 shares, respectively)	(307)	(236)
Accumulated other comprehensive loss	(569)	(566)
Total equity attributable to Meritor, Inc.	474	287
Noncontrolling interests	36	30
TOTAL EQUITY	510	317
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY	$ 2,728	$ 2,726

XML

CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) - shares shares in Millions	Jun. 30, 2019	Sep. 30, 2018
Statement of Financial Position [Abstract]
Common shares issued (in shares)	103.9	102.2
Common shares outstanding (in shares)	82.6	84.9
Treasury stock (in shares)	21.4	17.3

XML

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
OPERATING ACTIVITIES
CASH PROVIDED BY OPERATING ACTIVITIES (See Note 11)	$ 194	$ 191
INVESTING ACTIVITIES
Capital expenditures	(63)	(52)
Proceeds from sale of equity method investment	0	250
Cash paid for acquisition of AA Gear & Manufacturing, Inc.	0	(36)
Cash paid for investment in Transportation Power, Inc.	(6)	(6)
Proceeds from sale of a business	0	4
Proceeds from sale of assets	0	2
Proceeds from settlement of cross-currency swaps	17	0
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	(52)	162
FINANCING ACTIVITIES
Borrowings and securitization	(46)	(89)
Redemption of notes	(24)	(181)
Deferred issuance costs	(4)	0
Other financing activities	(2)	(3)
Net change in debt	(76)	(273)
Repurchase of common stock	(71)	(63)
CASH USED FOR FINANCING ACTIVITIES	(147)	(336)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1	(5)
CHANGE IN CASH AND CASH EQUIVALENTS	(4)	12
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	115	88
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$ 111	$ 100

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CONDENSED CONSOLIDATED STATEMENT OF EQUITY - USD ($) $ in Millions	Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Loss	Total Equity Attributable to Meritor, Inc.	Noncontrolling Interests
Beginning balance at Sep. 30, 2017	$ 295	$ 101	$ 765	$ 83	$ (136)	$ (545)	$ 268	$ 27
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	59			85		(33)	52	7
Equity based compensation expense	14		14				14
Vesting of equity based awards		1	(1)
Repurchase of common stock	(63)				(63)		(63)
Noncontrolling interest dividends	(1)							(1)
Other equity adjustments	(1)		1				1	(2)
Ending Balance at Jun. 30, 2018	303	102	779	168	(199)	(578)	272	31
Beginning balance at Mar. 31, 2018	312	102	775	104	(169)	(530)	282	30
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	17			64		(48)	16	1
Equity based compensation expense	4		4				4
Repurchase of common stock	(30)				(30)		(30)
Ending Balance at Jun. 30, 2018	303	102	779	168	(199)	(578)	272	31
Beginning balance at Sep. 30, 2018	317	102	787	200	(236)	(566)	287	30
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	252			248		(3)	245	7
Equity based compensation expense	13		13				13
Vesting of equity based awards		2	(2)
Repurchase of common stock	(71)				(71)		(71)
Noncontrolling interest dividends	(1)							(1)
Ending Balance at Jun. 30, 2019	510	104	798	448	(307)	(569)	474	36
Beginning balance at Mar. 31, 2019	445	104	793	362	(286)	(562)	411	34
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	81			86		(7)	79	2
Equity based compensation expense	5		5				5
Repurchase of common stock	(21)				(21)		(21)
Ending Balance at Jun. 30, 2019	$ 510	$ 104	$ 798	$ 448	$ (307)	$ (569)	$ 474	$ 36

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Basis of Presentation

9 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

Meritor, Inc. (the "company" or "Meritor"), headquartered in Troy, Michigan, is a premier global supplier of a broad range of integrated systems, modules and components to original equipment manufacturers ("OEMs") and the aftermarket for the commercial vehicle, transportation and industrial sectors. The company serves commercial truck, trailer, military, bus and coach, construction and other industrial OEMs and certain aftermarkets. The Condensed Consolidated Financial Statements are those of the company and its consolidated subsidiaries.

Certain businesses are reported in discontinued operations in the Condensed Consolidated Statement of Operations, Condensed Consolidated Statement of Cash Flows and related notes for all periods presented. Additional information regarding discontinued operations is discussed in Note 5.

In the opinion of the company, the unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting solely of adjustments of a normal, recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. These statements should be read in conjunction with the company’s audited consolidated financial statements and notes thereto included in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018. The Condensed Consolidated Balance Sheet data as of September 30, 2018 was derived from audited financial statements but does not include all annual disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the three and nine months ended June 30, 2019 are not necessarily indicative of the results for the full year.

The company’s fiscal year ends on the Sunday nearest September 30, and its fiscal quarters generally end on the Sundays nearest December 31, March 31 and June 30. The third quarter of fiscal years 2019 and 2018 ended on June 30, 2019 and July 1, 2018, respectively. All year and quarter references relate to the company’s fiscal year and fiscal quarters, unless otherwise stated. For ease of presentation, September 30 and June 30 are used consistently throughout this report to represent the fiscal year end and third fiscal quarter end, respectively.

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Earnings per Share

9 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings per Share

Earnings per Share

Basic earnings (loss) per share is calculated using the weighted average number of shares outstanding during each period. The diluted earnings (loss) per share calculation includes the impact of dilutive common stock options, restricted shares, restricted share units, performance share unit awards and convertible securities, if applicable.

A reconciliation of basic average common shares outstanding to diluted average common shares outstanding is as follows (in millions):

	Three Months Ended June 30,		Nine Months Ended June 30,
	2019	2018	2019	2018
Basic average common shares outstanding	83.0	87.2	83.7	88.1
Impact of restricted shares, restricted share units and performance share units	1.7	1.7	2.1	2.1
Impact of convertible notes	0.9	0.9	0.8	1.0
Diluted average common shares outstanding	85.6	89.8	86.6	91.2

In November 2018, the Board of Directors approved a grant of performance share units to all executives eligible to participate in the long-term incentive plan. Each performance share unit represents the right to receive one share of common stock or its cash equivalent upon achievement of certain performance and time vesting criteria. The fair value of each performance share unit was $16.50, which was the company’s share price on the grant date of December 1, 2018. The Board of Directors also approved a grant of 0.4 million restricted share units to these executives. The restricted share units vest at the earlier of three years from the date of grant or upon termination of employment with the company under certain circumstances. The fair value of each restricted share unit was $16.50, which was the company's share price on the grant date of December 1, 2018.

The actual number of performance share units that will vest depends upon the company’s performance relative to the established performance metrics for the three-year performance period of October 1, 2018 to September 30, 2021, measured at the end of the performance period. The number of performance share units that vest will depend on adjusted EBITDA margin and adjusted diluted earnings per share from continuing operations at the following weights: 50% associated with achieving an adjusted EBITDA

margin target and 50% associated with achieving an adjusted diluted earnings per share from continuing operations target. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.5 million performance share units.

In November 2015, the Board of Directors approved a grant of performance share units to all executives eligible to participate in the long-term incentive plan. Each performance share unit represents the right to receive one share of common stock or its cash equivalent upon achievement of certain performance and time vesting criteria. The fair value of each performance share unit was $10.51, which was the company’s share price on the grant date of December 1, 2015. The Board of Directors also approved a grant of 0.5 million restricted share units to these executives. The restricted share units vest at the earlier of three years from the date of grant or upon termination of employment with the company under certain circumstances. The fair value of each restricted share unit was $10.51, which was the company's share price on the grant date of December 1, 2015.

The actual number of performance share units that vested depended upon the company’s performance relative to the established performance metrics for the three-year performance period of October 1, 2015 to September 30, 2018, which was measured at the end of the performance period.

For the three and nine months ended June 30, 2019, the dilutive impact of previously issued restricted shares, restricted share units and performance share units was 1.7 million and 2.1 million shares, respectively. For the three and nine months ended June 30, 2018, the dilutive impact of previously issued restricted shares, restricted share units and performance share units was 1.7 million and 2.1 million shares, respectively. For the three and nine months ended June 30, 2019, compensation cost related to restricted shares, restricted share units and performance share units was $5 million and $13 million, respectively. For the three and nine months ended June 30, 2018, compensation cost related to restricted shares, restricted share units and performance share units was $4 million and $14 million, respectively.

For the three and nine months ended June 30, 2019, 0.9 million and 0.8 million shares, respectively, were included in the computation of diluted earnings per share, as the company's average stock price during these periods exceeded the conversion price for the 7.875 percent convertible notes due 2026. For the three and nine months ended June 30, 2018, 0.9 million and 1.0 million shares, respectively, were included in the computation of diluted earnings per share, as the company's average stock price during these periods exceeded the conversion price for the 7.875 percent convertible notes due 2026.

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New Accounting Standards

9 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

New Accounting Standards

New Accounting Standards

Accounting standards implemented during fiscal year 2019

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, followed by various related amendments (ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, ASU 2016-20, ASU 2017-05, ASU 2017-06, ASU 2017-13, and ASU 2017-14) collectively referred to as "Topic 606", which requires companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service and requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The company adopted Topic 606 in the first quarter of the fiscal year beginning October 1, 2018. As a result, the company has changed its accounting policy for revenue recognition as detailed below.

The company applied Topic 606 using the modified retrospective approach (i.e., by recognizing the cumulative effect of initially applying Topic 606 as an adjustment to the opening balance of equity at October 1, 2018). Therefore, the comparative information has not been adjusted and continues to be reported under Topic 605. There was no adjustment to the opening balance of equity at October 1, 2018 as there was no significant impact to previously recorded revenue or expense. The guidance has been applied to all existing contracts at the date of initial application. The adoption of Topic 606 had an immaterial impact on our Condensed Consolidated Balance Sheet, Condensed Consolidated Statement of Operations, and Condensed Consolidated Statement of Cash Flows but did require enhanced disclosures to meet the new disclosure requirements; those enhanced disclosures are included in Note 4.

In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The guidance requires entities to only include the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses (together with other employee compensation costs). The other components of net benefit cost, including amortization of prior service cost/credit, are to be included in a separate line item(s) outside of any sub-total of operating income. ASU 2017-07 also provides guidance that only the service cost component of net benefit cost is eligible for capitalization. The revisions in this amendment

are to be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. The company adopted this standard in the first quarter of fiscal year 2019. Amounts previously reflected in Operating Income were reclassified to Other income (expense) in accordance with the provisions of ASU 2017-07. Refer to Note 20 for amounts that were reclassified.

In July 2018, the FASB issued ASU 2018-09, Codification Improvements. The amendments in this ASU result from the FASB’s standing project to address suggestions on the Accounting Standards Codification ("ASC") and to make other incremental improvements to GAAP. The amendments include changes to clarify the ASC or correct unintended application of guidance that is not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities.

Some of the amendments in this ASU were effective upon issuance. Others have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities, or are conforming amendments that have been made to recently issued guidance that is not yet effective that may require application of the transition and effective date guidance in the original ASU.

The company adopted certain amendments in this ASU in the first quarter of fiscal year 2019. Those certain amendments had effective dates for annual periods beginning after December 15, 2017, for public business entities. The amendments that were adopted in the first quarter of fiscal year 2019 did not have a material impact on the company's Condensed Consolidated Financial Statements. The company plans to implement the remaining amendments beginning October 1, 2019 and is currently evaluating the potential impact on its Condensed Consolidated Financial Statements.

The company also adopted the following ASUs during fiscal year 2019, none of which had a material impact on the Condensed Consolidated Financial Statements or financial statement disclosures:

ASU		Effective Date
2016-01	Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities	October 1, 2018
2016-15	Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)	October 1, 2018
2016-16	Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory	October 1, 2018
2016-18	Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)	October 1, 2018
2017-01	Business Combinations (Topic 805): Clarifying the Definition of a Business	October 1, 2018
2017-09	Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting	October 1, 2018
2017-10	Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services (a consensus of the FASB Emerging Issues Task Force)	October 1, 2018
2018-03	Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities	October 1, 2018
2018-04	Investments—Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273 (SEC Update)	October 1, 2018
2018-08	Not-For-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made	October 1, 2018

Accounting standards to be implemented

The following represent the standards that may result in a significant change in practice and/or have a significant financial impact on the company.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The update will require lessees to recognize a right-of-use asset and lease liability for substantially all leases. The standard is required to be adopted by public business entities in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted.

The company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2019, and is currently assessing the potential impact of this guidance on its accounting policies and its Condensed Consolidated Financial Statements. The company plans to implement this standard using the additional and optional transition method as provided by ASU 2018-11. Please see discussion of ASU 2018-11 below.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments, including accounts receivable. The ASU also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The amendments in this update are required to be adopted by public business entities in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The company is currently evaluating the potential impact of this guidance on its accounting policies and its Condensed Consolidated Financial Statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220). The guidance in ASU 2018-02 allows an entity to elect to reclassify the stranded tax effects related to the Tax Cuts and Jobs Act of 2017 ("U.S. tax reform") from accumulated other comprehensive income into retained earnings. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The company is currently evaluating the potential impact of this new guidance on its Condensed Consolidated Financial Statements.

In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842. The amendments in this ASU affect narrow aspects of the guidance issued in ASU 2016-02, Leases (Topic 842), which is not yet effective. The effective date and transition requirements for this ASU are the same as those for ASU 2016-02 as described above. Therefore, the company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2019 in connection with its planned implementation of ASU 2016-02 and is currently assessing the potential impact of this new guidance on its accounting policies and its Condensed Consolidated Financial Statements.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. The amendments in this ASU affect the guidance issued in ASU 2016-02, Leases (Topic 842), which is not yet effective. The amendments provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The amendments also provide lessors with a practical expedient to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component in certain circumstances. The effective date for this ASU are the same as those for ASU 2016-02 as described above. Therefore, the company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2019 in connection with its planned implementation of ASU 2016-02 and is currently assessing the potential impact of this new guidance on its accounting policies and its Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU add, modify, and eliminate certain disclosure requirements on fair value measurements in Topic 820. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Certain amendments should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. Others should be applied retrospectively. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The company is currently evaluating the potential impact of this new guidance on its Condensed Consolidated Financial Statements.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The amendments in this ASU affect a variety of Topics in the Codification (ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities; ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments; and ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities).

For the amendments in this ASU that are applicable to ASU 2016-01, which Meritor has adopted, the effective date is the first quarter of fiscal year 2021 with early adoption permitted. For the amendments in this ASU that are applicable to ASU 2016-13, which Meritor has not yet adopted, the effective date is the first quarter of fiscal year 2021. For the amendments in this ASU that

are applicable to ASU 2017-12, which Meritor has adopted, the effective date is the first quarter of fiscal year 2020 with early adoption permitted. The company has not yet adopted any of these amendments and is currently evaluating the potential impact of this new guidance on its Condensed Consolidated Financial Statements.

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Revenue

9 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

Revenue is measured based on the consideration to which the company expects to be entitled, and is presented net of any estimates of customer sales allowances, incentives, rebates, and returns. The company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the company from a customer, are excluded from revenue.

Shipping and handling costs associated with outbound freight after control of a product has transferred to a customer are accounted for as a fulfillment cost, as opposed to a distinct performance obligation, and are included in cost of sales.

Nature of goods and services

The following is a description of principal activities - separated by reportable segments - from which the company generates its revenue.

The Commercial Truck segment supplies drivetrain systems and components, including axles, drivelines and braking and suspension systems, primarily for medium- and heavy-duty trucks and other applications in North America, South America, Europe and Asia Pacific. This segment also includes the company's aftermarket businesses in Asia Pacific and South America.

The Aftermarket, Industrial and Trailer segment supplies axles, brakes, drivelines, suspension parts and other replacement parts to commercial vehicle and industrial aftermarket customers, primarily in North America and Europe. In addition, this segment supplies drivetrain systems and certain components, including axles, drivelines, brakes and suspension systems for military, construction, bus and coach, fire and emergency and other applications in North America and Europe. It also supplies a variety of undercarriage products and systems for trailer applications in North America.

Although the company may enter into long-term supply arrangements with its major customers, the prices and volumes are not fixed over the term of the arrangements and a contract does not exist under the scope of Topic 606 until prices and volumes are known. As such, individual customer releases or purchase orders represent the contract with the customer.

The company accounts for individual products and services separately if they are distinct (i.e., if a product or service is separately identifiable from other items and if a customer can benefit from it on its own or with other resources that are readily available to the customer). The company has identified certain performance obligations related to brake pad fitting and axle dressing where it is acting as an agent and, therefore, recognizes revenue on a net basis for satisfaction of those performance obligations.

The company recognizes revenue for the sale of goods at the point in time when the customer takes control of the goods. As such, revenue is recognized upon shipment of product and transfer of ownership to the customer. The amount of revenue recognized is based on the purchase order price and adjusted for variable consideration (i.e., customer sales allowances, incentives, rebates, and returns). Provisions for customer sales allowances, incentives, rebates, and returns are recorded as a reduction of sales at the time of revenue recognition based primarily on historical experience. The company’s payment terms with customers are customary and vary by customer and geography but typically range from 30 to 90 days.

The company provides warranties on some of its products. The company records estimated product warranty costs at the time of shipment of products to customers (see Note 16 and Note 17).

Disaggregation of revenue

In the following tables, revenue is disaggregated for each of our operating segments by primary geographical market for the three and nine months ended June 30, 2019.

	Three Months Ended June 30, 2019
Primary Geographical Market	Commercial Truck		Aftermarket, Industrial and Trailer		Total
U.S.	$	419	$	278	$	697
Canada	—		18		18
Mexico	54		12		66
Total North America	473		308		781
Sweden	75		—		75
Italy	62		4		66
United Kingdom	40		3		43
Other Europe	3		16		19
Total Europe	180		23		203
Brazil	67		—		67
China	44		—		44
India	53		—		53
Other Asia-Pacific	18		—		18
Total sales	$	835	$	331	$	1,166

	Nine Months Ended June 30, 2019
Primary Geographical Market	Commercial Truck		Aftermarket, Industrial and Trailer		Total
U.S.	$	1,182	$	781	$	1,963
Canada	—		53		53
Mexico	151		35		186
Total North America	1,333		869		2,202
Sweden	223		—		223
Italy	178		13		191
United Kingdom	126		8		134
Other Europe	9		54		63
Total Europe	536		75		611
Brazil	180		—		180
China	129		—		129
India	172		—		172
Other Asia-Pacific	66		—		66
Total sales	$	2,416	$	944	$	3,360

Contract balances

As of June 30, 2019 and September 30, 2018, Trade receivables, net, which are included in Receivables, trade and other, net, on the Condensed Consolidated Balance Sheet, were $611 million and $566 million, respectively.

For the nine months ended June 30, 2019, the company had no material bad-debt expense and there were no material contract

assets, contract liabilities or deferred contract costs recorded on the Condensed Consolidated Balance Sheet as of June 30, 2019.

Contract costs

The company applies the practical expedient provided in Topic 606 and recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the company otherwise would have recognized is one year or less. The costs which are not capitalized are included in cost of sales.

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Discontinued Operations

9 Months Ended

Jun. 30, 2019

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

Results of discontinued operations are summarized as follows (in millions):

	Three Months Ended June 30,					Nine Months Ended June 30,
	2019		2018			2019		2018
Sales	$	—	$	—		$	—	$	—
Income (loss) before income taxes	$	1	$	(2	)	$	—	$	(4	)
Benefit from income taxes	—		—			—		1
Income (loss) from discontinued operations attributable to Meritor, Inc.	$	1	$	(2	)	$	—	$	(3	)

Loss from discontinued operations attributable to the company for the three and nine months ended June 30, 2018 was primarily related to environmental remediation and changes in estimates related to legal costs incurred in connection with a previously divested business.

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Goodwill

9 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill

In accordance with ASC Topic 350-20, "Intangibles—Goodwill and Other," goodwill is reviewed for impairment annually during the fourth quarter of the fiscal year or more frequently if certain indicators arise. If business conditions or other factors cause the operating results and cash flows of a reporting unit to decline, the company may be required to record impairment charges for goodwill at that time.

The company tests goodwill for impairment at a level of reporting referred to as a reporting unit, which is an operating segment or one level below an operating segment (referred to as a component). A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results of that component. When two or more components of an operating segment have similar economic characteristics, the components are aggregated and deemed a single reporting unit. An operating segment is deemed to be a reporting unit if all of its components are similar, if none of its components are a reporting unit, or if the segment comprises only a single component.

Acquisition of AA Gear & Manufacturing, Inc. Business

On April 30, 2018, the company acquired substantially all of the assets of AA Gear & Manufacturing, Inc. and its subsidiaries ("AAG") for a cash purchase price of approximately $35 million. The AAG acquisition was accounted for as a business combination. The company recorded goodwill in the amount of $12 million for the excess of consideration paid over the fair value of the individual assets acquired and liabilities assumed. This recorded goodwill consists largely of the synergies and economies of scale expected from combining the operations of the company and AAG. All of the goodwill was assigned to the Aftermarket, Industrial and Trailer reportable segment. All goodwill recognized is expected to be deductible for income tax purposes over the next 15 years.

Realignment of Reporting Units

As discussed in Note 23, the company realigned its operations in the second quarter of fiscal year 2019, resulting in a change to its reportable segments. The company’s reporting units did not change as a result of the change in reportable segments. The Commercial Truck segment contains one reporting unit. The Aftermarket, Industrial and Trailer segment contains four reporting units.

A summary of the changes in the carrying value of goodwill by the company’s two reportable segments are presented below (in millions):

	Commercial Truck			Aftermarket, Industrial and Trailer			Total
Goodwill (1)	$	266		$	170		$	436
Accumulated impairment losses (1)	—			(15		)	(15		)
Beginning Balance at September 30, 2018 (1)	266			155			421
AAG measurement period adjustment (see Note 9)	—			3			3
Foreign currency translation	(3		)	—			(3		)
Ending Balance at June 30, 2019	$	263		$	158		$	421

⁽¹⁾ Amounts have been recast to reflect reportable segment changes (see Note 23).

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Restructuring Costs

9 Months Ended

Jun. 30, 2019

Restructuring and Related Activities [Abstract]

Restructuring Costs

Restructuring Costs

Restructuring reserves, primarily related to unpaid employee termination benefits, were $1 million at June 30, 2019 and $4 million at September 30, 2018. The changes in restructuring reserves for the nine months ended June 30, 2019 and 2018 are as follows (in millions):

	Employee Termination Benefits			Plant Shutdown & Other			Total
Beginning Balance at September 30, 2018	$	4		$	—		$	4
Activity during the period:
Charges to continuing operations	(2		)	—			(2		)
Cash payments – continuing operations	(2		)	—			(2		)
Other	1			—			1
Total restructuring reserves at June 30, 2019	1			—			1
Less: non-current restructuring reserves	—			—			—
Restructuring reserves – current, at June 30, 2019	$	1		$	—		$	1
Balance at September 30, 2017	$	5		$	1		$	6
Activity during the period:
Charges to continuing operations	6			—			6
Cash payments – continuing operations	(6		)	(1		)	(7		)
Total restructuring reserves at June 30, 2018	5			—			5
Less: non-current restructuring reserves	(1		)	—			(1		)
Restructuring reserves – current, at June 30, 2018	$	4		$	—		$	4

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Income Taxes

9 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For each interim reporting period, the company makes an estimate of the effective tax rate expected to be applicable for the full fiscal year pursuant to FASB ASC Topic 740-270, "Accounting for Income Taxes in Interim Periods." The rate so determined is used in providing for income taxes on a year-to-date basis. Jurisdictions with a projected loss for the year or an actual year-to-date loss where no tax benefit can be recognized are excluded from the estimated annual effective tax rate. The impact of including these jurisdictions on the quarterly effective rate calculation could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings versus annual projections.

Income tax expense (benefit) is allocated among continuing operations, discontinued operations and other comprehensive income ("OCI"). Such allocation is applied by tax jurisdiction, and in periods in which there is a pre-tax loss from continuing

operations and pre-tax income in another category, such as discontinued operations or OCI, income tax expense is allocated to the other sources of income, with a related benefit recorded in continuing operations.

On December 22, 2017, the U.S. government enacted the U.S. tax reform. The U.S. tax reform made broad and complex changes to the U.S. tax code that affected the company's fiscal year ended September 30, 2018, including, but not limited to, reducing the U.S. federal corporate tax rate and requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries. The U.S. tax reform reduced the federal corporate tax rate to 21 percent effective January 1, 2018.

The SEC staff issued Staff Accounting Bulletin ("SAB") 118, which provides guidance on accounting for the tax effects of the U.S. tax reform. SAB 118 provides a measurement period that should not extend beyond one year from the U.S. tax reform enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the U.S. tax reform for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the U.S. tax reform is incomplete but the company is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the U.S. tax reform.

