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 December 29, 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 12 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 an 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	☐	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 ☒

73,910,025 shares of Common Stock, $1.00 par value, of Meritor, Inc. were outstanding on January 29, 2020.

INDEX

			Page No.
PART I.	FINANCIAL INFORMATION:
	Item 1.	Financial Statements:
		Condensed Consolidated Statement of Operations - - Three Months Ended December 31, 2019 and 2018	3
		Condensed Consolidated Statement Of Comprehensive Income - - Three Months Ended December 31, 2019 and 2018	4
		Condensed Consolidated Balance Sheet - - December 31, 2019 and September 30, 2019	5
		Condensed Consolidated Statement of Cash Flows - -Three Months Ended December 31, 2019 and 2018	6
		Condensed Consolidated Statement of Equity - - Three Months Ended December 31, 2019 and 2018	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	37
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
	Item 4.	Controls and Procedures	51
PART II.	OTHER INFORMATION:
	Item 1.	Legal Proceedings	52
	Item 1A.	Risk Factors	52
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
	Item 5.	Other Information	53
	Item 6.	Exhibits	54
Signatures			55

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 December 31,
	2019			2018
	(Unaudited)
Sales	$	901		$	1,038
Cost of sales	(774		)	(897		)
GROSS MARGIN	127			141
Selling, general and administrative	(70		)	(34		)
Other operating expense, net	(5		)	—
OPERATING INCOME	52			107
Other income, net	10			11
Equity in earnings of affiliates	6			9
Interest expense, net	(14		)	(14		)
INCOME BEFORE INCOME TAXES	54			113
Provision for income taxes	(13		)	(21		)
INCOME FROM CONTINUING OPERATIONS	41			92
INCOME FROM DISCONTINUED OPERATIONS, net of tax	—			—
NET INCOME	41			92
Less: Net income attributable to noncontrolling interests	(2		)	(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	39		$	90
NET INCOME ATTRIBUTABLE TO MERITOR, INC.
Net income from continuing operations	$	39		$	90
Income from discontinued operations	—			—
Net income	$	39		$	90
BASIC EARNINGS PER SHARE
Continuing operations	$	0.50		$	1.06
Discontinued operations	—			—
Basic earnings per share	$	0.50		$	1.06
DILUTED EARNINGS PER SHARE
Continuing operations	$	0.48		$	1.03
Discontinued operations	—			—
Diluted earnings per share	$	0.48		$	1.03
Basic average common shares outstanding	78.2			84.8
Diluted average common shares outstanding	80.7			87.5

See Notes to Condensed Consolidated Financial Statements.

3

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in millions)

	Three Months Ended December 31,
	2019			2018
	(Unaudited)
Net income	$	41		$	92
Other comprehensive income (loss):
Foreign currency translation adjustments:
Attributable to Meritor, Inc.	21			(4		)
Attributable to noncontrolling interest	—			1
Pension and other postretirement benefit related adjustments	3			—
Unrealized gain on cash flow hedges	2			1
Other comprehensive income (loss), net of tax	26			(2		)
Total comprehensive income	67			90
Less: Comprehensive income attributable to noncontrolling interest	(2		)	(3		)
Comprehensive income attributable to Meritor, Inc.	$	65		$	87

See Notes to Condensed Consolidated Financial Statements.

4

MERITOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions)

	December 31, 2019			September 30, 2019
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	108		$	108
Receivables, trade and other, net	478			551
Inventories	556			526
Other current assets	37			31
TOTAL CURRENT ASSETS	1,179			1,216
NET PROPERTY	517			515
GOODWILL	486			478
OTHER ASSETS	714			606
TOTAL ASSETS	$	2,896		$	2,815
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term debt	$	178		$	41
Accounts and notes payable	540			610
Other current liabilities	264			285
TOTAL CURRENT LIABILITIES	982			936
LONG-TERM DEBT	901			902
RETIREMENT BENEFITS	330			336
OTHER LIABILITIES	299			226
TOTAL LIABILITIES	2,512			2,400
COMMITMENTS AND CONTINGENCIES (See Note 20)
EQUITY:
Common stock (December 31, 2019 and September 30, 2019, 105.3 and 104.1 shares issued and 77.8 and 81.4 shares outstanding, respectively)	105			104
Additional paid-in capital	804			803
Retained earnings	530			491
Treasury stock, at cost (December 31, 2019 and September 30, 2019, 27.6 and 22.7 shares, respectively)	(432		)	(332		)
Accumulated other comprehensive loss	(655		)	(681		)
Total equity attributable to Meritor, Inc.	352			385
Noncontrolling interests	32			30
TOTAL EQUITY	384			415
TOTAL LIABILITIES AND EQUITY	$	2,896		$	2,815

See Notes to Condensed Consolidated Financial Statements.

5

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)

	Three Months Ended December 31,
	2019			2018
	(Unaudited)
OPERATING ACTIVITIES
Net income	$	41		$	92
Less: Income from discontinued operations, net of tax	—			—
Income from continuing operations	41			92
Adjustments to income from continuing operations to arrive at cash provided by (used for) operating activities:
Depreciation and amortization	24			22
Deferred income tax expense	3			3
Restructuring costs	5			—
Equity in earnings of affiliates	(6		)	(9		)
Pension and retiree medical income	(10		)	(9		)
Asbestos related liability remeasurement	—			(31		)
Other adjustments to income from continuing operations	3			5
Dividends received from equity method investments	—			1
Pension and retiree medical contributions	(3		)	(3		)
Restructuring payments	(7		)	(1		)
Changes in off-balance sheet accounts receivable securitization and factoring programs	7			38
Changes in receivables, inventories and accounts payable	(31		)	(52		)
Changes in other current assets and liabilities	(28		)	(40		)
Changes in other assets and liabilities	(16		)	(4		)
Operating cash flows provided by (used for) continuing operations	(18		)	12
Operating cash flows used for discontinued operations	(1		)	(1		)
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	(19	)	$	11
INVESTING ACTIVITIES
Capital expenditures	(16		)	(23		)
Cash paid for investment in Transportation Power, Inc.	—			(3		)
Other investing activities	—			(1		)
CASH USED FOR INVESTING ACTIVITIES	(16		)	(27		)
FINANCING ACTIVITIES
Securitization	72			33
Borrowings against revolving line of credit	65			45
Term loan payments	(3		)	—
Other financing activities	—			(1		)
Net change in debt	134			77
Repurchase of common stock	(100		)	(50		)
CASH PROVIDED BY FINANCING ACTIVITIES	34			27
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1			1
CHANGE IN CASH AND CASH EQUIVALENTS	—			12
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	108			115
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	108		$	127

See Notes to Condensed Consolidated Financial Statements.

6

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(in millions)

(Unaudited)

	Three months ended December 31, 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, 2019	$	104	$	803		$	491	$	(332	)	$	(681	)	$	385		$	30	$	415
Comprehensive income	—		—			39		—			26			65			2		67
Equity based compensation expense	—		3			—		—			—			3			—		3
Vesting of equity based awards	1		(1		)	—		—			—			—			—		—
Repurchase of common stock	—		—			—		(100		)	—			(100		)	—		(100		)
Other equity adjustments	—		(1		)	—		—			—			(1		)	—		(1		)
Ending Balance at December 31, 2019	$	105	$	804		$	530	$	(432	)	$	(655	)	$	352		$	32	$	384
	Three months ended December 31, 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 September 30, 2018	$	102	$	787		$	200	$	(236	)	$	(566	)	$	287		$	30	$	317
Comprehensive income (loss)	—		—			90		—			(3		)	87			3		90
Equity based compensation expense	—		5			—		—			—			5			—		5
Vesting of equity based awards	2		(2		)	—		—			—			—			—		—
Repurchase of common stock	—		—			—		(50		)	—			(50		)	—		(50		)
Ending Balance at December 31, 2018	$	104	$	790		$	290	$	(286	)	$	(569	)	$	329		$	33	$	362

See Notes to Condensed Consolidated Financial Statements.

7

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.

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, 2019. The Condensed Consolidated Balance Sheet data as of September 30, 2019 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 months ended December 31, 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 first quarter of fiscal years 2020 and 2019 ended on December 29, 2019 and December 30, 2018, respectively. Fiscal year 2019 ended on September 29, 2019. 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 December 31 are used consistently throughout this report to represent the fiscal year end and first 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 December 31,
	2019	2018
Basic average common shares outstanding	78.2	84.8
Impact of restricted shares, restricted share units and performance share units	1.6	2.1
Impact of convertible notes	0.9	0.6
Diluted average common shares outstanding	80.7	87.5

3. Equity Based Compensation

In November 2019, 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 $25.25, which was the company’s share price on the grant date of December 1, 2019. The Board of Directors also approved a grant of 0.3 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 $25.25, which was the company's share price on the grant date of December 1, 2019.

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, 2019 to September 30, 2022, measured at the end of the performance period. The number of performance share units that vest will depend on adjusted EBITDA margin, new business wins, free cash flow conversion and adjusted diluted earnings per share from continuing operations which are all weighted at 25%. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.4 million performance share units.

8

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

For the three months ended December 31, 2019 and December 31, 2018, the dilutive impact of previously issued restricted shares, restricted share units and performance share units was 1.6 million and 2.1 million shares, respectively. For the three months ended December 31, 2019 and December 31, 2018, compensation cost related to restricted shares, restricted share units and performance share units was $3 million and $5 million, respectively.

For the three months ended December 31, 2019 and December 31, 2018, 0.9 million and 0.6 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.

4. New Accounting Standards

Accounting standards implemented during fiscal year 2020

On October 1, 2019, the company implemented ASU 2016-02, Leases (Topic 842). The company elected the practical expedient package which allowed the company to not reassess whether existing contracts contain a lease and to not reassess classification of existing leases. The company also adopted ASU 2018-11 Leases (Topic 842) Targeted Improvements, electing to not separate lease and non-lease components in contracts that contain both and electing to not restate comparative periods when adopting ASU 2016-02. As a result, the company recognized a right-of-use asset and lease liability as a lessee for substantially all existing operating leases and has included new and expanded disclosures. (See Note 6)

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 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 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.

5. Revenue

Disaggregation of revenue

In the following tables, revenue is disaggregated for each of our operating segments by primary geographical market for the three months ended December 31, 2019 and 2018.

9

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Three Months Ended December 31, 2019
Primary Geographical Market	Commercial Truck		Aftermarket, Industrial and Trailer		Total
U.S.	$	292	$	243	$	535
Canada	—		14		14
Mexico	34		9		43
Total North America	326		266		592
Sweden	62		—		62
Italy	45		4		49
United Kingdom	33		2		35
Other Europe	1		37		38
Total Europe	141		43		184
Brazil	53		1		54
China	34		—		34
India	22		1		23
Other Asia-Pacific	14		—		14
Total sales	$	590	$	311	$	901

	Three Months Ended December 31, 2018(1)
Primary Geographical Market	Commercial Truck		Aftermarket, Industrial and Trailer		Total
U.S.	$	350	$	240	$	590
Canada	—		18		18
Mexico	47		10		57
Total North America	397		268		665
Sweden	74		—		74
Italy	57		4		61
United Kingdom	41		3		44
Other Europe	3		19		22
Total Europe	175		26		201
Brazil	50		—		50
China	41		—		41
India	57		—		57
Other Asia-Pacific	24		—		24
Total sales	$	744	$	294	$	1,038

⁽¹⁾ Amounts for the three months ended December 31, 2018 have been recast to reflect reportable segment changes.

Contract balances

As of December 31, 2019 and September 30, 2019, Trade receivables, net, which are included in Receivables, trade and other, net, on the Condensed Consolidated Balance Sheet, were $451 million and $517 million, respectively.

For the three months ended December 31, 2019 and December 31, 2018, 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 December 31, 2019 and December 31, 2018.

10

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

6. Leases

The company’s lease portfolio is comprised of leases of real estate, including manufacturing and office facilities, and leases of personal property, including machinery and equipment and IT equipment. Operating leases with an initial term of 12 months or less are not recorded on the Condensed Consolidated Balance Sheet and related lease expense is recognized on a straight-line basis over the lease term. Short-term lease costs and variable lease costs were insignificant in the three months ended December 31, 2019.

For all asset classes, the company has elected to adopt the practical expedient under ASC 842 to not separate lease and non-lease components in contracts that contain both. These lease agreements are accounted for as a single lease component for all classes of underlying assets. The company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As the discount rate implicit in the lease is typically unknown, the discount rate used to determine the lease liability for the majority of our leases is the collateralized incremental borrowing rate in the applicable geographic area for a similar term and amount as the lease agreement.

Components of lease expense

	Three Months Ended December 31, 2019
Finance lease costs	$	1
Operating lease costs	5
Total lease costs	$	6

The following table provides a summary of the location and amounts related to finance leases recognized in the Condensed Consolidated Balance Sheet.

	Classification	December 31, 2019
Finance lease right-of-use assets	Net Property	$	7
Finance lease liabilities	Short-term debt	2
Finance lease liabilities	Long-term debt	5

The following table provides a summary of the location and amounts related to operating leases recognized in the Condensed Consolidated Balance Sheet.

	Classification	December 31, 2019
Operating lease right-of-use assets	Other assets	$	78
Operating lease liabilities	Other current liabilities	14
Operating lease liabilities	Other liabilities	64

The following tables summarize additional information related to our lease agreements.

11

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Supplemental cash flow information related to leases

	Three Months Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5
Operating cash flows from finance leases	—
Financing cash flows from finance leases	1
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	4
Finance leases	2

Supplemental balance sheet information related to leases

	December 31, 2019
Weighted-average remaining lease term (years):
Operating leases	8.7
Finance leases	2.7
Weighted-average discount rate:
Operating leases	4.5	%
Finance leases	9.1	%

Maturities

	Operating Leases			Finance Leases
2020 (excluding the three months ended December 31, 2019)	$	13		$	2
2021	16			3
2022	13			2
2023	11			1
2024	8			—
Thereafter	35			—
Total lease payments	96			8
Less: Impact of discounting future lease payments	(18		)	(1		)
Present value of lease liabilities	$	78		$	7

Disclosures related to periods prior to adoption of ASU 2016-02

Cash obligations under future minimum rental commitments under operating leases as of September 30, 2019 are shown in the table below.

	2020		2021		2022		2023		2024		Thereafter		Total
Lease commitments	$	18	$	15	$	14	$	13	$	13	$	25	$	98

7. 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

12

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

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	$	261	$	232		$	493
Accumulated impairment losses	—		(15		)	(15		)
Beginning Balance at September 30, 2019	261		217			478
AxleTech measurement period adjustment (see Note 10)	—		2			2
Foreign currency translation	4		2			6
Ending Balance at December 31, 2019	$	265	$	221		$	486

8. Restructuring Costs

Restructuring reserves, primarily related to unpaid employee termination benefits, were $5 million at December 31, 2019 and $8 million at September 30, 2019. Restructuring costs are recorded within Other operating expense, net within the Condensed Consolidated Statement of Operations. The changes in restructuring reserves for the three months ended December 31, 2019 and 2018 are as follows (in millions):

	Total
Beginning Balance at September 30, 2019	$	8
Activity during the period:
Charges to continuing operations	5
Cash payments – continuing operations	(7		)
Other	(1		)
Total restructuring reserves at December 31, 2019	5
Less: non-current restructuring reserves	—
Restructuring reserves – current, at December 31, 2019	$	5
Balance at September 30, 2018	$	4
Activity during the period:
Charges to continuing operations	—
Cash payments – continuing operations	(1		)
Total restructuring reserves at December 31, 2018	3
Less: non-current restructuring reserves	(1		)
Restructuring reserves – current, at December 31, 2018	$	2

13

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. 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.

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. As of December 31, 2019, the company continues to maintain the valuation allowances in France, Germany, 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 December 31, 2019, the company had approximately $3 million of net pre-tax income compared to $6 million of net pre-tax income in the same period in fiscal year 2019 in tax jurisdictions in which tax expense (benefit) is not recorded.

10. Acquisition

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 $179 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 17). The acquisition 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 operates within Meritor’s Aftermarket, Industrial and Trailer segment.

Since completion of initial estimates in the fourth quarter of fiscal year 2019, the company recorded $2 million in measurement period adjustments to decrease the provisional fair value of receivables acquired in the AxleTech transaction, resulting in a corresponding $2 million increase in goodwill. This adjustment was made to reflect additional available information. The measurement period remains open to finalize the value of tangible and intangible assets. The company is reviewing and may record other additional measurement period adjustments in fiscal year 2020. All goodwill resulting from the acquisition of AxleTech was assigned to the Aftermarket, Industrial and Trailer reportable segment (see Note 7).

14

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

11. 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 12/31/19				Utilized as of 12/31/19				Utilized as of 9/30/19
		EUR		USD		EUR		USD		EUR		USD
On-balance sheet arrangement
Committed U.S. accounts receivable securitization (1)	December 2022	N/A		$	115	N/A		$	84	N/A		$	13
Total on-balance sheet arrangement: (1)		N/A		$	115	N/A		$	84	N/A		$	13
Off-balance sheet arrangements
Committed Swedish factoring facility (2)(3)	March 2020 (5)	€	155	$	169	€	128	$	140	€	109	$	119
Committed U.S. factoring facility (2)	February 2023	N/A		75		N/A		55		N/A		58
Uncommitted U.K. factoring facility	February 2022	25		27		3		4		6		6
Uncommitted Italy factoring facility	June 2022	30		33		21		23		21		23
Other uncommitted factoring facilities (4)	None	N/A		N/A		17		18		18		20
Total off-balance sheet arrangements		€	210	$	304	€	169	$	240	€	154	$	226

⁽¹⁾ Availability subject to adequate eligible accounts receivable available for sale. The utilized amount includes $4 million of letters of credit as of December 31, 2019 and September 30, 2019.

⁽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 June 22, 2020.

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

⁽⁵⁾ The company is working to extend this arrangement before its current maturity date.

Off-balance sheet arrangements 

Total costs associated with all of the off-balance sheet arrangements described above were $1 million for the three months ended December 31, 2019 and 2018, and are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Operations.

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):

	December 31, 2019		September 30, 2019
Finished goods	$	159	$	153
Work in process	44		39
Raw materials, parts and supplies	353		334
Total	$	556	$	526

13. Net Property

15

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

     Net property is summarized as follows (in millions):

	December 31, 2019			September 30, 2019
Property at cost:
Land and land improvements	$	31		$	31
Buildings	228			224
Machinery and equipment	962			935
Company-owned tooling	142			136
Construction in progress	67			74
Total	1,430			1,400
Less: accumulated depreciation	(913		)	(885		)
Net property	$	517		$	515

14. Other Assets

     Other assets are summarized as follows (in millions):

	December 31, 2019		September 30, 2019
Investments in non-consolidated joint ventures	$	115	$	110
Deferred income tax assets, net	139		122
Prepaid pension costs	163		149
Other	297		225
Other assets	$	714	$	606

15. Other Current Liabilities

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

	December 31, 2019		September 30, 2019
Compensation and benefits	$	87	$	125
Product warranties	17		18
Other	160		142
Other current liabilities	$	264	$	285

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):

	Three Months Ended December 31,
	2019			2018
Total product warranties – beginning of period	$	50		$	54
Accruals for product warranties	3			7
Payments	(7		)	(5		)
Change in estimates and other	—			(1		)
Total product warranties – end of period	46			55
Less: Non-current product warranties	(29		)	(36		)
Product warranties – current	$	17		$	19

16

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

16. Other Liabilities

Other liabilities are summarized as follows (in millions):

	December 31, 2019		September 30, 2019
Asbestos-related liabilities (see Note 20)	$	81	$	82
Product warranties (see Note 15)	29		32
Other	189		112
Other liabilities	$	299	$	226

17. Long-Term Debt

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

	December 31, 2019			September 30, 2019
3.25 percent convertible notes due 2037	$	319		$	319
7.875 percent convertible notes due 2026	23			23
Term loan due 2024	172			175
6.25 percent notes due 2024	445			444
Financing lease obligation	7			7
Borrowings and securitization	145			9
Unamortized discount on convertible notes	(32		)	(34		)
Subtotal	1,079			943
Less: current maturities	(178		)	(41		)
Long-term debt	$	901		$	902

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 December 31, 2019 as the holders are entitled to convert all or a portion of their 7.875 Percent Convertible Notes at any time beginning January 1, 2020 and prior to the close of business on March 31, 2020 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 December 31, 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 also classified as current as of September 30, 2019.

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.

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, which was utilized 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 credit facility is dependent upon various factors, including performance against certain financial covenants as highlighted below.

17

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 revolving credit 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 revolving credit agreement. At December 31, 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 23).

At December 31, 2019, there were $65 million in borrowings outstanding under the revolving credit facility. At September 30, 2019, 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 December 31, 2019 and September 30, 2019, there were no letters of credit outstanding under the revolving credit facility.

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 December 31, 2019 and September 30, 2019, the company had $18 million and $30 million, respectively, outstanding under this program at more than one bank.

18. Financial Instruments

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

	December 31, 2019				September 30, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	108	$	108	$	108	$	108
Short-term debt	178		208		41		60
Long-term debt	901		987		902		953
Foreign exchange forward contracts (other assets)	2		2		—		—
Foreign currency option contracts (other assets)	1		1		—		—
Cross-currency swaps (other assets)	6		6		10		10
Cross-currency swaps (other liabilities)	5		5		5		5

18

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

	December 31, 2019			September 30, 2019
	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported
Derivative Assets
Foreign exchange forward contracts	2	—	2	—	—	—
Cross-currency swaps	6	—	6	10	—	10
Foreign currency option contracts	1	—	1	—	—	—
Derivative Liabilities
Cross-currency swaps	5	—	5	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 December 31, 2019 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	108	$	—	$	—
Short-term debt	—		132		76
Long-term debt	—		818		169
Foreign exchange forward contracts (other assets)	—		2		—
Foreign exchange forward contracts (other liabilities)	—		—		—
Foreign currency option contracts (other assets)	—		1		—
Cross-currency swaps (other assets)	—		6		—
Cross-currency swaps (other liabilities)	—		5		—

19

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	108	$	—	$	—
Short-term debt	—		49		11
Long-term debt	—		782		171
Foreign exchange forward contracts (other liabilities)	—		—		—
Foreign currency option contracts (other assets)	—		—		—
Cross-currency swaps (other assets)	—		10		—
Cross-currency swaps (other liabilities)	—		5		—

No transfers of assets between any of the Levels occurred during the three months ended December 31, 2019 and 2018.

Cash and cash equivalents — All highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents. The carrying value approximates fair value because of the short maturity of these instruments.

     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 December 31, 2019 and September 30, 2019, the notional amount of the company's foreign exchange contracts outstanding under its foreign currency cash flow hedging program was $85 million and $110 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 Income (Loss) in the statement of shareholders’ equity and is recognized in operating income when the underlying forecasted transaction impacts earnings.

Foreign exchange swap contracts - The company uses foreign exchange swap purchase and sale contracts with terms of 18 months or less to hedge its exposure related to changes in foreign currency exchange rates on short term intercompany loans. As of December 31, 2019, the notional amount of the company’s foreign exchange swap contracts was $72 million. As of September 30, 2019, there were no foreign exchange swap contracts outstanding. 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.