Specifically, the company included discrete tax expense in its first quarter financial statements for fiscal year 2018 related to provisional amounts under SAB 118 for the impact of the revaluation of U.S. deferred tax assets and liabilities due to the federal income tax rate reduction from 35 percent to 21 percent. Additionally, the company estimated its liability and included provisional amounts for the one-time transition tax as a discrete tax expense. The company will elect to offset the liability associated with this transition tax by utilizing foreign tax credit carryovers. The revaluation of the deferred tax assets and the transition tax resulted in a non-cash charge of $77 million in the first quarter of fiscal year 2018. In the first quarter of fiscal year 2019, a $7 million income tax net benefit was recorded which consists of an income tax benefit of $11 million for refinement of the transition tax and $4 million income tax expense for refinement of other adjustments. In the third quarter of fiscal year 2019, a $2 million income tax benefit was recored to these other adjustments.

Tax expense related to the transition tax and rate change on net deferred tax assets and liabilities as of December 31, 2018 is now considered complete under SAB 118. Additionally, as of December 31, 2018, the company has accounted for the tax impacts related to the Global Intangible Low Tax Income ("GILTI"), Base Erosion Anti Abuse Tax ("BEAT") and Foreign Derived Intangible Income ("FDII") regimes as well as all other provisions of the U.S. tax reform that are effective in fiscal year 2019. The company has elected to treat GILTI as a period cost and, therefore, has not recognized deferred taxes for basis differences that may reverse as GILTI tax in future periods.

In evaluating the ability to recover its net deferred tax assets, the company utilizes a consistent approach which considers its historical operating results, including an assessment of the degree to which any gains or losses are driven by items that are unusual in nature, and tax planning strategies. In addition, the company reviews changes in near-term market conditions and other factors that impact future operating results. In fiscal year 2018, after sustained profitability and improved market conditions, the valuation allowance in Brazil was reversed. As of June 30, 2019, the company continues to maintain the valuation allowances in France, the U.K., and certain other jurisdictions, as the company believes the negative evidence that it will be able to recover these net deferred tax assets continues to outweigh the positive evidence. If, in the future, the company generates taxable income on a sustained basis, its conclusion regarding the need for valuation allowances in these jurisdictions could change.

For the three months ended June 30, 2019, the company had approximately $4 million of net pre-tax income compared to $7 million of net pre-tax income in the same period in fiscal year 2018 in tax jurisdictions in which tax expense (benefit) is not recorded.

For the nine months ended June 30, 2019, the company had approximately $12 million of net pre-tax income compared to $20 million of net pre-tax income in the same period in fiscal year 2018 in tax jurisdictions in which tax expense (benefit) is not recorded.

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Acquisition and Divestiture

9 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Acquisition and Divestiture

Acquisition and Divestiture

Acquisition of AxleTech Business

On July 26, 2019, the company acquired 100 percent of the voting equity interest of the AxleTech group companies for approximately $175 million in cash, subject to certain purchase price adjustments. The company funded the acquisition with the

term loan under the revolving credit agreement (see Note 18). The addition of AxleTech enhances Meritor’s growth platform with the addition of a complementary product portfolio that includes a full line of independent suspensions, axles, braking solutions and drivetrain components across the off-highway, defense, specialty and aftermarket markets. AxleTech will operate within Meritor’s Aftermarket, Industrial and Trailer segment. The amounts of revenue and earnings, fair value of identifiable net assets and related goodwill of AxleTech are unavailable and will be disclosed in the company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019.

Additionally, on July 29, 2019, the company approved a restructuring plan related to the integration of its acquisition of AxleTech. This restructuring plan is intended to realize certain targeted synergies following the acquisition, primarily from the elimination of cost overlap. With this restructuring plan, the Company expects to incur $11 million of total costs in the Aftermarket, Industrial and Trailer segment with approximately $7 million related to employee severance charges and approximately $4 million related to lease termination costs. Restructuring associated with severance actions are expected to be substantially completed by fiscal year 2020. The lease term expires in fiscal year 2023.

Acquisition of AAG Business

On April 30, 2018, the company acquired substantially all of the assets of AAG for a cash purchase price of approximately $35 million. AAG provides low-to-medium volume batch manufacturing for complex gear and shaft applications, as well as quick-turnaround prototyping solutions and emergency plant support. The AAG acquisition was accounted for as a business combination.

As of June 30, 2019, the company finalized all measurement period adjustments related to the AAG acquisition. Since completion of initial estimates in the fourth quarter of fiscal year 2018, the company recorded a $4 million decrease to finite lived intangible assets, a $1 million increase to accounts receivable and a $3 million increase to goodwill. The adjustments were made to reflect additional available information and updated valuation results. All goodwill resulting from the AAG acquisition was assigned to the Aftermarket, Industrial and Trailer reportable segment (see Note 6).

Divestiture of Meritor Huayang Vehicle Braking Company Ltd.

On February 7, 2018, Meritor completed the sale of its equity interest in Meritor Huayang Vehicle Braking Company Ltd. All assets and liabilities of the business were transferred at closing.

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Accounts Receivable Factoring and Securitization

9 Months Ended

Jun. 30, 2019

Accounts Receivable Factoring And Securitization [Abstract]

Accounts Receivable Factoring and Securitization

Accounts Receivable Factoring and Securitization

The company has a U.S. accounts receivable securitization facility with PNC Bank and participates in various accounts receivable factoring programs, primarily with Nordea Bank for trade receivables from AB Volvo, as follows:

	Current Expiration	Total Facility Size as of 6/30/19				Utilized as of 6/30/19				Utilized as of 9/30/18
		EUR		USD		EUR		USD		EUR		USD
On-balance sheet arrangement
Committed U.S. accounts receivable securitization (1)	December 2021	N/A		$	110	N/A		$	3	N/A		$	57
Total on-balance sheet arrangement: (1)		N/A		$	110	N/A		$	3	N/A		$	57
Off-balance sheet arrangements
Committed Swedish factoring facility (2)(3)	March 2020	€	155	$	176	€	140	$	160	€	136	$	158
Committed U.S. factoring facility (2)	February 2023	N/A		75		N/A		70		45		53
Uncommitted U.K. factoring facility	February 2022	25		28		10		11		8		9
Uncommitted Italy factoring facility	June 2022	30		34		30		34		24		28
Other uncommitted factoring facilities (4)	None	N/A		N/A		18		19		11		12
Total off-balance sheet arrangements		€	210	$	313	€	198	$	294	€	224	$	260

⁽¹⁾ Availability subject to adequate eligible accounts receivable available for sale. The utilized amount includes $3 million and $11 million of letters of credit as of June 30, 2019 and September 30, 2018, respectively.

⁽²⁾ Actual amounts may exceed the bank's commitment at the bank's discretion.

⁽³⁾ The facility is backed by a 364-day liquidity commitment from Nordea Bank which extends through January 10, 2020.

⁽⁴⁾ There is no explicit facility size under the agreement, but the counterparty approves the purchase of receivable tranches at its discretion.

On-balance sheet arrangement

U.S. Securitization Facility: The company's U.S. accounts receivables securitization facility with PNC Bank is subject to a maximum permitted priority debt-to-EBITDA ratio as of the last day of each fiscal quarter under the facility of 2.25 to 1.00. Under this program, the company has the ability to sell an undivided percentage ownership interest in substantially all of its trade receivables (excluding the receivables due from AB Volvo and subsidiaries eligible for sale under the U.S. accounts receivable factoring facility) of certain U.S. subsidiaries to ArvinMeritor Receivables Corporation ("ARC"), a wholly-owned, special purpose subsidiary. ARC funds these purchases with borrowings from participating lenders under a loan agreement. This program also includes a letter of credit facility pursuant to which ARC may request the issuance of letters of credit issued for the company’s U.S. subsidiaries (originators) or their designees, which when issued will constitute a utilization of the facility for the amount of letters of credit issued. Amounts outstanding under this agreement are collateralized by eligible receivables purchased by ARC and are reported as short-term debt in the Condensed Consolidated Balance Sheet. This securitization program contains a cross default to the company's revolving credit facility. At certain times during any given month, the company may sell eligible accounts receivable under this program to fund intra-month working capital needs. In such months, the company would then typically utilize the cash received from customers throughout the month to repay the borrowings under the program. Accordingly, during any given month, the company may borrow under this program amounts exceeding the amounts shown as outstanding at fiscal quarter ends.

Off-balance sheet arrangements 

Total costs associated with all of the off-balance sheet arrangements described above were $2 million and $1 million for the three months ended June 30, 2019 and 2018, respectively. Total costs associated with all of the off-balance sheet arrangements described above were $5 million and $3 million in the nine months ended June 30, 2019 and 2018, respectively, and are included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

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Operating Cash Flows

9 Months Ended

Jun. 30, 2019

Operating Cash Flow Disclosure [Abstract]

Operating Cash Flows

Operating Cash Flows

The reconciliation of net income to cash flows provided by operating activities is as follows (in millions):

	Nine Months Ended June 30,
	2019			2018
OPERATING ACTIVITIES
Net income	$	255		$	93
Less: Loss from discontinued operations, net of tax	—			(3		)
Income from continuing operations	255			96
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization	64			64
Deferred income tax expense	27			92
Loss on debt extinguishment	—			8
Restructuring costs	(2		)	6
Asset impairment charges	1			2
Equity in earnings of affiliates	(24		)	(20		)
Pension and retiree medical income	(28		)	(23		)
Asbestos related liability remeasurement	(31		)	—
Other adjustments to income from continuing operations	13			13
Dividends received from equity method investments	14			9
Pension and retiree medical contributions	(12		)	(17		)
Restructuring payments	(2		)	(7		)
Changes in off-balance sheet accounts receivable securitization and factoring programs	41			65
Changes in receivables, inventories and accounts payable	(96		)	(136		)
Changes in other current assets and liabilities	(21		)	26
Changes in other assets and liabilities	(3		)	12
Operating cash flows provided by continuing operations	196			190
Operating cash flows provided by (used for) discontinued operations	(2		)	1
CASH PROVIDED BY OPERATING ACTIVITIES	$	194		$	191

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Inventories

9 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories are stated at the lower of cost (using FIFO or average methods) or market (determined on the basis of estimated realizable values) and are summarized as follows (in millions):

	June 30, 2019		September 30, 2018
Finished goods	$	154	$	170
Work in process	42		41
Raw materials, parts and supplies	295		266
Total	$	491	$	477

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Other Current Assets

9 Months Ended

Jun. 30, 2019

Other Current Assets Disclosure [Abstract]

Other Current Assets

Other Current Assets

     Other current assets are summarized as follows (in millions):

	June 30, 2019		September 30, 2018
Asbestos-related recoveries (see Note 21)	$	8	$	16
Prepaid and other	24		30
Other current assets	$	32	$	46

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Net Property

9 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Net Property

Net Property

     Net property is summarized as follows (in millions):

	June 30, 2019			September 30, 2018
Property at cost:
Land and land improvements	$	30		$	29
Buildings	228			228
Machinery and equipment	928			914
Company-owned tooling	136			130
Construction in progress	66			81
Total	1,388			1,382
Less: accumulated depreciation	(907		)	(899		)
Net property	$	481		$	483

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Other Assets

9 Months Ended

Jun. 30, 2019

Other Assets, Noncurrent [Abstract]

Other Assets

Other Assets

     Other assets are summarized as follows (in millions):

	June 30, 2019		September 30, 2018
Investments in non-consolidated joint ventures	$	113	$	102
Asbestos-related recoveries (see Note 21)	57		76
Unamortized revolver debt issuance costs	8		7
Capitalized software costs, net	20		26
Deferred income tax assets, net	113		140
Assets for uncertain tax positions	52		53
Prepaid pension costs	166		152
Intangible assets (1)	13		18
Other	25		22
Other assets	$	567	$	596

⁽¹⁾  Primarily relates to customer relationships. As of June 30, 2019, the gross carrying value was $18 million and the accumulated amortization was $5 million. As of September 30, 2018, the gross carrying value was $22 million and the accumulated amortization was $4 million. The weighted average amortization periods for customer relationships is approximately 19 years.

The company holds a variable interest in a joint venture that is a variable interest entity ("VIE") accounted for under the equity method of accounting. The joint venture manufactures components for commercial vehicle applications primarily on behalf of the company. The variable interest relates to a supply arrangement between the company and the joint venture whereby the company supplies certain components to the joint venture on a cost-plus basis. The company is not the primary beneficiary of the joint venture, as the joint venture partner has shared or absolute control over key manufacturing operations, labor relationships, financing activities and certain other functions of the joint venture. Therefore, the company does not consolidate the joint venture. As of June 30, 2019 and September 30, 2018, the company’s investment in the joint venture was $68 million and $63 million, respectively.

TransPower

Meritor completed a $3 million investment in Transportation Power, Inc. ("TransPower") in each of the first and third quarters of fiscal year 2019. Investments of $3 million in TransPower were also made in each of the first and third quarters of fiscal year 2018. The company holds a variable interest in TransPower, a VIE. TransPower develops electrical drive solutions and supplies integrated drive systems, full electric truck solutions and energy-storage subsystems to major manufacturers of trucks, school buses, refuse vehicles and terminal tractors. The company is not the primary beneficiary of TransPower, as other owners have control over the significant activities of TransPower, including the development of intellectual property and manufacturing. Therefore, the company does not consolidate TransPower. As of June 30, 2019 and September 30, 2018, the company’s investment in TransPower was $12 million and $6 million, respectively, representing the company’s maximum exposure to loss.

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Other Current Liabilities

9 Months Ended

Jun. 30, 2019

Other Current Liabilities Disclosure [Abstract]

Other Current Liabilities

Other Current Liabilities

     Other current liabilities are summarized as follows (in millions):

	June 30, 2019		September 30, 2018
Compensation and benefits	$	108	$	122
Income taxes	12		27
Taxes other than income taxes	17		25
Accrued interest	14		11
Product warranties	18		19
Environmental reserves (see Note 21)	8		8
Restructuring (see Note 7)	1		3
Asbestos-related liabilities (see Note 21)	9		18
Indemnity obligations	1		1
Accrued payable to Maremont (see Note 21)	48		—
Other	60		56
Other current liabilities	$	296	$	290

Compensation and benefits includes the current portion of pension and retiree medical liability, accrued incentive compensation, salary and wages and accrued vacation, holiday and sick leave pay.

A summary of the changes in product warranties is as follows (in millions):

	Nine Months Ended June 30,
	2019			2018
Total product warranties – beginning of period	$	54		$	45
Accruals for product warranties	21			14
Payments	(18		)	(12		)
Change in estimates and other	(5		)	4
Total product warranties – end of period	52			51
Less: Non-current product warranties	(34		)	(33		)
Product warranties – current	$	18		$	18

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Other Liabilities

9 Months Ended

Jun. 30, 2019

Other Liabilities Disclosure [Abstract]

Other Liabilities

Other Liabilities

Other liabilities are summarized as follows (in millions):

	June 30, 2019		September 30, 2018
Asbestos-related liabilities (see Note 21)	$	91	$	193
Restructuring (see Note 7)	—		1
Non-current deferred income tax liabilities	16		16
Liabilities for uncertain tax positions	48		48
Product warranties (see Note 16)	34		35
Environmental (see Note 21)	7		9
Indemnity obligations	8		9
Other	30		21
Other liabilities	$	234	$	332

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Long-Term Debt

9 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

     Long-Term debt, net of discounts where applicable, is summarized as follows (in millions):

	June 30, 2019			September 30, 2018
3.25 percent convertible notes due 2037(1)(3)	$	319		$	318
4.0 percent convertible notes due 2027(1)(4)	—			24
7.875 percent convertible notes due 2026(1)(5)	22			22
6.25 percent notes due 2024(2)(6)	444			444
Capital lease obligation	7			7
Borrowings and securitization	—			46
Unamortized discount on convertible notes(7)	(34		)	(37		)
Subtotal	758			824
Less: current maturities	(24		)	(94		)
Long-term debt	$	734		$	730

⁽¹⁾ The 3.25 percent, 4.0 percent and 7.875 percent convertible notes contain a put and call feature, which allows for earlier redemption beginning in 2025, 2019 and 2020, respectively.

⁽²⁾ The 6.25 percent notes contain a call option, which allows for early redemption by Meritor.

⁽³⁾ The 3.25 percent convertible notes are presented net of $6 million and $7 million unamortized issuance costs as of June 30, 2019 and September 30, 2018, respectively.

⁽⁴⁾ The 4.0 percent convertible notes were presented net of unamortized issuance costs of an insignificant amount as of September 30, 2018.

⁽⁵⁾ The 7.875 percent convertible notes are presented net of unamortized issuance costs of an insignificant amount as of June 30, 2019 and September 30, 2018, and $1 million original issuance discount as of June 30, 2019 and September 30, 2018.

⁽⁶⁾ The 6.25 percent notes are presented net of $6 million unamortized issuance costs as of June 30, 2019 and September 30, 2018.

⁽⁷⁾ The carrying amount of the equity component related to convertible debt.

Repurchase of Debt Securities

On February 15, 2019, the company redeemed $19 million aggregate principal amount outstanding of the company's 4.0 percent senior convertible notes due 2027 ("the 4.0 Percent Convertible Notes") at a price of 100 percent of the accreted principal amount, plus accrued and unpaid interest. On June 7, 2019, the company redeemed the remaining $5 million aggregate principal amount outstanding of the 4.0 Percent Convertible Notes at a price equal to 100 percent of the accreted principal amount, plus accrued and unpaid interest. The 4.0 Percent Convertible Notes were classified as current as of September 30, 2018 as the securities were redeemable at the option of the holder on February 15, 2019, at a repurchase price in cash equal to 100 percent of the accreted principal amount of the securities to be repurchased, plus accrued and unpaid interest.

Current Classification of 7.875 Percent Convertible Notes

The 7.875 percent senior convertible notes due 2026 ("the 7.875 Percent Convertible Notes") were classified as current as of June 30, 2019 as the holders are entitled to convert all or a portion of their 7.875 Percent Convertible Notes at any time beginning July 1, 2019 and prior to the close of business on September 30, 2019 at a rate of 83.3333 shares of common stock per $1,000 principal amount at maturity of the 7.875 Percent Convertible Notes (representing a conversion price of approximately $12.00 per share). The 7.875 Percent Convertible Notes are convertible as the closing price of shares of the company's common stock for at least 20 trading days during the 30 consecutive trading-day period ending on June 28, 2019 was greater than 120 percent of the $12.00 conversion price associated with the 7.875 Percent Convertible Notes.

The 7.875 Percent Convertible Notes were classified as current as of September 30, 2018 as the holders were entitled to convert all or a portion of their 7.875 Percent Convertible Notes at any time beginning October 1, 2018 and prior to the close of business on December 31, 2018 at a rate of 83.3333 shares of common stock per $1,000 principal amount at maturity of the 7.875 Percent Convertible Notes (representing a conversion price of approximately $12.00 per share). The 7.875 Percent Convertible Notes were convertible as the closing price of shares of the company's common stock for at least 20 trading days during the 30 consecutive trading-day period ending on September 28, 2018 was greater than 120 percent of the $12.00 conversion price associated with the 7.875 Percent Convertible Notes.

The 7.875 Percent Convertible Notes surrendered for conversion, if any, would be settled in cash up to the principal amount at maturity of the 7.875 Percent Convertible Notes and cash, stock or a combination of cash and stock, at the company’s election, for the remainder of the conversion value of the 7.875 Percent Convertible Notes in excess of the principal amount at maturity and cash in lieu of any fractional shares, subject to and in accordance with the provisions of the indenture that governs the 7.875 Percent Convertible Notes.

As a result of the 7.875 Percent Convertible Notes becoming currently convertible for cash up to the principal amount of $23 million at the holder's option, $1 million of permanent equity was reclassified as mezzanine equity as of June 30, 2019 and September 30, 2018.

Revolving Credit Facility

On June 7, 2019, the company amended and restated its revolving credit facility. Pursuant to the revolving credit agreement as amended, the company has a $625 million revolving credit facility and a $175 million term loan facility, intended for the company's acquisition of AxleTech, that mature in June 2024 (with a springing maturity in November 2023 if the outstanding amount of the 6.25 percent notes due 2024 is greater than $75 million at that time). The availability under the revolving facility is dependent upon various factors, including performance against certain financial covenants as highlighted below.

The availability under the revolving credit facility is subject to certain financial covenants based on the ratio of the company’s priority debt (consisting principally of amounts outstanding under the revolving credit facility, the U.S. accounts receivable securitization and factoring programs, and third-party non-working capital foreign debt) to EBITDA. The company is required to maintain a total priority debt-to-EBITDA ratio, as defined in the agreement, of 2.25 to 1.00 or less as of the last day of each fiscal quarter throughout the term of the agreement.

Borrowings under the revolving credit facility are subject to interest based on quoted LIBOR rates plus a margin and a commitment fee on undrawn amounts, both of which are based upon either the company’s current corporate credit rating or its total leverage ratio, as defined in the agreement. At June 30, 2019, the margin over LIBOR rate was 200 basis points and the commitment fee was 30 basis points. Overnight revolving credit loans are at the prime rate plus a margin of 100 basis points.

Certain of the company’s subsidiaries, as defined in the revolving credit agreement, irrevocably and unconditionally guarantee amounts outstanding under the revolving credit facility. Similar subsidiary guarantees are provided for the benefit of the holders of the publicly held notes outstanding under the company’s indentures (see Note 24).

At June 30, 2019 and September 30, 2018, there were no borrowings outstanding under the revolving credit facility. The amended and extended revolving credit facility includes $100 million of availability for the issuance of letters of credit. At June 30, 2019 and September 30, 2018, there were no letters of credit outstanding under the revolving credit facility.

Capital Leases

The company had $7 million of outstanding capital lease arrangements at both June 30, 2019 and September 30, 2018.

Letter of Credit Facilities

On February 21, 2014, the company entered into an arrangement to amend and restate the letter of credit facility with Citicorp USA, Inc., as administrative agent and issuing bank, and the other lenders party thereto. Under the terms of this amended credit agreement, which expired in March 2019, the company had the right to obtain the issuance, renewal, extension and increase of letters of credit up to an aggregate availability of $25 million. This facility contained covenants and events of default generally similar to those existing in the company’s public debt indentures. There were $1 million of letters of credit outstanding under this facility at September 30, 2018. On March 20, 2019, the company allowed this facility to expire. The letters of credit previously provided under this facility were replaced with letters of credit issued under the company’s U.S. accounts receivables securitization facility with PNC Bank. The company had another $12 million and $19 million of letters of credit outstanding through other letter of credit facilities as of June 30, 2019 and September 30, 2018, respectively.

Other

One of the company's consolidated joint ventures in China participates in a bills of exchange program to settle its obligations with its trade suppliers. These programs are common in China and generally require the participation of local banks. Under these programs, the company's joint venture issues notes payable through the participating banks to its trade suppliers. If the issued notes payable remain unpaid on their respective due dates, this could constitute an event of default under the company’s revolving credit facility if the defaulted amount exceeds $35 million per bank. As of June 30, 2019 and September 30, 2018, the company had $25 million and $22 million, respectively, outstanding under this program at more than one bank.

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Financial Instruments

9 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

Financial Instruments

Fair values of financial instruments are summarized as follows (in millions):

	June 30, 2019				September 30, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	111	$	111	$	115	$	115
Short-term debt	24		51		94		116
Long-term debt	734		806		730		776
Foreign exchange forward contracts (other assets)	1		1		2		2
Foreign exchange forward contracts (other liabilities)	1		1		—		—
Foreign currency option contracts (other assets)	—		—		—		—
Cross-currency swaps (other assets)	—		—		6		6
Cross-currency swaps (other liabilities)	5		5		—		—

The following table reflects the offsetting of derivative assets and liabilities (in millions):

	June 30, 2019			September 30, 2018
	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported
Derivative Assets
Foreign exchange forward contracts	1	—	1	2	—	2
Cross-currency swaps	—	—	—	6	—	6
Derivative Liabilities
Foreign exchange forward contracts	1	—	1	—	—	—
Cross-currency swaps	5	—	5	—	—	—

Fair Value

FASB guidance provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical instruments (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

• Level 1 inputs use quoted prices in active markets for identical instruments.

• Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar instruments in active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

• Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related instrument.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest priority level input that is significant to the valuation. The company's assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

Fair value of financial instruments by the valuation hierarchy at June 30, 2019 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	111	$	—	$	—
Short-term debt	—		49		2
Long-term debt	—		801		5
Foreign exchange forward contracts (other assets)	—		1		—
Foreign exchange forward contracts (other liabilities)	—		—		1
Foreign currency option contracts (other assets)	—		—		—
Cross-currency Swap (other assets)	—		—		—
Cross-currency swaps (other liabilities)	—		5		—

Fair value of financial instruments by the valuation hierarchy at September 30, 2018 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	115	$	—	$	—
Short-term debt	—		114		2
Long-term debt	—		771		5
Foreign exchange forward contracts (other assets)	—		2		—
Foreign exchange forward contracts (other liabilities)	—		—		—
Foreign currency option contracts (other assets)	—		—		—
Cross-currency swap (other assets)	—		6		—

No transfers of assets between any of the Levels occurred during the three and nine months ended June 30, 2019 and 2018.

Cash and cash equivalents — The carrying value approximates fair value because of the short maturity of these instruments. The company did not have any cash equivalents as of June 30, 2019 or September 30, 2018.

     Short- and long-term debt — Fair values are based on transaction prices at public exchange for publicly traded debt. For debt instruments that are not publicly traded, fair values are based on interest rates that would be currently available to the company for issuance of similar types of debt instruments with similar terms and remaining maturities.

Foreign exchange forward contracts — The company uses foreign exchange forward purchase and sale contracts with terms of 18 months or less to hedge its exposure to changes in foreign currency exchange rates. As of June 30, 2019 and September 30, 2018, the notional amount of the company's foreign exchange contracts outstanding under its foreign currency cash flow hedging program was $118 million and $154 million, respectively. The fair value of foreign exchange forward contracts is based on a model which incorporates observable inputs including quoted spot rates, forward exchange rates and discounted future expected cash flows utilizing market interest rates with similar quality and maturity characteristics. For derivative instruments that are designated and qualify as cash flow hedges, changes in the fair value of the contracts is recorded in Accumulated Other Comprehensive Loss in the statement of shareholders’ equity and is recognized in operating income when the underlying forecasted transaction impacts earnings.

Foreign currency option contracts — The company uses option contracts to mitigate foreign exchange exposure on expected future Indian Rupee-denominated purchases. As of June 30, 2019 and September 30, 2018, the notional amount of the company's Indian rupee foreign exchange contracts outstanding was $114 million and $180 million, respectively. The company did not elect hedge accounting for these derivatives. Changes in fair value associated with these contracts are recorded in cost of sales in the Condensed Consolidated Statement of Operations.

The company uses option contracts to mitigate the risk of volatility in the translation of euro earnings to U.S. dollars. As of June 30, 2019, the notional amount of the company's euro option contracts outstanding was $12 million. As of September 30, 2018, there were no euro option contracts outstanding. These option contracts did not qualify for a hedge accounting election. Changes in fair value associated with these contracts are recorded in the Condensed Consolidated Statement of Operations in other income, net.

The company uses option contracts to mitigate the risk of volatility in the translation of Swedish krona to U.S. dollars. As of June 30, 2019, the notional amount of the company's Swedish krona option contracts outstanding was $18 million. As of September 30, 2018, there were no Swedish krona option contracts outstanding. These option contracts did not qualify for a hedge accounting election. Changes in fair value associated with these contracts are recorded in the Condensed Consolidated Statement of Operations in other income, net.

The company uses option contracts to mitigate foreign exchange exposure on expected future South Korean won-denominated purchases. As of June 30, 2019 and September 30, 2018, the notional amount of the company's South Korean won option contracts outstanding was $48 million and $41 million, respectively. The company did not elect hedge accounting for these derivatives. Changes in fair value associated with these contracts are recorded in cost of sales in the Condensed Consolidated Statement of Operations.

The company uses foreign currency option contracts to mitigate foreign currency exposure on expected future Brazilian real-denominated purchases. As of June 30, 2019, there were no Brazilian real option contracts outstanding. As of September 30, 2018, the notional amount of the company's Brazilian real option contracts outstanding was $16 million. The company did not elect

hedge accounting for these derivatives. Changes in fair value associated with these contracts are recorded in cost of sales in the Condensed Consolidated Statement of Operations.

The fair value of foreign currency option contracts is based on third-party proprietary models, which incorporate inputs at varying unobservable weights of quoted spot rates, market volatility, forward rates and time utilizing market instruments with similar quality and maturity characteristics.

Cross-currency swap contracts — The company uses cross-currency swap contracts to hedge a portion of its net investment in a foreign subsidiary against volatility in foreign exchange rates. These derivative instruments are designated and qualify as hedges of net investments in foreign operations using the spot method to assess effectiveness. Changes in fair values of the instruments are recognized in foreign currency translation adjustments, a component of other comprehensive income (loss) in the Condensed Consolidated Statement of Comprehensive Income (Loss), to offset the changes in the values of the net investments being hedged.

In the third quarter of fiscal year 2018, the company entered into multiple cross-currency swaps with a combined notional amount of $225 million, with maturities in May 2021. These swaps hedged a portion of the net investment in a certain European subsidiary against volatility in the euro/U.S. dollar foreign exchange rate.

In the third quarter of fiscal year 2019, the company unwound these cross-currency swaps and received proceeds of $19 million, $2 million of which related to net accrued interest receivable. The company also entered into multiple new cross-currency swaps with a combined notional amount of $225 million, with maturities in October 2022. As of both June 30, 2019 and September 30, 2018, the notional amount of the company's cross-currency swap contracts outstanding was $225 million. These swaps hedge a portion of the net investment in a certain European subsidiary against volatility in the euro/U.S. dollar foreign exchange rate.

The fair value of cross-currency swap contracts is based on a model which incorporates observable inputs, including quoted spot rates, forward exchange rates and discounted future expected cash flows, utilizing market interest rates with similar quality and maturity characteristics.

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Retirement Benefit Liabilities

9 Months Ended

Jun. 30, 2019

Retirement Benefits [Abstract]

Retirement Benefit Liabilities

Retirement Benefit Liabilities

Retirement benefit liabilities consisted of the following (in millions):

	June 30, 2019			September 30, 2018
Retiree medical liability	$	79		$	86
Pension liability	163			182
Other	15			13
Subtotal	257			281
Less: current portion (included in compensation and benefits, Note 16)	(19		)	(19		)
Retirement benefits	$	238		$	262

The components of net periodic pension and retiree medical income included in continuing operations for the three months ended June 30 are as follows (in millions):

	2019						2018
	Pension			Retiree Medical			Pension			Retiree Medical
Interest cost	$	13		$	1		$	14		$	1
Assumed return on plan assets	(24		)	—			(25		)	—
Amortization of prior service costs	—			(9		)	—			(9		)
Recognized actuarial loss	6			4			7			5
Total income	$	(5	)	$	(4	)	$	(4	)	$	(3	)

The components of net periodic pension and retiree medical income included in continuing operations for the nine months ended June 30 are as follows (in millions):

	2019						2018
	Pension			Retiree Medical			Pension			Retiree Medical
Interest cost	$	40		$	2		$	41		$	2
Assumed return on plan assets	(73		)	—			(74		)	—
Amortization of prior service costs	—			(26		)	—			(26		)
Recognized actuarial loss	17			12			21			13
Total income	$	(16	)	$	(12	)	$	(12	)	$	(11	)

For the three months ended June 30, 2019 and 2018, the non-service cost components of the net periodic pension and Other Post-Employment Benefits ("OPEB") income were $9 million and $7 million, respectively, and are presented in other income. For the nine months ended June 30, 2019 and 2018, the non-service cost components of the net periodic pension and OPEB income were $28 million and $23 million, respectively, and are presented in other income. We used the practical expedient for retrospective presentation of the 2018 other expense components in this disclosure. Refer to Note 3 for additional details on the adoption of ASU 2017-07.

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Contingencies

9 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Contingencies

Environmental

    Federal, state and local requirements relating to the discharge of substances into the environment, the disposal of hazardous wastes and other activities affecting the environment have, and will continue to have, an impact on the operations of the company. The process of estimating environmental liabilities is complex and dependent upon evolving physical and scientific data at the sites, uncertainties as to remedies and technologies to be used and the outcome of discussions with regulatory agencies. The company records liabilities for environmental issues in the accounting period in which they are considered to be probable and the cost can be reasonably estimated. At environmental sites in which more than one potentially responsible party has been identified, the company records a liability for its allocable share of costs related to its involvement with the site, as well as an allocable share of costs related to insolvent parties or unidentified shares. At environmental sites in which Meritor is the only potentially responsible

party, the company records a liability for the total probable and estimable costs of remediation before consideration of recovery from insurers or other third parties.

     The company has been designated as a potentially responsible party at ten Superfund sites, excluding sites as to which the company’s records disclose no involvement or as to which the company’s liability has been finally determined. Superfund is a United States federal government program designed to fund the cleanup of sites contaminated with hazardous substances and pollutants. Management estimates the total reasonably possible costs the company could incur for the remediation of the ten Superfund sites at June 30, 2019 to be approximately $23 million, of which $11 million is probable and recorded as a liability. Included in reasonably possible amounts are estimates for certain remediation actions that may be required if current actions are deemed inadequate by the regulators.

     In addition to the Superfund sites, various other lawsuits, claims and proceedings have been asserted against the company, alleging violations of federal, state and local environmental protection requirements, or seeking remediation of alleged environmental impairments, principally at previously disposed-of properties. For these matters, management has estimated the total reasonably possible costs the company could incur at June 30, 2019 to be approximately $13 million, of which $4 million is probable and recorded as a liability.

     Included in the company’s environmental liabilities are costs for on-going operation, maintenance and monitoring at environmental sites in which remediation has been put into place. This liability is discounted using discount rates in the range of 2.25 to 3.00 percent and is approximately $13 million at June 30, 2019. The undiscounted estimate of these costs is approximately $14 million.

     The following are the components of the Superfund and non-Superfund environmental reserves (in millions):

	Superfund Sites			Non-Superfund Sites			Total
Beginning Balance at September 30, 2018	$	12		$	5		$	17
Payments and other	(3		)	(2		)	(5		)
Accruals	2			1			3
Ending Balance at June 30, 2019	$	11		$	4		$	15

Environmental reserves are included in Other Current Liabilities (see Note 16) and Other Liabilities (see Note 17) in the Condensed Consolidated Balance Sheet.

     The actual amount of costs or damages for which the company may be held responsible could materially exceed the foregoing estimates because of uncertainties, including the financial condition of other potentially responsible parties, the success of the remediation, discovery of new contamination and other factors that make it difficult to predict actual costs accurately. However, based on management’s assessment, after consulting with outside advisors that specialize in environmental matters, and subject to the difficulties inherent in estimating these future costs, the company believes that its expenditures for environmental capital investment and remediation necessary to comply with present regulations governing environmental protection and other expenditures for the resolution of environmental claims will not have a material effect on the company’s business, financial condition or results of operations. In addition, in future periods, new laws and regulations, changes in remediation plans, advances in technology and additional information about the ultimate clean-up remedies could significantly change the company’s estimates. Management cannot assess the possible effect of compliance with future requirements.

In April 2016, the company was served with several complaints filed against the company and other defendants in the United States District Court for the Northern District of Mississippi. The complaints were amended in July 2016. These complaints allege damages, including diminution of property value, concealment/fraud and emotional distress resulting from alleged environmental pollution in and around a neighborhood in Grenada, Mississippi. Rockwell owned and operated a facility near the neighborhood from 1965 to 1985. The company filed answers to the complaints in July 2016. In May 2017, the company was served with a complaint filed against the company and other defendants by the Mississippi Attorney General in the Chancery Court of Grenada County, Mississippi. The complaint alleges that operations at the above-referenced Grenada facility caused contamination of off-site groundwater and surface waters. Subsequently, the company removed this action to the United States District Court for the Northern District of Mississippi. However, plaintiffs’ motion to remand the case to the Chancery Court was granted in March 2018. In April, May and July 2018, the company was served with additional property damage, personal injury and wrongful death lawsuits naming the company and others as defendants, which were brought by current and former residents of the same neighborhood. The company entered into settlement negotiations with plaintiffs and recorded an accrual in the second quarter of fiscal year 2019.

Asbestos

     Maremont Corporation ("Maremont"), a subsidiary of Meritor, manufactured friction products containing asbestos from 1953 through 1977, when it sold its friction product business. Arvin Industries, Inc., a predecessor of the company, acquired Maremont in 1986. Maremont and many other companies are defendants in suits brought by individuals claiming personal injuries as a result of exposure to asbestos-containing products.

Maremont had approximately 1,700 pending asbestos-related claims at September 30, 2018. 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. Plaintiffs’ lawyers often sue dozens or even hundreds of defendants in individual lawsuits, seeking damages against all named defendants irrespective of the disease or injury and irrespective of any causal connection with a particular product. For these reasons, the total number of claims filed is not necessarily the most meaningful factor in determining Maremont's asbestos-related liability.

Maremont Bankruptcy Filing: In the first quarter of fiscal year 2019, Maremont and its three wholly-owned subsidiaries, Maremont Exhaust Products, Inc., AVM, Inc., and Former Ride Control Operating Company, Inc., began to solicit votes from asbestos claimants in favor of a Joint Pre-Packaged Plan of Reorganization (the "Plan"). On January 18, 2019, the Plan was approved by voting asbestos claimants and, on January 22, 2019, Maremont and its subsidiaries voluntarily filed cases under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") seeking to implement the Plan through the Chapter 11 cases. Among other things, the Plan was intended to permanently resolve all current and future asbestos claims related to Maremont's historical asbestos-related activities through the creation of a trust pursuant to Section 524(g) of the U.S. Bankruptcy Code (the "524(g) Trust"). Meritor determined that the net amount of $51 million Maremont would be required to contribute to the 524(g) Trust according to the Plan represented Meritor's best estimate of Maremont's net asbestos liability. As a result, Meritor recognized $31 million of income related to remeasuring the Maremont net asbestos liability based on the terms of the Plan.

In the second quarter of fiscal 2019, Maremont and its subsidiaries were deconsolidated from the Condensed Consolidated Balance Sheet of the company as of January 22, 2019 and the results of Maremont’s operations were eliminated from the company’s consolidated results of operations beginning on that date as Maremont became subject to the control of a court. Deconsolidation had an insignificant impact on the Condensed Consolidated Statement of Operations. On a prospective basis, the company accounts for its investment in Maremont under the cost method. The fair value of this investment was zero at the date of deconsolidation. The company recorded $48 million in Other Current Liabilities, which represented Meritor’s best estimate of the contribution of cash and repayment of a loan to Maremont following Plan confirmation.

The Plan was confirmed by the U.S. Bankruptcy Court for the District of Delaware on May 17, 2019 and approved by the United States District Court for the District of Delaware on June 27, 2019. On July 9, 2019, the company contributed cash and repaid a loan to Maremont and Maremont funded the 524(g) Trust with such cash and its other assets, including its existing insurance policies. As a result, all current and future asbestos claims related to the Maremont’s historical asbestos-related activities have been channeled to the 524(g) Trust, which will process and satisfy all such claims going forward pursuant to its resolution and payment procedures.

Pending and Future Claims as of September 2018: Previously, Maremont engaged a third-party advisor with extensive experience in assessing asbestos-related liabilities to conduct a study to estimate its potential undiscounted liability for pending and future asbestos-related claims. Management continuously monitored the underlying claims data and experience, for the purpose of assessing the appropriateness of the assumptions used to estimate the liability.

As of September 30, 2018, the estimated range of equally likely possibilities of Maremont’s obligation for asbestos-related claims over the next 41 years was $107 million to $195 million. Based on the information contained in the actuarial study, and all other available information considered, Maremont concluded that no amount within the range of potential liability was more likely than any other and, therefore, recorded a liability at the low end of the range. Maremont recognized a liability for pending and future claims over the next 41 years of $107 million as of September 30, 2018.

Recoveries as of September 2018: Maremont had historically had insurance that reimburses a meaningful portion of the costs incurred defending against asbestos-related claims. The expected insurance receivable related to future asbestos-related liabilities was $24 million as of September 30, 2018.

     Rockwell International Corporation ("Rockwell") — ArvinMeritor, Inc. ("AM"), a predecessor of Meritor, along with many other companies, has also been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos used in certain components of Rockwell products many years ago. Liability for these claims was transferred at the time of the spin-off of the automotive business from Rockwell in 1997. There were approximately 1,400 pending active asbestos claims in lawsuits that name AM, together with many other companies, as defendants at June 30, 2019 and September 30, 2018.

A significant portion of the claims do not identify any Rockwell products or specify which of the claimants, if any, were exposed to asbestos attributable to Rockwell products, and past experience has shown that the vast majority of the claimants will likely never identify any of Rockwell products. Historically, AM has been dismissed from the vast majority of similar claims filed in the past with no payment to claimants. For those claimants who do show that they worked with Rockwell products, management nevertheless believes it has meritorious defenses, in substantial part due to the integrity of the products involved and the lack of any impairing medical condition on the part of many claimants.

Pending and Future Claims: The company engaged a third-party advisor with extensive experience in assessing asbestos-related liabilities to conduct a study to estimate its potential undiscounted liability for pending and future asbestos-related claims as of September 30, 2018. Management continuously monitors the underlying claims data and experience for the purpose of assessing the appropriateness of the assumptions used to estimate the liability.

As of September 30, 2018, the estimated probable range of equally likely possibilities of the company’s obligation for asbestos-related claims over the next 41 years is $103 million to $186 million. Based on the information contained in the actuarial study, and all other available information considered, management concluded that no amount within the range of potential liability was more likely than any other and, therefore, recorded a liability at the low end of the range. The company recognized a liability for pending and future claims over the next 41 years of $100 million as of June 30, 2019 and $103 million as of September 30, 2018.

Recoveries: AM has insurance coverage that management believes covers indemnity and defense costs, over and above self-insurance retentions, for a significant portion of these claims. The insurance receivables for Rockwell asbestos-related liabilities totaled $65 million and $68 million as of June 30, 2019 and September 30, 2018, respectively.

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 and recoveries for asbestos-related claims are subject to considerable uncertainty because such liabilities and recoveries are influenced by variables that are difficult to predict. The future litigation environment for Rockwell could change significantly from its past experience, due, for example, to changes in the mix of claims filed against Rockwell in terms of plaintiffs’ law firm, jurisdiction and disease; legislative or regulatory developments; the company’s approach to defending claims; or payments to plaintiffs from other defendants. Estimated recoveries are influenced by coverage issues among insurers and the continuing solvency of various insurance companies. If the assumptions with respect to the estimation period, the nature of pending claims, the cost to resolve claims and the amount of available insurance prove to be incorrect, the actual amount of liability for Rockwell asbestos-related claims, and the effect on the company, could differ materially from current estimates and, therefore, could have a material impact on the company’s financial condition and results of operations.

Indemnifications

The company has provided indemnities in conjunction with certain transactions, primarily divestitures. These indemnities address a variety of matters, which may include environmental, tax, asbestos and employment-related matters, and the periods of indemnification vary in duration.

   The company is not aware of any claims or other information that would give rise to material payments under such indemnification obligations.

Other

In addition, various lawsuits, claims and proceedings, other than those specifically disclosed in the Condensed Consolidated Financial Statements, have been or may be instituted or asserted against the company, relating to the conduct of the company’s business, including those pertaining to product liability, warranty or recall claims, intellectual property, safety and health, contract and employment matters. Although the outcome of other 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 effect on the company’s business, financial condition, results of operations or cash flows.

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Shareholders' Equity

9 Months Ended

Jun. 30, 2019

Equity [Abstract]

Shareholders' Equity

Shareholders' Equity

There were no dividends declared or paid in the first, second or third quarter of fiscal years 2019 and 2018. The payment of cash dividends and the amount of any dividend are subject to review and change at the discretion of the company's Board of Directors.

Common Stock and Debt Repurchase Authorizations

On July 26, 2019, the Board of Directors authorized the repurchase of up to $250 million of the company’s common stock from time to time through open market purchases, privately negotiated transactions or otherwise, subject to compliance with legal and regulatory requirements and the company’s debt covenants. This authorization supersedes the remaining authority under the prior November 2018 equity repurchase authorization described below.

On November 2, 2018, the Board of Directors authorized the repurchase of up to $200 million of the company's common stock and up to $100 million aggregate principal amount of any of the company's debt securities (including convertible debt securities), in each case from time to time through open market purchases, privately negotiated transactions or otherwise, subject to compliance with legal and regulatory requirements and the company's debt covenants. These repurchase authorizations superseded the remaining authority under the prior July 2016 repurchase authorizations described below. In the first quarter of fiscal year 2019, the company repurchased 3.0 million shares of common stock for $50 million (including commission costs) pursuant to the common stock repurchase authorization. In the third quarter of fiscal year 2019, the company repurchased 1.0 million shares of common stock for $21 million (including commission costs) pursuant to the common stock repurchase authorization. In the second quarter of fiscal year 2019, the company redeemed $19 million aggregate principal amount outstanding of the 4.0 Percent Convertible Notes pursuant to the debt repurchase authorization. In the third quarter of fiscal year 2019, the company redeemed the remaining $5 million aggregate principal amount of the outstanding 4.0 Percent Convertible Notes pursuant to the debt repurchase authorization. As of June 30, 2019, the amounts remaining available for repurchases were $130 million under this common stock repurchase authorization and $76 million under this debt repurchase authorization.

On July 21, 2016, the Board of Directors authorized the repurchase of up to $100 million of the company’s common stock and up to $150 million aggregate principal amount of any of the company’s debt securities (including convertible debt securities), in each case from time to time through open market purchases, privately negotiated transactions or otherwise, until September 30, 2019, subject to compliance with legal and regulatory requirements and the company's debt covenants. The repurchase program under the $100 million equity repurchase authorization was complete as of September 30, 2018. The amount remaining available for repurchases under the debt repurchase authorization was $50 million as of September 30, 2018.

Accumulated Other Comprehensive Loss ("AOCL")

The components of AOCL and the changes in AOCL by components, net of tax, for the three months ended June 30, 2019 and 2018 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Income (Loss) on cash flow hedges			Total
Balance at March 31, 2019	$	(87	)	$	(475	)	$	—		$	(562	)
Other comprehensive income before reclassification	(6		)	—			—			(6		)
Amounts reclassified from accumulated other comprehensive loss	—			1			(2		)	(1		)
Net current-period other comprehensive income	$	(6	)	$	1		$	(2	)	$	(7	)
Balance at June 30, 2019	$	(93	)	$	(474	)	$	(2	)	$	(569	)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(9	)	(a)
Actuarial losses	10			(a)
	1			Total before tax
	—			Tax benefit
Total reclassifications for the period	$	1		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 for additional details), which is recorded in other operating income (expense).

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Income (Loss) on cash flow hedges			Total
Balance at March 31, 2018	$	(35	)	$	(494	)	$	(1	)	$	(530	)
Other comprehensive income before reclassification	(52		)	—			1			(51		)
Amounts reclassified from accumulated other comprehensive loss	—			3			—			3
Net current-period other comprehensive income	$	(52	)	$	3		$	1		$	(48	)
Balance at June 30, 2018	$	(87	)	$	(491	)	$	—		$	(578	)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(9	)	(b)
Actuarial losses	$	12		(b)
	3			Total before tax
	—			Tax benefit
Total reclassifications for the period	$	3		Net of tax
(b)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 for additional details), which is recorded in other operating income (expense).

The components of AOCL and the changes in AOCL by components, net of tax, for the nine months ended June 30, 2019 and 2018 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Income (Loss) on cash flow hedges			Total
Balance at September 30, 2018	$	(90	)	$	(476	)	$	—		$	(566	)
Other comprehensive income before reclassification	(3		)	(1		)	—			(4		)
Amounts reclassified from accumulated other comprehensive loss	—			3			(2		)	1
Net current-period other comprehensive income	$	(3	)	$	2		$	(2	)	$	(3	)
Balance at June 30, 2019	$	(93	)	$	(474	)	$	(2	)	$	(569	)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(26	)	(a)
Actuarial losses	29			(a)
	3			Total before tax
	—			Tax benefit
Total reclassifications for the period	$	3		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 for additional details), which is recorded in other operating income (expense).

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Income (Loss) on cash flow hedges			Total
Balance at September 30, 2017	$	(41	)	$	(500	)	$	(4	)	$	(545	)
Other comprehensive income before reclassification	(46		)	1			4			(41		)
Amounts reclassified from accumulated other comprehensive loss	—			8			—			8
Net current-period other comprehensive income	$	(46	)	$	9		$	4		$	(33	)
Balance at June 30, 2018	$	(87	)	$	(491	)	$	—		$	(578	)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(26	)	(a)
Actuarial losses	34			(a)
	8			Total before tax
	(1		)	Tax benefit
Total reclassifications for the period	$	7		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 for additional details), which is recorded in other operating income (expense).

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Business Segment Information

9 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Business Segment Information

Business Segment Information

The company defines its operating segments as components of its business where separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The company’s Chief Operating Decision Maker ("CODM") is the Chief Executive Officer.

In the second quarter of fiscal year 2019, the company realigned its operations resulting in a change to its operating and reportable segments. As of the second quarter of fiscal year 2019, the reportable segments are (1) Commercial Truck and (2) Aftermarket, Industrial and Trailer. Prior year reportable segment financial results have been recast for these changes.