Foreign currency option contracts — The company uses option contracts to mitigate foreign exchange exposure on expected future foreign currency-denominated purchases. As of December 31, 2019 and September 30, 2019, the notional amount of the company's foreign exchange contracts outstanding was $105 million and $139 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 foreign currency earnings to U.S. dollars. As of December 31, 2019 and September 30, 2019, the notional amount of the company's option contracts outstanding was $64 million and $28 million, respectively. 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 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

20

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 2019, the company entered into multiple cross-currency swaps with a combined notional amount of $225 million and maturities in October 2022. As of both December 31, 2019 and September 30, 2019, 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.

19. Retirement Benefit Liabilities

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

	December 31, 2019			September 30, 2019
Retiree medical liability	$	66		$	67
Pension liability	263			271
Other	18			14
Subtotal	347			352
Less: current portion (included in compensation and benefits, Note 15)	(17		)	(16		)
Retirement benefits	$	330		$	336

The components of net periodic pension and retiree medical income included in continuing operations for the three months ended December 31 are as follows (in millions):

	2019						2018
	Pension			Retiree Medical			Pension			Retiree Medical
Interest cost	$	(11	)	$	—		$	(13	)	$	(1	)
Assumed return on plan assets	24			—			24			—
Amortization of prior service benefit	—			9			—			9
Recognized actuarial loss	(8		)	(4		)	(6		)	(4		)
Total income	$	5		$	5		$	5		$	4

For the three months ended December 31, 2019 and 2018, the non-service cost components of the net periodic pension and Other Post-Employment Benefits ("OPEB") income were $10 million and $9 million, respectively, and are presented in Other income, net.

20. 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.

21

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

     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 December 31, 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 December 31, 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 1.50 to 2.25 percent and is approximately $15 million at December 31, 2019. The undiscounted estimate of these costs is approximately $16 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, 2019	$	11		$	4	$	15
Payments and other	(1		)	—		(1		)
Accruals	1			—		1
Ending Balance at December 31, 2019	$	11		$	4	$	15

Environmental reserves are included in Other Current Liabilities (see Note 15) and Other Liabilities (see Note 16) 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.

22

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

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.

As of January 22, 2019, Maremont and its subsidiaries were deconsolidated from the Condensed Consolidated Balance Sheet and the results of Maremont's operations were eliminated from the Condensed Consolidated Statement of Operations as Maremont became subject to the control of a court. Deconsolidation had an insignificant impact on the Condensed Consolidated Statement of Operations.

The Plan was confirmed by the Bankruptcy Court 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 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.

     Rockwell International Corporation ("Rockwell") — ArvinMeritor, Inc. ("AM"), a predecessor of Meritor, along with many other companies, has 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 December 31, 2019 and September 30, 2019.

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, 2019. 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, 2019, the estimated probable range of equally likely possibilities of the company’s obligation for asbestos-related claims over the next 40 years is $91 million to $181 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 40 years of $90 million as of December 31, 2019 and $91 million as of September 30, 2019.

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 $60 million and $61 million as of December 31, 2019 and September 30, 2019, 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

23

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

Indemnification

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. 

21. Shareholders' Equity

There were no dividends declared or paid in the first quarter of fiscal years 2020 and 2019. 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 November 7, 2019, the Board of Directors authorized the repurchase of up to $325 million of the company's common stock, which was an increase from the prior $250 million authorization approved on July 26, 2019. Repurchases can be made 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. During fiscal year 2019, the company repurchased 1.3 million shares of common stock for $25 million (including commission costs) pursuant to this common stock repurchase authorization. During the first quarter of fiscal year 2020, the company repurchased 4.9 million shares of common stock for $100 million (including commission costs) pursuant to this authorization. As of December 31, 2019, the amount remaining available for repurchases under this common stock repurchase authorization was $200 million.

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. The remaining authority under the common stock repurchase authorization was superseded by the July 2019 authorization described above. As of December 31, 2019 and September 30, 2019, the amount remaining available for repurchase under this debt repurchase authorization was $76 million.

24

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 December 31, 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, 2019	$	(107	)	$	(572	)	$	(2	)	$	(681	)
Other comprehensive income before reclassification	21			—			—			21
Amounts reclassified from accumulated other comprehensive loss	—			3			2			5
Net current-period other comprehensive income	21			3			2			26
Balance at December 31, 2019	$	(86	)	$	(569	)	$	—		$	(655	)

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 benefit	$	(9	)	(a)
Actuarial losses	12			(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 19 for additional details), which is recorded in other income (expense), net.

	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	(4		)	(1		)	—		(5		)
Amounts reclassified from accumulated other comprehensive loss	—			1			1		2
Net current-period other comprehensive income	$	(4	)	$	—		$	1	$	(3	)
Balance at December 31, 2018	$	(94	)	$	(476	)	$	1	$	(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 benefit	$	(9	)	(b)
Actuarial losses	$	10		(b)
	1			Total before tax
	—			Tax benefit
Total reclassifications for the period	$	1		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 19 for additional details), which is recorded in other income (expense), net.

25

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

22. 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 December 31, 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 December 31, 2019
External Sales	$	590	$	311	$	—		$	901
Intersegment Sales	32		6		(38		)	—
Total Sales	$	622	$	317	$	(38	)	$	901
Three Months Ended December 31, 2018 (1)
External Sales	$	744	$	294	$	—		$	1,038
Intersegment Sales	35		9		(44		)	—
Total Sales	$	779	$	303	$	(44	)	$	1,038

⁽¹⁾ Amounts for the three months ended December 31, 2018 have been recast to reflect reportable segment changes.

26

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Three Months Ended December 31,
	2019			2018 (3)
Segment adjusted EBITDA:
Commercial Truck	$	56		$	77
Aftermarket, Industrial and Trailer	40			40
Segment adjusted EBITDA	96			117
Unallocated legacy and corporate expense, net (1)	2			2
Interest expense, net	(14		)	(14		)
Provision for income taxes	(13		)	(21		)
Depreciation and amortization	(24		)	(22		)
Noncontrolling interests	(2		)	(2		)
Loss on sale of receivables	(1		)	(1		)
Restructuring	(5		)	—
Asbestos related liability remeasurement (2)	—			31
Income from continuing operations attributable to Meritor, Inc.	$	39		$	90

⁽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 three months ended December 31, 2018 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 months ended December 31, 2018 have been recast to reflect reportable segment changes.

	December 31, 2019			September 30, 2019
Segment Assets:
Commercial Truck	$	1,700		$	1,659
Aftermarket, Industrial and Trailer	839			815
Total segment assets	2,539			2,474
Corporate (1)	597			567
Less: Accounts receivable sold under off-balance sheet factoring programs (2)	(240		)	(226		)
Total assets	$	2,896		$	2,815

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

⁽²⁾  At December 31, 2019 and September 30, 2019, segment assets include $240 million and $226 million, respectively, of accounts receivable sold under off-balance sheet accounts receivable factoring programs (see Note 11). These sold receivables are included in segment assets as the CODM reviews segment assets inclusive of these balances.

27

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

23. 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 17).

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.

28

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In millions)

(Unaudited)

	Three Months Ended December 31, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	535		$	366		$	—		$	901
Subsidiaries	—			23			35			(58		)	—
Total sales	—			558			401			(58		)	901
Cost of sales	(16		)	(469		)	(347		)	58			(774		)
GROSS MARGIN	(16		)	89			54			—			127
Selling, general and administrative	(24		)	(29		)	(17		)	—			(70		)
Other operating expense, net	—			—			(5		)	—			(5		)
OPERATING INCOME (LOSS)	(40		)	60			32			—			52
Other income, net	—			7			3			—			10
Equity in earnings of affiliates	—			4			2			—			6
Interest income (expense), net	(31		)	11			6			—			(14		)
INCOME (LOSS) BEFORE INCOME TAXES	(71		)	82			43			—			54
Benefit (provision) for income taxes	12			(15		)	(10		)	—			(13		)
Equity income from continuing operations of subsidiaries	98			28			—			(126		)	—
INCOME FROM CONTINUING OPERATIONS	39			95			33			(126		)	41
INCOME FROM DISCONTINUED OPERATIONS, net of tax	—			—			—			—			—
NET INCOME	39			95			33			(126		)	41
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	39		$	95		$	31		$	(126	)	$	39

29

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Three Months Ended December 31, 2019
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	39	$	95	$	33		$	(126	)	$	41
Other comprehensive income, net of tax	26		30		32			(62		)	26
Total comprehensive income	65		125		65			(188		)	67
Less: Comprehensive income attributable to noncontrolling interests	—		—		(2		)	—			(2		)
Comprehensive income attributable to Meritor, Inc.	$	65	$	125	$	63		$	(188	)	$	65

30

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In millions)

(Unaudited)

	Three Months Ended December 31, 2018
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	589		$	449		$	—		$	1,038
Subsidiaries	—			32			57			(89		)	—
Total sales	—			621			506			(89		)	1,038
Cost of sales	(15		)	(534		)	(437		)	89			(897		)
GROSS MARGIN	(15		)	87			69			—			141
Selling, general and administrative	(25		)	(27		)	18			—			(34		)
OPERATING INCOME (LOSS)	(40		)	60			87			—			107
Other income, net	—			5			6			—			11
Equity in earnings of affiliates	—			7			2			—			9
Interest income (expense), net	(32		)	12			6			—			(14		)
INCOME (LOSS) BEFORE INCOME TAXES	(72		)	84			101			—			113
Benefit (provision) for income taxes	11			(12		)	(20		)	—			(21		)
Equity income from continuing operations of subsidiaries	151			40			—			(191		)	—
INCOME FROM CONTINUING OPERATIONS	90			112			81			(191		)	92
INCOME FROM DISCONTINUED OPERATIONS, net of tax	—			—			—			—			—
NET INCOME	90			112			81			(191		)	92
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	90		$	112		$	79		$	(191	)	$	90

31

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Three Months Ended December 31, 2018
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	90		$	112		$	81		$	(191	)	$	92
Other comprehensive loss, net of tax	(3		)	(8		)	(9		)	18			(2		)
Total comprehensive income	87			104			72			(173		)	90
Less: Comprehensive income attributable to noncontrolling interests	—			—			(3		)	—			(3		)
Comprehensive income attributable to Meritor, Inc.	$	87		$	104		$	69		$	(173	)	$	87

32

MERITOR, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

(In millions)

(Unaudited)

	December 31, 2019
	Parent		Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	13	$	5		$	90	$	—		$	108
Receivables trade and other, net	3		82			393		—			478
Inventories	—		308			248		—			556
Other current assets	7		10			20		—			37
TOTAL CURRENT ASSETS	23		405			751		—			1,179
NET PROPERTY	22		257			238		—			517
GOODWILL	—		337			149		—			486
OTHER ASSETS	182		252			280		—			714
INVESTMENTS IN SUBSIDIARIES	4,575		958			—		(5,533		)	—
TOTAL ASSETS	$	4,802	$	2,209		$	1,418	$	(5,533	)	$	2,896
CURRENT LIABILITIES:
Short-term debt	$	97	$	—		$	81	$	—		$	178
Accounts and notes payable	19		251			270		—			540
Other current liabilities	74		88			102		—			264
TOTAL CURRENT LIABILITIES	190		339			453		—			982
LONG-TERM DEBT	897		—			4		—			901
RETIREMENT BENEFITS	305		1			24		—			330
INTERCOMPANY PAYABLE (RECEIVABLE)	2,997		(3,012		)	15		—			—
OTHER LIABILITIES	61		124			114		—			299
EQUITY ATTRIBUTABLE TO MERITOR, INC.	352		4,757			776		(5,533		)	352
NONCONTROLLING INTERESTS	—		—			32		—			32
TOTAL LIABILITIES AND EQUITY	$	4,802	$	2,209		$	1,418	$	(5,533	)	$	2,896

33

MERITOR, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

(In millions)

(Unaudited)

	September 30, 2019
	Parent		Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	4	$	4		$	100	$	—		$	108
Receivables trade and other, net	3		92			456		—			551
Inventories	—		292			234		—			526
Other current assets	6		10			15		—			31
TOTAL CURRENT ASSETS	13		398			805		—			1,216
NET PROPERTY	21		260			234		—			515
GOODWILL	—		337			141		—			478
OTHER ASSETS	170		225			211		—			606
INVESTMENTS IN SUBSIDIARIES	4,432		899			—		(5,331		)	—
TOTAL ASSETS	$	4,636	$	2,119		$	1,391	$	(5,331	)	$	2,815
CURRENT LIABILITIES:
Short-term debt	$	32	$	—		$	9	$	—		$	41
Accounts and notes payable	53		283			274		—			610
Other current liabilities	77		109			99		—			285
TOTAL CURRENT LIABILITIES	162		392			382		—			936
LONG-TERM DEBT	898		—			4		—			902
RETIREMENT BENEFITS	312		1			23		—			336
INTERCOMPANY PAYABLE (RECEIVABLE)	2,833		(3,005		)	172		—			—
OTHER LIABILITIES	46		112			68		—			226
EQUITY ATTRIBUTABLE TO MERITOR, INC.	385		4,619			712		(5,331		)	385
NONCONTROLLING INTERESTS	—		—			30		—			30
TOTAL LIABILITIES AND EQUITY	$	4,636	$	2,119		$	1,391	$	(5,331	)	$	2,815

34

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In millions)

(Unaudited)

	Three Months Ended December 31, 2019
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	65		$	9		$	(93	)	$	—	$	(19	)
INVESTING ACTIVITIES
Capital expenditures	—			(8		)	(8		)	—		(16		)
CASH USED FOR INVESTING ACTIVITIES	—			(8		)	(8		)	—		(16		)
FINANCING ACTIVITIES
Securitization	—			—			72			—		72
Borrowings against revolving line of credit	65			—			—			—		65
Term loan payments	(3		)	—			—			—		(3		)
Repurchase of common stock	(100		)	—			—			—		(100		)
Intercompany advances	(18		)	—			18			—		—
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(56		)	—			90			—		34
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	9			1			(10		)	—		—
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	4			4			100			—		108
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	13		$	5		$	90		$	—	$	108

35

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In millions)

(Unaudited)

	Three Months Ended December 31, 2018
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR)        OPERATING ACTIVITIES	$	(9	)	$	15		$	5		$	—	$	11
INVESTING ACTIVITIES
Capital expenditures	(1		)	(12		)	(10		)	—		(23		)
Cash paid for investment in Transportation Power, Inc.	(3		)	—			—			—		(3		)
Other investing activities	—			—			(1		)	—		(1		)
CASH USED FOR INVESTING ACTIVITIES	(4		)	(12		)	(11		)	—		(27		)
FINANCING ACTIVITIES
Securitization	—			—			33			—		33
Borrowings against revolving line of credit	45			—			—			—		45
Repurchase of common stock	(50		)	—			—			—		(50		)
Intercompany advances	18			—			(18		)	—		—
Other financing activities	—			(1		)	—			—		(1		)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	13			(1		)	15			—		27
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	—			2			10			—		12
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	24			6			85			—		115
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	24		$	8		$	95		$	—	$	127

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 December 31, 2019 and September 30, 2019, Parent-only obligations included $305 million and $315 million of pension and retiree medical benefits, respectively (see Note 19). All debt is debt of the Parent other than $85 million and $13 million at December 31, 2019 and September 30, 2019, respectively (see Note 17), and is primarily related to U.S. accounts receivable securitization and financing lease obligations. There were no cash dividends paid to the Parent by subsidiaries and investments accounted for by the equity method for the three months ended December 31, 2019 and December 31, 2018, respectively.

36

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

24. Subsequent Event

TransPower

As of December 31, 2019, the fair value of the company’s investment in Transportation Power Inc. ("TransPower") was $12 million. On January 16, 2020, Meritor acquired 100 percent of the voting equity interest of TransPower for an additional $16 million.

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.

1st Quarter Fiscal Year 2020 Results

Our sales for the first quarter of fiscal year 2020 were $901 million, a decrease compared to $1,038 million in the same period in the prior fiscal year. The decrease in sales was driven by lower global production volumes, partially offset by sales from our AxleTech business, which we acquired in the fourth quarter of fiscal year 2019.

Net income attributable to Meritor for the first quarter of fiscal year 2020 was $39 million compared to $90 million in the same period in the prior fiscal year. In the prior year, we recognized $31 million of income related to remeasuring the Maremont asbestos liability, which did not repeat. Lower revenue year over year and higher restructuring costs, related to programs announced in September 2019, also contributed to lower net income from continuing operations attributable to Meritor.

Adjusted EBITDA (see Non-GAAP Financial Measures below) for the first quarter of fiscal year 2020 was $98 million compared to $119 million in the same period in the prior fiscal year. Our adjusted EBITDA margin (see Non-GAAP Financial Measures below) in the first quarter of fiscal year 2020 was 10.9 percent compared to 11.5 percent in the same period in the prior fiscal year. The decrease in adjusted EBITDA and adjusted EBITDA margin year over year was driven primarily by lower revenue, partially offset by lower material and and labor and burden costs. Adjusted EBITDA margin was also impacted by our AxleTech business, as the expected benefit from executed synergies continue to ramp up to full run rate.

Net income from continuing operations attributable to the company for the first quarter of fiscal year 2020 was $39 million compared to $90 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 first quarter of fiscal year 2020 was $52 million compared to $69 million in the same period in the prior fiscal year.

Cash used for operating activities was $19 million in the first quarter of fiscal year 2020 compared to cash provided by operating activities of $11 million in the first quarter of fiscal year 2019. The decrease in cash provided by operating activities was driven primarily by lower earnings in the first quarter of fiscal year 2020.

Equity Repurchase Authorization

In the first quarter of fiscal year 2020, we repurchased 4.9 million shares of our common stock for $100 million (including commission costs) pursuant to the November 2019 equity repurchase authorization described in the Liquidity section below. The amount remaining available for repurchases under that repurchase authorization was $200 million as of December 31, 2019.

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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 months ended December 31, 2019 and 2018 based on available sources and management’s estimates.

	Three Months Ended December 31,		Percent
	2019	2018	Change
Estimated Commercial Truck production (in thousands):
North America, Heavy-Duty Trucks	67	84	(20	)%
North America, Medium-Duty Trucks	59	65	(9	)%
North America, Trailers	80	87	(8	)%
Western Europe, Heavy- and Medium-Duty Trucks	111	129	(14	)%
South America, Heavy- and Medium-Duty Trucks	30	27	11	%
India, Heavy- and Medium-Duty Trucks	71	114	(38	)%

North America:

During fiscal year 2020, we expect production volumes to decrease from the levels experienced in fiscal year 2019 by approximately 25 percent.

Western Europe:

During fiscal year 2020, we expect production volumes in Western Europe to decrease from the levels experienced in

fiscal year 2019.

South America:

During fiscal year 2020, we expect production volumes to increase slightly from the levels experienced in fiscal year 2019.

China:

During fiscal year 2020, we expect production volumes to decrease from the levels experienced in fiscal year 2019.

India:

During fiscal year 2020, we expect production volumes to significantly decrease from the levels experienced in fiscal year 2019.

Industry-Wide Issues and Other Significant 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, transportation costs and other commodities, including energy;

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

• Impact of currency exchange rate volatility; and

• Consolidation and globalization of OEMs and their suppliers.

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

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

• Ability to successfully execute and implement strategic initiatives, including the ability to launch a significant number of new products, potential product quality issues, and obtain new business;

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• 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 work with our customers to manage rapidly changing production volumes, including in the event of production interruptions affecting us, our customers or our suppliers;

• Competitively driven price reductions to our customers or 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 and free cash flow.

     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.

     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. Free cash flow over adjusted income from continuing operations is a specific financial measure of our M2022 plan used to measure the company's ability to convert earnings to free cash flow.

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.

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Our Board of Directors uses adjusted EBITDA margin, free cash flow, adjusted diluted earnings (loss) per share from continuing operations and free cash flow over adjusted income from continuing operations 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. 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 December 31,
	2019			2018
Income from continuing operations attributable to the company	$	39		$	90
Restructuring	5			—
Non-cash tax expense (1)	9			11
U.S. tax reform impacts (2)	—			(7		)
Asbestos related liability remeasurement (3)	—			(31		)
Income tax expense (benefits) (4)	(1		)	6
Adjusted income from continuing operations attributable to the company	$	52		$	69
Diluted earnings per share from continuing operations	$	0.48		$	1.03
Impact of adjustments on diluted earnings per share	0.16			(0.24		)
Adjusted diluted earnings per share from continuing operations	$	0.64		$	0.79

⁽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 three months ended December 31, 2018 includes $11 million of non-cash tax benefit related to the one time deemed repatriation of accumulated foreign earnings and $4 million of non-cash tax expense related to other adjustments.

⁽³⁾ The three months ended December 31, 2018 includes $31 million related to the remeasurement of the Maremont net asbestos liability based on the Maremont prepackaged plan of reorganization.

⁽⁴⁾ The three months ended December 31, 2019 includes $1 million of income tax benefits related to restructuring. The three months ended December 31, 2018 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 (used for) operating activities below (in millions).

	Three Months Ended December 31,
	2019			2018
Cash provided by (used for) operating activities	$	(19	)	$	11
Capital expenditures	(16		)	(23		)
Free cash flow	$	(35	)	$	(12	)
Free cash flow conversion(1)	(67		)%	(17		)%

⁽¹⁾ Represents free cash flow divided by adjusted income from continuing operations

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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 December 31,
	2019			2018
Net income attributable to Meritor, Inc.	$	39		$	90
Income from discontinued operations, net of tax, attributable to Meritor, Inc.	—			—
Income from continuing operations, net of tax, attributable to Meritor, Inc.	$	39		$	90
Interest expense, net	14			14
Provision for income taxes	13			21
Depreciation and amortization	24			22
Noncontrolling interests	2			2
Loss on sale of receivables	1			1
Asbestos related liability remeasurement	—			(31		)
Restructuring	5			—
Adjusted EBITDA	$	98		$	119
Adjusted EBITDA margin (1)	10.9		%	11.5		%
Unallocated legacy and corporate expense (income), net (2)	(2		)	(2		)
Segment adjusted EBITDA	$	96		$	117
Commercial Truck (3)
Segment adjusted EBITDA	$	56		$	77
Segment adjusted EBITDA margin (4)	9.0		%	9.9		%
Aftermarket, Industrial and Trailer (3)
Segment adjusted EBITDA	$	40		$	40
Segment adjusted EBITDA margin (4)	12.6		%	13.2		%

⁽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 months ended December 31, 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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MERITOR, INC.

Results of Operations

Three Months Ended December 31, 2019 Compared to Three Months Ended December 31, 2018

   Sales

The following table reflects total company and business segment sales for the three months ended December 31, 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 December 31,									Dollar Change Due To
	2019		2018 (1)		Dollar Change			% Change		Currency			Volume/ Other
Sales:
Commercial Truck
North America	$	326	$	397	$	(71	)	(18	)%	$	—		$	(71	)
Europe	141		175		(34		)	(19	)%	(3		)	(31		)
South America	53		50		3			6	%	(4		)	7
China	34		41		(7		)	(17	)%	(1		)	(6		)
India	22		57		(35		)	(61	)%	—			(35		)
Other	14		24		(10		)	(42	)%	(1		)	(9		)
Total External Sales	$	590	$	744	$	(154	)	(21	)%	$	(9	)	$	(145	)
Intersegment Sales	32		35		(3		)	(9	)%	(1		)	(2		)
Total Sales	$	622	$	779	$	(157	)	(20	)%	$	(10	)	$	(147	)
Aftermarket, Industrial and Trailer
North America	$	266	$	268	$	(2	)	(1	)%	$	—		$	(2	)
Europe	43		26		17			65	%	(1		)	18
Other	2		—		2			N/A		—			2
Total External Sales	$	311	$	294	$	17		6	%	$	(1	)	$	18
Intersegment Sales	6		9		(3		)	(33	)%	(1		)	(2		)
Total Sales	$	317	$	303	$	14		5	%	$	(2	)	$	16
Total External Sales	$	901	$	1,038	$	(137	)	(13	)%	$	(10	)	$	(127	)

⁽¹⁾ Amounts for the three months ended December 31, 2018 have been recast to reflect reportable segment changes.

Commercial Truck sales were $622 million in the first quarter of fiscal year 2020, down 20 percent compared to the first quarter of fiscal year 2019. The decrease in sales was driven primarily by decreased market volumes for most regions across the segment.

Aftermarket, Industrial and Trailer sales were $317 million in the first quarter of fiscal year 2020, up 5 percent compared to the first quarter of fiscal year 2019. Higher sales were primarily driven by revenue generated from our AxleTech business we acquired in the fourth quarter of fiscal year 2019, partially offset by decreased volumes across the segment.

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	Three Months Ended December 31,
	2019			2018			Dollar Change			% Change
Sales	$	901		$	1,038		$	(137	)	(13	)%
Cost of sales	(774		)	(897		)	123			14	%
GROSS MARGIN	127			141			(14		)	(10	)%
Selling, general and administrative	(70		)	(34		)	(36		)	(106	)%
Other operating expense, net	(5		)	—			(5		)	N/A
Other income, net	10			11			(1		)	(9	)%
Equity in earnings of affiliates	6			9			(3		)	(33	)%
Interest expense, net	(14		)	(14		)	—			—	%
INCOME BEFORE INCOME TAXES	54			113			(59		)	(52	)%
Provision for income taxes	(13		)	(21		)	8			38	%
NET INCOME	41			92			(51		)	(55	)%
Less: Net income attributable to noncontrolling interests	(2		)	(2		)	—			—	%
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	39		$	90		$	(51	)	(57	)%

Cost of Sales and Gross Margin

     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 December 31, 2019 was $774 million compared to $897 million in the same period in the prior fiscal year, representing a decrease of 14 percent, primarily driven by decreased market volumes. Total cost of sales was 85.9 and 86.4 percent of sales for the three-month periods ended December 31, 2019 and 2018, respectively.

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 December 31, 2019 decreased $106 million compared to the same period in the prior fiscal year primarily due to lower volumes, year-over-year steel prices and layered capacity costs.

Labor and overhead costs decreased by $20 million compared to the same period in the prior fiscal year primarily due to lower volumes.

Gross margin was $127 million and $141 million for the three-month periods ended December 31, 2019 and 2018, respectively. Gross margin as a percentage of sales was 14.1 and 13.6 percent for the three-month periods ended December 31, 2019 and 2018, respectively. Gross margin as a percentage of sales remained relatively flat as lower sales more than offset lower material, primarily steel, and freight costs.

Other Income Statement Items

     Selling, general and administrative expenses ("SG&A") for the three months ended December 31, 2019 and 2018 were $70 million and $34 million, respectively.

We recognized $31 million related to remeasuring the Maremont asbestos liability based on the terms of the plan of reorganization in the first quarter of fiscal year 2019 (see Note 20 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report). All other SG&A increased by $5 million primarily due to additional costs generated from our AxleTech business, which was acquired in the fourth quarter of fiscal year 2019.

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 December 31, 2019 and 2018 (dollars in millions).

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	Segment adjusted EBITDA							Segment adjusted EBITDA margins
	Three Months Ended December 31,							Three Months Ended December 31,
	2019		2018 (1)		Change			2019		2018 (1)		Change
Commercial Truck	$	56	$	77	$	(21	)	9.0	%	9.9	%	(0.9	) pts
Aftermarket, Industrial and Trailer	40		40		—			12.6	%	13.2	%	(0.6	) pts
Segment adjusted EBITDA	$	96	$	117	$	(21	)	10.7	%	11.3	%	(0.6	) pts

⁽¹⁾ Amounts for the three months ended December 31, 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 December 31, 2018 (1)	$	77		$	40		$	117
Lower earnings from unconsolidated affiliates	(3		)	—			(3		)
Impact of foreign currency exchange rates	(3		)	(1		)	(4		)
Volume, mix, pricing and other	(15		)	1			(14		)
Segment adjusted EBITDA – Quarter ended December 31, 2019	$	56		$	40		$	96

⁽¹⁾ Amounts for the three months ended December 31, 2018 have been recast to reflect reportable segment changes.

Commercial Truck segment adjusted EBITDA was $56 million in the first quarter of fiscal year 2020, down $21 million from the same period in the prior fiscal year. Segment adjusted EBITDA margin decreased from 9.9 percent in the first quarter of fiscal year 2019 to 9.0 percent in the first quarter of fiscal year 2020. The decrease in segment adjusted EBITDA and segment adjusted EBITDA margin were driven primarily by lower volumes, partially offset by lower freight, labor and burden and material costs.

     Aftermarket, Industrial and Trailer segment adjusted EBITDA was $40 million in the first quarter of fiscal years 2020 and 2019. Segment adjusted EBITDA margin decreased from 13.2 percent in the first quarter of fiscal year 2019 to 12.6 percent in the first quarter of fiscal year 2020. The decrease in segment adjusted EBITDA margin was driven primarily by the impact from our AxleTech business, as the benefit from executed synergies continue to ramp up to full run rate.

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Financial Condition

Cash Flows (in millions)

	Three Months Ended December 31,
	2019			2018
OPERATING CASH FLOWS
Income from continuing operations	$	41		$	92
Depreciation and amortization	24			22
Deferred income tax expense	3			3
Restructuring costs	5			—
Equity in earnings of affiliates	(6		)	(9		)
Pension and retiree medical income	(10		)	(9		)
Asbestos related liability remeasurement	—			(31		)
Dividends received from equity method investments	—			1
Pension and retiree medical contributions	(3		)	(3		)
Restructuring payments	(7		)	(1		)
Changes in receivables, inventories and accounts payable	(31		)	(52		)
Changes in off-balance sheet accounts receivable factoring	7			38
Changes in other current assets and liabilities	(28		)	(40		)
Changes in other assets and liabilities	(16		)	(4		)
Other, net	3			5
Cash flows provided by (used for) continuing operations	(18		)	12
Cash flows used for discontinued operations	(1		)	(1		)
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	(19	)	$	11

     Cash used for operating activities in the first three months of fiscal year 2020 was $19 million compared to cash provided by operating activities of $11 million in the same period of fiscal year 2019. The decrease in cash provided by operating activities was driven primarily by lower earnings in the first quarter of fiscal year 2020.

	Three Months Ended December 31,
	2019			2018
INVESTING CASH FLOWS
Capital expenditures	$	(16	)	$	(23	)
Cash paid for investment in Transportation Power, Inc.	—			(3		)
Other investing activities	—			(1		)
CASH USED FOR INVESTING ACTIVITIES	$	(16	)	$	(27	)

     Cash used for investing activities was $16 million in the first three months of fiscal year 2020 compared to $27 million in the same period in fiscal year 2019.

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MERITOR, INC.

	Three Months Ended December 31,
	2019			2018
FINANCING CASH FLOWS
Securitization	$	72		$	33
Borrowings against revolving line of credit	65			45
Term loan payments	(3		)	—
Other financing activities	—			(1		)
Net change in debt	134			77
Repurchase of common stock	(100		)	(50		)
CASH PROVIDED BY FINANCING ACTIVITIES	$	34		$	27

     Cash provided by financing activities was $34 million in the first three months of fiscal year 2020 compared to $27 million in the same period of fiscal year 2019. The increase in cash provided by financing activities is primarily related to additional borrowings against our revolving line of credit and securitization, offset by additional share repurchases in the first quarter of fiscal year 2020.

Liquidity

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

	December 31, 2019			September 30, 2019
Fixed-rate debt securities	$	445		$	444
Fixed-rate convertible notes	342			342
Unamortized discount on convertible notes	(32		)	(34		)
Term loan	172			175
Other borrowings	152			16
Total debt	$	1,079		$	943

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 2020 capital expenditures for our business segments to be approximately $115 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 December 31, 2019, in addition to cash on hand, are as follows (in millions):

	Total Facility Size		Utilized as of 12/31/19		Readily Available as of 12/31/19		Current Expiration
On-balance sheet arrangements:
Revolving credit facility (1)	$	625	$	65	$	560	June 2024 (1)
Committed U.S. accounts receivable securitization (2)	115		84		—		December 2022
Total on-balance sheet arrangements	$	740	$	149	$	560
Off-balance sheet arrangements: (2)
Committed Swedish factoring facility (3)	$	169	$	140	$	—	March 2020 (5)
Committed U.S. factoring facility (3)	75		55		—		February 2023
Uncommitted U.K. factoring facility	27		4		—		February 2022
Uncommitted Italy factoring facility	33		23		—		June 2022
Other uncommitted factoring facilities (4)	N/A		18		N/A		None
Total off-balance sheet arrangements	304		240		—
Total available sources	$	1,044	$	389	$	560

⁽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.

⁽⁵⁾  The company is working to extend this arrangement before its current maturity date.

Cash and Liquidity Needs – At December 31, 2019, we had $108 million in cash and cash equivalents, of which $31 million was held in jurisdictions outside of the U.S. that, if repatriated, could result in withholding taxes. We plan to repatriate substantially all of this cash. An immaterial deferred tax liability for the related withholding taxes has been recorded on the cash that we expect to repatriate. In addition, we plan to utilize ongoing cash flow from domestic operations and external borrowings, to meet our liquidity needs in the U.S.

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 December 31, 2019, we were in compliance with this covenant under our credit agreement.

Equity Repurchase Authorization – On November 7, 2019, the Board of Directors authorized the repurchase of up to $325 million of the company's common stock, which was an increase from the prior $250 million authorization approved on July 26, 2019. Repurchases can be made 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. During fiscal year 2019, the company repurchased 1.3 million shares of common stock for $25 million (including commission costs) pursuant to this common stock repurchase authorization. During the first quarter of fiscal year 2020, the company repurchased 4.9 million shares of common stock for $100 million (including commission costs) pursuant to this authorization. As of December 31, 2019, the amount remaining available for repurchases under this common stock repurchase authorization was $200 million.

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. 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.

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Debt Repurchase Authorization – 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. The amount remaining available for repurchases under this repurchase authorization was $76 million as of December 31, 2019 and September 30, 2019.

Revolving Credit Facility – The revolving credit facility is discussed in Note 17 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report.

Other – Refer to Note 17 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report.

Credit Ratings – At January 28, 2020, 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 December 31, 2019 of $240 million, of which $195 million was attributable to committed factoring facilities involving the sale of AB Volvo accounts receivables. The remaining amount of $45 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 June 22, 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).

     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. 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 December 31, 2019 and September 30, 2019, respectively.

Contingencies

Contingencies related to environmental, asbestos and other matters are discussed in Note 20 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, 2019 (the "2019 Form 10-K"). Our critical accounting estimates are consistent with those described in Item 7 of our 2019 Form 10-K.

New Accounting Pronouncements

New Accounting Pronouncements are discussed in Note 4 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

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MERITOR, INC.

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 2019, the company entered into multiple 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.

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)	$	0.7		$	(0.7	)	Fair Value
Forward contracts in Euro (1)	(3.0		)	3.0			Fair Value
Foreign exchange swap (1)	(7.3		)	7.3			Fair Value
Foreign currency denominated debt (2)	0.5			(0.5		)	Fair Value
Foreign currency option contracts in USD	4.0			(0.8		)	Fair Value
Foreign currency option contracts in Euro	(0.1		)	2.5			Fair Value
Cross-currency swaps	(25.1		)	25.3			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)	$	(33.2	)	$	35.3		Fair Value
Debt – variable rate	(1.6		)	1.6			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 December 31, 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 $0.5 million in foreign currency denominated debt. At December 31, 2019, a 10% increase in quoted currency exchange rates would result in an increase of $0.5 million in foreign currency denominated debt.

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(3) At December 31, 2019, the fair value of outstanding debt was $1,195 million. A 50 basis points decrease in quoted interest rates would result in an increase of $35.3 million in the fair value of fixed rate debt. A 50 basis points increase in quoted interest rates would result in a decrease of $33.2 million in the fair value of fixed rate debt.

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MERITOR, INC.

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 December 31, 2019. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of December 31, 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 December 31, 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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MERITOR, INC.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Except as set forth in Note 20 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, 2019.

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, 2019.

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 December 31, 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)
October 1- 31, 2019	3,245,056	$	18.42	3,245,056	$	240,210,940
November 1- 30, 2019	1,140,408	$	24.70	1,140,408	$	212,048,300
December 1- 31, 2019	483,385	$	25.13	483,385	$	199,899,691
Total	4,868,849			4,868,849		199,899,691

(1) 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 superseded the remaining authority under the prior November 2018 equity repurchase authorization. On November 7, 2019, the Board of Directors increased the amount of the repurchase authorization to $325 million.

     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 first quarter of fiscal 2020 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 first quarter of fiscal 2020 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 outlooks, 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., AxleTech and Transportation Power, Inc. 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.

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Item 6. Exhibits

3-a**	Amended and Restated Articles of Incorporation of Meritor effective January 23, 2020.
3-b**	Amended and Restated By-laws of Meritor effective January 23, 2020.
10-a**	Form of Restricted Stock Agreement for Directors under the 2020 Long-Term Incentive Plan.
10-b**	Form of Restricted Stock Agreement for Director Deferral Elections pursuant to the Non-Employee Director Retainer Deferral Policy under the 2020 Long-Term Incentive Plan.
10-c**	Form of Performance Share Unit Agreement for Employees under the 2020 Long-Term Incentive Plan.
10-d**	Form of Restricted Share Unit Agreement for Employees under the 2020 Long-Term Incentive Plan.
10-e**	Form of Restricted Share Unit Agreement for Employee retention under the 2020 Long-Term Incentive Plan.
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.

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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:	January 30, 2020	By:	/s/	Scott M. Confer
				Scott M. Confer
				Interim Chief Legal Officer and Corporate Secretary
				(For the registrant)
Date:	January 30, 2020	By:	/s/	Carl D. Anderson
				Carl D. Anderson
				Senior Vice President, Chief Financial Officer
Date:	January 30, 2020	By:	/s/	Paul D. Bialy
				Paul D. Bialy
				Vice President, Chief Accounting Officer

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EX-3.A

Exhibit 3-a

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF

MERITOR, INC.

ARTICLE 1

IDENTIFICATION

The name of the Corporation is Meritor, Inc. (the “Corporation” or the “Company”).

ARTICLE 2

PURPOSE, POWERS AND DURATION

Section 2.01Purpose. The purpose for which the Corporation is formed is the transaction of any or all lawful business for which corporations may be incorporated under the Indiana Business Corporation Law, as the same may, from time to time, be amended (the “Act”).

Section 2.02Powers. The Corporation, subject to any limitations or restrictions imposed by the Act, other law or these Articles of Incorporation, as the same may, from time to time, be amended (these “Articles”), shall have the same powers as an individual to do all things necessary or convenient to carry out its business and affairs, including without limitation all powers enumerated in the Act as examples of corporate powers.

Section 2.03Duration. The Corporation is to have perpetual existence.

ARTICLE 3
REGISTERED OFFICE AND REGISTERED AGENT

The street address of the registered office of the Corporation is:

and the name and business office of its registered agent in charge of such office are:

CT Corporation System

The undersigned represents that the registered agent named above has consented to the appointment of registered agent.

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ARTICLE 4
NUMBER OF AUTHORIZED SHARES

The Corporation shall have authority to issue a total of Five Hundred Thirty Million (530,000,000) shares of the Corporation (“Shares”).

ARTICLE 5
GENERAL PROVISIONS REGARDING SHARES

Section 5.01Common Stock.

(a)Five Hundred Million (500,000,000) of the Shares that the Corporation has authority to issue constitute a separate and single class of Shares designated as “Common Stock”, which shall have a par value of One Dollar ($1.00) per share and shall not be issued in series, with all shares of Common Stock having identical rights, preferences and limitations.

(b)The Common Stock shall have the following voting powers, designations, preferences and relative, participating, optional and other special rights, and qualifications, limitations or restrictions thereof:

(i)Dividends. Whenever the full dividends upon any outstanding Preferred Stock for all past dividend periods shall have been paid and the full dividends thereon for the then current respective dividend periods shall have been paid, or declared and a sum sufficient for the respective payments thereof set apart, the holders of shares of the Common Stock shall be entitled to receive such dividends and distributions in equal amounts per share, payable in cash or otherwise, as may be declared thereon by the Board of Directors of the Corporation (the “Board”) from time to time out of assets or funds of the Corporation legally available therefor.

(ii)Rights on Liquidation. In the event of any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, after the payment or setting apart for payment to the holders of any outstanding Preferred Stock of the full preferential amounts to which such holders are entitled as herein provided or referred to, all of the remaining assets of the Corporation shall belong to and be distributable in equal amounts per share to the holders of the Common Stock. For purposes of this Section 5.01(b)(ii), a consolidation or merger of the Corporation with any other corporation, or the sale, transfer or lease of all or substantially all its assets shall not constitute or be deemed a liquidation, dissolution or winding-up of the Corporation.

(iii)Voting. Subject to the rights of holders of Preferred Stock of any series, the holders of Common Stock shall have the right to cast one vote for each duly authorized, issued and outstanding share of Common Stock held by them upon each question or matter submitted generally to the Shareholders.

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Section 5.02Preferred Stock. Thirty Million (30,000,000) of the Shares that the Corporation has authority to issue constitute a separate and single class of Shares designated as “Preferred Stock”, which shall be without par value, shall rank prior to and be preferred over Common Stock as to assets and dividends, and may be issued in series as follows, with all shares of Preferred Stock of the same series having identical rights, preferences and limitations:

(a)Two Million (2,000,000) shares of Preferred Stock (or such greater or lesser number as may be established pursuant to Section 6.01 of these Articles) constitute a separate and single series designated as “Series A Junior Participating Preferred Stock”, which shall have the relative rights, preferences and limitations set forth in this Article 5 and in Article 6 of these Articles.

(b)The remainder of the Preferred Stock (“Other Preferred Stock”) may be issued in one or more series. Subject to the rights of the holders of any then outstanding Preferred Stock, the Board is vested with authority to determine and state the designations and the relative rights (including voting rights, if any), preferences and limitations of any such series of Other Preferred Stock by the adoption and filing in accordance with the Act, before the issuance of any Shares of such series, of an amendment or amendments to these Articles determining the terms of such series (a “Preferred Stock Amendment”). The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:

(i)the designation of the series, which may be by distinguishing number, letter or title;

(ii)the number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the Preferred Stock Amendment) increase or decrease (but not below the number of shares thereof then outstanding);

(iii)whether dividends, if any, shall be cumulative or noncumulative and the dividend rate of the series;

(iv)the dates at which dividends, if any, shall be payable;

(v)the redemption rights and price or prices, if any, for shares of the series;

(vi)the terms and amount of any sinking fund provided for the purchase or redemption of shares of the series;

(vii)the amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;

(viii)whether the shares of the series shall be convertible into shares of any other class or series, or any other security, of the Corporation or any other corporation, and, if so, the specification of such other class or series or such other security, the conversion price or prices or rate or rates, any adjustments thereof, the date or dates as of which such shares shall be convertible and all other terms and conditions upon which such conversion may be made;

(ix)restrictions on the issuance of shares of the same series or of any other class or series; and

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(x)the voting rights, if any, of the holders of shares of the series.

Except as may be provided in these Articles or in a Preferred Stock Amendment, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, and except as may be required by the Act, holders of Preferred Stock shall not be entitled to receive notice of any meeting of Shareholders at which they are not entitled to vote. Subject to the requirements of the Act, the number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the outstanding Common Stock.

Section 5.03Issuance of Shares. Subject to the rights of any then outstanding Preferred Stock, the Board has authority to authorize and direct the issuance by the Corporation of Shares on such terms and conditions as it may, from time to time, determine, subject only to the restrictions, limitations, conditions and requirements imposed by the Act, other applicable laws and these Articles.

Section 5.04Distributions Upon Shares. Subject to the rights of any then outstanding Preferred Stock, the Board has authority to authorize and direct in respect of the issued and outstanding shares of Common Stock and Preferred Stock (i) the payment of dividends and the making of other distributions by the Corporation at such times, in such amounts and forms, from such sources and upon such terms and conditions as it may, from time to time, determine, subject only to the restrictions, limitations, conditions and requirements imposed by the Act, other applicable laws and these Articles, and (ii) the making by the Corporation of Share dividends and Share splits, pro rata and without consideration, in Shares of the same class or series or in Shares of any other class or series, and without obtaining the affirmative vote or the written consent of the holders of the Shares of the class or series in respect of which the payment or distribution is to be made.

Section 5.05Preemptive Rights. Unless otherwise determined by the Board, no holder of Shares shall, as such holder, have any right to purchase or subscribe for any Shares of any class which the Corporation may issue or sell, whether or not exchangeable for any Shares of any class or classes and whether out of unissued shares authorized by these Articles as originally filed or by any amendment thereof or out of Shares acquired by it after the issue thereof.

Section 5.06Acquisition of Shares. Subject to the rights of any then outstanding Preferred Stock, the Board has authority to authorize and direct the acquisition by the Corporation of the issued and outstanding shares of Common Stock and Preferred Stock, in such amounts, from such persons, for such considerations, from such sources and upon such terms and conditions as it may, from time to time, determine, subject only to the restrictions, limitations, conditions and requirements imposed by the Act, other applicable laws and these Articles.

Section 5.07Issuance of Rights, Options and Warrants. Subject to the rights of any then outstanding Preferred Stock, the Board has authority to create and to authorize and direct the issuance (on either a pro rata or a non-pro rata basis) by the Corporation of rights, options and warrants for the purchase of Shares, other securities of the Corporation, or shares or other securities of any successor in interest of the Corporation (a “Successor”), at such times, in such amounts, to such persons, for such consideration (if any), with such form and content (including without limitation the consideration for which any Shares, other securities of the Corporation, or shares or other securities of any Successor are to be issued) and upon such terms and conditions as it may, from time to time, determine, subject only to the restrictions, limitations, conditions and requirements imposed by the Act, other applicable laws and these Articles.

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Section 5.08Record Ownership of Shares. 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 5.09Recognition Procedure for Beneficial Ownership of Shares. The Board may establish a recognition procedure, which may be included in the By-Laws of the Corporation (as the same may be amended from time to time, the “By-Laws”), by which the beneficial owner of any Share registered on the books of the Corporation in the name of a nominee is recognized by the Corporation, to the extent provided in any such recognition procedure, as the owner thereof.