      The company has two reportable segments at June 30, 2019, as follows:

• The Commercial Truck segment supplies drivetrain systems and components, including axles, drivelines and braking and suspension systems, primarily for medium- and heavy-duty trucks and other applications in North America, South America, Europe and Asia Pacific. This segment also includes the company's aftermarket businesses in Asia Pacific and South America.

• The Aftermarket, Industrial and Trailer segment supplies axles, brakes, drivelines, suspension parts and other replacement parts to commercial vehicle and industrial aftermarket customers, primarily in North America and Europe. In addition, this segment supplies drivetrain systems and certain components, including axles, drivelines, brakes and suspension systems for military, construction, bus and coach, fire and emergency and other applications in North America and Europe. It also supplies a variety of undercarriage products and systems for trailer applications in North America.

     Segment adjusted EBITDA is defined as income (loss) from continuing operations before interest expense, income taxes, depreciation and amortization, non-controlling interests in consolidated joint ventures, loss on sale of receivables, restructuring expense, asset impairment charges and other special items as determined by management. Segment adjusted EBITDA excludes unallocated legacy and corporate income (expense), net. The company uses segment adjusted EBITDA as the primary basis for the CODM to evaluate the performance of each of its reportable segments.

     The accounting policies of the segments are the same as those applied in the Condensed Consolidated Financial Statements, except for the use of segment adjusted EBITDA. The company may allocate certain common costs, primarily corporate functions,

between the segments differently than the company would for stand alone financial information prepared in accordance with GAAP. These allocated costs include expenses for shared services such as information technology, finance, communications, legal and human resources. The company does not allocate interest expense and certain legacy and other corporate costs not directly associated with the segment.

     Segment information is summarized as follows (in millions):

	Commercial Truck		Aftermarket, Industrial and Trailer		Eliminations			Total
Three Months Ended June 30, 2019
External Sales	$	835	$	331	$	—		$	1,166
Intersegment Sales	34		9		(43		)	—
Total Sales	$	869	$	340	$	(43	)	$	1,166
Three Months Ended June 30, 2018 (1)
External Sales	$	819	$	310	$	—		$	1,129
Intersegment Sales	35		9		(44		)	—
Total Sales	$	854	$	319	$	(44	)	$	1,129
	Commercial Truck		Aftermarket, Industrial and Trailer		Eliminations			Total
Nine Months Ended June 30, 2019
External Sales	$	2,416	$	944				$	3,360
Intersegment Sales	108		28		(136		)	—
Total Sales	$	2,524	$	972	$	(136	)	$	3,360
Nine Months Ended June 30, 2018 (1)
External Sales	$	2,254	$	844	$	—		$	3,098
Intersegment Sales	102		25		(127		)	—
Total Sales	$	2,356	$	869	$	(127	)	$	3,098

⁽¹⁾ Amounts for the three and nine months ended June 30, 2018 have been recast to reflect reportable segment changes.

	Three Months Ended June 30,						Nine Months Ended June 30,
	2019			2018 (3)			2019			2018 (3)
Segment adjusted EBITDA:
Commercial Truck	$	93		$	100		$	258		$	263
Aftermarket, Industrial and Trailer	54			38			146			108
Segment adjusted EBITDA	147			138			404			371
Unallocated legacy and corporate expense, net (1)	(1		)	(3		)	—			(15		)
Interest expense, net	(14		)	(14		)	(43		)	(54		)
Provision for income taxes	(21		)	(26		)	(69		)	(131		)
Depreciation and amortization	(21		)	(22		)	(64		)	(64		)
Noncontrolling interests	(3		)	(3		)	(7		)	(8		)
Loss on sale of receivables	(2		)	(1		)	(5		)	(3		)
Asset impairment charges	(1		)	—			(1		)	(2		)
Restructuring	1			(3		)	2			(6		)
Asbestos related liability remeasurement (2)	—			—			31			—
Income from continuing operations attributable to Meritor, Inc.	$	85		$	66		$	248		$	88

⁽¹⁾  Unallocated legacy and corporate income (expense), net represents items that are not directly related to the company's business segments. These items primarily include asbestos-related charges and settlements, pension and retiree medical costs associated with sold businesses, and other legacy costs for environmental and product liability.

⁽²⁾ The nine months ended June 30, 2019 includes $31 million related to the remeasurement of the Maremont asbestos liability based on the Maremont prepackaged plan of reorganization.

⁽³⁾  Amounts for the three and nine months ended June 30, 2018 have been recast to reflect reportable segment changes.

	June 30, 2019			September 30, 2018 (3)
Segment Assets:
Commercial Truck	$	1,846		$	1,764
Aftermarket, Industrial and Trailer	609			589
Total segment assets	2,455			2,353
Corporate (1)	567			633
Less: Accounts receivable sold under off-balance sheet factoring programs (2)	(294		)	(260		)
Total assets	$	2,728		$	2,726

⁽¹⁾  Corporate assets consist primarily of cash, deferred income taxes and prepaid pension costs.

⁽²⁾  At June 30, 2019 and September 30, 2018, segment assets include $294 million and $260 million, respectively, of accounts receivable sold under off-balance sheet accounts receivable factoring programs (see Note 10). These sold receivables are included in segment assets as the CODM reviews segment assets inclusive of these balances.

⁽³⁾ 

Amounts as of September 30, 2018 have been recast to reflect reportable segment changes, including the reallocation of goodwill.

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Supplemental Guarantor Condensed Consolidating Financial Statements

9 Months Ended

Jun. 30, 2019

Condensed Financial Information Disclosure [Abstract]

Supplemental Guarantor Condensed Consolidating Financial Statements

Supplemental Guarantor Condensed Consolidating Financial Statements

Rule 3-10 of Regulation S-X requires that separate financial information for issuers and guarantors of registered securities be filed in certain circumstances. Certain of the company's 100-percent-owned subsidiaries, as defined in the credit agreement (the "Guarantors"), irrevocably and unconditionally guarantee amounts outstanding under the senior secured revolving credit facility on a joint and several basis. Similar subsidiary guarantees were provided for the benefit of the holders of the notes outstanding under the company's indentures (see Note 18).

In lieu of providing separate audited financial statements for Meritor, Inc. (the "Parent") and Guarantors, the company has included the accompanying condensed consolidating financial statements as permitted by Regulation S-X Rules 3-10. These condensed consolidating financial statements are presented on the equity method. Under this method, the investments in subsidiaries are recorded at cost and adjusted for the Parent's share of the subsidiary's cumulative results of operations, capital contributions and distribution and other equity changes. The Guarantors are combined in the condensed consolidating financial statements.

	Three Months Ended June 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	696		$	470		$	—		$	1,166
Subsidiaries	—			24			46			(70		)	—
Total sales	—			720			516			(70		)	1,166
Cost of sales	(17		)	(599		)	(441		)	70			(987		)
GROSS MARGIN	(17		)	121			75			—			179
Selling, general and administrative	(30		)	(28		)	(15		)	—			(73		)
Restructuring	—			1			—			—			1
Other operating expense, net	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(50		)	94			60			—			104
Other income (expense), net	14			(2		)	(2		)	—			10
Equity in earnings of affiliates	—			6			3			—			9
Interest income (expense), net	(32		)	11			7			—			(14		)
INCOME (LOSS) BEFORE INCOME TAXES	(68		)	109			68			—			109
Benefit (provision) for income taxes	19			(18		)	(22		)	—			(21		)
Equity income from continuing operations of subsidiaries	134			37			—			(171		)	—
INCOME FROM CONTINUING OPERATIONS	85			128			46			(171		)	88
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax	1			—			—			—			1
NET INCOME	86			128			46			(171		)	89
Less: Net income attributable to noncontrolling interests	—			—			(3		)	—			(3		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	86		$	128		$	43		$	(171	)	$	86

	Three Months Ended June 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	86		$	128		$	46		$	(171	)	$	89
Other comprehensive loss, net of tax	(7		)	(2		)	(3		)	4			(8		)
Total comprehensive income	79			126			43			(167		)	81
Less: Comprehensive income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
Comprehensive income attributable to Meritor, Inc.	$	79		$	126		$	41		$	(167	)	$	79

	Three Months Ended June 30, 2018 (1)
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	629		$	500		$	—		$	1,129
Subsidiaries	—			40			61			(101		)	—
Total sales	—			669			561			(101		)	1,129
Cost of sales	(20		)	(559		)	(481		)	101			(959		)
GROSS MARGIN	(20		)	110			80			—			170
Selling, general and administrative	(30		)	(27		)	(19		)	—			(76		)
Restructuring	(2		)	(1		)	—			—			(3		)
OPERATING INCOME (LOSS)	(52		)	82			61			—			91
Other income (expense), net	28			(15		)	(4		)	—			9
Equity in earnings of affiliates	—			6			3			—			9
Interest income (expense), net	(26		)	6			6			—			(14		)
INCOME (LOSS) BEFORE INCOME TAXES	(50		)	79			66			—			95
Benefit (provision) for income taxes	7			(13		)	(20		)	—			(26		)
Equity income from continuing operations of subsidiaries	109			39			—			(148		)	—
INCOME FROM CONTINUING OPERATIONS	66			105			46			(148		)	69
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(2		)	(2		)	(2		)	4			(2		)
NET INCOME	64			103			44			(144		)	67
Less: Net income attributable to noncontrolling interests	—			—			(3		)	—			(3		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	64		$	103		$	41		$	(144	)	$	64

⁽¹⁾ Prior period has been recast, see Note 20.

	Three Months Ended June 30, 2018
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	64		$	103		$	44		$	(144	)	$	67
Other comprehensive loss, net of tax	(48		)	(57		)	(8		)	63			(50		)
Total comprehensive income	16			46			36			(81		)	17
Less: Comprehensive income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
Comprehensive income attributable to Meritor, Inc.	$	16		$	46		$	35		$	(81	)	$	16

	Nine Months Ended June 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,962		$	1,398		$	—		$	3,360
Subsidiaries	—			84			154			(238		)	—
Total sales	—			2,046			1,552			(238		)	3,360
Cost of sales	(48		)	(1,723		)	(1,333		)	238			(2,866		)
GROSS MARGIN	(48		)	323			219			—			494
Selling, general and administrative	(83		)	(85		)	(12		)	—			(180		)
Restructuring	—			1			1			—			2
Other operating expense, net	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(134		)	239			208			—			313
Other income (expense), net	64			(11		)	(23		)	—			30
Equity in earnings of affiliates	—			16			8			—			24
Interest income (expense), net	(97		)	35			19			—			(43		)
INCOME (LOSS) BEFORE INCOME TAXES	(167		)	279			212			—			324
Benefit (provision) for income taxes	50			(52		)	(67		)	—			(69		)
Equity income from continuing operations of subsidiaries	365			86			—			(451		)	—
INCOME FROM CONTINUING OPERATIONS	248			313			145			(451		)	255
LOSS FROM DISCONTINUED OPERATIONS, net of tax	—			—			—			—			—
NET INCOME	248			313			145			(451		)	255
Less: Net income attributable to noncontrolling interests	—			—			(7		)	—			(7		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	248		$	313		$	138		$	(451	)	$	248

	Nine Months Ended June 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	248		$	313		$	145		$	(451	)	$	255
Other comprehensive loss, net of tax	(3		)	(9		)	(11		)	20			(3		)
Total comprehensive income	245			304			134			(431		)	252
Less: Comprehensive income attributable to noncontrolling interests	—			—			(7		)	—			(7		)
Comprehensive income attributable to Meritor, Inc.	$	245		$	304		$	127		$	(431	)	$	245

	Nine Months Ended June 30, 2018 (1)
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,663		$	1,435		$	—		$	3,098
Subsidiaries	—			107			159			(266		)	—
Total sales	—			1,770			1,594			(266		)	3,098
Cost of sales	(57		)	(1,477		)	(1,357		)	266			(2,625		)
GROSS MARGIN	(57		)	293			237			—			473
Selling, general and administrative	(90		)	(74		)	(54		)	—			(218		)
Restructuring	(2		)	(2		)	(2		)	—			(6		)
Other operating expense, net	(10		)	(1		)	(1		)	—			(12		)
OPERATING INCOME (LOSS)	(159		)	216			180			—			237
Other income (expense), net	70			(10		)	(36		)	—			24
Equity in earnings of affiliates	—			14			6			—			20
Interest income (expense), net	(91		)	21			16			—			(54		)
INCOME (LOSS) BEFORE INCOME TAXES	(180		)	241			166			—			227
Provision for income taxes	(8		)	(75		)	(48		)	—			(131		)
Equity income from continuing operations of subsidiaries	276			100			—			(376		)	—
INCOME FROM CONTINUING OPERATIONS	88			266			118			(376		)	96
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(3		)	(2		)	(2		)	4			(3		)
NET INCOME	85			264			116			(372		)	93
Less: Net income attributable to noncontrolling interests	—			—			(8		)	—			(8		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	85		$	264		$	108		$	(372	)	$	85

⁽¹⁾ Prior period has been recast, see Note 20.

	Nine Months Ended June 30, 2018
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	85		$	264		$	116		$	(372	)	$	93
Other comprehensive income (loss), net of tax	(33		)	(45		)	6			38			(34		)
Total comprehensive income	52			219			122			(334		)	59
Less: Comprehensive income attributable to noncontrolling interests	—			—			(7		)	—			(7		)
Comprehensive income attributable to Meritor, Inc.	$	52		$	219		$	115		$	(334	)	$	52

	June 30, 2019
	Parent		Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	27	$	5		$	79	$	—		$	111
Receivables trade and other, net	3		81			541		—			625
Inventories	—		260			231		—			491
Other current assets	4		11			17		—			32
TOTAL CURRENT ASSETS	34		357			868		—			1,259
NET PROPERTY	21		240			220		—			481
GOODWILL	—		254			167		—			421
OTHER ASSETS	147		189			231		—			567
INVESTMENTS IN SUBSIDIARIES	4,188		960			—		(5,148		)	—
TOTAL ASSETS	$	4,390	$	2,000		$	1,486	$	(5,148	)	$	2,728
CURRENT LIABILITIES:
Short-term debt	$	23	$	—		$	1	$	—		$	24
Accounts and notes payable	54		292			345		—			691
Other current liabilities	144		65			87		—			296
TOTAL CURRENT LIABILITIES	221		357			433		—			1,011
LONG-TERM DEBT	730		—			4		—			734
RETIREMENT BENEFITS	218		—			20		—			238
INTERCOMPANY PAYABLE (RECEIVABLE)	2,691		(2,856		)	165		—			—
OTHER LIABILITIES	55		118			61		—			234
MEZZANINE EQUITY	1		—			—		—			1
EQUITY ATTRIBUTABLE TO MERITOR, INC.	474		4,381			767		(5,148		)	474
NONCONTROLLING INTERESTS	—		—			36		—			36
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY	$	4,390	$	2,000		$	1,486	$	(5,148	)	$	2,728

	September 30, 2018
	Parent		Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	24	$	6		$	85	$	—		$	115
Receivables trade and other, net	2		62			524		—			588
Inventories	—		242			235		—			477
Other current assets	6		12			28		—			46
TOTAL CURRENT ASSETS	32		322			872		—			1,226
NET PROPERTY	24		241			218		—			483
GOODWILL	—		250			171		—			421
OTHER ASSETS	179		182			235		—			596
INVESTMENTS IN SUBSIDIARIES	3,583		855			—		(4,438		)	—
TOTAL ASSETS	$	3,818	$	1,850		$	1,496	$	(4,438	)	$	2,726
CURRENT LIABILITIES:
Short-term debt	$	47	$	—		$	47	$	—		$	94
Accounts and notes payable	64		297			339		—			700
Other current liabilities	77		71			142		—			290
TOTAL CURRENT LIABILITIES	188		368			528		—			1,084
LONG-TERM DEBT	726		—			4		—			730
RETIREMENT BENEFITS	241		—			21		—			262
INTERCOMPANY PAYABLE (RECEIVABLE)	2,325		(2,640		)	315		—			—
OTHER LIABILITIES	50		124			158		—			332
MEZZANINE EQUITY	1		—			—		—			1
EQUITY ATTRIBUTABLE TO MERITOR, INC.	287		3,998			440		(4,438		)	287
NONCONTROLLING INTERESTS	—		—			30		—			30
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY	$	3,818	$	1,850		$	1,496	$	(4,438	)	$	2,726

	Nine Months Ended June 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY OPERATING ACTIVITIES	$	8		$	32		$	154		$	—	$	194
INVESTING ACTIVITIES
Capital expenditures	(2		)	(32		)	(29		)	—		(63		)
Cash paid for investment in Transportation Power, Inc.	(6		)	—			—			—		(6		)
Proceeds from settlement of cross-currency swaps	17			—			—			—		17
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	9			(32		)	(29		)	—		(52		)
FINANCING ACTIVITIES
Borrowings and securitization	—			—			(46		)	—		(46		)
Redemption of notes	(24		)	—			—			—		(24		)
Deferred issuance costs	(4		)	—			—			—		(4		)
Repurchase of common stock	(71		)	—			—			—		(71		)
Intercompany advances	86			—			(86		)	—		—
Other financing activities	(1		)	(1		)	—			—		(2		)
CASH USED FOR FINANCING ACTIVITIES	(14		)	(1		)	(132		)	—		(147		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	3			(1		)	(6		)	—		(4		)
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	24			6			85			—		115
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	27		$	5		$	79		$	—	$	111

	Nine Months Ended June 30, 2018
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR)        OPERATING ACTIVITIES	$	(26	)	$	31		$	186		$	—	$	191
INVESTING ACTIVITIES
Capital expenditures	(3		)	(25		)	(24		)	—		(52		)
Proceeds from sale of a business	4			—			—			—		4
Proceeds from prior year sale of equity method investment	250			—			—			—		250
Cash paid for investment in Transportation Power, Inc.	(6		)	—			—			—		(6		)
Cash paid for acquisition of AA Gear & Manufacturing, Inc.	(36		)	—			—			—		(36		)
Proceeds from sale of assets	—			—			2			—		2
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	209			(25		)	(22		)	—		162
FINANCING ACTIVITIES
Borrowings and securitization	—			—			(89		)	—		(89		)
Redemption of notes	(181		)	—			—			—		(181		)
Repurchase of common stock	(63		)	—			—			—		(63		)
Intercompany advances	67			—			(67		)	—		—
Other financing activities	(1		)	(2		)	—			—		(3		)
CASH USED FOR FINANCING ACTIVITIES	(178		)	(2		)	(156		)	—		(336		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			(5		)	—		(5		)
CHANGE IN CASH AND CASH EQUIVALENTS	5			4			3			—		12
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	10			3			75			—		88
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	15		$	7		$	78		$	—	$	100

Basis of Presentation

Certain information and footnote disclosures normally included in financial statements prepared in conformity with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. As of June 30, 2019 and September 30, 2018, Parent-only obligations included $224 million and $248 million of pension and retiree medical benefits, respectively (see Note 20). All debt is debt of the Parent other than $5 million and $51 million at June 30, 2019 and September 30, 2018, respectively (see Note 18), and is primarily related to U.S. accounts receivable securitization and capital lease obligations. There were $29 million of cash dividends paid to the Parent by subsidiaries and investments accounted for by the equity method for the nine months ended June 30, 2019 and June 30, 2018, respectively.

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New Accounting Standards (Policies)

9 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

New Accounting Standards

Accounting standards implemented during fiscal year 2019

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, followed by various related amendments (ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, ASU 2016-20, ASU 2017-05, ASU 2017-06, ASU 2017-13, and ASU 2017-14) collectively referred to as "Topic 606", which requires companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service and requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The company adopted Topic 606 in the first quarter of the fiscal year beginning October 1, 2018. As a result, the company has changed its accounting policy for revenue recognition as detailed below.

The company applied Topic 606 using the modified retrospective approach (i.e., by recognizing the cumulative effect of initially applying Topic 606 as an adjustment to the opening balance of equity at October 1, 2018). Therefore, the comparative information has not been adjusted and continues to be reported under Topic 605. There was no adjustment to the opening balance of equity at October 1, 2018 as there was no significant impact to previously recorded revenue or expense. The guidance has been applied to all existing contracts at the date of initial application. The adoption of Topic 606 had an immaterial impact on our Condensed Consolidated Balance Sheet, Condensed Consolidated Statement of Operations, and Condensed Consolidated Statement of Cash Flows but did require enhanced disclosures to meet the new disclosure requirements; those enhanced disclosures are included in Note 4.

In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The guidance requires entities to only include the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses (together with other employee compensation costs). The other components of net benefit cost, including amortization of prior service cost/credit, are to be included in a separate line item(s) outside of any sub-total of operating income. ASU 2017-07 also provides guidance that only the service cost component of net benefit cost is eligible for capitalization. The revisions in this amendment

are to be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. The company adopted this standard in the first quarter of fiscal year 2019. Amounts previously reflected in Operating Income were reclassified to Other income (expense) in accordance with the provisions of ASU 2017-07. Refer to Note 20 for amounts that were reclassified.

In July 2018, the FASB issued ASU 2018-09, Codification Improvements. The amendments in this ASU result from the FASB’s standing project to address suggestions on the Accounting Standards Codification ("ASC") and to make other incremental improvements to GAAP. The amendments include changes to clarify the ASC or correct unintended application of guidance that is not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities.

Some of the amendments in this ASU were effective upon issuance. Others have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities, or are conforming amendments that have been made to recently issued guidance that is not yet effective that may require application of the transition and effective date guidance in the original ASU.

The company adopted certain amendments in this ASU in the first quarter of fiscal year 2019. Those certain amendments had effective dates for annual periods beginning after December 15, 2017, for public business entities. The amendments that were adopted in the first quarter of fiscal year 2019 did not have a material impact on the company's Condensed Consolidated Financial Statements. The company plans to implement the remaining amendments beginning October 1, 2019 and is currently evaluating the potential impact on its Condensed Consolidated Financial Statements.

The company also adopted the following ASUs during fiscal year 2019, none of which had a material impact on the Condensed Consolidated Financial Statements or financial statement disclosures:

ASU		Effective Date
2016-01	Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities	October 1, 2018
2016-15	Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)	October 1, 2018
2016-16	Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory	October 1, 2018
2016-18	Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)	October 1, 2018
2017-01	Business Combinations (Topic 805): Clarifying the Definition of a Business	October 1, 2018
2017-09	Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting	October 1, 2018
2017-10	Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services (a consensus of the FASB Emerging Issues Task Force)	October 1, 2018
2018-03	Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities	October 1, 2018
2018-04	Investments—Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273 (SEC Update)	October 1, 2018
2018-08	Not-For-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made	October 1, 2018

Accounting standards to be implemented

The following represent the standards that may result in a significant change in practice and/or have a significant financial impact on the company.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The update will require lessees to recognize a right-of-use asset and lease liability for substantially all leases. The standard is required to be adopted by public business entities in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted.

The company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2019, and is currently assessing the potential impact of this guidance on its accounting policies and its Condensed Consolidated Financial Statements. The company plans to implement this standard using the additional and optional transition method as provided by ASU 2018-11. Please see discussion of ASU 2018-11 below.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments, including accounts receivable. The ASU also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The amendments in this update are required to be adopted by public business entities in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The company is currently evaluating the potential impact of this guidance on its accounting policies and its Condensed Consolidated Financial Statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220). The guidance in ASU 2018-02 allows an entity to elect to reclassify the stranded tax effects related to the Tax Cuts and Jobs Act of 2017 ("U.S. tax reform") from accumulated other comprehensive income into retained earnings. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The company is currently evaluating the potential impact of this new guidance on its Condensed Consolidated Financial Statements.

In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842. The amendments in this ASU affect narrow aspects of the guidance issued in ASU 2016-02, Leases (Topic 842), which is not yet effective. The effective date and transition requirements for this ASU are the same as those for ASU 2016-02 as described above. Therefore, the company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2019 in connection with its planned implementation of ASU 2016-02 and is currently assessing the potential impact of this new guidance on its accounting policies and its Condensed Consolidated Financial Statements.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. The amendments in this ASU affect the guidance issued in ASU 2016-02, Leases (Topic 842), which is not yet effective. The amendments provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The amendments also provide lessors with a practical expedient to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component in certain circumstances. The effective date for this ASU are the same as those for ASU 2016-02 as described above. Therefore, the company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2019 in connection with its planned implementation of ASU 2016-02 and is currently assessing the potential impact of this new guidance on its accounting policies and its Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU add, modify, and eliminate certain disclosure requirements on fair value measurements in Topic 820. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Certain amendments should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. Others should be applied retrospectively. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The company is currently evaluating the potential impact of this new guidance on its Condensed Consolidated Financial Statements.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The amendments in this ASU affect a variety of Topics in the Codification (ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities; ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments; and ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities).

For the amendments in this ASU that are applicable to ASU 2016-01, which Meritor has adopted, the effective date is the first quarter of fiscal year 2021 with early adoption permitted. For the amendments in this ASU that are applicable to ASU 2016-13, which Meritor has not yet adopted, the effective date is the first quarter of fiscal year 2021. For the amendments in this ASU that

are applicable to ASU 2017-12, which Meritor has adopted, the effective date is the first quarter of fiscal year 2020 with early adoption permitted. The company has not yet adopted any of these amendments and is currently evaluating the potential impact of this new guidance on its Condensed Consolidated Financial Statements.

Revenue and Contract Costs

Revenue is measured based on the consideration to which the company expects to be entitled, and is presented net of any estimates of customer sales allowances, incentives, rebates, and returns. The company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the company from a customer, are excluded from revenue.

Shipping and handling costs associated with outbound freight after control of a product has transferred to a customer are accounted for as a fulfillment cost, as opposed to a distinct performance obligation, and are included in cost of sales.

Nature of goods and services

The following is a description of principal activities - separated by reportable segments - from which the company generates its revenue.

The Commercial Truck segment supplies drivetrain systems and components, including axles, drivelines and braking and suspension systems, primarily for medium- and heavy-duty trucks and other applications in North America, South America, Europe and Asia Pacific. This segment also includes the company's aftermarket businesses in Asia Pacific and South America.

The Aftermarket, Industrial and Trailer segment supplies axles, brakes, drivelines, suspension parts and other replacement parts to commercial vehicle and industrial aftermarket customers, primarily in North America and Europe. In addition, this segment supplies drivetrain systems and certain components, including axles, drivelines, brakes and suspension systems for military, construction, bus and coach, fire and emergency and other applications in North America and Europe. It also supplies a variety of undercarriage products and systems for trailer applications in North America.

Although the company may enter into long-term supply arrangements with its major customers, the prices and volumes are not fixed over the term of the arrangements and a contract does not exist under the scope of Topic 606 until prices and volumes are known. As such, individual customer releases or purchase orders represent the contract with the customer.

The company accounts for individual products and services separately if they are distinct (i.e., if a product or service is separately identifiable from other items and if a customer can benefit from it on its own or with other resources that are readily available to the customer). The company has identified certain performance obligations related to brake pad fitting and axle dressing where it is acting as an agent and, therefore, recognizes revenue on a net basis for satisfaction of those performance obligations.

The company recognizes revenue for the sale of goods at the point in time when the customer takes control of the goods. As such, revenue is recognized upon shipment of product and transfer of ownership to the customer. The amount of revenue recognized is based on the purchase order price and adjusted for variable consideration (i.e., customer sales allowances, incentives, rebates, and returns). Provisions for customer sales allowances, incentives, rebates, and returns are recorded as a reduction of sales at the time of revenue recognition based primarily on historical experience. The company’s payment terms with customers are customary and vary by customer and geography but typically range from 30 to 90 days.

The company provides warranties on some of its products. The company records estimated product warranty costs at the time of shipment of products to customers (see Note 16 and Note 17).

Contract costs

The company applies the practical expedient provided in Topic 606 and recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the company otherwise would have recognized is one year or less. The costs which are not capitalized are included in cost of sales.

Inventories

Inventories are stated at the lower of cost (using FIFO or average methods) or market (determined on the basis of estimated realizable values)

Fair Value

Fair Value

FASB guidance provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical instruments (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

• Level 1 inputs use quoted prices in active markets for identical instruments.

• Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar instruments in active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

• Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related instrument.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest priority level input that is significant to the valuation. The company's assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

Environmental

Environmental

    Federal, state and local requirements relating to the discharge of substances into the environment, the disposal of hazardous wastes and other activities affecting the environment have, and will continue to have, an impact on the operations of the company. The process of estimating environmental liabilities is complex and dependent upon evolving physical and scientific data at the sites, uncertainties as to remedies and technologies to be used and the outcome of discussions with regulatory agencies. The company records liabilities for environmental issues in the accounting period in which they are considered to be probable and the cost can be reasonably estimated. At environmental sites in which more than one potentially responsible party has been identified, the company records a liability for its allocable share of costs related to its involvement with the site, as well as an allocable share of costs related to insolvent parties or unidentified shares. At environmental sites in which Meritor is the only potentially responsible

party, the company records a liability for the total probable and estimable costs of remediation before consideration of recovery from insurers or other third parties.

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Earnings per Share (Tables)

9 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Reconciliation of basic average common shares outstanding

A reconciliation of basic average common shares outstanding to diluted average common shares outstanding is as follows (in millions):

	Three Months Ended June 30,		Nine Months Ended June 30,
	2019	2018	2019	2018
Basic average common shares outstanding	83.0	87.2	83.7	88.1
Impact of restricted shares, restricted share units and performance share units	1.7	1.7	2.1	2.1
Impact of convertible notes	0.9	0.9	0.8	1.0
Diluted average common shares outstanding	85.6	89.8	86.6	91.2

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New Accounting Standards (Tables)

9 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Schedule of adopted ASUs during the period

The company also adopted the following ASUs during fiscal year 2019, none of which had a material impact on the Condensed Consolidated Financial Statements or financial statement disclosures:

ASU		Effective Date
2016-01	Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities	October 1, 2018
2016-15	Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)	October 1, 2018
2016-16	Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory	October 1, 2018
2016-18	Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)	October 1, 2018
2017-01	Business Combinations (Topic 805): Clarifying the Definition of a Business	October 1, 2018
2017-09	Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting	October 1, 2018
2017-10	Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services (a consensus of the FASB Emerging Issues Task Force)	October 1, 2018
2018-03	Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities	October 1, 2018
2018-04	Investments—Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273 (SEC Update)	October 1, 2018
2018-08	Not-For-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made	October 1, 2018

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Revenue (Tables)

9 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Disaggregation of revenue by operating segment

In the following tables, revenue is disaggregated for each of our operating segments by primary geographical market for the three and nine months ended June 30, 2019.

	Three Months Ended June 30, 2019
Primary Geographical Market	Commercial Truck		Aftermarket, Industrial and Trailer		Total
U.S.	$	419	$	278	$	697
Canada	—		18		18
Mexico	54		12		66
Total North America	473		308		781
Sweden	75		—		75
Italy	62		4		66
United Kingdom	40		3		43
Other Europe	3		16		19
Total Europe	180		23		203
Brazil	67		—		67
China	44		—		44
India	53		—		53
Other Asia-Pacific	18		—		18
Total sales	$	835	$	331	$	1,166

	Nine Months Ended June 30, 2019
Primary Geographical Market	Commercial Truck		Aftermarket, Industrial and Trailer		Total
U.S.	$	1,182	$	781	$	1,963
Canada	—		53		53
Mexico	151		35		186
Total North America	1,333		869		2,202
Sweden	223		—		223
Italy	178		13		191
United Kingdom	126		8		134
Other Europe	9		54		63
Total Europe	536		75		611
Brazil	180		—		180
China	129		—		129
India	172		—		172
Other Asia-Pacific	66		—		66
Total sales	$	2,416	$	944	$	3,360

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Discontinued Operations (Tables)

9 Months Ended

Jun. 30, 2019

Discontinued Operations and Disposal Groups [Abstract]

Summary of discontinued operations

Results of discontinued operations are summarized as follows (in millions):

	Three Months Ended June 30,					Nine Months Ended June 30,
	2019		2018			2019		2018
Sales	$	—	$	—		$	—	$	—
Income (loss) before income taxes	$	1	$	(2	)	$	—	$	(4	)
Benefit from income taxes	—		—			—		1
Income (loss) from discontinued operations attributable to Meritor, Inc.	$	1	$	(2	)	$	—	$	(3	)

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Goodwill (Tables)

9 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of the changes in carrying value of goodwill

A summary of the changes in the carrying value of goodwill by the company’s two reportable segments are presented below (in millions):

	Commercial Truck			Aftermarket, Industrial and Trailer			Total
Goodwill (1)	$	266		$	170		$	436
Accumulated impairment losses (1)	—			(15		)	(15		)
Beginning Balance at September 30, 2018 (1)	266			155			421
AAG measurement period adjustment (see Note 9)	—			3			3
Foreign currency translation	(3		)	—			(3		)
Ending Balance at June 30, 2019	$	263		$	158		$	421

⁽¹⁾ Amounts have been recast to reflect reportable segment changes (see Note 23).

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Restructuring Costs (Tables)

9 Months Ended

Jun. 30, 2019

Restructuring and Related Activities [Abstract]

Schedule of changes in restructuring reserves

The changes in restructuring reserves for the nine months ended June 30, 2019 and 2018 are as follows (in millions):

	Employee Termination Benefits			Plant Shutdown & Other			Total
Beginning Balance at September 30, 2018	$	4		$	—		$	4
Activity during the period:
Charges to continuing operations	(2		)	—			(2		)
Cash payments – continuing operations	(2		)	—			(2		)
Other	1			—			1
Total restructuring reserves at June 30, 2019	1			—			1
Less: non-current restructuring reserves	—			—			—
Restructuring reserves – current, at June 30, 2019	$	1		$	—		$	1
Balance at September 30, 2017	$	5		$	1		$	6
Activity during the period:
Charges to continuing operations	6			—			6
Cash payments – continuing operations	(6		)	(1		)	(7		)
Total restructuring reserves at June 30, 2018	5			—			5
Less: non-current restructuring reserves	(1		)	—			(1		)
Restructuring reserves – current, at June 30, 2018	$	4		$	—		$	4

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Accounts Receivable Factoring and Securitization (Tables)

9 Months Ended

Jun. 30, 2019

Accounts Receivable Factoring And Securitization [Abstract]

Summary of accounts receivable factoring and securitization

The company has a U.S. accounts receivable securitization facility with PNC Bank and participates in various accounts receivable factoring programs, primarily with Nordea Bank for trade receivables from AB Volvo, as follows:

	Current Expiration	Total Facility Size as of 6/30/19				Utilized as of 6/30/19				Utilized as of 9/30/18
		EUR		USD		EUR		USD		EUR		USD
On-balance sheet arrangement
Committed U.S. accounts receivable securitization (1)	December 2021	N/A		$	110	N/A		$	3	N/A		$	57
Total on-balance sheet arrangement: (1)		N/A		$	110	N/A		$	3	N/A		$	57
Off-balance sheet arrangements
Committed Swedish factoring facility (2)(3)	March 2020	€	155	$	176	€	140	$	160	€	136	$	158
Committed U.S. factoring facility (2)	February 2023	N/A		75		N/A		70		45		53
Uncommitted U.K. factoring facility	February 2022	25		28		10		11		8		9
Uncommitted Italy factoring facility	June 2022	30		34		30		34		24		28
Other uncommitted factoring facilities (4)	None	N/A		N/A		18		19		11		12
Total off-balance sheet arrangements		€	210	$	313	€	198	$	294	€	224	$	260

⁽¹⁾ Availability subject to adequate eligible accounts receivable available for sale. The utilized amount includes $3 million and $11 million of letters of credit as of June 30, 2019 and September 30, 2018, respectively.

⁽²⁾ Actual amounts may exceed the bank's commitment at the bank's discretion.

⁽³⁾ The facility is backed by a 364-day liquidity commitment from Nordea Bank which extends through January 10, 2020.

⁽⁴⁾ There is no explicit facility size under the agreement, but the counterparty approves the purchase of receivable tranches at its discretion.

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Operating Cash Flows (Tables)

9 Months Ended

Jun. 30, 2019

Operating Cash Flow Disclosure [Abstract]

Schedule of operating cash flows

The reconciliation of net income to cash flows provided by operating activities is as follows (in millions):

	Nine Months Ended June 30,
	2019			2018
OPERATING ACTIVITIES
Net income	$	255		$	93
Less: Loss from discontinued operations, net of tax	—			(3		)
Income from continuing operations	255			96
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization	64			64
Deferred income tax expense	27			92
Loss on debt extinguishment	—			8
Restructuring costs	(2		)	6
Asset impairment charges	1			2
Equity in earnings of affiliates	(24		)	(20		)
Pension and retiree medical income	(28		)	(23		)
Asbestos related liability remeasurement	(31		)	—
Other adjustments to income from continuing operations	13			13
Dividends received from equity method investments	14			9
Pension and retiree medical contributions	(12		)	(17		)
Restructuring payments	(2		)	(7		)
Changes in off-balance sheet accounts receivable securitization and factoring programs	41			65
Changes in receivables, inventories and accounts payable	(96		)	(136		)
Changes in other current assets and liabilities	(21		)	26
Changes in other assets and liabilities	(3		)	12
Operating cash flows provided by continuing operations	196			190
Operating cash flows provided by (used for) discontinued operations	(2		)	1
CASH PROVIDED BY OPERATING ACTIVITIES	$	194		$	191

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Inventories (Tables)

9 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Summary of inventories

Inventories are stated at the lower of cost (using FIFO or average methods) or market (determined on the basis of estimated realizable values) and are summarized as follows (in millions):

	June 30, 2019		September 30, 2018
Finished goods	$	154	$	170
Work in process	42		41
Raw materials, parts and supplies	295		266
Total	$	491	$	477

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Other Current Assets (Tables)

9 Months Ended

Jun. 30, 2019

Other Current Assets Disclosure [Abstract]

Summary of other current assets

Other current assets are summarized as follows (in millions):

	June 30, 2019		September 30, 2018
Asbestos-related recoveries (see Note 21)	$	8	$	16
Prepaid and other	24		30
Other current assets	$	32	$	46

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Net Property (Tables)

9 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Summary of net property

Net property is summarized as follows (in millions):

	June 30, 2019			September 30, 2018
Property at cost:
Land and land improvements	$	30		$	29
Buildings	228			228
Machinery and equipment	928			914
Company-owned tooling	136			130
Construction in progress	66			81
Total	1,388			1,382
Less: accumulated depreciation	(907		)	(899		)
Net property	$	481		$	483

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Other Assets (Tables)

9 Months Ended

Jun. 30, 2019

Other Assets, Noncurrent [Abstract]

Summary of other assets

Other assets are summarized as follows (in millions):

	June 30, 2019		September 30, 2018
Investments in non-consolidated joint ventures	$	113	$	102
Asbestos-related recoveries (see Note 21)	57		76
Unamortized revolver debt issuance costs	8		7
Capitalized software costs, net	20		26
Deferred income tax assets, net	113		140
Assets for uncertain tax positions	52		53
Prepaid pension costs	166		152
Intangible assets (1)	13		18
Other	25		22
Other assets	$	567	$	596

⁽¹⁾ 

Primarily relates to customer relationships. As of June 30, 2019, the gross carrying value was $18 million and the accumulated amortization was $5 million. As of September 30, 2018, the gross carrying value was $22 million and the accumulated amortization was $4 million. The weighted average amortization periods for customer relationships is approximately 19 years.

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Other Current Liabilities (Tables)

9 Months Ended

Jun. 30, 2019

Other Current Liabilities Disclosure [Abstract]

Summary of other current liabilities

Other current liabilities are summarized as follows (in millions):

	June 30, 2019		September 30, 2018
Compensation and benefits	$	108	$	122
Income taxes	12		27
Taxes other than income taxes	17		25
Accrued interest	14		11
Product warranties	18		19
Environmental reserves (see Note 21)	8		8
Restructuring (see Note 7)	1		3
Asbestos-related liabilities (see Note 21)	9		18
Indemnity obligations	1		1
Accrued payable to Maremont (see Note 21)	48		—
Other	60		56
Other current liabilities	$	296	$	290

Summary of the changes in product warranties

A summary of the changes in product warranties is as follows (in millions):

	Nine Months Ended June 30,
	2019			2018
Total product warranties – beginning of period	$	54		$	45
Accruals for product warranties	21			14
Payments	(18		)	(12		)
Change in estimates and other	(5		)	4
Total product warranties – end of period	52			51
Less: Non-current product warranties	(34		)	(33		)
Product warranties – current	$	18		$	18

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Other Liabilities (Tables)

9 Months Ended

Jun. 30, 2019

Other Liabilities Disclosure [Abstract]

Summary of other liabilities

Other liabilities are summarized as follows (in millions):

	June 30, 2019		September 30, 2018
Asbestos-related liabilities (see Note 21)	$	91	$	193
Restructuring (see Note 7)	—		1
Non-current deferred income tax liabilities	16		16
Liabilities for uncertain tax positions	48		48
Product warranties (see Note 16)	34		35
Environmental (see Note 21)	7		9
Indemnity obligations	8		9
Other	30		21
Other liabilities	$	234	$	332

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Long-Term Debt (Tables)

9 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Summary of long-term debt

Long-Term debt, net of discounts where applicable, is summarized as follows (in millions):

	June 30, 2019			September 30, 2018
3.25 percent convertible notes due 2037(1)(3)	$	319		$	318
4.0 percent convertible notes due 2027(1)(4)	—			24
7.875 percent convertible notes due 2026(1)(5)	22			22
6.25 percent notes due 2024(2)(6)	444			444
Capital lease obligation	7			7
Borrowings and securitization	—			46
Unamortized discount on convertible notes(7)	(34		)	(37		)
Subtotal	758			824
Less: current maturities	(24		)	(94		)
Long-term debt	$	734		$	730

⁽¹⁾ The 3.25 percent, 4.0 percent and 7.875 percent convertible notes contain a put and call feature, which allows for earlier redemption beginning in 2025, 2019 and 2020, respectively.

⁽²⁾ The 6.25 percent notes contain a call option, which allows for early redemption by Meritor.

⁽³⁾ The 3.25 percent convertible notes are presented net of $6 million and $7 million unamortized issuance costs as of June 30, 2019 and September 30, 2018, respectively.

⁽⁴⁾ The 4.0 percent convertible notes were presented net of unamortized issuance costs of an insignificant amount as of September 30, 2018.

⁽⁵⁾ The 7.875 percent convertible notes are presented net of unamortized issuance costs of an insignificant amount as of June 30, 2019 and September 30, 2018, and $1 million original issuance discount as of June 30, 2019 and September 30, 2018.

⁽⁶⁾ The 6.25 percent notes are presented net of $6 million unamortized issuance costs as of June 30, 2019 and September 30, 2018.

⁽⁷⁾ The carrying amount of the equity component related to convertible debt.

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Financial Instruments (Tables)

9 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair value of financial instruments

Fair values of financial instruments are summarized as follows (in millions):

	June 30, 2019				September 30, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	111	$	111	$	115	$	115
Short-term debt	24		51		94		116
Long-term debt	734		806		730		776
Foreign exchange forward contracts (other assets)	1		1		2		2
Foreign exchange forward contracts (other liabilities)	1		1		—		—
Foreign currency option contracts (other assets)	—		—		—		—
Cross-currency swaps (other assets)	—		—		6		6
Cross-currency swaps (other liabilities)	5		5		—		—

Offsetting of derivative assets and liabilities

The following table reflects the offsetting of derivative assets and liabilities (in millions):

	June 30, 2019			September 30, 2018
	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported
Derivative Assets
Foreign exchange forward contracts	1	—	1	2	—	2
Cross-currency swaps	—	—	—	6	—	6
Derivative Liabilities
Foreign exchange forward contracts	1	—	1	—	—	—
Cross-currency swaps	5	—	5	—	—	—

Fair value of financial instruments by valuation hierarchy

Fair value of financial instruments by the valuation hierarchy at June 30, 2019 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	111	$	—	$	—
Short-term debt	—		49		2
Long-term debt	—		801		5
Foreign exchange forward contracts (other assets)	—		1		—
Foreign exchange forward contracts (other liabilities)	—		—		1
Foreign currency option contracts (other assets)	—		—		—
Cross-currency Swap (other assets)	—		—		—
Cross-currency swaps (other liabilities)	—		5		—

Fair value of financial instruments by the valuation hierarchy at September 30, 2018 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	115	$	—	$	—
Short-term debt	—		114		2
Long-term debt	—		771		5
Foreign exchange forward contracts (other assets)	—		2		—
Foreign exchange forward contracts (other liabilities)	—		—		—
Foreign currency option contracts (other assets)	—		—		—
Cross-currency swap (other assets)	—		6		—

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Retirement Benefit Liabilities (Tables)

9 Months Ended

Jun. 30, 2019

Retirement Benefits [Abstract]

Summary of retirement benefit liabilities

Retirement benefit liabilities consisted of the following (in millions):

	June 30, 2019			September 30, 2018
Retiree medical liability	$	79		$	86
Pension liability	163			182
Other	15			13
Subtotal	257			281
Less: current portion (included in compensation and benefits, Note 16)	(19		)	(19		)
Retirement benefits	$	238		$	262

Components of net periodic pension and retiree medical income

The components of net periodic pension and retiree medical income included in continuing operations for the three months ended June 30 are as follows (in millions):

	2019						2018
	Pension			Retiree Medical			Pension			Retiree Medical
Interest cost	$	13		$	1		$	14		$	1
Assumed return on plan assets	(24		)	—			(25		)	—
Amortization of prior service costs	—			(9		)	—			(9		)
Recognized actuarial loss	6			4			7			5
Total income	$	(5	)	$	(4	)	$	(4	)	$	(3	)

The components of net periodic pension and retiree medical income included in continuing operations for the nine months ended June 30 are as follows (in millions):

	2019						2018
	Pension			Retiree Medical			Pension			Retiree Medical
Interest cost	$	40		$	2		$	41		$	2
Assumed return on plan assets	(73		)	—			(74		)	—
Amortization of prior service costs	—			(26		)	—			(26		)
Recognized actuarial loss	17			12			21			13
Total income	$	(16	)	$	(12	)	$	(12	)	$	(11	)

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Contingencies (Tables)

9 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Summary of environmental reserves

The following are the components of the Superfund and non-Superfund environmental reserves (in millions):

	Superfund Sites			Non-Superfund Sites			Total
Beginning Balance at September 30, 2018	$	12		$	5		$	17
Payments and other	(3		)	(2		)	(5		)
Accruals	2			1			3
Ending Balance at June 30, 2019	$	11		$	4		$	15

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Shareholders' Equity (Tables)

9 Months Ended

Jun. 30, 2019

Equity [Abstract]

Schedule of accumulated other comprehensive loss

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Income (Loss) on cash flow hedges			Total
Balance at March 31, 2018	$	(35	)	$	(494	)	$	(1	)	$	(530	)
Other comprehensive income before reclassification	(52		)	—			1			(51		)
Amounts reclassified from accumulated other comprehensive loss	—			3			—			3
Net current-period other comprehensive income	$	(52	)	$	3		$	1		$	(48	)
Balance at June 30, 2018	$	(87	)	$	(491	)	$	—		$	(578	)

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Income (Loss) on cash flow hedges			Total
Balance at September 30, 2017	$	(41	)	$	(500	)	$	(4	)	$	(545	)
Other comprehensive income before reclassification	(46		)	1			4			(41		)
Amounts reclassified from accumulated other comprehensive loss	—			8			—			8
Net current-period other comprehensive income	$	(46	)	$	9		$	4		$	(33	)
Balance at June 30, 2018	$	(87	)	$	(491	)	$	—		$	(578	)

The components of AOCL and the changes in AOCL by components, net of tax, for the nine months ended June 30, 2019 and 2018 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Income (Loss) on cash flow hedges			Total
Balance at September 30, 2018	$	(90	)	$	(476	)	$	—		$	(566	)
Other comprehensive income before reclassification	(3		)	(1		)	—			(4		)
Amounts reclassified from accumulated other comprehensive loss	—			3			(2		)	1
Net current-period other comprehensive income	$	(3	)	$	2		$	(2	)	$	(3	)
Balance at June 30, 2019	$	(93	)	$	(474	)	$	(2	)	$	(569	)

The components of AOCL and the changes in AOCL by components, net of tax, for the three months ended June 30, 2019 and 2018 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Income (Loss) on cash flow hedges			Total
Balance at March 31, 2019	$	(87	)	$	(475	)	$	—		$	(562	)
Other comprehensive income before reclassification	(6		)	—			—			(6		)
Amounts reclassified from accumulated other comprehensive loss	—			1			(2		)	(1		)
Net current-period other comprehensive income	$	(6	)	$	1		$	(2	)	$	(7	)
Balance at June 30, 2019	$	(93	)	$	(474	)	$	(2	)	$	(569	)

Reclassification out of accumulated other comprehensive income

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(26	)	(a)
Actuarial losses	34			(a)
	8			Total before tax
	(1		)	Tax benefit
Total reclassifications for the period	$	7		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 for additional details), which is recorded in other operating income (expense).

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(26	)	(a)
Actuarial losses	29			(a)
	3			Total before tax
	—			Tax benefit
Total reclassifications for the period	$	3		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 for additional details), which is recorded in other operating income (expense).

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(9	)	(a)
Actuarial losses	10			(a)
	1			Total before tax
	—			Tax benefit
Total reclassifications for the period	$	1		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 for additional details), which is recorded in other operating income (expense).