Section 5.10Disclosure Procedure for Beneficial Ownership of Shares. The Board may establish a disclosure procedure, which may be included in the By-Laws, by which the name of the beneficial owner of any Share registered on the books of the Corporation in the name of a nominee shall, to the extent not prohibited by the Act or other applicable laws, be disclosed to the Corporation. Any disclosure procedure established by the Board may include reasonable sanctions to ensure compliance therewith, including without limitation (i) prohibiting the voting of, (ii) providing for mandatory or optional reacquisition by the Corporation of, and (iii) the withholding or payment into escrow of any dividend or other distribution in respect of, any Share of which the name of the beneficial owner is not disclosed to the Corporation as required by such disclosure procedure.

Section 5.11Liability of Shareholders. The private property of the Shareholders of the Corporation shall not be subject to the payment of corporate debts to any extent whatever.

ARTICLE 6
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

The Series A Junior Participating Preferred Stock shall have the designation and the relative rights, preferences and limitations set forth in this Article 6.

Section 6.01Designation and Amount. The shares of such series shall be designated as “Series A Junior Participating Preferred Stock” (the “Series A Preferred Stock”) and the number of shares constituting the Series A Preferred Stock shall be Two Million (2,000,000). Such number of shares may be increased or decreased by resolution of the Board; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock.

Section 6.02Dividends and Distributions.

(a)Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common

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Stock, and of any other junior stock of the Corporation, shall be entitled to receive, when, as and if declared by the Board out of funds legally available for the purpose, quarterly dividends payable in cash on the second Monday of March, June, September and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $1.00 or (ii) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(b)The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in Section 6.02(a) immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

(c)Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.

Section 6.03Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights:

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(a)Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the Shareholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(b)Except as otherwise provided herein, in any other Preferred Stock Amendment creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of Shareholders of the Corporation.

(c)Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

Section 6.04Certain Restrictions.

(a)Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 6.02 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

(i)declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;

(ii)declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

(iii)redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or

(iv)redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred

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Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(b)The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under Section 6.04(a)(iii), purchase or otherwise acquire such shares at such time and in such manner.

Section 6.05Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth in these Articles, or in any Preferred Stock Amendment creating a series of Preferred Stock or any similar stock or as otherwise required by law.

Section 6.06Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (a) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (b) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (a) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 6.07Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of

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Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 6.08No Redemption. The shares of Series A Preferred Stock shall not be redeemable.

Section 6.09Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation’s Preferred Stock.

Section 6.10Amendment. These Articles shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class.

ARTICLE 7
DIRECTORS, BY-LAWS AND ARTICLES OF INCORPORATION

Section 7.01Number of Directors. The number of Directors of the Corporation shall be fixed from time to time by the Board pursuant to a resolution adopted by a majority of the whole Board, provided that such number shall not be less than three (3). A director need not be a Shareholder. The election of directors need not be by ballot unless the By-Laws so require.

Section 7.02Terms of Directors.

(a)Until the election of directors at the annual meeting of shareholders to be held in 2023, the Directors, other than those who may be elected by the holders of any series of Preferred Stock or any other series or class of Shares, as provided in these Articles or in any Preferred Stock Amendment, shall be divided, with respect to the time for which they severally hold office, into classes, with Directors in each class having the terms of office specified in this Section 7.02. The term of office for the class of Directors elected in 2018 shall expire at the annual meeting of shareholders to be held in 2021, the term of office for the class of Directors elected in 2019 shall expire at the annual meeting of shareholders to be held in 2022, and the term of office for the class of Directors elected in 2020 shall expire at the annual meeting of shareholders to be held in 2023, with each Director to hold office until his or her successor shall have been duly elected and qualified. Commencing at the annual meeting of shareholders to be held in 2021, Directors whose terms expire at such meeting (or such Directors’ successors) shall be elected to hold office for a one-year term expiring at the next annual meeting of shareholders, with each Director to hold office until his or her successor shall have been duly elected and qualified. Commencing with the election of Directors at the annual meeting of shareholders to be held in 2023, the

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classification of the Board shall terminate and all Directors shall thereupon be elected for a one-year term expiring at the next annual meeting of shareholders.

(b)Subject to the rights of the holders of any series of Preferred Stock, and unless the Board otherwise determines, newly created directorships resulting from any increase in the authorized number of Directors or any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by a majority vote of the Directors then in office, though less than a quorum, and any Director so chosen shall hold office (i) prior to the election of Directors at the annual meeting of shareholders to be held in 2023, 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 or (ii) commencing with the election of Directors at the annual meeting of shareholders to be held in 2023, for a term expiring at the next annual meeting of such shareholders, and in each case until such Director’s successor shall have been duly elected and qualified. No decrease in the number of authorized Directors constituting the whole Board shall shorten the term of any incumbent Director.

Section 7.03Removal for Cause. Subject to the rights of the holders of any series of Preferred Stock or any other series or class of Shares, as provided in these Articles or in any Preferred Stock Amendment, to elect additional Directors under specific circumstances, no Director of the Corporation shall be removed from his or her office as a Director by vote or other action of Shareholders or otherwise except for cause and in no event without the affirmative vote of at least 80 percent of the voting power of the Shares of the Corporation then entitled to vote at an election of Directors (the “Voting Shares”), voting together as a single class.

Section 7.04By-Laws. Except as otherwise expressly provided in these Articles or the Act, the By-laws of the Corporation may from time to time be altered, amended or repealed, or new By-laws may be adopted, by either (a) the Board by the affirmative vote of a majority of the total number of Directors at the time, or (b) the affirmative vote, at a meeting of the shareholders of the Corporation, of the holders of at least a majority of the voting power of the Voting Shares, voting together as a single class.

Section 7.05Articles of Incorporation. From time to time any of the provisions of these Articles may be amended, altered or repealed, and other provisions authorized by the statutes of the State of Indiana at the time in force may be added or inserted in the manner at the time prescribed by said statutes, and all rights at any time conferred upon the Shareholders of the Corporation by its Articles of Incorporation are granted subject to the provisions of this Section 7.05. Notwithstanding anything contained in these Articles to the contrary, none of Article 7, Article 9 or the last sentence of Section 8.01 may be amended or repealed, and no provision inconsistent with this Article 7, Article 9 or the last sentence of Section 8.01 may be adopted, except by the affirmative vote of the holders of at least 80 percent of the voting power of the Voting Shares, voting together as a single class.

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ARTICLE 8
PROVISIONS FOR REGULATIONS OF BUSINESS
AND CONDUCT OF AFFAIRS OF CORPORATION

Section 8.01Meetings of Shareholders. Meetings of the Shareholders shall be held at such place, within or without the State of Indiana, as may be provided in the By-Laws or in the respective notices, or waivers of notice, thereof. In the absence of any such provision, all Shareholders’ meetings shall be held at the principal office of the Corporation. Special meetings of the Shareholders for any purpose or purposes shall be called only by the Board pursuant to a resolution adopted by a majority of the total number of Directors which the Corporation would have if there were no vacancies.

Section 8.02Action by Directors. Meetings of the Board or any committee of the Board (a “Committee”) shall be held at such place, within or without the State of Indiana, as may be specified in the By-Laws or in the respective notices, or waivers of notice, thereof and shall be conducted in such manner as may be specified in the By-Laws or permitted by the Act. Any action required or permitted to be taken at any meeting of the Board or a Committee may be taken without a meeting if a consent in writing setting forth the action so taken is signed by all members of the Board or such Committee, and such written consent is filed with the minutes of the proceedings of the Board or such Committee.

Section 8.03Board Committees. Unless the By-Laws otherwise provide, the Board may, by resolution adopted by a majority of the whole Board of Directors, designate from among its members one or more Committees, each of which shall, to the extent provided in the resolution or By-Laws and not prohibited by the Act and other applicable laws, have and exercise all of the authority of the Board in the management of the Corporation.

Section 8.04Places of Keeping of Corporate Records. The Corporation shall keep at its principal office a copy of (i) these Articles, and all amendments thereto currently in effect; (ii) the By-Laws, and all amendments thereto currently in effect; (iii) minutes of all meetings of the Shareholders (“Shareholders Minutes”) for the prior three years; (iv) all written communications by the Corporation to the Shareholders, including the financial statements furnished by the Corporation to the Shareholders for the prior three years; (v) a list of the names and business addresses of the current Directors and the current officers of the Corporation (“Officers”); and (vi) the most recent Annual Report of the Corporation as filed with the Secretary of State of Indiana. The Corporation shall also keep and maintain at its principal office, or at such other place or places within or without the State of Indiana as may be provided, from time to time, in the By-Laws, (i) minutes of all meetings of the Board and of each Committee, and records of all actions taken by the Board and by each Committee without a meeting; (ii) appropriate accounting records of the Corporation; (iii) a record of the Shareholders in a form that permits preparation of a list of the names and addresses of all the Shareholders, in alphabetical order by class of Shares, stating the number and class of Shares held by each Shareholder; and (iv) Shareholders Minutes for periods preceding the prior three years. All of the records of the Corporation described in this Section 8.04 (collectively, the “Corporate Records”) shall be maintained in written form or in another form capable of conversion into written form within a reasonable time.

Section 8.05Limitation of Liability of Directors, Officers and Others.

(a)No Director, member of any Committee, member of another committee appointed by the Board (an “Appointed Committee”), Officer, employee or agent of the Corporation (collectively, “Corporate Person”) shall be liable for any loss or damage suffered on account of any action taken or omitted to be taken by such Corporate Person if, in taking or omitting to take any

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action causing such loss or damage, either (i) such Corporate Person acted (A) in good faith, (B) with the care an ordinarily prudent person in a like position would have exercised under similar circumstances, and (C) in a manner such Corporate Person reasonably believed was in the best interests of the Corporation, or (ii) such Corporate Person’s breach of or failure to act in accordance with the standards of conduct set forth in clause (i) above (the “Standards of Conduct”) did not constitute willful misconduct or recklessness.

(b)Any Corporate Person shall be fully protected, and shall be deemed to have complied with the Standards of Conduct, in relying in good faith, with respect to any information contained therein, upon (i) the Corporate Records, or (ii) information, opinions, reports or statements (including financial statements and other financial data) prepared or presented by (A) one or more other Corporate Persons whom such Corporate Person reasonably believes to be competent in the matters presented, (B) legal counsel, public accountants or other persons as to matters that such Corporate Person reasonably believes are within such person’s professional or expert competence, (C) a Committee or an Appointed Committee, of which such Corporate Person is not a member, if such Corporate Person reasonably believes such Committee or Appointed Committee merits confidence, or (D) the Board, if such Corporate Person is not a Director and reasonably believes that the Board merits confidence.

(c)No repeal or modification of this Section 8.05, directly or by adoption of an inconsistent provision of these Articles, by the Shareholders of the Corporation shall be effective with respect to any cause of action, suit, claim or other matter that, but for this Section 8.05, would accrue or arise prior to such repeal or modification.

Section 8.06Indemnification of Directors, Officers and Others. To the extent permitted by the Act and the By-Laws, the Corporation may:

(a)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 or criminal, administrative or investigative, formal or informal (an “Action”), by reason of the fact that such person is or was 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 (collectively, an “Authorized Capacity”) of or for another corporation, unincorporated association, business trust, estate, partnership, trust, joint venture, individual or other legal entity, whether or not organized or formed for profit (collectively, “Another Entity”), against expenses (including attorneys’ fees) (“Expenses”) and judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Action;

(b)pay, in advance of the final disposition of an Action, the Expenses reasonably incurred in defending such action by a person who may be entitled to indemnification by the Corporation; and

(c)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 and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability.

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The indemnification and advance of Expenses authorized by this Section 8.06 shall (i) not be deemed exclusive of any other rights to which a person may be entitled under any law, any resolution of the Board or the Shareholders, any other authorization, whenever adopted, after notice, by a majority vote of all then outstanding Shares entitled to vote generally in the election of Directors, or the articles of incorporation, by-laws or other governing documents, or any resolution of or other authorization by the directors, shareholders, partners, trustees, members, owners or governing body, of Another Entity; (ii) inure to the benefit of the heirs, executors and administrators of such person; and (iii) continue as to any such person who has ceased to be a Corporate Person or to be serving in an Authorized Capacity of or for Another Entity.

Section 8.07Compensation of Directors. The Board is hereby specifically authorized, in and by the By-Laws, or by resolution duly adopted by the Board, to make provision for reasonable compensation to its members for their services as Directors, and to fix the basis and conditions upon which such compensation shall be paid. Any Director may also serve the Corporation in any other capacity and receive compensation therefor in any form.

Section 8.08Direction of Purposes and Exercise of Powers by Directors. The Board, subject to any specific limitations or restrictions imposed by the Act or these Articles, shall direct the carrying out of the purposes and exercise the powers of the Corporation, without previous authorization or subsequent approval by the Shareholders.

ARTICLE 9
SHAREHOLDER VOTE REQUIRED FOR
BUSINESS COMBINATIONS

Section 9.01Higher Vote for Business Combinations. In addition to any affirmative vote required by law, these Articles or the By-Laws of the Corporation, and except as otherwise expressly provided in Section 9.02, a Business Combination (as hereinafter defined) shall not be consummated without the affirmative vote of the holders of at least 80 percent of the Voting Shares, voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage or separate class vote may be specified, by law or in any agreement with any national securities exchange or otherwise.

Section 9.02When Higher Vote Is Not Required. The provisions of Section 9.01 shall not be applicable to a Business Combination if the conditions specified in either of the following paragraphs (a) or (b) are met.

(a)Approval by Continuing Directors. The Business Combination shall have been approved by at least two-thirds of the Continuing Directors (as hereinafter defined), whether such approval is made prior to or subsequent to the date on which the Interested Shareholder (as hereinafter defined) became an Interested Shareholder (the “Determination Date”).

(b)Price and Procedure Requirements. Each of the seven conditions specified in the following subparagraphs (i) through (vii) shall have been met:

(i)The aggregate amount of the cash and the Fair Market Value (as hereinafter defined) as of the date of the consummation of the Business Combination (the

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“Consummation Date”) of any consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be an amount at least equal to the higher amount determined under clauses (A) and (B) below (the requirements of this paragraph (b)(i) shall be applicable with respect to all shares of Common Stock outstanding, whether or not the Interested Shareholder has previously acquired any shares of the Common Stock): (A) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by or on behalf of the Interested Shareholder for any shares of Common Stock acquired beneficially by it (1) within the two-year period immediately prior to the first public announcement of the proposal of the Business Combination (the “Announcement Date”) or (2) in the transaction in which it became an Interested Shareholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Morgan Guaranty Trust Company of New York (or of such other major bank headquartered in New York City selected by at least two-thirds of the Continuing Directors) from time to time in effect in New York City, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid in other than cash, per share of Common Stock from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of such interest payable per share of Common Stock; and (B) the Fair Market Value per share of Common Stock on the Announcement Date or on the Determination Date, whichever is higher.

(ii)The aggregate amount of the cash and the Fair Market Value as of the Consummation Date of any consideration other than cash to be received per share by holders of outstanding Shares of any class or series, other than the Common Stock, in such Business Combination shall be an amount at least equal to the highest amount determined under clauses (A), (B) and (C) below (the requirements of this paragraph (b)(ii) shall be applicable with respect to all outstanding Shares of every class or series, other than the Common Stock, whether or not the Interested Shareholder has previously acquired any Shares of a particular class or series):

(A)the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by or on behalf of the Interested Shareholder for any Shares of such class or series acquired beneficially by it (1) within the two-year period immediately prior to the Announcement Date or (2) in the transaction in which it became an Interested Shareholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Morgan Guaranty Trust Company of New York (or of such other major bank headquartered in New York City selected by at least two-thirds of the Continuing Directors) from time to time in effect in New York City, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid in other than cash, per share of such class or series of Shares from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of such interest payable per share of such class or series of Shares; and

(B)the Fair Market Value per share of such class or series of Shares on the Announcement Date or on the Determination Date, whichever is higher; and

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(C)the highest preferential amount per share to which the holders of Shares of such class or series would be entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, regardless of whether the Business Combination to be consummated constitutes such an event.

(iii)The consideration to be received by holders of a particular class or series of outstanding Shares (including Common Stock) shall be in cash or in the same form as previously has been paid by or on behalf of the Interested Shareholder in its direct or indirect acquisition of beneficial ownership of Shares of such class or series. If the consideration so paid for Shares of any class or series varied as to form, the form of consideration for such class or series of Shares shall be either cash or the form used to acquire beneficial ownership of the largest number of Shares of such class or series previously acquired by the Interested Shareholder.

(iv)After such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination, such Interested Shareholder shall not have become the beneficial owner of any additional Shares except as part of the transaction that results in such Interested Shareholder becoming an Interested Shareholder and except in a transaction that, after giving effect thereto, would not result in any increase in the Interested Shareholder’s percentage beneficial ownership of any class or series of Shares; and, except as approved by at least two-thirds of the Continuing Directors: (A) there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) payable in accordance with the terms of any outstanding Shares; (B) there shall have been no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any stock split, stock dividend or subdivision of the Common Stock); and (C) there shall have been an increase in the annual rate of dividends paid on the Common Stock as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of Common Stock.

(v)After such Interested Shareholder has become an Interested Shareholder, such Interested Shareholder shall not have received the benefit, directly or indirectly (except proportionately as a Shareholder of the Corporation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise.

(vi)A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all Shareholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). The proxy or information statement shall contain on the first page thereof, in a prominent place, any statement as to the advisability of the Business Combination that the Continuing Directors, or any of them, may choose to make and, if deemed advisable by at least two-thirds of the Continuing Directors, the opinion of an investment banking firm selected for and on behalf of the Corporation by at least two-thirds of the Continuing

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Directors as to the fairness of the terms of the Business Combination from a financial point of view to the holders of the outstanding Shares other than the Interested Shareholder and its Affiliates or Associates (as hereinafter defined).

(vii)Such Interested Shareholder shall not have made any material change in the Corporation’s business or equity capital structure without the approval of at least two-thirds of the Continuing Directors.

Any Business Combination to which Section 9.01 shall not apply by reason of this Section 9.02 shall require only such affirmative vote as is required by law, any other provision of these Articles, the By-Laws of the Corporation or any agreement with any national securities exchange.

Section 9.03Certain Definitions. For the purposes of this Article 9:

(a)A “Business Combination” shall mean:

(i)any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (A) any Interested Shareholder or (B) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested Shareholder; or

(ii)any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder involving any assets or securities of the Corporation, any Subsidiary or any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder having an aggregate Fair Market Value of $25,000,000 or more; or

(iii)the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Shareholder or any Affiliate or Associate of any Interested Shareholder; or

(iv)any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) that has the effect, directly or indirectly, of increasing the proportionate share of any class or series of Shares, or any securities convertible into Shares or into equity securities of any Subsidiary, that is beneficially owned by any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder; or

(v)any agreement, contract, arrangement or other understanding providing for any one or more of the actions specified in clauses (i) through (iv) above.

(b)A “person” shall mean any individual, firm, corporation or other entity and shall include any group composed of any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Shares.

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(c)“Interested Shareholder” shall mean any person (other than the Corporation or any Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation, any Subsidiary or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who or which:

(i)is the beneficial owner of Voting Shares having 10 percent or more of the votes entitled to be cast by the holders of all then outstanding Voting Shares; or

(ii)is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of Voting Shares having 10 percent or more of the votes entitled to be cast by the holders of all then outstanding Voting Shares; or

(iii)is an assignee of or has otherwise succeeded to any Voting Shares which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933;

provided, however, that neither Meritor Automotive, Inc. nor Arvin Industries, Inc. shall be deemed an Interested Shareholder as a result of any ownership of Shares or otherwise prior to the mergers of such corporations with and into the Corporation.

(d)A person shall be a “beneficial owner” of any Shares:

(i)which such person or any Affiliate or Associate of such person beneficially owns, directly or indirectly; or

(ii)which such person or any Affiliate or Associate of such person has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding; or

(iii)which are beneficially owned, directly or indirectly, by any other person with which such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Shares.

(e)For the purposes of determining whether a person is an Interested Shareholder pursuant to Section 9.03(c), the number of Shares deemed to be outstanding shall include shares deemed owned by the Interested Shareholder through application of Section 9.03(d) but shall not include any other Shares that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

(f) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on July 7, 2000 (the term “registrant” in such Rule 12b-2 meaning in this case the Corporation).

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(g)“Subsidiary” means any corporation of which a majority of any class of equity security is beneficially owned by the Corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in Section 9.03(c), the term “Subsidiary” shall mean only a corporation of which a majority of each class of equity security is beneficially owned by the Corporation.

(h)“Continuing Director” means any member of the Board who is not an Affiliate or Associate or representative of the Interested Shareholder and was a member of the Board prior to the time that the Interested Shareholder became an Interested Shareholder, and any successor of a Continuing Director who is not an Affiliate or Associate or representative of the Interested Shareholder and is recommended or elected to succeed a Continuing Director by at least two-thirds of the Continuing Directors then members of the Board.

(i)“Fair Market Value” means: (i) in the case of cash, the amount of such cash; (ii) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period immediately preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined in good faith by at least two-thirds of the Continuing Directors; and (iii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by at least two-thirds of the Continuing Directors.

(j)In the event of any Business Combination in which the Corporation survives, the phrase “consideration other than cash to be received” as used in Sections 9.02(b)(i) and (ii) shall include the shares of Common Stock and/or the shares of any other class or series of Shares retained by the holders of such shares.

Section 9.04Powers of Continuing Directors. Any determination as to compliance with this Article 9, including without limitation (a) whether a person is an Interested Shareholder, (b) the number of Shares or other securities beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another, (d) whether the requirements of Section 9.02(b)(ii) have been met with respect to any Business Combination, and (e) whether the assets that are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $25,000,000 or more shall be made only upon action by not less than two-thirds of the Continuing Directors of the Corporation; and the good faith determination of at least two-thirds of the Continuing Directors on such matters shall be conclusive and binding for all the purposes of this Article 9.

Section 9.05No Effect on Fiduciary Obligations. Nothing contained in this Article 9 shall be construed to relieve the Board or any Interested Shareholder from any fiduciary obligation imposed by law.

Section 9.06Amendment, Repeal, etc. Notwithstanding any other provisions of these Articles or the By-Laws of the Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, these Articles or the By-Laws of the Corporation), the affirmative vote of the

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holders of at least 80 percent of the voting power of the Voting Shares, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article 9; provided, however, that the preceding provisions of this Section 9.06 shall not apply to any amendment to this Article 9, and such amendment shall require only such affirmative vote as is required by law and any other provisions of these Articles or the By-Laws of the Corporation, if such amendment shall have been approved by at least two-thirds of the members of the Board who are persons who would be eligible to serve as Continuing Directors.

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EX-3.B

Exhibit 3-b

AMENDED AND RESTATED BY-LAWS

OF

MERITOR, INC.

(As of January 23, 2020)

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)    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) 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.

SECTION 2.10. 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 (i) prior to the election of Directors at the annual meeting of shareholders to be held prior to 2023, 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 or (ii) commencing with the election of directors at the annual meeting of shareholders held in 2023, for a term expiring at the next annual meeting of shareholders, and in each case 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 the Chief Executive Officer and President, at any time, may be suspended by the the Chief Executive Officer and President until the Board of Directors convenes, and any such officer, including the 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 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 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, 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 (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)    "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.

(c)    "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.

(d)    "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. Except as otherwise expressly provided in the Articles of Incorporation or the Act, these By-laws may from time to time be altered, amended or repealed, or new By-laws may be adopted, by either (a) the Board of Directors by the affirmative vote of a majority of the total number of directors at the time, or (b) the affirmative vote, at a meeting of the shareholders of the Corporation, of the holders of at least a majority of the voting power of the shares of the Corporation then entitled to vote at an election of directors, voting together as a single class.

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-10.A

Exhibit 10-a

[Name]

Grant Date: [●]

Restricted Shares Granted: [●]

Vesting: 100% after 3 Years

Director

MERITOR, INC.

2020 LONG-TERM INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

In accordance with Section 11 of the 2020 Long-Term Incentive Plan (the “Plan”), of Meritor, Inc. (the “Company”), and your election pursuant to the Meritor, Inc. Non-Employee Director Retainer Deferral Policy (the “Policy”), the number of shares of Common Stock of the Company specified above have been granted to you as of the date listed above (“Grant Date”) as restricted shares (“Restricted Shares”). By accepting such award (this “Award”), you agree to the terms and conditions of this restricted stock agreement (this “Agreement”). All capitalized terms used herein and not otherwise defined will have the meanings set forth in the Plan.

1. Earning of Restricted Shares

(a)    Except as otherwise provided in this Agreement, you will be deemed to have earned the Restricted Shares on the earlier of (1) the third anniversary of the Grant Date provided that you continue to serve as a member of the Board for the period from the Grant Date through such date (the “Vesting Period”), and (2) the date of your death, Disability or Qualifying Termination.

(b)    If you resign from the Board or cease to be a member of the Board by reason of the antitrust laws, compliance with the Company’s conflict of interest policies, or other circumstances that the Board determines not to be adverse to the best interests of the Company prior to the end of the Vesting Period, the Board may, upon resolution, determine that the Restricted Shares will be deemed earned on the date of such termination of membership on the Board.

(c)    If your membership on the Board terminates for any reason that is not described in Section 1(a) or Section 1(b) and the Board does not determine that the Restricted Shares will be deemed fully earned upon such termination, in either case, prior to the last day of the Vesting Period, then your Restricted Shares under this Agreement will be immediately cancelled and forfeited and you will have no further rights to the Restricted Shares granted pursuant to this Agreement or this Award.

2. Retention of Certificates for Restricted Shares

Certificates for the Restricted Shares and any dividends or distributions thereon or in respect thereof that may be paid in additional shares of Common Stock, other securities of the Company or securities of another entity (“Stock Dividends”), will be delivered to and held by the Company, or such Restricted Shares or Stock Dividends will be registered in book entry form, subject to the Company’s instructions, until you have earned the Restricted Shares in accordance with the provisions of Section 1. To facilitate implementation of the provisions of this Agreement, you undertake to sign and deposit with the Company’s Office of the Secretary, if requested, a Stock Transfer Power to the Company with respect to the Restricted Shares and any Stock Dividends thereon.

3. Dividends and Voting Rights

Notwithstanding the retention by the Company of certificates (or the right to give instructions with respect to shares held in book entry form) for the Restricted Shares and any Stock Dividends, you will be entitled to receive any dividends that may be paid in cash on, and to vote, the Restricted Shares and any Stock Dividends held by the Company (or subject to its instructions) in accordance with Section 2, unless and until such Restricted Shares have been forfeited in accordance with Section 5.

4. Delivery of Earned Restricted Shares

As promptly as practicable after you will have been deemed to have earned the Restricted Shares in accordance with Section 1, the Company will deliver to you (or in the event of your death, to your estate or any person who acquires your interest in the Restricted Shares by bequest or inheritance) the Restricted Shares, together with any Stock Dividends then held by the Company (or subject to its instructions).

5. Forfeiture of Unearned Restricted Shares

Notwithstanding any other provision of this Agreement, if at any time it becomes impossible for you to earn any of the Restricted Shares in accordance with this Agreement, then all the Restricted Shares, together with any Stock Dividends, then being held by the Company (or subject to its instructions) in accordance with Section 2 will be forfeited, and you will have no further rights of any kind or nature with respect thereto or this Award. Upon any such forfeiture, the Restricted Shares, together with any Stock Dividends, will be transferred to the Company.

6. Transferability

This grant is not transferable by you other than by will or by the laws of descent and distribution, and the Restricted Shares and any Stock Dividends will be deliverable, during your lifetime, only to you.

7. Interpretations and Determinations

All interpretations, determinations and other actions by the Committee not revoked or modified by the Board will be final, conclusive and binding upon all parties hereto.

8. Withholding and Sale of Shares for Taxes

The Company shall have the right, in connection with the delivery of the Restricted Shares and any Stock Dividends subject to this agreement, (a) to deduct from any payment otherwise due by the Company to you or any other person receiving delivery of the Restricted Shares and any Stock Dividends an amount equal to any taxes required to be withheld by law with respect to such delivery, (b) to require you or any other person receiving such delivery to pay to it an amount sufficient to provide for any such taxes so required to be withheld or (c) to sell such number of the Restricted Shares and any Stock Dividends as may be necessary so that the net proceeds of such sale shall be an amount sufficient to provide for any such taxes so required to be withheld.

9. No Acquired Rights

You acknowledge, agree and consent that: (a) the Plan and Policy are discretionary and the Company may amend, cancel or terminate the Plan or Policy at any time; (b) the grant of the Restricted Shares is a one-time benefit offered to you and does not create any contractual or other right for you to receive any grant of restricted shares or benefits under the Plan or Policy in the future; (c) future grants, if any, will be at the sole discretion of the Company, including, but not limited to, the timing of any grant, the number of shares and forfeiture provisions; and (d) your participation in the Plan and Policy is voluntary.

10. Section 409A

(a)This Agreement is intended to be exempt from Section 409A of the Code and the regulations and other guidance related thereto (“Section 409A”) and, to the maximum extent permitted, this Agreement will be interpreted in accordance with such intention. Notwithstanding any other provision of this Agreement to the contrary, the Company makes no representation that the Plan or Policy or any amounts payable under this Agreement will be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to this Agreement.

(b)To the extent that any amount payable under this Agreement or Policy constitutes an amount payable or benefit to be provided under a "nonqualified deferred compensation plan" (as defined in Section 409A) that is not exempt from Section 409A, and such amount is payable as a result of a Separation from Service and you are a "specified employee" (as defined and determined under Section 409A and any relevant procedures that the Company may establish) at the time of your Separation from Service, then, notwithstanding any other provision in this Agreement to the contrary, such payment or delivery of shares will not be made to you until the day after the date that is six (6) months following your Separation from Service, at which time all payments that otherwise would have been paid to you under this Agreement during that six-month period, but were not paid because of this paragraph, will be paid in a single lump sum. This six-month delay will cease to be applicable in the event of your death.

(c)For purposes of this Agreement, “Separation from Service” will have the meaning set forth in Section 409A and all references to termination of membership on the Board and similar references will be deemed to be references to “Separation from Service” within the meaning of Section 409A.

11.    Applicable Law

This Agreement and the Company’s obligation to deliver Restricted Shares and any Stock Dividends hereunder will be governed by and construed and enforced in accordance with the laws of Indiana and the federal laws of the United States.

12.    Entire Agreement

This Agreement and the Plan and Policy embody the entire agreement and understanding between the Company and you with respect to the Restricted Shares, and there are no representations, promises, covenants, agreements or understandings with respect to the Restricted Shares other than those expressly set forth in this Agreement and the Plan or Policy. In the event of any conflict between this Agreement and the Plan or Policy, the terms of the Plan or Policy will govern.

1

EX-10.B

Exhibit 10-b

[Name]

Grant Date: [●]

Restricted Shares Granted: [●]

Vesting: 100% in the third year

Director

MERITOR, INC.

2020 LONG-TERM INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

In accordance with Section 11 of the 2020 Long-Term Incentive Plan (the “Plan”), of Meritor, Inc. (the “Company”), and your election pursuant to the Meritor, Inc. Non-Employee Director Retainer Deferral Policy (the “Policy”), the number of shares of Common Stock of the Company specified above have been granted to you as of the date listed above (“Grant Date”) as restricted shares (“Restricted Shares”). By accepting such award (this “Award”), you agree to the terms and conditions of this restricted stock agreement (this “Agreement”). All capitalized terms used herein and not otherwise defined will have the meanings set forth in the Plan.

1. Earning of Restricted Shares

(a)    Except as otherwise provided in this Agreement, you will be deemed to have earned the Restricted Shares on the earlier of (1) January 1, 2023 provided that you continue to serve as a member of the Board for the period from the Grant Date through such date (the “Vesting Period”), and (2) the date of your death, Disability or Qualifying Termination.

(b)    If you resign from the Board or cease to be a member of the Board by reason of the antitrust laws, compliance with the Company’s conflict of interest policies, or other circumstances that the Board determines not to be adverse to the best interests of the Company prior to the end of the Vesting Period, the Board may, upon resolution, determine that the Restricted Shares will be deemed earned on the date of such termination of membership on the Board.

(c)    If your membership on the Board terminates for any reason that is not described in Section 1(a) or Section 1(b) and the Board does not determine that the Restricted Shares will be deemed fully earned upon such termination, in either case, prior to the last day of the Vesting Period, then your Restricted Shares under this Agreement will be immediately cancelled and forfeited and you will have no further rights to the Restricted Shares granted pursuant to this Agreement or this Award.

2. Retention of Certificates for Restricted Shares

Certificates for the Restricted Shares and any dividends or distributions thereon or in respect thereof that may be paid in additional shares of Common Stock, other securities of the Company or securities of another entity (“Stock Dividends”), will be delivered to and held by the Company, or such Restricted Shares or Stock Dividends will be registered in book entry form, subject to the Company’s instructions, until you have earned the Restricted Shares in accordance with the provisions of Section 1. To facilitate implementation of the provisions of this Agreement, you undertake to sign and deposit with the Company’s Office of the Secretary, if requested, a Stock Transfer Power to the Company with respect to the Restricted Shares and any Stock Dividends thereon.

3. Dividends and Voting Rights

Notwithstanding the retention by the Company of certificates (or the right to give instructions with respect to shares held in book entry form) for the Restricted Shares and any Stock Dividends, you will be entitled to receive any dividends that may be paid in cash on, and to vote, the Restricted Shares and any Stock Dividends held by the Company (or subject to its instructions) in accordance with Section 2, unless and until such Restricted Shares have been forfeited in accordance with Section 5.

4. Delivery of Earned Restricted Shares

As promptly as practicable after you will have been deemed to have earned the Restricted Shares in accordance with Section 1, the Company will deliver to you (or in the event of your death, to your estate or any person who acquires your interest in the Restricted Shares by bequest or inheritance) the Restricted Shares, together with any Stock Dividends then held by the Company (or subject to its instructions).

5. Forfeiture of Unearned Restricted Shares

Notwithstanding any other provision of this Agreement, if at any time it becomes impossible for you to earn any of the Restricted Shares in accordance with this Agreement, then all the Restricted Shares, together with any Stock Dividends, then being held by the Company (or subject to its instructions) in accordance with Section 2 will be forfeited, and you will have no further rights of any kind or nature with respect thereto or this Award. Upon any such forfeiture, the Restricted Shares, together with any Stock Dividends, will be transferred to the Company.

6. Transferability

This grant is not transferable by you other than by will or by the laws of descent and distribution, and the Restricted Shares and any Stock Dividends will be deliverable, during your lifetime, only to you.

7. Interpretations and Determinations

All interpretations, determinations and other actions by the Committee not revoked or modified by the Board will be final, conclusive and binding upon all parties hereto.

8. Withholding and Sale of Shares for Taxes

The Company shall have the right, in connection with the delivery of the Restricted Shares and any Stock Dividends subject to this agreement, (a) to deduct from any payment otherwise due by the Company to you or any other person receiving delivery of the Restricted Shares and any Stock Dividends an amount equal to any taxes required to be withheld by law with respect to such delivery, (b) to require you or any other person receiving such delivery to pay to it an amount sufficient to provide for any such taxes so required to be withheld or (c) to sell such number of the Restricted Shares and any Stock Dividends as may be necessary so that the net proceeds of such sale shall be an amount sufficient to provide for any such taxes so required to be withheld.

9. No Acquired Rights

You acknowledge, agree and consent that: (a) the Plan and Policy are discretionary and the Company may amend, cancel or terminate the Plan or Policy at any time; (b) the grant of the Restricted Shares is a one-time benefit offered to you and does not create any contractual or other right for you to receive any grant of restricted shares or benefits under the Plan or Policy in the future; (c) future grants, if any, will be at the sole discretion of the Company, including, but not limited to, the timing of any grant, the number of shares and forfeiture provisions; and (d) your participation in the Plan and Policy is voluntary.

10. Section 409A

(a)This Agreement is intended to be exempt from Section 409A of the Code and the regulations and other guidance related thereto (“Section 409A”) and, to the maximum extent permitted, this Agreement will be interpreted in accordance with such intention. Notwithstanding any other provision of this Agreement to the contrary, the Company makes no representation that the Plan or Policy or any amounts payable under this Agreement will be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to this Agreement.

(b)To the extent that any amount payable under this Agreement or Policy constitutes an amount payable or benefit to be provided under a "nonqualified deferred compensation plan" (as defined in Section 409A) that is not exempt from Section 409A, and such amount is payable as a result of a Separation from Service and you are a "specified employee" (as defined and determined under Section 409A and any relevant procedures that the Company may establish) at the time of your Separation from Service, then, notwithstanding any other provision in this Agreement to the contrary, such payment or delivery of shares will not be made to you until the day after the date that is six (6) months following your Separation from Service, at which time all payments that otherwise would have been paid to you under this Agreement during that six-month period, but were not paid because of this paragraph, will be paid in a single lump sum. This six-month delay will cease to be applicable in the event of your death.

(c)For purposes of this Agreement, “Separation from Service” will have the meaning set forth in Section 409A and all references to termination of membership on the Board and similar references will be deemed to be references to “Separation from Service” within the meaning of Section 409A.

11.    Applicable Law

This Agreement and the Company’s obligation to deliver Restricted Shares and any Stock Dividends hereunder will be governed by and construed and enforced in accordance with the laws of Indiana and the federal laws of the United States.

12.    Entire Agreement

This Agreement and the Plan and Policy embody the entire agreement and understanding between the Company and you with respect to the Restricted Shares, and there are no representations, promises, covenants, agreements or understandings with respect to the Restricted Shares other than those expressly set forth in this Agreement and the Plan or Policy. In the event of any conflict between this Agreement and the Plan or Policy, the terms of the Plan or Policy will govern.

EX-10.C

Exhibit 10-c

Employee

Participant Name

Grant Date: Grant Date

Grant ID: Grant ID

Units Granted: Shares Granted

Vesting: 100% after 3 Years

MERITOR, INC.

2020 LONG-TERM INCENTIVE PLAN

PERFORMANCE SHARE UNIT AGREEMENT

In accordance with Section 11 of the 2020 Long-Term Incentive Plan (the “Plan”) of Meritor, Inc. (the “Company”), the number of Performance Share Units specified above have been granted to you as of the date listed above (“Grant Date”) as Performance Share Units (“Performance Share Units”). By accepting such award (this “Award”), you agree to the terms and conditions of this performance share unit agreement (this “Agreement”). Each Performance Share Unit represents a right to receive one share of common stock, par value $1.00 per share, of the Company (the “Common Stock”) or its cash equivalent in the future upon achievement of certain performance and time-based vesting criteria. All capitalized terms used herein and not otherwise defined will have the meanings set forth in the Plan.

1. Vesting of Performance Share Units

(a)    Except as otherwise provided in this Agreement, the Performance Share Units will vest on the third anniversary of the Grant Date provided that you continue to serve as an employee of the Company for the period from the Grant Date through the third anniversary of the Grant Date (the “Vesting Period”).

(b)    If you incur a Separation from Service due to your Disability or death (other than pursuant to a Qualifying Termination within the two (2) year period immediately following a Change of Control) prior to the last day of the Vesting Period, then a prorated portion of the Performance Share Units, based upon the ratio of the number of full months of the Vesting Period that have elapsed as of the end of the month in which your Separation from Service due to Disability or death occurs over the total number of months in such period, will vest for Plan purposes effective as of the last day of the Vesting Period and will be payable at the time and in the form specified in Section 2, subject to achievement of the Performance Goals referred to in Section 3.

(c)    If you incur a Separation from Service due to Retirement (other than pursuant to a Qualifying Termination within the two (2) year period immediately following a Change of Control) at least one (1) year after the Grant Date and prior to the last day of the Vesting Period, then this Award will remain outstanding for the remainder of the Vesting Period and will continue to vest for Plan purposes in accordance with the terms of this Agreement as though you were still employed and will be payable at the time and in the form specified in Section 2, subject to achievement of the Performance Goals referred to in Section 3.

(d)    If you incur a Separation from Service due to involuntary termination of employment by the Company without Cause (other than pursuant to a Qualifying Termination within the two (2) year period immediately following a Change of Control) prior to the last day of the Vesting Period, then solely for purposes of determining whether you are vested in this Award, the number of full years of completed service in the vesting schedule will determine the amount of Performance Share Units available to vest on the regularly scheduled vesting date. Each year of completed service during the vesting schedule will allow you to vest in one-third of the Award on the scheduled vesting date. This Award will be payable at the time and in the form specified in Section 2, subject to achievement of the Performance Goals referred to in Section 3.

(e)    Subject to Section 9(b), if you incur a Separation from Service due to a Qualifying Termination within the two (2) year period immediately following a Change of Control and prior to the last day of the Vesting Period, then this Award will vest on the date of such Separation from Service, will be deemed fully earned at the target amount as of the date on which the Change of Control occurs and will be payable within thirty (30) days of the date of such Separation from Service in the form specified in Section 2.

(f)    If you incur any Separation from Service, that is not described in Section 1(b) through (e) prior to the last day of the Vesting Period, then this Award will be immediately cancelled and forfeited and you will have no further rights to the Performance Share Units granted pursuant to this Agreement.

2. Payment of Performance Share Units

Except as otherwise provided in Section 1(e) subject to achievement of the Performance Goals referred to in Appendix A and Section 9(b) within the last calendar month of the calendar year in which the Vesting Period ends, the Company will deliver to you (or in the event of your death, to your estate or any person who acquires your interest in the Performance Share Units by bequest or inheritance) upon satisfaction of any required tax withholding obligations, one (1) share of Common Stock in respect of each Performance Share Unit or its cash equivalent in a single sum payment in cash, as the Committee in its sole discretion may determine. For the avoidance of doubt, the Committee may pay an award of Performance Share Units wholly in Shares or cash or partly in Shares or cash, as the Committee in its sole discretion may determine. Any cash amounts payable pursuant to this Section 2 will be calculated based on the fair market value of the Common Stock on the vesting date (or such other date as the Committee shall determine in its sole discretion). No shares of Common Stock will be issued to you and no cash equivalent will be paid to you at the time this Award is made, and you will not have any rights as a shareowner with respect to the Performance Share Units unless and until the shares of Common Stock have been delivered to you.

3. Performance Goals

Except as otherwise provided in Section 1(e) the payment of Performance Share Units will be subject to the achievement of the Performance Goals set forth in Appendix A. The number of Shares (or amount of cash) payable to you in respect of the Performance Share Units subject to this Agreement will be determined by multiplying applicable weighted percentage of the number of Performance Share Units subject to this Agreement by the applicable percentage payout for achievement of such Performance Goals specified in Appendix A, in each case as, determined by the Committee in its sole discretion.

4. Forfeiture of Unearned Performance Share Units

Notwithstanding any other provision of this Agreement, if at any time it becomes impossible for you to earn any of the Performance Share Units in accordance with this Agreement, then all the Performance Share Units will be forfeited and you will have no further rights of any kind or nature with respect thereto.

5.    Transferability

This grant is not transferable by you other than by will or by the laws of descent and distribution, and the Performance Share Units will be deliverable, during your lifetime, only to you.

6.    Interpretations and Determinations

All interpretations, determinations and other actions by the Committee not revoked or modified by the Board will be final, conclusive and binding upon all parties hereto.

7.    Withholding and Sale of Shares for Taxes

You are liable and responsible for all taxes owed in connection with the Performance Share Units, regardless of any action the Company takes with respect to any tax withholding obligations that arise in connection with the Performance Share Units, whether due to national, federal, state or local taxes, including any employment tax obligation (the “Tax Withholding Obligation”). The Company has the right, in connection with the delivery of any Shares or cash in respect of the Performance Share Units subject to this Agreement, (a) to deduct from any payment otherwise due by the Company to you or any other person receiving delivery of such shares or cash an amount equal to any taxes required to be withheld by law with respect to such delivery, (b) to require you or any other person receiving such delivery to pay to it an amount sufficient to provide for any such taxes so required to be withheld, or (c) to sell such number of Shares as may be necessary so that the net proceeds of such sale shall be an amount sufficient to provide for any such taxes so required to be withheld. To the extent that any Performance Share Units are settled in Shares,your acceptance of this Agreement constitutes your irrevocable instruction and authorization to the Company to withhold and sell on your behalf the number of Shares from those Shares issuable to you under this Award as the Company determines to be sufficient to satisfy the Tax Withholding Obligation as and when any such Tax Withholding Obligation becomes due (the “Sale for Taxes”). This irrevocable instruction is intended to qualify the Sale for Taxes under a safe harbor from insider trading liability for transactions pursuant to a written trading plan that meets the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. In the case of any amounts withheld for taxes pursuant to this provision in the form of Shares, the amount withheld will not exceed the minimum required by applicable law and regulations.

1. No Acquired Rights

You acknowledge, agree and consent that: (a) the Plan is discretionary and the Company may amend, cancel or terminate the Plan at any time; (b) the grant of the Performance Share Units is a one-time benefit offered to you and does not create any contractual or other right for you to receive any grant of Performance Share Units or benefits under the Plan in the future; (c) future grants, if any, will be at the sole discretion of the Company, including, but not limited to, the timing of any grant, the number of shares and forfeiture provisions; and (d) your participation in the Plan is voluntary.

The value of your Performance Share Units is an extraordinary item of compensation outside the scope of your employment contract, if any. As such, your Performance Share Units are not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

2. Section 409A

(a)This Agreement is intended to comply with Section 409A of the Code and the regulations and other guidance related thereto (“Section 409A”) and, to the maximum extent permitted, this Agreement will be interpreted in accordance with such intention. Notwithstanding any other provision of this Agreement to the contrary, the Company makes no representation that the Plan or any amounts payable under this Agreement will be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to this Agreement.

(b)To the extent that any amount payable under this Agreement constitutes an amount payable or benefit to be provided under a "nonqualified deferred compensation plan" (as defined in Section 409A) that is not exempt from Section 409A, and such amount is payable as a result of a Separation from Service and you are a "specified employee" (as defined and determined under Section 409A and any relevant procedures that the Company may establish) at the time of your Separation from Service, then, notwithstanding any other provision in this Agreement to the contrary, such payment or delivery of shares will not be made to you until the day after the date that is six (6) months following your Separation from Service, at which time all payments that otherwise would have been paid to you under this Agreement during that six-month period, but were not paid because of this paragraph, will be paid in a single lump sum. This six-month delay will cease to be applicable in the event of your death.