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(9	)	(b)
Actuarial losses	$	12		(b)
	3			Total before tax
	—			Tax benefit
Total reclassifications for the period	$	3		Net of tax
(b)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 for additional details), which is recorded in other operating income (expense).

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Business Segment Information (Tables)

9 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Summary of segment information

Segment information is summarized as follows (in millions):

	Commercial Truck		Aftermarket, Industrial and Trailer		Eliminations			Total
Three Months Ended June 30, 2019
External Sales	$	835	$	331	$	—		$	1,166
Intersegment Sales	34		9		(43		)	—
Total Sales	$	869	$	340	$	(43	)	$	1,166
Three Months Ended June 30, 2018 (1)
External Sales	$	819	$	310	$	—		$	1,129
Intersegment Sales	35		9		(44		)	—
Total Sales	$	854	$	319	$	(44	)	$	1,129
	Commercial Truck		Aftermarket, Industrial and Trailer		Eliminations			Total
Nine Months Ended June 30, 2019
External Sales	$	2,416	$	944				$	3,360
Intersegment Sales	108		28		(136		)	—
Total Sales	$	2,524	$	972	$	(136	)	$	3,360
Nine Months Ended June 30, 2018 (1)
External Sales	$	2,254	$	844	$	—		$	3,098
Intersegment Sales	102		25		(127		)	—
Total Sales	$	2,356	$	869	$	(127	)	$	3,098

⁽¹⁾ Amounts for the three and nine months ended June 30, 2018 have been recast to reflect reportable segment changes.

Segment income attributable to parent

	Three Months Ended June 30,						Nine Months Ended June 30,
	2019			2018 (3)			2019			2018 (3)
Segment adjusted EBITDA:
Commercial Truck	$	93		$	100		$	258		$	263
Aftermarket, Industrial and Trailer	54			38			146			108
Segment adjusted EBITDA	147			138			404			371
Unallocated legacy and corporate expense, net (1)	(1		)	(3		)	—			(15		)
Interest expense, net	(14		)	(14		)	(43		)	(54		)
Provision for income taxes	(21		)	(26		)	(69		)	(131		)
Depreciation and amortization	(21		)	(22		)	(64		)	(64		)
Noncontrolling interests	(3		)	(3		)	(7		)	(8		)
Loss on sale of receivables	(2		)	(1		)	(5		)	(3		)
Asset impairment charges	(1		)	—			(1		)	(2		)
Restructuring	1			(3		)	2			(6		)
Asbestos related liability remeasurement (2)	—			—			31			—
Income from continuing operations attributable to Meritor, Inc.	$	85		$	66		$	248		$	88

⁽¹⁾  Unallocated legacy and corporate income (expense), net represents items that are not directly related to the company's business segments. These items primarily include asbestos-related charges and settlements, pension and retiree medical costs associated with sold businesses, and other legacy costs for environmental and product liability.

⁽²⁾ The nine months ended June 30, 2019 includes $31 million related to the remeasurement of the Maremont asbestos liability based on the Maremont prepackaged plan of reorganization.

⁽³⁾ 

Amounts for the three and nine months ended June 30, 2018 have been recast to reflect reportable segment changes.

Schedule of segment assets

	June 30, 2019			September 30, 2018 (3)
Segment Assets:
Commercial Truck	$	1,846		$	1,764
Aftermarket, Industrial and Trailer	609			589
Total segment assets	2,455			2,353
Corporate (1)	567			633
Less: Accounts receivable sold under off-balance sheet factoring programs (2)	(294		)	(260		)
Total assets	$	2,728		$	2,726

⁽¹⁾  Corporate assets consist primarily of cash, deferred income taxes and prepaid pension costs.

⁽²⁾  At June 30, 2019 and September 30, 2018, segment assets include $294 million and $260 million, respectively, of accounts receivable sold under off-balance sheet accounts receivable factoring programs (see Note 10). These sold receivables are included in segment assets as the CODM reviews segment assets inclusive of these balances.

⁽³⁾  Amounts as of September 30, 2018 have been recast to reflect reportable segment changes, including the reallocation of goodwill.

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Supplemental Guarantor Condensed Consolidating Financial Statements (Tables)

9 Months Ended

Jun. 30, 2019

Condensed Financial Information Disclosure [Abstract]

Schedule of condensed consolidating statement of operations

	Three Months Ended June 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	696		$	470		$	—		$	1,166
Subsidiaries	—			24			46			(70		)	—
Total sales	—			720			516			(70		)	1,166
Cost of sales	(17		)	(599		)	(441		)	70			(987		)
GROSS MARGIN	(17		)	121			75			—			179
Selling, general and administrative	(30		)	(28		)	(15		)	—			(73		)
Restructuring	—			1			—			—			1
Other operating expense, net	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(50		)	94			60			—			104
Other income (expense), net	14			(2		)	(2		)	—			10
Equity in earnings of affiliates	—			6			3			—			9
Interest income (expense), net	(32		)	11			7			—			(14		)
INCOME (LOSS) BEFORE INCOME TAXES	(68		)	109			68			—			109
Benefit (provision) for income taxes	19			(18		)	(22		)	—			(21		)
Equity income from continuing operations of subsidiaries	134			37			—			(171		)	—
INCOME FROM CONTINUING OPERATIONS	85			128			46			(171		)	88
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax	1			—			—			—			1
NET INCOME	86			128			46			(171		)	89
Less: Net income attributable to noncontrolling interests	—			—			(3		)	—			(3		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	86		$	128		$	43		$	(171	)	$	86

	Three Months Ended June 30, 2018 (1)
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	629		$	500		$	—		$	1,129
Subsidiaries	—			40			61			(101		)	—
Total sales	—			669			561			(101		)	1,129
Cost of sales	(20		)	(559		)	(481		)	101			(959		)
GROSS MARGIN	(20		)	110			80			—			170
Selling, general and administrative	(30		)	(27		)	(19		)	—			(76		)
Restructuring	(2		)	(1		)	—			—			(3		)
OPERATING INCOME (LOSS)	(52		)	82			61			—			91
Other income (expense), net	28			(15		)	(4		)	—			9
Equity in earnings of affiliates	—			6			3			—			9
Interest income (expense), net	(26		)	6			6			—			(14		)
INCOME (LOSS) BEFORE INCOME TAXES	(50		)	79			66			—			95
Benefit (provision) for income taxes	7			(13		)	(20		)	—			(26		)
Equity income from continuing operations of subsidiaries	109			39			—			(148		)	—
INCOME FROM CONTINUING OPERATIONS	66			105			46			(148		)	69
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(2		)	(2		)	(2		)	4			(2		)
NET INCOME	64			103			44			(144		)	67
Less: Net income attributable to noncontrolling interests	—			—			(3		)	—			(3		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	64		$	103		$	41		$	(144	)	$	64

⁽¹⁾ Prior period has been recast, see Note 20.

	Nine Months Ended June 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,962		$	1,398		$	—		$	3,360
Subsidiaries	—			84			154			(238		)	—
Total sales	—			2,046			1,552			(238		)	3,360
Cost of sales	(48		)	(1,723		)	(1,333		)	238			(2,866		)
GROSS MARGIN	(48		)	323			219			—			494
Selling, general and administrative	(83		)	(85		)	(12		)	—			(180		)
Restructuring	—			1			1			—			2
Other operating expense, net	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(134		)	239			208			—			313
Other income (expense), net	64			(11		)	(23		)	—			30
Equity in earnings of affiliates	—			16			8			—			24
Interest income (expense), net	(97		)	35			19			—			(43		)
INCOME (LOSS) BEFORE INCOME TAXES	(167		)	279			212			—			324
Benefit (provision) for income taxes	50			(52		)	(67		)	—			(69		)
Equity income from continuing operations of subsidiaries	365			86			—			(451		)	—
INCOME FROM CONTINUING OPERATIONS	248			313			145			(451		)	255
LOSS FROM DISCONTINUED OPERATIONS, net of tax	—			—			—			—			—
NET INCOME	248			313			145			(451		)	255
Less: Net income attributable to noncontrolling interests	—			—			(7		)	—			(7		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	248		$	313		$	138		$	(451	)	$	248

	Nine Months Ended June 30, 2018 (1)
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,663		$	1,435		$	—		$	3,098
Subsidiaries	—			107			159			(266		)	—
Total sales	—			1,770			1,594			(266		)	3,098
Cost of sales	(57		)	(1,477		)	(1,357		)	266			(2,625		)
GROSS MARGIN	(57		)	293			237			—			473
Selling, general and administrative	(90		)	(74		)	(54		)	—			(218		)
Restructuring	(2		)	(2		)	(2		)	—			(6		)
Other operating expense, net	(10		)	(1		)	(1		)	—			(12		)
OPERATING INCOME (LOSS)	(159		)	216			180			—			237
Other income (expense), net	70			(10		)	(36		)	—			24
Equity in earnings of affiliates	—			14			6			—			20
Interest income (expense), net	(91		)	21			16			—			(54		)
INCOME (LOSS) BEFORE INCOME TAXES	(180		)	241			166			—			227
Provision for income taxes	(8		)	(75		)	(48		)	—			(131		)
Equity income from continuing operations of subsidiaries	276			100			—			(376		)	—
INCOME FROM CONTINUING OPERATIONS	88			266			118			(376		)	96
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(3		)	(2		)	(2		)	4			(3		)
NET INCOME	85			264			116			(372		)	93
Less: Net income attributable to noncontrolling interests	—			—			(8		)	—			(8		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	85		$	264		$	108		$	(372	)	$	85

⁽¹⁾ Prior period has been recast, see Note 20.

Schedule of condensed consolidating statement of comprehensive income (loss)

	Three Months Ended June 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	86		$	128		$	46		$	(171	)	$	89
Other comprehensive loss, net of tax	(7		)	(2		)	(3		)	4			(8		)
Total comprehensive income	79			126			43			(167		)	81
Less: Comprehensive income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
Comprehensive income attributable to Meritor, Inc.	$	79		$	126		$	41		$	(167	)	$	79

	Three Months Ended June 30, 2018
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	64		$	103		$	44		$	(144	)	$	67
Other comprehensive loss, net of tax	(48		)	(57		)	(8		)	63			(50		)
Total comprehensive income	16			46			36			(81		)	17
Less: Comprehensive income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
Comprehensive income attributable to Meritor, Inc.	$	16		$	46		$	35		$	(81	)	$	16

	Nine Months Ended June 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	248		$	313		$	145		$	(451	)	$	255
Other comprehensive loss, net of tax	(3		)	(9		)	(11		)	20			(3		)
Total comprehensive income	245			304			134			(431		)	252
Less: Comprehensive income attributable to noncontrolling interests	—			—			(7		)	—			(7		)
Comprehensive income attributable to Meritor, Inc.	$	245		$	304		$	127		$	(431	)	$	245

	Nine Months Ended June 30, 2018
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	85		$	264		$	116		$	(372	)	$	93
Other comprehensive income (loss), net of tax	(33		)	(45		)	6			38			(34		)
Total comprehensive income	52			219			122			(334		)	59
Less: Comprehensive income attributable to noncontrolling interests	—			—			(7		)	—			(7		)
Comprehensive income attributable to Meritor, Inc.	$	52		$	219		$	115		$	(334	)	$	52

Schedule of condensed consolidating balance sheet

	June 30, 2019
	Parent		Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	27	$	5		$	79	$	—		$	111
Receivables trade and other, net	3		81			541		—			625
Inventories	—		260			231		—			491
Other current assets	4		11			17		—			32
TOTAL CURRENT ASSETS	34		357			868		—			1,259
NET PROPERTY	21		240			220		—			481
GOODWILL	—		254			167		—			421
OTHER ASSETS	147		189			231		—			567
INVESTMENTS IN SUBSIDIARIES	4,188		960			—		(5,148		)	—
TOTAL ASSETS	$	4,390	$	2,000		$	1,486	$	(5,148	)	$	2,728
CURRENT LIABILITIES:
Short-term debt	$	23	$	—		$	1	$	—		$	24
Accounts and notes payable	54		292			345		—			691
Other current liabilities	144		65			87		—			296
TOTAL CURRENT LIABILITIES	221		357			433		—			1,011
LONG-TERM DEBT	730		—			4		—			734
RETIREMENT BENEFITS	218		—			20		—			238
INTERCOMPANY PAYABLE (RECEIVABLE)	2,691		(2,856		)	165		—			—
OTHER LIABILITIES	55		118			61		—			234
MEZZANINE EQUITY	1		—			—		—			1
EQUITY ATTRIBUTABLE TO MERITOR, INC.	474		4,381			767		(5,148		)	474
NONCONTROLLING INTERESTS	—		—			36		—			36
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY	$	4,390	$	2,000		$	1,486	$	(5,148	)	$	2,728

	September 30, 2018
	Parent		Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	24	$	6		$	85	$	—		$	115
Receivables trade and other, net	2		62			524		—			588
Inventories	—		242			235		—			477
Other current assets	6		12			28		—			46
TOTAL CURRENT ASSETS	32		322			872		—			1,226
NET PROPERTY	24		241			218		—			483
GOODWILL	—		250			171		—			421
OTHER ASSETS	179		182			235		—			596
INVESTMENTS IN SUBSIDIARIES	3,583		855			—		(4,438		)	—
TOTAL ASSETS	$	3,818	$	1,850		$	1,496	$	(4,438	)	$	2,726
CURRENT LIABILITIES:
Short-term debt	$	47	$	—		$	47	$	—		$	94
Accounts and notes payable	64		297			339		—			700
Other current liabilities	77		71			142		—			290
TOTAL CURRENT LIABILITIES	188		368			528		—			1,084
LONG-TERM DEBT	726		—			4		—			730
RETIREMENT BENEFITS	241		—			21		—			262
INTERCOMPANY PAYABLE (RECEIVABLE)	2,325		(2,640		)	315		—			—
OTHER LIABILITIES	50		124			158		—			332
MEZZANINE EQUITY	1		—			—		—			1
EQUITY ATTRIBUTABLE TO MERITOR, INC.	287		3,998			440		(4,438		)	287
NONCONTROLLING INTERESTS	—		—			30		—			30
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY	$	3,818	$	1,850		$	1,496	$	(4,438	)	$	2,726

Schedule of condensed consolidating statement of cash flows

	Nine Months Ended June 30, 2019
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY OPERATING ACTIVITIES	$	8		$	32		$	154		$	—	$	194
INVESTING ACTIVITIES
Capital expenditures	(2		)	(32		)	(29		)	—		(63		)
Cash paid for investment in Transportation Power, Inc.	(6		)	—			—			—		(6		)
Proceeds from settlement of cross-currency swaps	17			—			—			—		17
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	9			(32		)	(29		)	—		(52		)
FINANCING ACTIVITIES
Borrowings and securitization	—			—			(46		)	—		(46		)
Redemption of notes	(24		)	—			—			—		(24		)
Deferred issuance costs	(4		)	—			—			—		(4		)
Repurchase of common stock	(71		)	—			—			—		(71		)
Intercompany advances	86			—			(86		)	—		—
Other financing activities	(1		)	(1		)	—			—		(2		)
CASH USED FOR FINANCING ACTIVITIES	(14		)	(1		)	(132		)	—		(147		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	3			(1		)	(6		)	—		(4		)
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	24			6			85			—		115
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	27		$	5		$	79		$	—	$	111

	Nine Months Ended June 30, 2018
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR)        OPERATING ACTIVITIES	$	(26	)	$	31		$	186		$	—	$	191
INVESTING ACTIVITIES
Capital expenditures	(3		)	(25		)	(24		)	—		(52		)
Proceeds from sale of a business	4			—			—			—		4
Proceeds from prior year sale of equity method investment	250			—			—			—		250
Cash paid for investment in Transportation Power, Inc.	(6		)	—			—			—		(6		)
Cash paid for acquisition of AA Gear & Manufacturing, Inc.	(36		)	—			—			—		(36		)
Proceeds from sale of assets	—			—			2			—		2
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	209			(25		)	(22		)	—		162
FINANCING ACTIVITIES
Borrowings and securitization	—			—			(89		)	—		(89		)
Redemption of notes	(181		)	—			—			—		(181		)
Repurchase of common stock	(63		)	—			—			—		(63		)
Intercompany advances	67			—			(67		)	—		—
Other financing activities	(1		)	(2		)	—			—		(3		)
CASH USED FOR FINANCING ACTIVITIES	(178		)	(2		)	(156		)	—		(336		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			(5		)	—		(5		)
CHANGE IN CASH AND CASH EQUIVALENTS	5			4			3			—		12
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	10			3			75			—		88
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	15		$	7		$	78		$	—	$	100

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Earnings per Share - Reconciliation of common shares (Details) - shares shares in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share [Abstract]
Basic average common shares outstanding (in shares)	83.0	87.2	83.7	88.1
Impact of restricted shares, restricted share units and performance share units (in shares)	1.7	1.7	2.1	2.1
Impact of convertible notes (in shares)	0.9	0.9	0.8	1.0
Diluted average common shares outstanding (in shares)	85.6	89.8	86.6	91.2

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Earnings per Share - Additional information (Details) - USD ($) $ / shares in Units, $ in Millions			1 Months Ended		3 Months Ended		9 Months Ended
	Dec. 01, 2018	Dec. 01, 2015	Nov. 30, 2018	Nov. 30, 2015	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Impact of restricted shares, restricted share units and performance share units (in shares)					1,700,000	1,700,000	2,100,000	2,100,000
Share-based compensation expense					$ 5	$ 4	$ 13	$ 14
Impact of convertible notes (in shares)					900,000	900,000	800,000	1,000,000.0
Convertible Notes Payable | 7.875% Convertible Notes Due 2026
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Interest rate					7.875%		7.875%
Executive Officer
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number or shares issuable per performance share unit (in shares)	1			1
Executive Officer | Performance Shares
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Exercise price (in usd per share)	$ 16.50	$ 10.51
Executive Officer | Performance Shares | Performance period of October 1, 2018 to September 30, 2021
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance period			3 years
Shares authorized for grant (in shares)			500,000
Executive Officer | Performance Shares | Performance period of October 1, 2018 to September 30, 2021 | Minimum
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance-based vesting percentage							0.00%
Executive Officer | Performance Shares | Performance period of October 1, 2018 to September 30, 2021 | Maximum
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance-based vesting percentage							200.00%
Executive Officer | Performance Shares | Performance period of October 1, 2018 to September 30, 2021 | Performance Objective One
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Award vesting rights percentage							50.00%
Executive Officer | Performance Shares | Performance period of October 1, 2018 to September 30, 2021 | Performance Objective Two
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Award vesting rights percentage							50.00%
Executive Officer | Performance Shares | Performance period of October 1, 2015 to September 30, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance period				3 years
Executive Officer | Restricted Share Units (RSUs)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Exercise price (in usd per share)		$ 10.51
Shares granted (in shares)			400,000	500,000
Vesting period	3 years	3 years

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Revenue (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
Disaggregation of Revenue [Line Items]
Sales	$ 1,166	$ 1,129	$ 3,360	$ 3,098
Trade receivables, net	611		611		$ 566
U.S.
Disaggregation of Revenue [Line Items]
Sales	697		1,963
Canada
Disaggregation of Revenue [Line Items]
Sales	18		53
Mexico
Disaggregation of Revenue [Line Items]
Sales	66		186
Total North America
Disaggregation of Revenue [Line Items]
Sales	781		2,202
Sweden
Disaggregation of Revenue [Line Items]
Sales	75		223
Italy
Disaggregation of Revenue [Line Items]
Sales	66		191
United Kingdom
Disaggregation of Revenue [Line Items]
Sales	43		134
Other Europe
Disaggregation of Revenue [Line Items]
Sales	19		63
Total Europe
Disaggregation of Revenue [Line Items]
Sales	203		611
Brazil
Disaggregation of Revenue [Line Items]
Sales	67		180
China
Disaggregation of Revenue [Line Items]
Sales	44		129
India
Disaggregation of Revenue [Line Items]
Sales	53		172
Other Asia-Pacific
Disaggregation of Revenue [Line Items]
Sales	18		66
Commercial Truck & Trailer
Disaggregation of Revenue [Line Items]
Sales	835		2,416
Commercial Truck & Trailer | U.S.
Disaggregation of Revenue [Line Items]
Sales	419		1,182
Commercial Truck & Trailer | Canada
Disaggregation of Revenue [Line Items]
Sales	0		0
Commercial Truck & Trailer | Mexico
Disaggregation of Revenue [Line Items]
Sales	54		151
Commercial Truck & Trailer | Total North America
Disaggregation of Revenue [Line Items]
Sales	473		1,333
Commercial Truck & Trailer | Sweden
Disaggregation of Revenue [Line Items]
Sales	75		223
Commercial Truck & Trailer | Italy
Disaggregation of Revenue [Line Items]
Sales	62		178
Commercial Truck & Trailer | United Kingdom
Disaggregation of Revenue [Line Items]
Sales	40		126
Commercial Truck & Trailer | Other Europe
Disaggregation of Revenue [Line Items]
Sales	3		9
Commercial Truck & Trailer | Total Europe
Disaggregation of Revenue [Line Items]
Sales	180		536
Commercial Truck & Trailer | Brazil
Disaggregation of Revenue [Line Items]
Sales	67		180
Commercial Truck & Trailer | China
Disaggregation of Revenue [Line Items]
Sales	44		129
Commercial Truck & Trailer | India
Disaggregation of Revenue [Line Items]
Sales	53		172
Commercial Truck & Trailer | Other Asia-Pacific
Disaggregation of Revenue [Line Items]
Sales	18		66
Aftermarket & Industrial
Disaggregation of Revenue [Line Items]
Sales	331		944
Aftermarket & Industrial | U.S.
Disaggregation of Revenue [Line Items]
Sales	278		781
Aftermarket & Industrial | Canada
Disaggregation of Revenue [Line Items]
Sales	18		53
Aftermarket & Industrial | Mexico
Disaggregation of Revenue [Line Items]
Sales	12		35
Aftermarket & Industrial | Total North America
Disaggregation of Revenue [Line Items]
Sales	308		869
Aftermarket & Industrial | Sweden
Disaggregation of Revenue [Line Items]
Sales	0		0
Aftermarket & Industrial | Italy
Disaggregation of Revenue [Line Items]
Sales	4		13
Aftermarket & Industrial | United Kingdom
Disaggregation of Revenue [Line Items]
Sales	3		8
Aftermarket & Industrial | Other Europe
Disaggregation of Revenue [Line Items]
Sales	16		54
Aftermarket & Industrial | Total Europe
Disaggregation of Revenue [Line Items]
Sales	23		75
Aftermarket & Industrial | Brazil
Disaggregation of Revenue [Line Items]
Sales	0		0
Aftermarket & Industrial | China
Disaggregation of Revenue [Line Items]
Sales	0		0
Aftermarket & Industrial | India
Disaggregation of Revenue [Line Items]
Sales	0		0
Aftermarket & Industrial | Other Asia-Pacific
Disaggregation of Revenue [Line Items]
Sales	$ 0		$ 0

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Discontinued Operations (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Discontinued Operations and Disposal Groups [Abstract]
Sales	$ 0	$ 0	$ 0	$ 0
Income (loss) before income taxes	1	(2)	0	(4)
Benefit from income taxes	0	0	0	1
Income (loss) from discontinued operations attributable to Meritor, Inc.	$ 1	$ (2)	$ 0	$ (3)

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Goodwill - Additional Information (Details) $ in Millions		9 Months Ended
	Apr. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) unit segment	Sep. 30, 2018 USD ($)
Goodwill [Line Items]
Goodwill from acquisition		$ 421	$ 421
Number of reportable segments | segment		2
Aftermarket, Industrial and Trailer
Goodwill [Line Items]
Goodwill from acquisition		$ 158	155
Goodwill tax deductible period	15 years
Number of reporting units | unit		4
Commercial Truck
Goodwill [Line Items]
Goodwill from acquisition		$ 263	$ 266
Number of reporting units | unit		1
AA Gear & Manufacturing, Inc.
Goodwill [Line Items]
Purchase price	$ 35
Goodwill from acquisition	$ 12

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Goodwill - Changes in the Carrying Value of Goodwill (Details) - USD ($) $ in Millions		9 Months Ended
	Sep. 30, 2018	Jun. 30, 2019
Goodwill [Line Items]
Goodwill	$ 436
Accumulated impairment losses	(15)
Goodwill [Roll Forward]
Goodwill net, Beginning balance		$ 421
AAG measurement period adjustment (see Note 9)		3
Foreign currency translation		(3)
Goodwill net, Ending balance	421	421
Commercial Truck
Goodwill [Line Items]
Goodwill	266
Accumulated impairment losses	0
Goodwill [Roll Forward]
Goodwill net, Beginning balance		266
AAG measurement period adjustment (see Note 9)		0
Foreign currency translation		(3)
Goodwill net, Ending balance	266	263
Aftermarket, Industrial and Trailer
Goodwill [Line Items]
Goodwill	170
Accumulated impairment losses	(15)
Goodwill [Roll Forward]
Goodwill net, Beginning balance		155
AAG measurement period adjustment (see Note 9)		3
Foreign currency translation		0
Goodwill net, Ending balance	$ 155	$ 158