(c)For purposes of this Agreement, “Separation from Service” will have the meaning set forth in Section 409A and all references to termination of employment and similar references will be deemed to be references to “Separation from Service” within the meaning of Section 409A.

3. Applicable Law

This Agreement and the Company’s obligation to deliver shares of Common Stock or their cash equivalent upon payment or settlement of Performance Share Units hereunder will be governed by and construed and enforced in accordance with the laws of Indiana and the federal laws of the United States.

4. Entire Agreement

This Agreement and the Plan embody the entire agreement and understanding between the Company and you with respect to the Performance Share Units, and there are no representations, promises, covenants, agreements or understandings with respect to the Performance Share Units other than those expressly set forth in this Agreement and the Plan. In the event of any conflict between this Agreement and the Plan, the terms of the Plan will govern.

APPENDIX A

LTIP METRICS AND TARGETS

Performance Criteria Definition

1

EX-10.D

Exhibit 10-d

Participant Name

Grant Date: Grant Date

Grant ID: Grant ID

Units Granted: Shares Granted

Vesting: 100% after 3 Years

Employee

MERITOR, INC.

2020 LONG-TERM INCENTIVE PLAN

RESTRICTED SHARE UNIT AGREEMENT

In accordance with Section 11 of the 2020 Long-Term Incentive Plan (the “Plan”) of Meritor, Inc. (the “Company”), the number of restricted share units specified above have been granted to you as of the date listed above (“Grant Date”) as restricted share units (“Restricted Share Units”). By accepting such award (this “Award”), you agree to the terms and conditions of this restricted share unit agreement (this “Agreement”). Each Restricted Share Unit represents a right to receive one share of common stock, par value $1.00 per share, of the Company (the “Common Stock”) or its cash equivalent in the future. All capitalized terms used herein and not otherwise defined will have the meanings set forth in the Plan.

1. Vesting of Restricted Share Units

(a)    Except as otherwise provided in this Agreement, the Restricted Share Units will vest on the third anniversary of the Grant Date provided that you continue to serve as an employee of the Company for the period from the Grant Date through the third anniversary of the Grant Date (the “Vesting Period”).

(b)    If you incur a Separation from Service due to your Disability or death (other than pursuant to a Qualifying Termination within the two (2) year period immediately following a Change of Control) prior to the last day of the Vesting Period, then a prorated portion of the Restricted Share Units, based upon the ratio of the number of full months of the Vesting Period that have elapsed as of the end of the month in which your Separation from Service due to Disability or death occurs over the total number of months in such period, will vest for Plan purposes effective as of the end of the Vesting Period and will be payable at the time and in the form specified in Section 2.

(c)    If you incur a Separation from Service due to Retirement (other than pursuant to a Qualifying Termination within the two (2) year period immediately following a Change of Control) at least one (1) year after the Grant Date and prior to the last day of the Vesting Period, then this Award will remain outstanding for the remainder of the Vesting Period and will continue to vest for Plan purposes in accordance with the terms of this Agreement as though you were still employed and will be payable at the time and in the form specified in Section 2.

(d)    If you incur a Separation from Service due to involuntary termination of employment by the Company without Cause (other than pursuant to a Qualifying Termination within the two (2) year period immediately following a Change of Control) prior to the last day of the Vesting Period, then solely for purposes of determining whether you are vested in this Award, the number of full years of completed service in the vesting schedule will determine the amount of Restricted Share Units available to vest on the regularly scheduled vesting date. Each year of completed service during the vesting schedule will allow you to vest in one-third of the Award on the scheduled vesting date. This Award will be payable at the time and in the form specified in Section 2.

(e)    Subject to Section 8(b), if you incur a Separation from Service due to a Qualifying Termination within the two (2) year period immediately following a Change of Control and prior to the last day of the Vesting Period, then this Award will vest on the date of such Separation from Service and will be payable within thirty (30) days of the date of such Separation from Service in the form specified in Section 2.

(f)    If you incur any Separation from Service that is not described in Section 1(b) through (e) prior to the last day of the Vesting Period, then this Award will be immediately cancelled and forfeited and you will have no further rights to the Restricted Stock Units granted pursuant to this Agreement.

2. Payment of Restricted Share Units

Except as otherwise provided in Section 1(e) and subject to Section 8(b) within the last calendar month of the calendar year in which the Vesting Period ends, the Company will deliver to you (or in the event of your death, to your estate or any person who acquires your interest in the Restricted Share Units by bequest or inheritance) upon satisfaction of any required tax withholding obligations, one (1) share of Common Stock in respect of each Restricted Share Unit or its cash equivalent in a single sum payment in cash, as the Committee in its sole discretion shall determine. For the avoidance of doubt, the Committee may pay an award of Restricted Shares Units wholly in Shares or cash or partly in Shares or cash, as the Committee in its sole discretion may determine. Any cash amounts payable pursuant to this Section 2 will be calculated based on the fair market value of the Common Stock on the vesting date (or such other date as the Committee shall determine in its sole discretion). No shares of Common Stock will be issued to you and no cash equivalent will be paid to you at the time this Award is made, and you will not have any rights as a shareowner with respect to the Restricted Share Units unless and until the shares of Common Stock have been delivered to you.

3.    Forfeiture of Unearned Restricted Share Units

Notwithstanding any other provision of this Agreement, if at any time it becomes impossible for you to earn any of the Restricted Share Units in accordance with this Agreement, then all the Restricted Share Units will be forfeited and you will have no further rights of any kind or nature with respect thereto.

4.    Transferability

This grant is not transferable by you other than by will or by the laws of descent and distribution, and the Restricted Share Units will be deliverable, during your lifetime, only to you.

5.    Interpretations and Determinations

All interpretations, determinations and other actions by the Committee not revoked or modified by the Board will be final, conclusive and binding upon all parties hereto.

6.    Withholding and Sale of Shares for Taxes

You are liable and responsible for all taxes owed in connection with the Restricted Share Units, regardless of any action the Company takes with respect to any tax withholding obligations that arise in connection with the Restricted Share Units, whether due to national, federal, state or local taxes, including any employment tax obligation (the “Tax Withholding Obligation”). The Company has the right, in connection with the delivery of any Shares or cash in respect of the Restricted Share Units subject to this Agreement, (a) to deduct from any payment otherwise due by the Company to you or any other person receiving delivery of such shares or cash an amount equal to any taxes required to be withheld by law with respect to such delivery, (b) to require you or any other person receiving such delivery to pay to it an amount sufficient to provide for any such taxes so required to be withheld, or (c) to sell such number of Shares as may be necessary so that the net proceeds of such sale shall be an amount sufficient to provide for any such taxes so required to be withheld. To the extent that any Restricted Share Units are settled in Shares, your acceptance of this Agreement constitutes your irrevocable instruction and authorization to the Company to withhold and sell on your behalf the number of Shares from those Shares issuable to you under this Award as the Company determines to be sufficient to satisfy the Tax Withholding Obligation as and when any such Tax Withholding Obligation becomes due (the “Sale for Taxes”). This irrevocable instruction is intended to qualify the Sale for Taxes under a safe harbor from insider trading liability for transactions pursuant to a written trading plan that meets the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. In the case of any amounts withheld for taxes pursuant to this provision in the form of Shares, the amount withheld will not exceed the minimum required by applicable law and regulations.

1. No Acquired Rights

You acknowledge, agree and consent that: (a) the Plan is discretionary and the Company may amend, cancel or terminate the Plan at any time; (b) the grant of the Restricted Share Units is a one-time benefit offered to you and does not create any contractual or other right for you to receive any grant of restricted share units or benefits under the Plan in the future; (c) future grants, if any, will be at the sole discretion of the Company, including, but not limited to, the timing of any grant, the number of shares and forfeiture provisions; and (d) your participation in the Plan is voluntary.

The value of your Restricted Share Units is an extraordinary item of compensation outside the scope of your employment contract, if any. As such, your Restricted Share Units are not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

1. Section 409A

(a)This Agreement is intended to comply with Section 409A of the Code and the regulations and other guidance related thereto (“Section 409A”) and, to the maximum extent permitted, this Agreement will be interpreted in accordance with such intention. Notwithstanding any other provision of this Agreement to the contrary, the Company makes no representation that the Plan or any amounts payable under this Agreement will be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to this Agreement.

(b)To the extent that any amount payable under this Agreement constitutes an amount payable or benefit to be provided under a "nonqualified deferred compensation plan" (as defined in Section 409A) that is not exempt from Section 409A, and such amount is payable as a result of a Separation from Service and you are a "specified employee" (as defined and determined under Section 409A and any relevant procedures that the Company may establish) at the time of your Separation from Service, then, notwithstanding any other provision in this Agreement to the contrary, such payment or delivery of shares will not be made to you until the day after the date that is six (6) months following your Separation from Service, at which time all payments that otherwise would have been paid to you under this Agreement during that six-month period, but were not paid because of this paragraph, will be paid in a single lump sum. This six-month delay will cease to be applicable in the event of your death.

(c)For purposes of this Agreement, “Separation from Service” will have the meaning set forth in Section 409A and all references to termination of employment and similar references will be deemed to be references to “Separation from Service” within the meaning of Section 409A.

9.    Applicable Law

This Agreement and the Company’s obligation to deliver shares of Common Stock or their cash equivalent upon payment or settlement of Restricted Share Units hereunder will be governed by and construed and enforced in accordance with the laws of Indiana and the federal laws of the United States.

10.    Entire Agreement

This Agreement and the Plan embody the entire agreement and understanding between the Company and you with respect to the Restricted Share Units, and there are no representations, promises, covenants, agreements or understandings with respect to the Restricted Share Units other than those expressly set forth in this Agreement and the Plan. In the event of any conflict between this Agreement and the Plan, the terms of the Plan will govern.

EX-10.E

Exhibit 10-e

Participant Name

Grant Date: Grant Date

Grant ID: Grant ID

Units Granted: Shares Granted

Vesting: 100% after 3 Years

Employee

MERITOR, INC.

2020 LONG-TERM INCENTIVE PLAN

RESTRICTED SHARE UNIT AGREEMENT

In accordance with Section 11 of the 2020 Long-Term Incentive Plan (the “Plan”) of Meritor, Inc. (the “Company”), the number of restricted share units specified above have been granted to you as of the date listed above (“Grant Date”) as restricted share units (“Restricted Share Units”). By accepting such award (this “Award”), you agree to the terms and conditions of this restricted share unit agreement (this “Agreement”). Each Restricted Share Unit represents a right to receive one share of common stock, par value $1.00 per share, of the Company (the “Common Stock”) or its cash equivalent in the future. All capitalized terms used herein and not otherwise defined will have the meanings set forth in the Plan.

1. Vesting of Restricted Share Units

(a)    Except as otherwise provided in this Agreement, the Restricted Share Units will vest on the third anniversary of the Grant Date provided that you continue to serve as an employee of the Company for the period from the Grant Date through the third anniversary of the Grant Date (the “Vesting Period”).

(b)    If you incur a Separation from Service due to your Disability or death (other than pursuant to a Qualifying Termination within the two (2) year period immediately following a Change of Control) prior to the last day of the Vesting Period, then a prorated portion of the Restricted Share Units, based upon the ratio of the number of full months of the Vesting Period that have elapsed as of the end of the month in which your Separation from Service due to Disability or death occurs over the total number of months in such period, will vest for Plan purposes effective as of the end of the Vesting Period and will be payable at the time and in the form specified in Section 2.

(c)    If you incur a Separation from Service due to involuntary termination of employment by the Company without Cause (other than pursuant to a Qualifying Termination within the two (2) year period immediately following a Change of Control) prior to the last day of the Vesting Period, then solely for purposes of determining whether you are vested in this Award, the number of full years of completed service in the vesting schedule will determine the amount of Restricted Share Units available to vest on the regularly scheduled vesting date. Each year of completed service during the vesting schedule will allow you to vest in one-third of the Award on the scheduled vesting date. This Award will be payable at the time and in the form specified in Section 2.

(d)    Subject to Section 8(b), if you incur a Separation from Service due to a Qualifying Termination within the two (2) year period immediately following a Change of Control and prior to the last day of the Vesting Period, then this Award will vest on the date of such Separation from Service and will be payable within thirty (30) days of the date of such Separation from Service in the form specified in Section 2.

(e)    If you incur any Separation from Service that is not described in Section 1(b) through (e) prior to the last day of the Vesting Period, then this Award will be immediately cancelled and forfeited and you will have no further rights to the Restricted Share Units granted pursuant to this Agreement.

(f)     For the avoidance of doubt, the Restricted Share Units granted pursuant to this Agreement will not vest pursuant to any of the retirement provisions set forth in the Plan.

2. Payment of Restricted Share Units

Except as otherwise provided in Section 1(e) and subject to Section 8(b) within the last calendar month of the calendar year in which the Vesting Period ends, the Company will deliver to you (or in the event of your death, to your estate or any person who acquires your interest in the Restricted Share Units by bequest or inheritance) upon satisfaction of any required tax withholding obligations, one (1) share of Common Stock in respect of each Restricted Share Unit or its cash equivalent in a single sum payment in cash, as the Committee in its sole discretion shall determine. For the avoidance of doubt, the Committee may pay an award of Restricted Shares Units wholly in Shares or cash or partly in Shares or cash, as the Committee in its sole discretion may determine. Any cash amounts payable pursuant to this Section 2 will be calculated based on the fair market value of the Common Stock on the vesting date (or such other date as the Committee shall determine in its sole discretion). No shares of Common Stock will be issued to you and no cash equivalent will be paid to you at the time this Award is made, and you will not have any rights as a shareowner with respect to the Restricted Share Units unless and until the shares of Common Stock have been delivered to you.

3.    Forfeiture of Unearned Restricted Share Units

Notwithstanding any other provision of this Agreement, if at any time it becomes impossible for you to earn any of the Restricted Share Units in accordance with this Agreement, then all the Restricted Share Units will be forfeited and you will have no further rights of any kind or nature with respect thereto.

4.    Transferability

This grant is not transferable by you other than by will or by the laws of descent and distribution, and the Restricted Share Units will be deliverable, during your lifetime, only to you.

5.    Interpretations and Determinations

All interpretations, determinations and other actions by the Committee not revoked or modified by the Board will be final, conclusive and binding upon all parties hereto.

6.    Withholding and Sale of Shares for Taxes

You are liable and responsible for all taxes owed in connection with the Restricted Share Units, regardless of any action the Company takes with respect to any tax withholding obligations that arise in connection with the Restricted Share Units, whether due to national, federal, state or local taxes, including any employment tax obligation (the “Tax Withholding Obligation”). The Company has the right, in connection with the delivery of any Shares or cash in respect of the Restricted Share Units subject to this Agreement, (a) to deduct from any payment otherwise due by the Company to you or any other person receiving delivery of such shares or cash an amount equal to any taxes required to be withheld by law with respect to such delivery, (b) to require you or any other person receiving such delivery to pay to it an amount sufficient to provide for any such taxes so required to be withheld, or (c) to sell such number of Shares as may be necessary so that the net proceeds of such sale shall be an amount sufficient to provide for any such taxes so required to be withheld. To the extent that any Restricted Share Units are settled in Shares, your acceptance of this Agreement constitutes your irrevocable instruction and authorization to the Company to withhold and sell on your behalf the number of Shares from those Shares issuable to you under this Award as the Company determines to be sufficient to satisfy the Tax Withholding Obligation as and when any such Tax Withholding Obligation becomes due (the “Sale for Taxes”). This irrevocable instruction is intended to qualify the Sale for Taxes under a safe harbor from insider trading liability for transactions pursuant to a written trading plan that meets the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. In the case of any amounts withheld for taxes pursuant to this provision in the form of Shares, the amount withheld will not exceed the minimum required by applicable law and regulations.

1. No Acquired Rights

You acknowledge, agree and consent that: (a) the Plan is discretionary and the Company may amend, cancel or terminate the Plan at any time; (b) the grant of the Restricted Share Units is a one-time benefit offered to you and does not create any contractual or other right for you to receive any grant of restricted share units or benefits under the Plan in the future; (c) future grants, if any, will be at the sole discretion of the Company, including, but not limited to, the timing of any grant, the number of shares and forfeiture provisions; and (d) your participation in the Plan is voluntary.

The value of your Restricted Share Units is an extraordinary item of compensation outside the scope of your employment contract, if any. As such, your Restricted Share Units are not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

1. Section 409A

(a)This Agreement is intended to comply with Section 409A of the Code and the regulations and other guidance related thereto (“Section 409A”) and, to the maximum extent permitted, this Agreement will be interpreted in accordance with such intention. Notwithstanding any other provision of this Agreement to the contrary, the Company makes no representation that the Plan or any amounts payable under this Agreement will be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to this Agreement.

(b)To the extent that any amount payable under this Agreement constitutes an amount payable or benefit to be provided under a "nonqualified deferred compensation plan" (as defined in Section 409A) that is not exempt from Section 409A, and such amount is payable as a result of a Separation from Service and you are a "specified employee" (as defined and determined under Section 409A and any relevant procedures that the Company may establish) at the time of your Separation from Service, then, notwithstanding any other provision in this Agreement to the contrary, such payment or delivery of shares will not be made to you until the day after the date that is six (6) months following your Separation from Service, at which time all payments that otherwise would have been paid to you under this Agreement during that six-month period, but were not paid because of this paragraph, will be paid in a single lump sum. This six-month delay will cease to be applicable in the event of your death.

(c)For purposes of this Agreement, “Separation from Service” will have the meaning set forth in Section 409A and all references to termination of employment and similar references will be deemed to be references to “Separation from Service” within the meaning of Section 409A.

9.    Applicable Law

This Agreement and the Company’s obligation to deliver shares of Common Stock or their cash equivalent upon payment or settlement of Restricted Share Units hereunder will be governed by and construed and enforced in accordance with the laws of Indiana and the federal laws of the United States.

10.    Entire Agreement

This Agreement and the Plan embody the entire agreement and understanding between the Company and you with respect to the Restricted Share Units, and there are no representations, promises, covenants, agreements or understandings with respect to the Restricted Share Units other than those expressly set forth in this Agreement and the Plan. In the event of any conflict between this Agreement and the Plan, the terms of the Plan will govern.

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 December 29, 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: January 30, 2020

/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 December 29, 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: January 30, 2020

/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 December 29, 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: January 30, 2020

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 December 29, 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: January 30, 2020

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Supplemental Guarantor Condensed Consolidating Financial Statements - Condensed Consolidating Statement of Comprehensive Income (Loss) (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Condensed Statement of Income Captions [Line Items]
Net income	$ 41	$ 92
Other comprehensive income (loss), net of tax	26	(2)
Total comprehensive income	67	90
Less: Comprehensive income attributable to noncontrolling interests	(2)	(3)
Comprehensive income attributable to Meritor, Inc.	65	87
Eliminations
Condensed Statement of Income Captions [Line Items]
Net income	(126)	(191)
Other comprehensive income (loss), net of tax	(62)	18
Total comprehensive income	(188)	(173)
Less: Comprehensive income attributable to noncontrolling interests	0	0
Comprehensive income attributable to Meritor, Inc.	(188)	(173)
Parent | Reportable Legal Entities
Condensed Statement of Income Captions [Line Items]
Net income	39	90
Other comprehensive income (loss), net of tax	26	(3)
Total comprehensive income	65	87
Less: Comprehensive income attributable to noncontrolling interests	0	0
Comprehensive income attributable to Meritor, Inc.	65	87
Guarantors | Reportable Legal Entities
Condensed Statement of Income Captions [Line Items]
Net income	95	112
Other comprehensive income (loss), net of tax	30	(8)
Total comprehensive income	125	104
Less: Comprehensive income attributable to noncontrolling interests	0	0
Comprehensive income attributable to Meritor, Inc.	125	104
Non- Guarantors | Reportable Legal Entities
Condensed Statement of Income Captions [Line Items]
Net income	33	81
Other comprehensive income (loss), net of tax	32	(9)
Total comprehensive income	65	72
Less: Comprehensive income attributable to noncontrolling interests	(2)	(3)
Comprehensive income attributable to Meritor, Inc.	$ 63	$ 69

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Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019
Income Tax Disclosure [Abstract]
Net pre-tax income (loss) tax benefit not recorded	$ 3	$ 6

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Net Property (Details) - USD ($) $ in Millions	Dec. 31, 2019	Sep. 30, 2019
Property, Plant and Equipment [Line Items]
Property at cost	$ 1,430	$ 1,400
Less: accumulated depreciation	(913)	(885)
Net property	517	515
Land and land improvements
Property, Plant and Equipment [Line Items]
Property at cost	31	31
Buildings
Property, Plant and Equipment [Line Items]
Property at cost	228	224
Machinery and equipment
Property, Plant and Equipment [Line Items]
Property at cost	962	935
Company-owned tooling
Property, Plant and Equipment [Line Items]
Property at cost	142	136
Construction in progress
Property, Plant and Equipment [Line Items]
Property at cost	$ 67	$ 74

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Long-Term Debt (Tables)

3 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Summary of Long-term Debt

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

	December 31, 2019			September 30, 2019
3.25 percent convertible notes due 2037	$	319		$	319
7.875 percent convertible notes due 2026	23			23
Term loan due 2024	172			175
6.25 percent notes due 2024	445			444
Financing lease obligation	7			7
Borrowings and securitization	145			9
Unamortized discount on convertible notes	(32		)	(34		)
Subtotal	1,079			943
Less: current maturities	(178		)	(41		)
Long-term debt	$	901		$	902

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Net Property (Tables)

3 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

Summary of Net Property

Net property is summarized as follows (in millions):

	December 31, 2019			September 30, 2019
Property at cost:
Land and land improvements	$	31		$	31
Buildings	228			224
Machinery and equipment	962			935
Company-owned tooling	142			136
Construction in progress	67			74
Total	1,430			1,400
Less: accumulated depreciation	(913		)	(885		)
Net property	$	517		$	515

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Shareholders' Equity (Tables)

3 Months Ended

Dec. 31, 2019

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Loss

The components of AOCL and the changes in AOCL by components, net of tax, for the three months ended December 31, 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, 2019	$	(107	)	$	(572	)	$	(2	)	$	(681	)
Other comprehensive income before reclassification	21			—			—			21
Amounts reclassified from accumulated other comprehensive loss	—			3			2			5
Net current-period other comprehensive income	21			3			2			26
Balance at December 31, 2019	$	(86	)	$	(569	)	$	—		$	(655	)

	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	(4		)	(1		)	—		(5		)
Amounts reclassified from accumulated other comprehensive loss	—			1			1		2
Net current-period other comprehensive income	$	(4	)	$	—		$	1	$	(3	)
Balance at December 31, 2018	$	(94	)	$	(476	)	$	1	$	(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 benefit	$	(9	)	(b)
Actuarial losses	$	10		(b)
	1			Total before tax
	—			Tax benefit
Total reclassifications for the period	$	1		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 19 for additional details), which is recorded in other income (expense), net.

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 benefit	$	(9	)	(a)
Actuarial losses	12			(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 19 for additional details), which is recorded in other income (expense), net.

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Business Segment Information

3 Months Ended

Dec. 31, 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 December 31, 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 December 31, 2019
External Sales	$	590	$	311	$	—		$	901
Intersegment Sales	32		6		(38		)	—
Total Sales	$	622	$	317	$	(38	)	$	901
Three Months Ended December 31, 2018 (1)
External Sales	$	744	$	294	$	—		$	1,038
Intersegment Sales	35		9		(44		)	—
Total Sales	$	779	$	303	$	(44	)	$	1,038

⁽¹⁾ Amounts for the three months ended December 31, 2018 have been recast to reflect reportable segment changes.

	Three Months Ended December 31,
	2019			2018 (3)
Segment adjusted EBITDA:
Commercial Truck	$	56		$	77
Aftermarket, Industrial and Trailer	40			40
Segment adjusted EBITDA	96			117
Unallocated legacy and corporate expense, net (1)	2			2
Interest expense, net	(14		)	(14		)
Provision for income taxes	(13		)	(21		)
Depreciation and amortization	(24		)	(22		)
Noncontrolling interests	(2		)	(2		)
Loss on sale of receivables	(1		)	(1		)
Restructuring	(5		)	—
Asbestos related liability remeasurement (2)	—			31
Income from continuing operations attributable to Meritor, Inc.	$	39		$	90

⁽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 three months ended December 31, 2018 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 months ended December 31, 2018 have been recast to reflect reportable segment changes.

	December 31, 2019			September 30, 2019
Segment Assets:
Commercial Truck	$	1,700		$	1,659
Aftermarket, Industrial and Trailer	839			815
Total segment assets	2,539			2,474
Corporate (1)	597			567
Less: Accounts receivable sold under off-balance sheet factoring programs (2)	(240		)	(226		)
Total assets	$	2,896		$	2,815

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

⁽²⁾ 

At December 31, 2019 and September 30, 2019, segment assets include $240 million and $226 million, respectively, of accounts receivable sold under off-balance sheet accounts receivable factoring programs (see Note 11). These sold receivables are included in segment assets as the CODM reviews segment assets inclusive of these balances.

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Other Assets

3 Months Ended

Dec. 31, 2019

Other Assets, Noncurrent [Abstract]

Other Assets

Other Assets

     Other assets are summarized as follows (in millions):

	December 31, 2019		September 30, 2019
Investments in non-consolidated joint ventures	$	115	$	110
Deferred income tax assets, net	139		122
Prepaid pension costs	163		149
Other	297		225
Other assets	$	714	$	606

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Financial Instruments

3 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

Financial Instruments

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

	December 31, 2019				September 30, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	108	$	108	$	108	$	108
Short-term debt	178		208		41		60
Long-term debt	901		987		902		953
Foreign exchange forward contracts (other assets)	2		2		—		—
Foreign currency option contracts (other assets)	1		1		—		—
Cross-currency swaps (other assets)	6		6		10		10
Cross-currency swaps (other liabilities)	5		5		5		5

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

	December 31, 2019			September 30, 2019
	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported
Derivative Assets
Foreign exchange forward contracts	2	—	2	—	—	—
Cross-currency swaps	6	—	6	10	—	10
Foreign currency option contracts	1	—	1	—	—	—
Derivative Liabilities
Cross-currency swaps	5	—	5	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 December 31, 2019 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	108	$	—	$	—
Short-term debt	—		132		76
Long-term debt	—		818		169
Foreign exchange forward contracts (other assets)	—		2		—
Foreign exchange forward contracts (other liabilities)	—		—		—
Foreign currency option contracts (other assets)	—		1		—
Cross-currency swaps (other assets)	—		6		—
Cross-currency swaps (other liabilities)	—		5		—

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

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	108	$	—	$	—
Short-term debt	—		49		11
Long-term debt	—		782		171
Foreign exchange forward contracts (other liabilities)	—		—		—
Foreign currency option contracts (other assets)	—		—		—
Cross-currency swaps (other assets)	—		10		—
Cross-currency swaps (other liabilities)	—		5		—

No transfers of assets between any of the Levels occurred during the three months ended December 31, 2019 and 2018.

Cash and cash equivalents — All highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents. The carrying value approximates fair value because of the short maturity of these instruments.

     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 December 31, 2019 and September 30, 2019, the notional amount of the company's foreign exchange contracts outstanding under its foreign currency cash flow hedging program was $85 million and $110 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 Income (Loss) in the statement of shareholders’ equity and is recognized in operating income when the underlying forecasted transaction impacts earnings.

Foreign exchange swap contracts - The company uses foreign exchange swap purchase and sale contracts with terms of 18 months or less to hedge its exposure related to changes in foreign currency exchange rates on short term intercompany loans. As of December 31, 2019, the notional amount of the company’s foreign exchange swap contracts was $72 million. As of September 30, 2019, there were no foreign exchange swap contracts outstanding. 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.

Foreign currency option contracts — The company uses option contracts to mitigate foreign exchange exposure on expected future foreign currency-denominated purchases. As of December 31, 2019 and September 30, 2019, the notional amount of the company's foreign exchange contracts outstanding was $105 million and $139 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 foreign currency earnings to U.S. dollars. As of December 31, 2019 and September 30, 2019, the notional amount of the company's option contracts outstanding was $64 million and $28 million, respectively. 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 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 2019, the company entered into multiple cross-currency swaps with a combined notional amount of $225 million and maturities in October 2022. As of both December 31, 2019 and September 30, 2019, 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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Revenue (Tables)

3 Months Ended

Dec. 31, 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 months ended December 31, 2019 and 2018.

	Three Months Ended December 31, 2019
Primary Geographical Market	Commercial Truck		Aftermarket, Industrial and Trailer		Total
U.S.	$	292	$	243	$	535
Canada	—		14		14
Mexico	34		9		43
Total North America	326		266		592
Sweden	62		—		62
Italy	45		4		49
United Kingdom	33		2		35
Other Europe	1		37		38
Total Europe	141		43		184
Brazil	53		1		54
China	34		—		34
India	22		1		23
Other Asia-Pacific	14		—		14
Total sales	$	590	$	311	$	901

	Three Months Ended December 31, 2018(1)
Primary Geographical Market	Commercial Truck		Aftermarket, Industrial and Trailer		Total
U.S.	$	350	$	240	$	590
Canada	—		18		18
Mexico	47		10		57
Total North America	397		268		665
Sweden	74		—		74
Italy	57		4		61
United Kingdom	41		3		44
Other Europe	3		19		22
Total Europe	175		26		201
Brazil	50		—		50
China	41		—		41
India	57		—		57
Other Asia-Pacific	24		—		24
Total sales	$	744	$	294	$	1,038

⁽¹⁾ Amounts for the three months ended December 31, 2018 have been recast to reflect reportable segment changes.

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Supplemental Guarantor Condensed Consolidating Financial Statements

3 Months Ended

Dec. 31, 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 17).

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 December 31, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	535		$	366		$	—		$	901
Subsidiaries	—			23			35			(58		)	—
Total sales	—			558			401			(58		)	901
Cost of sales	(16		)	(469		)	(347		)	58			(774		)
GROSS MARGIN	(16		)	89			54			—			127
Selling, general and administrative	(24		)	(29		)	(17		)	—			(70		)
Other operating expense, net	—			—			(5		)	—			(5		)
OPERATING INCOME (LOSS)	(40		)	60			32			—			52
Other income, net	—			7			3			—			10
Equity in earnings of affiliates	—			4			2			—			6
Interest income (expense), net	(31		)	11			6			—			(14		)
INCOME (LOSS) BEFORE INCOME TAXES	(71		)	82			43			—			54
Benefit (provision) for income taxes	12			(15		)	(10		)	—			(13		)
Equity income from continuing operations of subsidiaries	98			28			—			(126		)	—
INCOME FROM CONTINUING OPERATIONS	39			95			33			(126		)	41
INCOME FROM DISCONTINUED OPERATIONS, net of tax	—			—			—			—			—
NET INCOME	39			95			33			(126		)	41
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	39		$	95		$	31		$	(126	)	$	39

	Three Months Ended December 31, 2019
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	39	$	95	$	33		$	(126	)	$	41
Other comprehensive income, net of tax	26		30		32			(62		)	26
Total comprehensive income	65		125		65			(188		)	67
Less: Comprehensive income attributable to noncontrolling interests	—		—		(2		)	—			(2		)
Comprehensive income attributable to Meritor, Inc.	$	65	$	125	$	63		$	(188	)	$	65

	Three Months Ended December 31, 2018
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	589		$	449		$	—		$	1,038
Subsidiaries	—			32			57			(89		)	—
Total sales	—			621			506			(89		)	1,038
Cost of sales	(15		)	(534		)	(437		)	89			(897		)
GROSS MARGIN	(15		)	87			69			—			141
Selling, general and administrative	(25		)	(27		)	18			—			(34		)
OPERATING INCOME (LOSS)	(40		)	60			87			—			107
Other income, net	—			5			6			—			11
Equity in earnings of affiliates	—			7			2			—			9
Interest income (expense), net	(32		)	12			6			—			(14		)
INCOME (LOSS) BEFORE INCOME TAXES	(72		)	84			101			—			113
Benefit (provision) for income taxes	11			(12		)	(20		)	—			(21		)
Equity income from continuing operations of subsidiaries	151			40			—			(191		)	—
INCOME FROM CONTINUING OPERATIONS	90			112			81			(191		)	92
INCOME FROM DISCONTINUED OPERATIONS, net of tax	—			—			—			—			—
NET INCOME	90			112			81			(191		)	92
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	90		$	112		$	79		$	(191	)	$	90

	Three Months Ended December 31, 2018
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	90		$	112		$	81		$	(191	)	$	92
Other comprehensive loss, net of tax	(3		)	(8		)	(9		)	18			(2		)
Total comprehensive income	87			104			72			(173		)	90
Less: Comprehensive income attributable to noncontrolling interests	—			—			(3		)	—			(3		)
Comprehensive income attributable to Meritor, Inc.	$	87		$	104		$	69		$	(173	)	$	87

	December 31, 2019
	Parent		Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	13	$	5		$	90	$	—		$	108
Receivables trade and other, net	3		82			393		—			478
Inventories	—		308			248		—			556
Other current assets	7		10			20		—			37
TOTAL CURRENT ASSETS	23		405			751		—			1,179
NET PROPERTY	22		257			238		—			517
GOODWILL	—		337			149		—			486
OTHER ASSETS	182		252			280		—			714
INVESTMENTS IN SUBSIDIARIES	4,575		958			—		(5,533		)	—
TOTAL ASSETS	$	4,802	$	2,209		$	1,418	$	(5,533	)	$	2,896
CURRENT LIABILITIES:
Short-term debt	$	97	$	—		$	81	$	—		$	178
Accounts and notes payable	19		251			270		—			540
Other current liabilities	74		88			102		—			264
TOTAL CURRENT LIABILITIES	190		339			453		—			982
LONG-TERM DEBT	897		—			4		—			901
RETIREMENT BENEFITS	305		1			24		—			330
INTERCOMPANY PAYABLE (RECEIVABLE)	2,997		(3,012		)	15		—			—
OTHER LIABILITIES	61		124			114		—			299
EQUITY ATTRIBUTABLE TO MERITOR, INC.	352		4,757			776		(5,533		)	352
NONCONTROLLING INTERESTS	—		—			32		—			32
TOTAL LIABILITIES AND EQUITY	$	4,802	$	2,209		$	1,418	$	(5,533	)	$	2,896

	September 30, 2019
	Parent		Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	4	$	4		$	100	$	—		$	108
Receivables trade and other, net	3		92			456		—			551
Inventories	—		292			234		—			526
Other current assets	6		10			15		—			31
TOTAL CURRENT ASSETS	13		398			805		—			1,216
NET PROPERTY	21		260			234		—			515
GOODWILL	—		337			141		—			478
OTHER ASSETS	170		225			211		—			606
INVESTMENTS IN SUBSIDIARIES	4,432		899			—		(5,331		)	—
TOTAL ASSETS	$	4,636	$	2,119		$	1,391	$	(5,331	)	$	2,815
CURRENT LIABILITIES:
Short-term debt	$	32	$	—		$	9	$	—		$	41
Accounts and notes payable	53		283			274		—			610
Other current liabilities	77		109			99		—			285
TOTAL CURRENT LIABILITIES	162		392			382		—			936
LONG-TERM DEBT	898		—			4		—			902
RETIREMENT BENEFITS	312		1			23		—			336
INTERCOMPANY PAYABLE (RECEIVABLE)	2,833		(3,005		)	172		—			—
OTHER LIABILITIES	46		112			68		—			226
EQUITY ATTRIBUTABLE TO MERITOR, INC.	385		4,619			712		(5,331		)	385
NONCONTROLLING INTERESTS	—		—			30		—			30
TOTAL LIABILITIES AND EQUITY	$	4,636	$	2,119		$	1,391	$	(5,331	)	$	2,815

	Three Months Ended December 31, 2019
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	65		$	9		$	(93	)	$	—	$	(19	)
INVESTING ACTIVITIES
Capital expenditures	—			(8		)	(8		)	—		(16		)
CASH USED FOR INVESTING ACTIVITIES	—			(8		)	(8		)	—		(16		)
FINANCING ACTIVITIES
Securitization	—			—			72			—		72
Borrowings against revolving line of credit	65			—			—			—		65
Term loan payments	(3		)	—			—			—		(3		)
Repurchase of common stock	(100		)	—			—			—		(100		)
Intercompany advances	(18		)	—			18			—		—
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(56		)	—			90			—		34
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	9			1			(10		)	—		—
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	4			4			100			—		108
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	13		$	5		$	90		$	—	$	108

	Three Months Ended December 31, 2018
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR)        OPERATING ACTIVITIES	$	(9	)	$	15		$	5		$	—	$	11
INVESTING ACTIVITIES
Capital expenditures	(1		)	(12		)	(10		)	—		(23		)
Cash paid for investment in Transportation Power, Inc.	(3		)	—			—			—		(3		)
Other investing activities	—			—			(1		)	—		(1		)
CASH USED FOR INVESTING ACTIVITIES	(4		)	(12		)	(11		)	—		(27		)
FINANCING ACTIVITIES
Securitization	—			—			33			—		33
Borrowings against revolving line of credit	45			—			—			—		45
Repurchase of common stock	(50		)	—			—			—		(50		)
Intercompany advances	18			—			(18		)	—		—
Other financing activities	—			(1		)	—			—		(1		)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	13			(1		)	15			—		27
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	—			2			10			—		12
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	24			6			85			—		115
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	24		$	8		$	95		$	—	$	127

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 December 31, 2019 and September 30, 2019, Parent-only obligations included $305 million and $315 million of pension and retiree medical benefits, respectively (see Note 19). All debt is debt of the Parent other than $85 million and $13 million at December 31, 2019 and September 30, 2019, respectively (see Note 17), and is primarily related to U.S. accounts receivable securitization and financing lease obligations. There were no cash dividends paid to the Parent by subsidiaries and investments accounted for by the equity method for the three months ended December 31, 2019 and December 31, 2018, respectively.

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Accounts Receivable Factoring and Securitization (Tables)

3 Months Ended

Dec. 31, 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 12/31/19				Utilized as of 12/31/19				Utilized as of 9/30/19
		EUR		USD		EUR		USD		EUR		USD
On-balance sheet arrangement
Committed U.S. accounts receivable securitization (1)	December 2022	N/A		$	115	N/A		$	84	N/A		$	13
Total on-balance sheet arrangement: (1)		N/A		$	115	N/A		$	84	N/A		$	13
Off-balance sheet arrangements
Committed Swedish factoring facility (2)(3)	March 2020 (5)	€	155	$	169	€	128	$	140	€	109	$	119
Committed U.S. factoring facility (2)	February 2023	N/A		75		N/A		55		N/A		58
Uncommitted U.K. factoring facility	February 2022	25		27		3		4		6		6
Uncommitted Italy factoring facility	June 2022	30		33		21		23		21		23
Other uncommitted factoring facilities (4)	None	N/A		N/A		17		18		18		20
Total off-balance sheet arrangements		€	210	$	304	€	169	$	240	€	154	$	226

⁽¹⁾ Availability subject to adequate eligible accounts receivable available for sale. The utilized amount includes $4 million of letters of credit as of December 31, 2019 and September 30, 2019.

⁽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 June 22, 2020.

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

⁽⁵⁾ The company is working to extend this arrangement before its current maturity date.

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Leases

3 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

Leases

The company’s lease portfolio is comprised of leases of real estate, including manufacturing and office facilities, and leases of personal property, including machinery and equipment and IT equipment. Operating leases with an initial term of 12 months or less are not recorded on the Condensed Consolidated Balance Sheet and related lease expense is recognized on a straight-line basis over the lease term. Short-term lease costs and variable lease costs were insignificant in the three months ended December 31, 2019.

For all asset classes, the company has elected to adopt the practical expedient under ASC 842 to not separate lease and non-lease components in contracts that contain both. These lease agreements are accounted for as a single lease component for all classes of underlying assets. The company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As the discount rate implicit in the lease is typically unknown, the discount rate used to determine the lease liability for the majority of our leases is the collateralized incremental borrowing rate in the applicable geographic area for a similar term and amount as the lease agreement.

Components of lease expense

	Three Months Ended December 31, 2019
Finance lease costs	$	1
Operating lease costs	5
Total lease costs	$	6

The following table provides a summary of the location and amounts related to finance leases recognized in the Condensed Consolidated Balance Sheet.

	Classification	December 31, 2019
Finance lease right-of-use assets	Net Property	$	7
Finance lease liabilities	Short-term debt	2
Finance lease liabilities	Long-term debt	5

The following table provides a summary of the location and amounts related to operating leases recognized in the Condensed Consolidated Balance Sheet.

	Classification	December 31, 2019
Operating lease right-of-use assets	Other assets	$	78
Operating lease liabilities	Other current liabilities	14
Operating lease liabilities	Other liabilities	64

The following tables summarize additional information related to our lease agreements.

Supplemental cash flow information related to leases

	Three Months Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5
Operating cash flows from finance leases	—
Financing cash flows from finance leases	1
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	4
Finance leases	2

Supplemental balance sheet information related to leases

	December 31, 2019
Weighted-average remaining lease term (years):
Operating leases	8.7
Finance leases	2.7
Weighted-average discount rate:
Operating leases	4.5	%
Finance leases	9.1	%

Maturities

	Operating Leases			Finance Leases
2020 (excluding the three months ended December 31, 2019)	$	13		$	2
2021	16			3
2022	13			2
2023	11			1
2024	8			—
Thereafter	35			—
Total lease payments	96			8
Less: Impact of discounting future lease payments	(18		)	(1		)
Present value of lease liabilities	$	78		$	7

Disclosures related to periods prior to adoption of ASU 2016-02

Cash obligations under future minimum rental commitments under operating leases as of September 30, 2019 are shown in the table below.

	2020		2021		2022		2023		2024		Thereafter		Total
Lease commitments	$	18	$	15	$	14	$	13	$	13	$	25	$	98

Leases

Leases

The company’s lease portfolio is comprised of leases of real estate, including manufacturing and office facilities, and leases of personal property, including machinery and equipment and IT equipment. Operating leases with an initial term of 12 months or less are not recorded on the Condensed Consolidated Balance Sheet and related lease expense is recognized on a straight-line basis over the lease term. Short-term lease costs and variable lease costs were insignificant in the three months ended December 31, 2019.

For all asset classes, the company has elected to adopt the practical expedient under ASC 842 to not separate lease and non-lease components in contracts that contain both. These lease agreements are accounted for as a single lease component for all classes of underlying assets. The company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As the discount rate implicit in the lease is typically unknown, the discount rate used to determine the lease liability for the majority of our leases is the collateralized incremental borrowing rate in the applicable geographic area for a similar term and amount as the lease agreement.

Components of lease expense

	Three Months Ended December 31, 2019
Finance lease costs	$	1
Operating lease costs	5
Total lease costs	$	6

The following table provides a summary of the location and amounts related to finance leases recognized in the Condensed Consolidated Balance Sheet.

	Classification	December 31, 2019
Finance lease right-of-use assets	Net Property	$	7
Finance lease liabilities	Short-term debt	2
Finance lease liabilities	Long-term debt	5

The following table provides a summary of the location and amounts related to operating leases recognized in the Condensed Consolidated Balance Sheet.

	Classification	December 31, 2019
Operating lease right-of-use assets	Other assets	$	78
Operating lease liabilities	Other current liabilities	14
Operating lease liabilities	Other liabilities	64

The following tables summarize additional information related to our lease agreements.

Supplemental cash flow information related to leases

	Three Months Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5
Operating cash flows from finance leases	—
Financing cash flows from finance leases	1
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	4
Finance leases	2

Supplemental balance sheet information related to leases

	December 31, 2019
Weighted-average remaining lease term (years):
Operating leases	8.7
Finance leases	2.7
Weighted-average discount rate:
Operating leases	4.5	%
Finance leases	9.1	%

Maturities

	Operating Leases			Finance Leases
2020 (excluding the three months ended December 31, 2019)	$	13		$	2
2021	16			3
2022	13			2
2023	11			1
2024	8			—
Thereafter	35			—
Total lease payments	96			8
Less: Impact of discounting future lease payments	(18		)	(1		)
Present value of lease liabilities	$	78		$	7

Disclosures related to periods prior to adoption of ASU 2016-02

Cash obligations under future minimum rental commitments under operating leases as of September 30, 2019 are shown in the table below.

	2020		2021		2022		2023		2024		Thereafter		Total
Lease commitments	$	18	$	15	$	14	$	13	$	13	$	25	$	98

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CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) - shares shares in Millions	Dec. 31, 2019	Sep. 30, 2019
Statement of Financial Position [Abstract]
Common shares issued (in shares)	105.3	104.1
Common shares outstanding (in shares)	77.8	81.4
Treasury stock (in shares)	27.6	22.7

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Acquisition

3 Months Ended

Dec. 31, 2019

Business Combinations [Abstract]

Acquisition

Acquisition

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 $179 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 17). The acquisition 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 operates within Meritor’s Aftermarket, Industrial and Trailer segment.

Since completion of initial estimates in the fourth quarter of fiscal year 2019, the company recorded $2 million in measurement period adjustments to decrease the provisional fair value of receivables acquired in the AxleTech transaction, resulting in a corresponding $2 million increase in goodwill. This adjustment was made to reflect additional available information. The measurement period remains open to finalize the value of tangible and intangible assets. The company is reviewing and may record other additional measurement period adjustments in fiscal year 2020. All goodwill resulting from the acquisition of AxleTech was assigned to the Aftermarket, Industrial and Trailer reportable segment (see Note 7).