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Restructuring Costs (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
Restructuring Reserve [Roll Forward]
Beginning balance			$ 4	$ 6
Charges to continuing operations	$ (1)	$ 3	(2)	6
Cash payments – continuing operations			(2)	(7)
Other			1
Ending balance	1	5	1	5
Less: non-current restructuring reserves	0	(1)	0	(1)	$ (1)
Restructuring reserves – current	1	4	1	4	$ 3
Employee Termination Benefits
Restructuring Reserve [Roll Forward]
Beginning balance			4	5
Charges to continuing operations			(2)	6
Cash payments – continuing operations			(2)	(6)
Other			1
Ending balance	1	5	1	5
Less: non-current restructuring reserves	0	(1)	0	(1)
Restructuring reserves – current	1	4	1	4
Plant Shutdown & Other
Restructuring Reserve [Roll Forward]
Beginning balance			0	1
Charges to continuing operations			0	0
Cash payments – continuing operations			0	(1)
Other			0
Ending balance	0	0	0	0
Less: non-current restructuring reserves	0	0	0	0
Restructuring reserves – current	$ 0	$ 0	$ 0	$ 0

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Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended				9 Months Ended
	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2019	Jun. 30, 2018
Income Tax Disclosure [Abstract]
Transition tax non-cash charge				$ 77
Income tax net benefit recorded		$ 7
Transition tax refinement benefit		11
Income tax expense for refinement of other adjustments		$ 4
Income tax benefit for refinement of other adjustments	$ 2
Net pre-tax income (loss) tax benefit not recorded	$ 4		$ 7		$ 12	$ 20

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Acquisition and Divestiture (Details) - USD ($) $ in Millions			9 Months Ended
	Jul. 26, 2019	Apr. 30, 2018	Jun. 30, 2019	Jul. 29, 2019
Business Acquisition [Line Items]
Increase to goodwill			$ 3
AA Gear & Manufacturing, Inc.
Business Acquisition [Line Items]
Purchase price		$ 35
Decrease to finite lived intangible assets			4
Increase to accounts receivable			1
Increase to goodwill			3
Subsequent Event | AxleTech
Business Acquisition [Line Items]
Percentage of shares acquired	100.00%
Purchase price	$ 175
Aftermarket, Industrial and Trailer
Business Acquisition [Line Items]
Increase to goodwill			$ 3
Aftermarket, Industrial and Trailer | Subsequent Event | AxleTech
Business Acquisition [Line Items]
Total restructuring costs expected				$ 11
Aftermarket, Industrial and Trailer | Employee Severance Charges | Subsequent Event | AxleTech
Business Acquisition [Line Items]
Total restructuring costs expected				7
Aftermarket, Industrial and Trailer | Lease Termination | Subsequent Event | AxleTech
Business Acquisition [Line Items]
Total restructuring costs expected				$ 4

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Accounts Receivable Factoring and Securitization (Details) € in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 EUR (€)	Jun. 30, 2019 USD ($)	Sep. 30, 2018 EUR (€)	Sep. 30, 2018 USD ($)
Accounts Receivable Factoring And Securitization [Line Items]
Maximum limit for securitization financing arrangement						$ 110
Utilization of securitization financing arrangement						3		$ 57
Maximum limit for sale of eligible trade receivables					€ 210	313
Utilization of accounts receivable factoring facility under arrangement					198	294	€ 224	260
Costs associated with off balance sheet factoring arrangements	$ 2	$ 1	$ 5	$ 3
Committed U.S. accounts receivable securitization
Accounts Receivable Factoring And Securitization [Line Items]
Maximum limit for securitization financing arrangement						110
Utilization of securitization financing arrangement						3		57
Debt-to-EBITDA ratio			2.25
Committed U.S. accounts receivable securitization | Letter of Credit
Accounts Receivable Factoring And Securitization [Line Items]
Letters of credit outstanding						3		11
Committed Swedish factoring facility
Accounts Receivable Factoring And Securitization [Line Items]
Maximum limit for sale of eligible trade receivables					155	176
Utilization of accounts receivable factoring facility under arrangement					140	160	136	158
Liquidity commitment			364 days
Committed U.S. factoring facility (2)
Accounts Receivable Factoring And Securitization [Line Items]
Maximum limit for sale of eligible trade receivables						75
Utilization of accounts receivable factoring facility under arrangement						70	45	53
Uncommitted U.K. factoring facility
Accounts Receivable Factoring And Securitization [Line Items]
Maximum limit for sale of eligible trade receivables					25	28
Utilization of accounts receivable factoring facility under arrangement					10	11	8	9
Uncommitted Italy factoring facility
Accounts Receivable Factoring And Securitization [Line Items]
Maximum limit for sale of eligible trade receivables					30	34
Utilization of accounts receivable factoring facility under arrangement					30	34	24	28
Other uncommitted factoring facilities (4)
Accounts Receivable Factoring And Securitization [Line Items]
Utilization of accounts receivable factoring facility under arrangement					€ 18	$ 19	€ 11	$ 12

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Operating Cash Flows (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
OPERATING ACTIVITIES
NET INCOME	$ 89	$ 67	$ 255	$ 93
Less: Loss from discontinued operations, net of tax	1	(2)	0	(3)
Income from continuing operations	88	69	255	96
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization			64	64
Deferred income tax expense			27	92
Loss on debt extinguishment			0	8
Restructuring costs	(1)	3	(2)	6
Asset impairment charges			1	2
Equity in earnings of affiliates	$ (9)	$ (9)	(24)	(20)
Pension and retiree medical income			(28)	(23)
Asbestos related liability remeasurement			(31)	0
Other adjustments to income from continuing operations			13	13
Dividends received from equity method investments			14	9
Pension and retiree medical contributions			(12)	(17)
Restructuring payments			(2)	(7)
Changes in off-balance sheet accounts receivable securitization and factoring programs			41	65
Changes in receivables, inventories and accounts payable			(96)	(136)
Changes in other current assets and liabilities			(21)	26
Changes in other assets and liabilities			(3)	12
Operating cash flows provided by continuing operations			196	190
Operating cash flows provided by (used for) discontinued operations			(2)	1
CASH PROVIDED BY OPERATING ACTIVITIES			$ 194	$ 191

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Inventories (Details) - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
Inventory Disclosure [Abstract]
Finished goods	$ 154	$ 170
Work in process	42	41
Raw materials, parts and supplies	295	266
Total inventories	$ 491	$ 477

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Other Current Assets (Details) - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
Other Current Assets Disclosure [Abstract]
Asbestos-related recoveries (see Note 21)	$ 8	$ 16
Prepaid and other	24	30
Other current assets	$ 32	$ 46

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Net Property (Details) - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
Property, Plant and Equipment [Line Items]
Property at cost	$ 1,388	$ 1,382
Less: accumulated depreciation	(907)	(899)
Net property	481	483
Land and land improvements
Property, Plant and Equipment [Line Items]
Property at cost	30	29
Buildings
Property, Plant and Equipment [Line Items]
Property at cost	228	228
Machinery and equipment
Property, Plant and Equipment [Line Items]
Property at cost	928	914
Company-owned tooling
Property, Plant and Equipment [Line Items]
Property at cost	136	130
Construction in progress
Property, Plant and Equipment [Line Items]
Property at cost	$ 66	$ 81

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Other Assets - Summary of Other Assets (Details) - USD ($) $ in Millions	9 Months Ended
	Jun. 30, 2019	Sep. 30, 2018
Other Assets, Noncurrent [Abstract]
Investments in non-consolidated joint ventures	$ 113	$ 102
Asbestos-related recoveries (see Note 21)	57	76
Unamortized revolver debt issuance costs	8	7
Capitalized software costs, net	20	26
Deferred income tax assets, net	113	140
Assets for uncertain tax positions	52	53
Prepaid pension costs	166	152
Intangible assets	13	18
Other	25	22
Other assets	567	596
Customer Relationships
Finite-Lived Intangible Assets [Line Items]
Gross carrying value of intangible assets	18	22
Accumulated amortization	$ 5	$ 4
Weighted average amortization period	19 years

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Other Assets - Additional information (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Variable Interest Entity, Not Primary Beneficiary
Schedule of Equity Method Investments [Line Items]
Strategic investment	$ 3	$ 3		$ 3	$ 3
Maximum exposure to loss	12		$ 6
Equity Method Joint Venture
Schedule of Equity Method Investments [Line Items]
Investments in joint venture	$ 68		$ 63

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Other Current Liabilities - Summary of other current liabilities (Details) - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018	Jun. 30, 2018
Other Current Liabilities Disclosure [Abstract]
Compensation and benefits	$ 108	$ 122
Income taxes	12	27
Taxes other than income taxes	17	25
Accrued interest	14	11
Product warranties	18	19	$ 18
Environmental reserves (see Note 21)	8	8
Restructuring (see Note 7)	1	3	$ 4
Asbestos-related liabilities (see Note 21)	9	18
Indemnity obligations	1	1
Accrued payable to Maremont (see Note 21)	48	0
Other	60	56
Other current liabilities	$ 296	$ 290

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Other Current Liabilities - Summary of changes in product warranties (Details) - USD ($) $ in Millions	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
Movement in Standard Product Warranty Accrual [Roll Forward]
Total product warranties – beginning of period	$ 54	$ 45
Accruals for product warranties	21	14
Payments	(18)	(12)
Change in estimates and other	(5)	4
Total product warranties – end of period	52	51
Less: Non-current product warranties	(34)	(33)	$ (35)
Product warranties – current	$ 18	$ 18	$ 19

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Other Liabilities (Details) - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018	Jun. 30, 2018
Other Liabilities Disclosure [Abstract]
Asbestos-related liabilities (see Note 21)	$ 91	$ 193
Restructuring (see Note 7)	0	1	$ 1
Non-current deferred income tax liabilities	16	16
Liabilities for uncertain tax positions	48	48
Product warranties (see Note 16)	34	35	$ 33
Environmental (see Note 21)	7	9
Indemnity obligations	8	9
Other	30	21
Other liabilities	$ 234	$ 332

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Long-Term Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
Debt Instrument [Line Items]
Capital lease obligation	$ 7	$ 7
Subtotal	758	824
Less: current maturities	(24)	(94)
Long-term debt	734	730
Unamortized issuance cost	8	7
Convertible Notes Payable
Debt Instrument [Line Items]
Unamortized discount on convertible notes	(34)	(37)
3.25% convertible notes due 2037 | Convertible Notes Payable
Debt Instrument [Line Items]
Debt	$ 319	318
Interest rate	3.25%
Unamortized issuance cost	$ 6	7
4.0% convertible notes due 2027 | Convertible Notes Payable
Debt Instrument [Line Items]
Debt	$ 0	$ 24
Interest rate	4.00%	4.00%
7.875% Convertible Notes Due 2026 | Convertible Notes Payable
Debt Instrument [Line Items]
Debt	$ 22	$ 22
Interest rate	7.875%
Original issuance discount	$ 1	1
6.25% notes due 2024
Debt Instrument [Line Items]
Debt	$ 444	444
Interest rate	6.25%
Unamortized issuance cost	$ 6	6
Borrowings and securitization
Debt Instrument [Line Items]
Borrowings and securitization	$ 0	$ 46

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Long-Term Debt - Repurchases of Debt Securities (Details) - Convertible Notes Payable - 4.0% convertible notes due 2027 - USD ($)	Feb. 15, 2019	Jun. 30, 2019	Jun. 07, 2019	Sep. 30, 2018
Debt Instrument [Line Items]
Principal amount of convertible notes repurchased	$ 19,000,000	$ 5,000,000	$ 5,000,000
Interest rate		4.00%		4.00%
Redemption price	100.00%

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Long-Term Debt - Current Classification of Notes (Details) - Convertible Notes Payable		9 Months Ended
	Feb. 15, 2019	Jun. 30, 2019 USD ($) trading_day $ / shares	Sep. 30, 2018 USD ($)
7.875% Convertible Notes Due 2026
Debt Instrument [Line Items]
Interest rate		7.875%
Trading days | trading_day		20
Consecutive trading days | trading_day		30
Conversion price threshold percentage		120.00%
Principle amount of debt | $			$ 23,000,000
Permanent equity reclassified as mezzanine equity | $		$ 1,000,000	$ 1,000,000
7.875% Convertible Notes Due 2026 | Redemption Period One
Debt Instrument [Line Items]
Conversion ratio of common stock per principal		83.3333
Conversion price (in usd per share) | $ / shares		$ 12.00
4.0% convertible notes due 2027
Debt Instrument [Line Items]
Interest rate		4.00%	4.00%
Redemption price	100.00%

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Long-Term Debt - Revolving Credit Facility (Details)	9 Months Ended
	Jun. 30, 2019 USD ($)	Nov. 30, 2023 USD ($)	Jun. 07, 2019 USD ($)	Sep. 30, 2018 USD ($)
6.25% notes due 2024
Line of Credit Facility [Line Items]
Interest rate	6.25%
Revolving Credit Facility
Line of Credit Facility [Line Items]
Borrowings outstanding	$ 0			$ 0
Letters of credit outstanding	$ 0			$ 0
Revolving Credit Facility | LIBOR
Line of Credit Facility [Line Items]
Basis spread on variable rate	200.00%
Unused capacity, commitment fee percentage	30.00%
Revolving Credit Facility | Triggering Event One
Line of Credit Facility [Line Items]
Debt-to-EBITDA ratio	2.25
Revolving Credit Facility | Amended Revolving Credit Facility
Line of Credit Facility [Line Items]
Maximum borrowing capacity			$ 625,000,000
Maximum limit on issuance, letters of credit	$ 100,000,000
Revolving Credit Facility | Overnight Revolving Credit Loans | Prime Rate
Line of Credit Facility [Line Items]
Basis spread on variable rate	100.00%
Term Loan Facility | Line of Credit | Amended Revolving Credit Facility
Line of Credit Facility [Line Items]
Principle amount of debt			$ 175,000,000
Forecast | 6.25% notes due 2024
Line of Credit Facility [Line Items]
Borrowings outstanding		$ 75,000,000

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Long-Term Debt - Capital Leases (Details) - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
Debt Instrument [Line Items]
Outstanding capital lease obligations	$ 7	$ 7
Other Capital Lease Arrangements
Debt Instrument [Line Items]
Outstanding capital lease obligations	$ 7	$ 7

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Long-Term Debt - Letter of Credit Facilities (Details) - USD ($)	Jun. 30, 2019	Sep. 30, 2018	Feb. 21, 2014
Other Letters of Credit Arrangements
Line of Credit Facility [Line Items]
Letters of credit outstanding	$ 12,000,000	$ 19,000,000
Standby Letters of Credit
Line of Credit Facility [Line Items]
Maximum limit on issuance, letters of credit			$ 25,000,000
Letters of credit outstanding		$ 1,000,000

XML

Long-Term Debt - Other (Details) - China - Notes Payable to Banks - Other Export Financing Arrangements - USD ($)	Jun. 30, 2019	Sep. 30, 2018
Debt Instrument [Line Items]
Debt default, amount	$ 35,000,000
Long-term debt outstanding	$ 25,000,000	$ 22,000,000

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Financial Instruments - Fair Value of Financial Instruments (Details) - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 111	$ 115
Short-term debt	24	94
Long-term debt	734	730
Carrying Value | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other assets)	1	2
Foreign contracts and cross-currency swaps (other liabilities)	1	0
Carrying Value | Foreign currency option contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other assets)	0	0
Carrying Value | Cross-currency swaps
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other assets)	0	6
Foreign contracts and cross-currency swaps (other liabilities)	5	0
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	111	115
Short-term debt	51	116
Long-term debt	806	776
Fair Value | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other assets)	1	2
Foreign contracts and cross-currency swaps (other liabilities)	1	0
Fair Value | Foreign currency option contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other assets)	0	0
Fair Value | Cross-currency swaps
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other assets)	0	6
Foreign contracts and cross-currency swaps (other liabilities)	$ 5	$ 0

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Financial Instruments - Offsetting of Derivative Assets and Liabilities (Details) - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
Foreign exchange forward contracts
Derivative Assets
Gross Amounts Recognized	$ 1	$ 2
Gross Amounts Offset	0	0
Net Amounts Reported	1	2
Derivative Liabilities
Gross Amounts Recognized	1	0
Gross Amounts Offset	0	0
Net Amounts Reported	1	0
Cross-currency swaps
Derivative Assets
Gross Amounts Recognized	0	6
Gross Amounts Offset	0	0
Net Amounts Reported	0	6
Derivative Liabilities
Gross Amounts Recognized	5	0
Gross Amounts Offset	0	0
Net Amounts Reported	$ 5	$ 0

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Financial Instruments - Fair Value of Financial Instruments by Valuation Hierarchy (Details) - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 111	$ 115
Short-term debt	0	0
Long-term debt	0	0
Level 1 | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other assets)	0	0
Foreign contracts and cross-currency swaps (other liabilities)	0	0
Level 1 | Foreign currency option contracts | Short-term
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other assets)	0	0
Level 1 | Cross-currency swaps
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other liabilities)	0
Level 1 | Cross-currency swaps | Short-term
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other assets)	0	0
Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	0	0
Short-term debt	49	114
Long-term debt	801	771
Level 2 | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other assets)	1	2
Foreign contracts and cross-currency swaps (other liabilities)	0	0
Level 2 | Foreign currency option contracts | Short-term
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other assets)	0	0
Level 2 | Cross-currency swaps
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other liabilities)	5
Level 2 | Cross-currency swaps | Short-term
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other assets)	0	6
Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	0	0
Short-term debt	2	2
Long-term debt	5	5
Level 3 | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other assets)	0	0
Foreign contracts and cross-currency swaps (other liabilities)	1	0
Level 3 | Foreign currency option contracts | Short-term
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other assets)	0	0
Level 3 | Cross-currency swaps
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other liabilities)	0
Level 3 | Cross-currency swaps | Short-term
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign contracts and cross-currency swaps (other assets)	$ 0	$ 0

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Financial Instruments - Additional Information (Details) - USD ($)	3 Months Ended	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Sep. 30, 2018	Jun. 30, 2018
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Cash equivalents	$ 0	$ 0	$ 0
Foreign currency option contracts | India, Rupees
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Foreign currency contract, notional amount	114,000,000	114,000,000	180,000,000
Foreign currency option contracts | Euro
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Foreign currency contract, notional amount	12,000,000	12,000,000	0
Foreign currency option contracts | Swedish, Krona
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Foreign currency contract, notional amount	18,000,000	18,000,000	0
Foreign currency option contracts | Korea (South), Won
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Foreign currency contract, notional amount	48,000,000	48,000,000	41,000,000
Foreign currency option contracts | Brazil, Brazil Real
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Foreign currency contract, notional amount	0	0	16,000,000
Cross-currency swaps
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Foreign currency contract, notional amount	225,000,000	225,000,000	225,000,000	$ 225,000,000
Proceeds from unwinding of swaps	19,000,000
Net accrued interest receivable	2,000,000	$ 2,000,000
Cash Flow Hedging | Designated as Hedging Instrument | Foreign exchange forward contracts
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Term of foreign exchange forward contract		18 months
Foreign currency contract, notional amount	$ 118,000,000	$ 118,000,000	$ 154,000,000

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Retirement Benefit Liabilities - Summary of retirement benefits (Details) - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
Retirement Benefits [Abstract]
Retiree medical liability	$ 79	$ 86
Pension liability	163	182
Other	15	13
Subtotal	257	281
Less: current portion (included in compensation and benefits, Note 16)	(19)	(19)
Retirement benefits	$ 238	$ 262

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Retirement Benefit Liabilities - Components of net periodic pension and retiree medical income (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Pension
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Interest cost	$ 13	$ 14	$ 40	$ 41
Assumed return on plan assets	(24)	(25)	(73)	(74)
Amortization of prior service costs	0	0	0	0
Recognized actuarial loss	6	7	17	21
Total income	(5)	(4)	(16)	(12)
Retiree Medical
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Interest cost	1	1	2	2
Assumed return on plan assets	0	0	0	0
Amortization of prior service costs	(9)	(9)	(26)	(26)
Recognized actuarial loss	4	5	12	13
Total income	$ (4)	$ (3)	$ (12)	$ (11)

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Retirement Benefit Liabilities - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Retirement Benefits [Abstract]
Non-service cost components of the net periodic pension and OPEB income	$ 9	$ 7	$ 28	$ 23

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Contingencies - Additional Information (Details)	3 Months Ended	9 Months Ended
	Dec. 31, 2018 USD ($)	Jun. 30, 2019 USD ($) site claim	Jun. 30, 2018 USD ($)	Jan. 22, 2019 USD ($)	Sep. 30, 2018 USD ($) claim
Loss Contingencies [Line Items]
Environmental accrual balance		$ 15,000,000			$ 17,000,000
Discounted amount environmental accrual for on-going operations maintenance and monitoring		13,000,000
Undiscounted amount environmental accrual for on-going operations maintenance and monitoring		14,000,000
Asbestos related liability remeasurement income		31,000,000	$ 0
Other current liabilities		296,000,000			$ 290,000,000
Maremont Asbestos
Loss Contingencies [Line Items]
Number of pending claims | claim					1,700
Damages sought	$ 51,000,000
Asbestos related liability remeasurement income	$ 31,000,000	$ 31,000,000
Fair value of investment under cost method				$ 0
Other current liabilities				$ 48,000,000
Obligation period for asbestos personal injury claims		41 years
Pending and future claims					$ 107,000,000
Estimated insurance recoveries					$ 24,000,000
Rockwell Asbestos
Loss Contingencies [Line Items]
Number of pending claims | claim		1,400			1,400
Pending and future claims		$ 100,000,000			$ 103,000,000
Estimated insurance recoveries		$ 65,000,000			68,000,000
Low Range
Loss Contingencies [Line Items]
Site contingency, accrual, discount rate		2.25%
Low Range | Maremont Asbestos
Loss Contingencies [Line Items]
Possible loss					107,000,000
Low Range | Rockwell Asbestos
Loss Contingencies [Line Items]
Possible loss					103,000,000
High Range
Loss Contingencies [Line Items]
Site contingency, accrual, discount rate		3.00%
High Range | Maremont Asbestos
Loss Contingencies [Line Items]
Possible loss					195,000,000
High Range | Rockwell Asbestos
Loss Contingencies [Line Items]
Possible loss					186,000,000
Superfund Sites
Loss Contingencies [Line Items]
Number of Superfund environmental sites | site		10
Environmental costs reasonably possible		$ 23,000,000
Environmental accrual balance		11,000,000			12,000,000
Non-Superfund Sites
Loss Contingencies [Line Items]
Environmental costs reasonably possible		13,000,000
Environmental accrual balance		$ 4,000,000			$ 5,000,000

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Contingencies - Summary of environmental reserves (Details) $ in Millions	9 Months Ended
	Jun. 30, 2019 USD ($)
Accrual for Environmental Loss Contingencies [Roll Forward]
Beginning balance	$ 17
Payments and other	(5)
Accruals	3
Ending balance	15
Superfund Sites
Accrual for Environmental Loss Contingencies [Roll Forward]
Beginning balance	12
Payments and other	(3)
Accruals	2
Ending balance	11
Non-Superfund Sites
Accrual for Environmental Loss Contingencies [Roll Forward]
Beginning balance	5
Payments and other	(2)
Accruals	1
Ending balance	$ 4

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Shareholders' Equity - Common Stock and Debt Repurchase Authorizations (Details) - USD ($) shares in Millions	3 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Jul. 26, 2019	Jun. 07, 2019	Feb. 15, 2019	Nov. 02, 2018	Sep. 30, 2018	Jul. 21, 2016
Class of Stock [Line Items]
Dividends declared or paid	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0
Debt Securities
Class of Stock [Line Items]
Debt repurchase program, amount authorized										$ 100,000,000		$ 150,000,000
Remaining authorized repurchase amount under debt repurchase	$ 76,000,000										$ 50,000,000
Common Stock
Class of Stock [Line Items]
Authorized repurchase of securities, with debt reduction target										$ 200,000,000		$ 100,000,000
Stock repurchased during the period (in shares)	1.0		3.0
Stock repurchased during period	$ 21,000,000		$ 50,000,000
Remaining authorized repurchase amount under the stock repurchase program	130,000,000
4.0% convertible notes due 2027 | Convertible Notes Payable
Class of Stock [Line Items]
Principal amount of convertible notes repurchased	$ 5,000,000							$ 5,000,000	$ 19,000,000
Interest rate	4.00%										4.00%
Subsequent Event | Common Stock
Class of Stock [Line Items]
Authorized repurchase of securities, with debt reduction target							$ 250,000,000

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Shareholders' Equity - Schedule of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	$ (562)	$ (530)	$ (566)	$ (545)
Other comprehensive income before reclassification	(6)	(51)	(4)	(41)
Amounts reclassified from accumulated other comprehensive loss	(1)	3	1	8
Net current-period other comprehensive income	(7)	(48)	(3)	(33)
Ending balance	(569)	(578)	(569)	(578)
Foreign Currency Translation
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(87)	(35)	(90)	(41)
Other comprehensive income before reclassification	(6)	(52)	(3)	(46)
Amounts reclassified from accumulated other comprehensive loss	0	0	0	0
Net current-period other comprehensive income	(6)	(52)	(3)	(46)
Ending balance	(93)	(87)	(93)	(87)
Employee Benefit Related Adjustments
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(475)	(494)	(476)	(500)
Other comprehensive income before reclassification	0	0	(1)	1
Amounts reclassified from accumulated other comprehensive loss	1	3	3	8
Net current-period other comprehensive income	1	3	2	9
Ending balance	(474)	(491)	(474)	(491)
Unrealized Income (Loss) on cash flow hedges
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	0	(1)	0	(4)
Other comprehensive income before reclassification	0	1	0	4
Amounts reclassified from accumulated other comprehensive loss	(2)	0	(2)	0
Net current-period other comprehensive income	(2)	1	(2)	4
Ending balance	$ (2)	$ 0	$ (2)	$ 0

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Shareholders' Equity - Changes in Accumulated Other Comprehensive Income (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total reclassifications for the period	$ (1)	$ 3	$ 1	$ 8
Amount Reclassified from Accumulated Other Comprehensive Income | Employee Benefit Related Adjustment
Accumulated Other Comprehensive Income (Loss) [Line Items]
Prior service costs	(9)	(9)	(26)	(26)
Actuarial losses	10	12	29	34
Total before tax	1	3	3	8
Tax expense (benefit)	0	0	0	(1)
Total reclassifications for the period	$ 1	$ 3	$ 3	$ 7

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Business Segment Information - Summary of Segment Information (Details) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) segment	Jun. 30, 2018 USD ($)
Segment Reporting [Abstract]
Number of reportable segments | segment			2
Segment Reporting Information [Line Items]
Sales	$ 1,166	$ 1,129	$ 3,360	$ 3,098
Commercial Truck
Segment Reporting Information [Line Items]
Sales	835	819	2,416	2,254
Aftermarket, Industrial and Trailer
Segment Reporting Information [Line Items]
Sales	331	310	944	844
Eliminations
Segment Reporting Information [Line Items]
Sales	(43)	(44)	(136)	(127)
Eliminations | Commercial Truck
Segment Reporting Information [Line Items]
Sales	34	35	108	102
Eliminations | Aftermarket, Industrial and Trailer
Segment Reporting Information [Line Items]
Sales	9	9	28	25
Operating Segments
Segment Reporting Information [Line Items]
Sales	1,166	1,129	3,360	3,098
Operating Segments | Commercial Truck
Segment Reporting Information [Line Items]
Sales	869	854	2,524	2,356
Operating Segments | Aftermarket, Industrial and Trailer
Segment Reporting Information [Line Items]
Sales	$ 340	$ 319	$ 972	$ 869

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Business Segment Information - Segment Income Attributable to Parent (Details) - USD ($) $ in Millions	3 Months Ended			9 Months Ended
	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Information [Line Items]
Interest expense, net	$ (14)		$ (14)	$ (43)	$ (54)
Provision for income taxes	(21)		(26)	(69)	(131)
Depreciation and amortization				(64)	(64)
Noncontrolling interests	(3)		(3)	(7)	(8)
Asset impairment charges				(1)	(2)
Restructuring	1		(3)	2	(6)
Asbestos related liability remeasurement				31	0
Income from continuing operations attributable to Meritor, Inc.	85		66	248	88
Operating Segments
Segment Reporting Information [Line Items]
Segment adjusted EBITDA	147		138	404	371
Operating Segments | Commercial Truck
Segment Reporting Information [Line Items]
Segment adjusted EBITDA	93		100	258	263
Operating Segments | Aftermarket, Industrial and Trailer
Segment Reporting Information [Line Items]
Segment adjusted EBITDA	54		38	146	108
Segment Reconciling Items
Segment Reporting Information [Line Items]
Unallocated legacy and corporate income, net	(1)		(3)	0	(15)
Interest expense, net	(14)		(14)	(43)	(54)
Provision for income taxes	(21)		(26)	(69)	(131)
Depreciation and amortization	(21)		(22)	(64)	(64)
Noncontrolling interests	(3)		(3)	(7)	(8)
Loss on sale of receivables	(2)		(1)	(5)	(3)
Asset impairment charges	(1)		0	(1)	(2)
Restructuring	1		(3)	2	(6)
Asbestos related liability remeasurement	$ 0		$ 0	31	$ 0
Maremont Asbestos
Segment Reporting Information [Line Items]
Asbestos related liability remeasurement		$ 31		$ 31

XML

Business Segment Information - Schedule of Segment Assets (Details) - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
Segment Reporting Information [Line Items]
Total assets	$ 2,728	$ 2,726
Operating Segments
Segment Reporting Information [Line Items]
Total assets	2,455	2,353
Operating Segments | Commercial Truck
Segment Reporting Information [Line Items]
Total assets	1,846	1,764
Operating Segments | Aftermarket, Industrial and Trailer
Segment Reporting Information [Line Items]
Total assets	609	589
Corporate
Segment Reporting Information [Line Items]
Total assets	567	633
Segment Reconciling Items
Segment Reporting Information [Line Items]
Less: Accounts receivable sold under off-balance sheet factoring programs	$ (294)	$ (260)

XML

Supplemental Guarantor Condensed Consolidating Financial Statements - Additional Information (Details) - USD ($) $ in Millions	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
Condensed Financial Information Disclosure [Abstract]
Parent's total ownership, percentage	100.00%
Parent
Condensed Financial Statements, Captions [Line Items]
Pension and retiree benefits, parent obligation	$ 224		$ 248
Proceeds from investment in subsidiary	29	$ 29
Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Debt and capital lease obligations, subsidiary portion	$ 5		$ 51

XML

Supplemental Guarantor Condensed Consolidating Financial Statements - Condensed Consolidating Statement of Operations (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Sales
Sales	$ 1,166	$ 1,129	$ 3,360	$ 3,098
Cost of sales	(987)	(959)	(2,866)	(2,625)
GROSS MARGIN	179	170	494	473
Selling, general and administrative	(73)	(76)	(180)	(218)
Restructuring	1	(3)	2	(6)
Other operating income (expense)	(3)	0	(3)	(12)
OPERATING INCOME (LOSS)	104	91	313	237
Other income (expense), net	10	9	30	24
Equity in earnings of affiliates	9	9	24	20
Interest income (expense), net	(14)	(14)	(43)	(54)
INCOME (LOSS) BEFORE INCOME TAXES	109	95	324	227
Benefit (provision) for income taxes	(21)	(26)	(69)	(131)
Equity income from continuing operations of subsidiaries	0	0	0	0
INCOME FROM CONTINUING OPERATIONS	88	69	255	96
LOSS FROM DISCONTINUED OPERATIONS, net of tax	1	(2)	0	(3)
NET INCOME	89	67	255	93
Less: Net income attributable to noncontrolling interests	(3)	(3)	(7)	(8)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	86	64	248	85
Elims
Sales
Sales	(70)	(101)	(238)	(266)
Cost of sales	70	101	238	266
GROSS MARGIN	0	0	0	0
Selling, general and administrative	0	0	0	0
Restructuring	0	0	0	0
Other operating income (expense)	0		0	0
OPERATING INCOME (LOSS)	0	0	0	0
Other income (expense), net	0	0	0	0
Equity in earnings of affiliates	0	0	0	0
Interest income (expense), net	0	0	0	0
INCOME (LOSS) BEFORE INCOME TAXES	0	0	0	0
Benefit (provision) for income taxes	0	0	0	0
Equity income from continuing operations of subsidiaries	(171)	(148)	(451)	(376)
INCOME FROM CONTINUING OPERATIONS	(171)	(148)	(451)	(376)
LOSS FROM DISCONTINUED OPERATIONS, net of tax	0	4	0	4
NET INCOME	(171)	(144)	(451)	(372)
Less: Net income attributable to noncontrolling interests	0	0	0	0
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	(171)	(144)	(451)	(372)
Parent
Sales
Sales	0	0	0	0
Parent | Reportable Legal Entities
Sales
Sales	0	0	0	0
Cost of sales	(17)	(20)	(48)	(57)
GROSS MARGIN	(17)	(20)	(48)	(57)
Selling, general and administrative	(30)	(30)	(83)	(90)
Restructuring	0	(2)	0	(2)
Other operating income (expense)	(3)		(3)	(10)
OPERATING INCOME (LOSS)	(50)	(52)	(134)	(159)
Other income (expense), net	14	28	64	70
Equity in earnings of affiliates	0	0	0	0
Interest income (expense), net	(32)	(26)	(97)	(91)
INCOME (LOSS) BEFORE INCOME TAXES	(68)	(50)	(167)	(180)
Benefit (provision) for income taxes	19	7	50	(8)
Equity income from continuing operations of subsidiaries	134	109	365	276
INCOME FROM CONTINUING OPERATIONS	85	66	248	88
LOSS FROM DISCONTINUED OPERATIONS, net of tax	1	(2)	0	(3)
NET INCOME	86	64	248	85
Less: Net income attributable to noncontrolling interests	0	0	0	0
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	86	64	248	85
Parent | Elims
Sales
Sales	0	0	0	0
Guarantors
Sales
Sales	696	629	1,962	1,663
Guarantors | Reportable Legal Entities
Sales
Sales	720	669	2,046	1,770
Cost of sales	(599)	(559)	(1,723)	(1,477)
GROSS MARGIN	121	110	323	293
Selling, general and administrative	(28)	(27)	(85)	(74)
Restructuring	1	(1)	1	(2)
Other operating income (expense)	0		0	(1)
OPERATING INCOME (LOSS)	94	82	239	216
Other income (expense), net	(2)	(15)	(11)	(10)
Equity in earnings of affiliates	6	6	16	14
Interest income (expense), net	11	6	35	21
INCOME (LOSS) BEFORE INCOME TAXES	109	79	279	241
Benefit (provision) for income taxes	(18)	(13)	(52)	(75)
Equity income from continuing operations of subsidiaries	37	39	86	100
INCOME FROM CONTINUING OPERATIONS	128	105	313	266
LOSS FROM DISCONTINUED OPERATIONS, net of tax	0	(2)	0	(2)
NET INCOME	128	103	313	264
Less: Net income attributable to noncontrolling interests	0	0	0	0
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	128	103	313	264
Guarantors | Elims
Sales
Sales	24	40	84	107
Non- Guarantors
Sales
Sales	470	500	1,398	1,435
Non- Guarantors | Reportable Legal Entities
Sales
Sales	516	561	1,552	1,594
Cost of sales	(441)	(481)	(1,333)	(1,357)
GROSS MARGIN	75	80	219	237
Selling, general and administrative	(15)	(19)	(12)	(54)
Restructuring	0	0	1	(2)
Other operating income (expense)	0		0	(1)
OPERATING INCOME (LOSS)	60	61	208	180
Other income (expense), net	(2)	(4)	(23)	(36)
Equity in earnings of affiliates	3	3	8	6
Interest income (expense), net	7	6	19	16
INCOME (LOSS) BEFORE INCOME TAXES	68	66	212	166
Benefit (provision) for income taxes	(22)	(20)	(67)	(48)
Equity income from continuing operations of subsidiaries	0	0	0	0
INCOME FROM CONTINUING OPERATIONS	46	46	145	118
LOSS FROM DISCONTINUED OPERATIONS, net of tax	0	(2)	0	(2)
NET INCOME	46	44	145	116
Less: Net income attributable to noncontrolling interests	(3)	(3)	(7)	(8)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	43	41	138	108
Non- Guarantors | Elims
Sales
Sales	$ 46	$ 61	$ 154	$ 159

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Supplemental Guarantor Condensed Consolidating Financial Statements - Condensed Consolidating Statement of Comprehensive Income (Loss) (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Condensed Statement of Income Captions [Line Items]
Net income	$ 89	$ 67	$ 255	$ 93
Other comprehensive income (loss), net of tax	(8)	(50)	(3)	(34)
Total comprehensive income	81	17	252	59
Less: Comprehensive income attributable to noncontrolling interests	(2)	(1)	(7)	(7)
Comprehensive income attributable to Meritor, Inc.	79	16	245	52
Elims
Condensed Statement of Income Captions [Line Items]
Net income	(171)	(144)	(451)	(372)
Other comprehensive income (loss), net of tax	4	63	20	38
Total comprehensive income	(167)	(81)	(431)	(334)
Less: Comprehensive income attributable to noncontrolling interests	0	0	0	0
Comprehensive income attributable to Meritor, Inc.	(167)	(81)	(431)	(334)
Parent | Reportable Legal Entities
Condensed Statement of Income Captions [Line Items]
Net income	86	64	248	85
Other comprehensive income (loss), net of tax	(7)	(48)	(3)	(33)
Total comprehensive income	79	16	245	52
Less: Comprehensive income attributable to noncontrolling interests	0	0	0	0
Comprehensive income attributable to Meritor, Inc.	79	16	245	52
Guarantors | Reportable Legal Entities
Condensed Statement of Income Captions [Line Items]
Net income	128	103	313	264
Other comprehensive income (loss), net of tax	(2)	(57)	(9)	(45)
Total comprehensive income	126	46	304	219
Less: Comprehensive income attributable to noncontrolling interests	0	0	0	0
Comprehensive income attributable to Meritor, Inc.	126	46	304	219
Non- Guarantors | Reportable Legal Entities
Condensed Statement of Income Captions [Line Items]
Net income	46	44	145	116
Other comprehensive income (loss), net of tax	(3)	(8)	(11)	6
Total comprehensive income	43	36	134	122
Less: Comprehensive income attributable to noncontrolling interests	(2)	(1)	(7)	(7)
Comprehensive income attributable to Meritor, Inc.	$ 41	$ 35	$ 127	$ 115

XML

Supplemental Guarantor Condensed Consolidating Financial Statements - Condensed Consolidating Balance Sheet (Details) - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
CURRENT ASSETS:
Cash and cash equivalents	$ 111	$ 115
Receivables trade and other, net	625	588
Inventories	491	477
Other current assets	32	46
TOTAL CURRENT ASSETS	1,259	1,226
NET PROPERTY	481	483
GOODWILL	421	421
OTHER ASSETS	567	596
INVESTMENTS IN SUBSIDIARIES	0	0
TOTAL ASSETS	2,728	2,726
CURRENT LIABILITIES:
Short-term debt	24	94
Accounts and notes payable	691	700
Other current liabilities	296	290
TOTAL CURRENT LIABILITIES	1,011	1,084
LONG-TERM DEBT	734	730
RETIREMENT BENEFITS	238	262
INTERCOMPANY PAYABLE (RECEIVABLE)	0	0
OTHER LIABILITIES	234	332
MEZZANINE EQUITY	1	1
EQUITY ATTRIBUTABLE TO MERITOR, INC.	474	287
NONCONTROLLING INTERESTS	36	30
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY	2,728	2,726
Elims
CURRENT ASSETS:
Cash and cash equivalents	0	0
Receivables trade and other, net	0	0
Inventories	0	0
Other current assets	0	0
TOTAL CURRENT ASSETS	0	0
NET PROPERTY	0	0
GOODWILL	0	0
OTHER ASSETS	0	0
INVESTMENTS IN SUBSIDIARIES	(5,148)	(4,438)
TOTAL ASSETS	(5,148)	(4,438)
CURRENT LIABILITIES:
Short-term debt	0	0
Accounts and notes payable	0	0
Other current liabilities	0	0
TOTAL CURRENT LIABILITIES	0	0
LONG-TERM DEBT	0	0
RETIREMENT BENEFITS	0	0
INTERCOMPANY PAYABLE (RECEIVABLE)	0	0
OTHER LIABILITIES	0	0
MEZZANINE EQUITY	0	0
EQUITY ATTRIBUTABLE TO MERITOR, INC.	(5,148)	(4,438)
NONCONTROLLING INTERESTS	0	0
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY	(5,148)	(4,438)
Parent | Reportable Legal Entities
CURRENT ASSETS:
Cash and cash equivalents	27	24
Receivables trade and other, net	3	2
Inventories	0	0
Other current assets	4	6
TOTAL CURRENT ASSETS	34	32
NET PROPERTY	21	24
GOODWILL	0	0
OTHER ASSETS	147	179
INVESTMENTS IN SUBSIDIARIES	4,188	3,583
TOTAL ASSETS	4,390	3,818
CURRENT LIABILITIES:
Short-term debt	23	47
Accounts and notes payable	54	64
Other current liabilities	144	77
TOTAL CURRENT LIABILITIES	221	188
LONG-TERM DEBT	730	726
RETIREMENT BENEFITS	218	241
INTERCOMPANY PAYABLE (RECEIVABLE)	2,691	2,325
OTHER LIABILITIES	55	50
MEZZANINE EQUITY	1	1
EQUITY ATTRIBUTABLE TO MERITOR, INC.	474	287
NONCONTROLLING INTERESTS	0	0
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY	4,390	3,818
Guarantors | Reportable Legal Entities
CURRENT ASSETS:
Cash and cash equivalents	5	6
Receivables trade and other, net	81	62
Inventories	260	242
Other current assets	11	12
TOTAL CURRENT ASSETS	357	322
NET PROPERTY	240	241
GOODWILL	254	250
OTHER ASSETS	189	182
INVESTMENTS IN SUBSIDIARIES	960	855
TOTAL ASSETS	2,000	1,850
CURRENT LIABILITIES:
Short-term debt	0	0
Accounts and notes payable	292	297
Other current liabilities	65	71
TOTAL CURRENT LIABILITIES	357	368
LONG-TERM DEBT	0	0
RETIREMENT BENEFITS	0	0
INTERCOMPANY PAYABLE (RECEIVABLE)	(2,856)	(2,640)
OTHER LIABILITIES	118	124
MEZZANINE EQUITY	0	0
EQUITY ATTRIBUTABLE TO MERITOR, INC.	4,381	3,998
NONCONTROLLING INTERESTS	0	0
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY	2,000	1,850
Non- Guarantors | Reportable Legal Entities
CURRENT ASSETS:
Cash and cash equivalents	79	85
Receivables trade and other, net	541	524
Inventories	231	235
Other current assets	17	28
TOTAL CURRENT ASSETS	868	872
NET PROPERTY	220	218
GOODWILL	167	171
OTHER ASSETS	231	235
INVESTMENTS IN SUBSIDIARIES	0	0
TOTAL ASSETS	1,486	1,496
CURRENT LIABILITIES:
Short-term debt	1	47
Accounts and notes payable	345	339
Other current liabilities	87	142
TOTAL CURRENT LIABILITIES	433	528
LONG-TERM DEBT	4	4
RETIREMENT BENEFITS	20	21
INTERCOMPANY PAYABLE (RECEIVABLE)	165	315
OTHER LIABILITIES	61	158
MEZZANINE EQUITY	0	0
EQUITY ATTRIBUTABLE TO MERITOR, INC.	767	440
NONCONTROLLING INTERESTS	36	30
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY	$ 1,486	$ 1,496

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Supplemental Guarantor Condensed Consolidating Financial Statements - Condensed Consolidating Statement of Cash Flows (Details) - USD ($) $ in Millions	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Condensed Cash Flow Statements, Captions [Line Items]
CASH PROVIDED BY OPERATING ACTIVITIES	$ 194	$ 191
INVESTING ACTIVITIES
Capital expenditures	(63)	(52)
Proceeds from sale of a business	0	4
Proceeds from sale of equity method investment	0	250
Cash paid for investment in Transportation Power, Inc.	(6)	(6)
Cash paid for acquisition of AA Gear & Manufacturing, Inc.	0	(36)
Proceeds from sale of assets		2
Proceeds from settlement of cross-currency swaps	17	0
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	(52)	162
FINANCING ACTIVITIES
Borrowings and securitization	(46)	(89)
Redemption of notes	(24)	(181)
Deferred issuance costs	(4)	0
Repurchase of common stock	(71)	(63)
Intercompany advances	0	0
Other financing activities	(2)	(3)
CASH USED FOR FINANCING ACTIVITIES	(147)	(336)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1	(5)
CHANGE IN CASH AND CASH EQUIVALENTS	(4)	12
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	115	88
CASH AND CASH EQUIVALENTS AT END OF PERIOD	111	100
Elims
Condensed Cash Flow Statements, Captions [Line Items]
CASH PROVIDED BY OPERATING ACTIVITIES	0	0
INVESTING ACTIVITIES
Capital expenditures	0	0
Proceeds from sale of a business		0
Proceeds from sale of equity method investment		0
Cash paid for investment in Transportation Power, Inc.	0	0
Cash paid for acquisition of AA Gear & Manufacturing, Inc.		0
Proceeds from sale of assets		0
Proceeds from settlement of cross-currency swaps	0
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	0	0
FINANCING ACTIVITIES
Borrowings and securitization	0	0
Redemption of notes	0	0
Deferred issuance costs	0
Repurchase of common stock	0	0
Intercompany advances	0	0
Other financing activities	0	0
CASH USED FOR FINANCING ACTIVITIES	0	0
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	0	0
CHANGE IN CASH AND CASH EQUIVALENTS	0	0
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	0	0
CASH AND CASH EQUIVALENTS AT END OF PERIOD	0	0
Parent | Reportable Legal Entities
Condensed Cash Flow Statements, Captions [Line Items]
CASH PROVIDED BY OPERATING ACTIVITIES	8	(26)
INVESTING ACTIVITIES
Capital expenditures	(2)	(3)
Proceeds from sale of a business		4
Proceeds from sale of equity method investment		250
Cash paid for investment in Transportation Power, Inc.	(6)	(6)
Cash paid for acquisition of AA Gear & Manufacturing, Inc.		(36)
Proceeds from sale of assets		0
Proceeds from settlement of cross-currency swaps	17
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	9	209
FINANCING ACTIVITIES
Borrowings and securitization	0	0
Redemption of notes	(24)	(181)
Deferred issuance costs	(4)
Repurchase of common stock	(71)	(63)
Intercompany advances	86	67
Other financing activities	(1)	(1)
CASH USED FOR FINANCING ACTIVITIES	(14)	(178)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	0	0
CHANGE IN CASH AND CASH EQUIVALENTS	3	5
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	24	10
CASH AND CASH EQUIVALENTS AT END OF PERIOD	27	15
Guarantors | Reportable Legal Entities
Condensed Cash Flow Statements, Captions [Line Items]
CASH PROVIDED BY OPERATING ACTIVITIES	32	31
INVESTING ACTIVITIES
Capital expenditures	(32)	(25)
Proceeds from sale of a business		0
Proceeds from sale of equity method investment		0
Cash paid for investment in Transportation Power, Inc.	0	0
Cash paid for acquisition of AA Gear & Manufacturing, Inc.		0
Proceeds from sale of assets		0
Proceeds from settlement of cross-currency swaps	0
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	(32)	(25)
FINANCING ACTIVITIES
Borrowings and securitization	0	0
Redemption of notes	0	0
Deferred issuance costs	0
Repurchase of common stock	0	0
Intercompany advances	0	0
Other financing activities	(1)	(2)
CASH USED FOR FINANCING ACTIVITIES	(1)	(2)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	0	0
CHANGE IN CASH AND CASH EQUIVALENTS	(1)	4
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	6	3
CASH AND CASH EQUIVALENTS AT END OF PERIOD	5	7
Non- Guarantors | Reportable Legal Entities
Condensed Cash Flow Statements, Captions [Line Items]
CASH PROVIDED BY OPERATING ACTIVITIES	154	186
INVESTING ACTIVITIES
Capital expenditures	(29)	(24)
Proceeds from sale of a business		0
Proceeds from sale of equity method investment		0
Cash paid for investment in Transportation Power, Inc.	0	0
Cash paid for acquisition of AA Gear & Manufacturing, Inc.		0
Proceeds from sale of assets		2
Proceeds from settlement of cross-currency swaps	0
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	(29)	(22)
FINANCING ACTIVITIES
Borrowings and securitization	(46)	(89)
Redemption of notes	0	0
Deferred issuance costs	0
Repurchase of common stock	0	0
Intercompany advances	(86)	(67)
Other financing activities	0	0
CASH USED FOR FINANCING ACTIVITIES	(132)	(156)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1	(5)
CHANGE IN CASH AND CASH EQUIVALENTS	(6)	3
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	85	75
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$ 79	$ 78