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COVER PAGE - shares	3 Months Ended
	Dec. 31, 2019	Jan. 29, 2020
Cover page.
Document type	10-Q
Document quarterly report	true
Document period end date	Dec. 29, 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		73,910,025
Amendment flag	false
Entity central index key	0001113256
Current fiscal year end date	--09-30
Document fiscal year focus	2020
Document fiscal period focus	Q1

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Earnings per Share

3 Months Ended

Dec. 31, 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 December 31,
	2019	2018
Basic average common shares outstanding	78.2	84.8
Impact of restricted shares, restricted share units and performance share units	1.6	2.1
Impact of convertible notes	0.9	0.6
Diluted average common shares outstanding	80.7	87.5

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Shareholders' Equity - Schedule of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	$ (681)	$ (566)
Other comprehensive income before reclassification	21	(5)
Amounts reclassified from accumulated other comprehensive loss	5	2
Net current-period other comprehensive income	26	(3)
Ending balance	(655)	(569)
Foreign Currency Translation
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(107)	(90)
Other comprehensive income before reclassification	21	(4)
Amounts reclassified from accumulated other comprehensive loss	0	0
Net current-period other comprehensive income	21	(4)
Ending balance	(86)	(94)
Employee Benefit Related Adjustments
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(572)	(476)
Other comprehensive income before reclassification	0	(1)
Amounts reclassified from accumulated other comprehensive loss	3	1
Net current-period other comprehensive income	3	0
Ending balance	(569)	(476)
Unrealized Income (Loss) on cash flow hedges
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(2)	0
Other comprehensive income before reclassification	0	0
Amounts reclassified from accumulated other comprehensive loss	2	1
Net current-period other comprehensive income	2	1
Ending balance	$ 0	$ 1

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Financial Instruments - Fair Value of Financial Instruments (Details) - USD ($) $ in Millions	Dec. 31, 2019	Sep. 30, 2019
Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 108	$ 108
Short-term debt	178	41
Long-term debt	901	902
Carrying Value | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other assets	2	0
Carrying Value | Foreign currency option contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other assets	1	0
Carrying Value | Cross-currency swaps
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other assets	6	10
Cross-currency swaps (other liabilities)	5	5
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	108	108
Short-term debt	208	60
Long-term debt	987	953
Fair Value | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other assets	2	0
Fair Value | Foreign currency option contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other assets	1	0
Fair Value | Cross-currency swaps
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other assets	6	10
Cross-currency swaps (other liabilities)	$ 5	$ 5

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Long-Term Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Millions	Dec. 31, 2019	Sep. 30, 2019
Debt Instrument [Line Items]
Debt	$ 172	$ 175
Financing lease obligation	7
Financing lease obligation		7
Subtotal	1,079	943
Less: current maturities	(178)	(41)
Long-term debt	901	902
Convertible Notes Payable
Debt Instrument [Line Items]
Unamortized discount on convertible notes	$ (32)	(34)
3.25 percent convertible notes due 2037 | Convertible Notes Payable
Debt Instrument [Line Items]
Interest rate	3.25%
Debt	$ 319	319
7.875 percent convertible notes due 2026 | Convertible Notes Payable
Debt Instrument [Line Items]
Interest rate	7.875%
Debt	$ 23	23
6.25 percent notes due 2024
Debt Instrument [Line Items]
Interest rate	6.25%
Debt	$ 445	444
Borrowings and securitization
Debt Instrument [Line Items]
Borrowings and securitization	$ 145	$ 9

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Retirement Benefit Liabilities - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Retirement Benefits [Abstract]
Non-service cost components of the net periodic pension and OPEB income	$ 10	$ 9

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Leases - Schedule of Future Minimum Rental Commitments under Operating Leases (Details) $ in Millions	Dec. 31, 2019 USD ($)
Leases [Abstract]
2020	$ 18
2021	15
2022	14
2023	13
2024	13
Thereafter	25
Total	$ 98

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Earnings per Share - Reconciliation of common shares (Details) - shares shares in Millions	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Earnings Per Share [Abstract]
Basic average common shares outstanding (in shares)	78.2	84.8
Impact of restricted shares, restricted share units and performance share units (in shares)	1.6	2.1
Impact of convertible notes (in shares)	0.9	0.6
Diluted average common shares outstanding (in shares)	80.7	87.5

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Leases - Schedule of Leases in Consolidated Balance Sheet (Details) $ in Millions	Dec. 31, 2019 USD ($)
Finance Lease Assets And Liabilities Lessee
Finance lease right-of-use assets, Net Property	$ 7
Finance lease liabilities, Short-term debt	2
Finance lease liabilities, Long-term debt	5
Operating Lease Assets And Liabilities Lessee
Operating lease right-of-use assets, Other assets	78
Operating lease liabilities, Other current liabilities	14
Operating lease liabilities, Other liabilities	$ 64

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Inventories (Tables)

3 Months Ended

Dec. 31, 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):

	December 31, 2019		September 30, 2019
Finished goods	$	159	$	153
Work in process	44		39
Raw materials, parts and supplies	353		334
Total	$	556	$	526

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Leases (Tables)

3 Months Ended

Dec. 31, 2019

Leases [Abstract]

Schedule of Lease Cost

Supplemental balance sheet information related to leases

	December 31, 2019
Weighted-average remaining lease term (years):
Operating leases	8.7
Finance leases	2.7
Weighted-average discount rate:
Operating leases	4.5	%
Finance leases	9.1	%

Supplemental cash flow information related to leases

	Three Months Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5
Operating cash flows from finance leases	—
Financing cash flows from finance leases	1
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	4
Finance leases	2

Components of lease expense

	Three Months Ended December 31, 2019
Finance lease costs	$	1
Operating lease costs	5
Total lease costs	$	6

Assets and Liabilities, Lessee

The following table provides a summary of the location and amounts related to finance leases recognized in the Condensed Consolidated Balance Sheet.

	Classification	December 31, 2019
Finance lease right-of-use assets	Net Property	$	7
Finance lease liabilities	Short-term debt	2
Finance lease liabilities	Long-term debt	5

The following table provides a summary of the location and amounts related to operating leases recognized in the Condensed Consolidated Balance Sheet.

	Classification	December 31, 2019
Operating lease right-of-use assets	Other assets	$	78
Operating lease liabilities	Other current liabilities	14
Operating lease liabilities	Other liabilities	64

Maturities of Operating Lease Liabilities

Maturities

	Operating Leases			Finance Leases
2020 (excluding the three months ended December 31, 2019)	$	13		$	2
2021	16			3
2022	13			2
2023	11			1
2024	8			—
Thereafter	35			—
Total lease payments	96			8
Less: Impact of discounting future lease payments	(18		)	(1		)
Present value of lease liabilities	$	78		$	7

Maturities of Finance Lease Liabilities

Maturities

	Operating Leases			Finance Leases
2020 (excluding the three months ended December 31, 2019)	$	13		$	2
2021	16			3
2022	13			2
2023	11			1
2024	8			—
Thereafter	35			—
Total lease payments	96			8
Less: Impact of discounting future lease payments	(18		)	(1		)
Present value of lease liabilities	$	78		$	7

Schedule of Future Minimum Rental Commitments under Operating Leases

Cash obligations under future minimum rental commitments under operating leases as of September 30, 2019 are shown in the table below.

	2020		2021		2022		2023		2024		Thereafter		Total
Lease commitments	$	18	$	15	$	14	$	13	$	13	$	25	$	98

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Subsequent Event

3 Months Ended

Dec. 31, 2019

Subsequent Events [Abstract]

Subsequent Event

Subsequent Event

TransPower

As of December 31, 2019, the fair value of the company’s investment in Transportation Power Inc. ("TransPower") was $12 million. On January 16, 2020, Meritor acquired 100 percent of the voting equity interest of TransPower for an additional $16 million.

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Basis of Presentation

3 Months Ended

Dec. 31, 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.

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, 2019. The Condensed Consolidated Balance Sheet data as of September 30, 2019 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 months ended December 31, 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 first quarter of fiscal years 2020 and 2019 ended on December 29, 2019 and December 30, 2018, respectively. Fiscal year 2019 ended on September 29, 2019. 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 December 31 are used consistently throughout this report to represent the fiscal year end and first fiscal quarter end, respectively.

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Revenue

3 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

Disaggregation of revenue

In the following tables, revenue is disaggregated for each of our operating segments by primary geographical market for the three months ended December 31, 2019 and 2018.

	Three Months Ended December 31, 2019
Primary Geographical Market	Commercial Truck		Aftermarket, Industrial and Trailer		Total
U.S.	$	292	$	243	$	535
Canada	—		14		14
Mexico	34		9		43
Total North America	326		266		592
Sweden	62		—		62
Italy	45		4		49
United Kingdom	33		2		35
Other Europe	1		37		38
Total Europe	141		43		184
Brazil	53		1		54
China	34		—		34
India	22		1		23
Other Asia-Pacific	14		—		14
Total sales	$	590	$	311	$	901

	Three Months Ended December 31, 2018(1)
Primary Geographical Market	Commercial Truck		Aftermarket, Industrial and Trailer		Total
U.S.	$	350	$	240	$	590
Canada	—		18		18
Mexico	47		10		57
Total North America	397		268		665
Sweden	74		—		74
Italy	57		4		61
United Kingdom	41		3		44
Other Europe	3		19		22
Total Europe	175		26		201
Brazil	50		—		50
China	41		—		41
India	57		—		57
Other Asia-Pacific	24		—		24
Total sales	$	744	$	294	$	1,038

⁽¹⁾ Amounts for the three months ended December 31, 2018 have been recast to reflect reportable segment changes.

Contract balances

As of December 31, 2019 and September 30, 2019, Trade receivables, net, which are included in Receivables, trade and other, net, on the Condensed Consolidated Balance Sheet, were $451 million and $517 million, respectively.

For the three months ended December 31, 2019 and December 31, 2018, 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 December 31, 2019 and December 31, 2018.

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CONDENSED CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions	Dec. 31, 2019	Sep. 30, 2019
CURRENT ASSETS:
Cash and cash equivalents	$ 108	$ 108
Receivables trade and other, net	478	551
Inventories	556	526
Other current assets	37	31
TOTAL CURRENT ASSETS	1,179	1,216
NET PROPERTY	517	515
GOODWILL	486	478
OTHER ASSETS	714	606
TOTAL ASSETS	2,896	2,815
CURRENT LIABILITIES:
Short-term debt	178	41
Accounts and notes payable	540	610
Other current liabilities	264	285
TOTAL CURRENT LIABILITIES	982	936
LONG-TERM DEBT	901	902
RETIREMENT BENEFITS	330	336
OTHER LIABILITIES	299	226
TOTAL LIABILITIES	2,512	2,400
COMMITMENTS AND CONTINGENCIES (See Note 20)
EQUITY:
Common stock (December 31, 2019 and September 30, 2019, 105.3 and 104.1 shares issued and 77.8 and 81.4 shares outstanding, respectively)	105	104
Additional paid-in capital	804	803
Retained earnings	530	491
Treasury stock, at cost (December 31, 2019 and September 30, 2019, 27.6 and 22.7 shares, respectively)	(432)	(332)
Accumulated other comprehensive loss	(655)	(681)
Total equity attributable to Meritor, Inc.	352	385
Noncontrolling interests	32	30
TOTAL EQUITY	384	415
TOTAL LIABILITIES AND EQUITY	$ 2,896	$ 2,815

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Income Taxes

3 Months Ended

Dec. 31, 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.

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. As of December 31, 2019, the company continues to maintain the valuation allowances in France, Germany, 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 December 31, 2019, the company had approximately $3 million of net pre-tax income compared to $6 million of net pre-tax income in the same period in fiscal year 2019 in tax jurisdictions in which tax expense (benefit) is not recorded.

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Shareholders' Equity - Changes in Accumulated Other Comprehensive Income (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Accumulated Other Comprehensive Income (Loss) [Line Items]
Tax benefit	$ (13)	$ (21)
INCOME FROM CONTINUING OPERATIONS	41	92
Amount Reclassified from Accumulated Other Comprehensive Income | Employee Benefit Related Adjustments
Accumulated Other Comprehensive Income (Loss) [Line Items]
Prior service benefit	(9)	(9)
Actuarial losses	12	10
Total before tax	3	1
Tax benefit	0	0
INCOME FROM CONTINUING OPERATIONS	$ 3	$ 1

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Financial Instruments - Offsetting of Derivative Assets and Liabilities (Details) - USD ($) $ in Millions	Dec. 31, 2019	Sep. 30, 2019
Foreign exchange forward contracts
Derivative Assets
Gross Amounts Recognized	$ 2	$ 0
Gross Amounts Offset	0	0
Net Amounts Reported	2	0
Cross-currency swaps
Derivative Assets
Gross Amounts Recognized	6	10
Gross Amounts Offset	0	0
Net Amounts Reported	6	10
Derivative Liabilities
Gross Amounts Recognized	5	5
Gross Amounts Offset	0	0
Net Amounts Reported	5	5
Foreign currency option contracts
Derivative Assets
Gross Amounts Recognized	1	0
Gross Amounts Offset	0	0
Net Amounts Reported	$ 1	$ 0

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Long-Term Debt - Current Classification of Notes (Details) - Convertible Notes Payable - 7.875 percent convertible notes due 2026	3 Months Ended
	Dec. 31, 2019 trading_day $ / shares
Debt Instrument [Line Items]
Interest rate	7.875%
Trading days	20
Consecutive trading days	30
Threshold percentage of stock price trigger (greater than)	120.00%
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

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Contingencies - Additional Information (Details) $ in Millions	3 Months Ended
	Dec. 31, 2019 USD ($) site claim	Dec. 31, 2018 USD ($)	Sep. 30, 2019 USD ($) claim
Loss Contingencies [Line Items]
Environmental accrual balance	$ 15		$ 15
Discounted amount environmental accrual for on-going operations maintenance and monitoring	15
Undiscounted amount environmental accrual for on-going operations maintenance and monitoring	16
Asbestos related liability remeasurement	$ 0	$ 31
Maremont Asbestos
Loss Contingencies [Line Items]
Damages sought		51
Asbestos related liability remeasurement		$ 31
Obligation period for asbestos personal injury claims	40 years
Rockwell Asbestos
Loss Contingencies [Line Items]
Number of pending claims | claim	1,400		1,400
Pending and future claims	$ 90		$ 91
Asbestos-related insurance recoveries	$ 60		61
Low Range
Loss Contingencies [Line Items]
Site contingency, accrual, discount rate	1.50%
Low Range | Rockwell Asbestos
Loss Contingencies [Line Items]
Possible loss			91
High Range
Loss Contingencies [Line Items]
Site contingency, accrual, discount rate	2.25%
High Range | Rockwell Asbestos
Loss Contingencies [Line Items]
Possible loss			181
Superfund Sites
Loss Contingencies [Line Items]
Number of Superfund environmental sites | site	10
Environmental costs reasonably possible	$ 23
Environmental accrual balance	11		11
Non-Superfund Sites
Loss Contingencies [Line Items]
Environmental costs reasonably possible	13
Environmental accrual balance	$ 4		$ 4

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Supplemental Guarantor Condensed Consolidating Financial Statements (Tables)

3 Months Ended

Dec. 31, 2019

Condensed Financial Information Disclosure [Abstract]

Schedule of Condensed Consolidating Statement of Operations

	Three Months Ended December 31, 2019
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	535		$	366		$	—		$	901
Subsidiaries	—			23			35			(58		)	—
Total sales	—			558			401			(58		)	901
Cost of sales	(16		)	(469		)	(347		)	58			(774		)
GROSS MARGIN	(16		)	89			54			—			127
Selling, general and administrative	(24		)	(29		)	(17		)	—			(70		)
Other operating expense, net	—			—			(5		)	—			(5		)
OPERATING INCOME (LOSS)	(40		)	60			32			—			52
Other income, net	—			7			3			—			10
Equity in earnings of affiliates	—			4			2			—			6
Interest income (expense), net	(31		)	11			6			—			(14		)
INCOME (LOSS) BEFORE INCOME TAXES	(71		)	82			43			—			54
Benefit (provision) for income taxes	12			(15		)	(10		)	—			(13		)
Equity income from continuing operations of subsidiaries	98			28			—			(126		)	—
INCOME FROM CONTINUING OPERATIONS	39			95			33			(126		)	41
INCOME FROM DISCONTINUED OPERATIONS, net of tax	—			—			—			—			—
NET INCOME	39			95			33			(126		)	41
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	39		$	95		$	31		$	(126	)	$	39

	Three Months Ended December 31, 2018
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	589		$	449		$	—		$	1,038
Subsidiaries	—			32			57			(89		)	—
Total sales	—			621			506			(89		)	1,038
Cost of sales	(15		)	(534		)	(437		)	89			(897		)
GROSS MARGIN	(15		)	87			69			—			141
Selling, general and administrative	(25		)	(27		)	18			—			(34		)
OPERATING INCOME (LOSS)	(40		)	60			87			—			107
Other income, net	—			5			6			—			11
Equity in earnings of affiliates	—			7			2			—			9
Interest income (expense), net	(32		)	12			6			—			(14		)
INCOME (LOSS) BEFORE INCOME TAXES	(72		)	84			101			—			113
Benefit (provision) for income taxes	11			(12		)	(20		)	—			(21		)
Equity income from continuing operations of subsidiaries	151			40			—			(191		)	—
INCOME FROM CONTINUING OPERATIONS	90			112			81			(191		)	92
INCOME FROM DISCONTINUED OPERATIONS, net of tax	—			—			—			—			—
NET INCOME	90			112			81			(191		)	92
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	90		$	112		$	79		$	(191	)	$	90

Schedule of Condensed Consolidating Statement of Comprehensive Income (Loss)

	Three Months Ended December 31, 2019
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	39	$	95	$	33		$	(126	)	$	41
Other comprehensive income, net of tax	26		30		32			(62		)	26
Total comprehensive income	65		125		65			(188		)	67
Less: Comprehensive income attributable to noncontrolling interests	—		—		(2		)	—			(2		)
Comprehensive income attributable to Meritor, Inc.	$	65	$	125	$	63		$	(188	)	$	65

	Three Months Ended December 31, 2018
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	90		$	112		$	81		$	(191	)	$	92
Other comprehensive loss, net of tax	(3		)	(8		)	(9		)	18			(2		)
Total comprehensive income	87			104			72			(173		)	90
Less: Comprehensive income attributable to noncontrolling interests	—			—			(3		)	—			(3		)
Comprehensive income attributable to Meritor, Inc.	$	87		$	104		$	69		$	(173	)	$	87

Schedule of Condensed Consolidating Balance Sheet

	December 31, 2019
	Parent		Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	13	$	5		$	90	$	—		$	108
Receivables trade and other, net	3		82			393		—			478
Inventories	—		308			248		—			556
Other current assets	7		10			20		—			37
TOTAL CURRENT ASSETS	23		405			751		—			1,179
NET PROPERTY	22		257			238		—			517
GOODWILL	—		337			149		—			486
OTHER ASSETS	182		252			280		—			714
INVESTMENTS IN SUBSIDIARIES	4,575		958			—		(5,533		)	—
TOTAL ASSETS	$	4,802	$	2,209		$	1,418	$	(5,533	)	$	2,896
CURRENT LIABILITIES:
Short-term debt	$	97	$	—		$	81	$	—		$	178
Accounts and notes payable	19		251			270		—			540
Other current liabilities	74		88			102		—			264
TOTAL CURRENT LIABILITIES	190		339			453		—			982
LONG-TERM DEBT	897		—			4		—			901
RETIREMENT BENEFITS	305		1			24		—			330
INTERCOMPANY PAYABLE (RECEIVABLE)	2,997		(3,012		)	15		—			—
OTHER LIABILITIES	61		124			114		—			299
EQUITY ATTRIBUTABLE TO MERITOR, INC.	352		4,757			776		(5,533		)	352
NONCONTROLLING INTERESTS	—		—			32		—			32
TOTAL LIABILITIES AND EQUITY	$	4,802	$	2,209		$	1,418	$	(5,533	)	$	2,896

	September 30, 2019
	Parent		Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	4	$	4		$	100	$	—		$	108
Receivables trade and other, net	3		92			456		—			551
Inventories	—		292			234		—			526
Other current assets	6		10			15		—			31
TOTAL CURRENT ASSETS	13		398			805		—			1,216
NET PROPERTY	21		260			234		—			515
GOODWILL	—		337			141		—			478
OTHER ASSETS	170		225			211		—			606
INVESTMENTS IN SUBSIDIARIES	4,432		899			—		(5,331		)	—
TOTAL ASSETS	$	4,636	$	2,119		$	1,391	$	(5,331	)	$	2,815
CURRENT LIABILITIES:
Short-term debt	$	32	$	—		$	9	$	—		$	41
Accounts and notes payable	53		283			274		—			610
Other current liabilities	77		109			99		—			285
TOTAL CURRENT LIABILITIES	162		392			382		—			936
LONG-TERM DEBT	898		—			4		—			902
RETIREMENT BENEFITS	312		1			23		—			336
INTERCOMPANY PAYABLE (RECEIVABLE)	2,833		(3,005		)	172		—			—
OTHER LIABILITIES	46		112			68		—			226
EQUITY ATTRIBUTABLE TO MERITOR, INC.	385		4,619			712		(5,331		)	385
NONCONTROLLING INTERESTS	—		—			30		—			30
TOTAL LIABILITIES AND EQUITY	$	4,636	$	2,119		$	1,391	$	(5,331	)	$	2,815

Schedule of Condensed Consolidating Statement of Cash Flows

	Three Months Ended December 31, 2019
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	65		$	9		$	(93	)	$	—	$	(19	)
INVESTING ACTIVITIES
Capital expenditures	—			(8		)	(8		)	—		(16		)
CASH USED FOR INVESTING ACTIVITIES	—			(8		)	(8		)	—		(16		)
FINANCING ACTIVITIES
Securitization	—			—			72			—		72
Borrowings against revolving line of credit	65			—			—			—		65
Term loan payments	(3		)	—			—			—		(3		)
Repurchase of common stock	(100		)	—			—			—		(100		)
Intercompany advances	(18		)	—			18			—		—
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(56		)	—			90			—		34
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	9			1			(10		)	—		—
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	4			4			100			—		108
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	13		$	5		$	90		$	—	$	108

	Three Months Ended December 31, 2018
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR)        OPERATING ACTIVITIES	$	(9	)	$	15		$	5		$	—	$	11
INVESTING ACTIVITIES
Capital expenditures	(1		)	(12		)	(10		)	—		(23		)
Cash paid for investment in Transportation Power, Inc.	(3		)	—			—			—		(3		)
Other investing activities	—			—			(1		)	—		(1		)
CASH USED FOR INVESTING ACTIVITIES	(4		)	(12		)	(11		)	—		(27		)
FINANCING ACTIVITIES
Securitization	—			—			33			—		33
Borrowings against revolving line of credit	45			—			—			—		45
Repurchase of common stock	(50		)	—			—			—		(50		)
Intercompany advances	18			—			(18		)	—		—
Other financing activities	—			(1		)	—			—		(1		)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	13			(1		)	15			—		27
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	—			2			10			—		12
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	24			6			85			—		115
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	24		$	8		$	95		$	—	$	127

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Leases - Schedule of Lease Cost (Details) $ in Millions	3 Months Ended
	Dec. 31, 2019 USD ($)
Leases [Abstract]
Finance lease costs	$ 1
Operating lease costs	5
Total lease costs	$ 6

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Leases - Maturities of Operating and Finance Lease Liabilities (Details) $ in Millions	Dec. 31, 2019 USD ($)
Operating Leases
2020 (excluding the three months ended December 31, 2019)	$ 13
2021	16
2022	13
2023	11
2024	8
Thereafter	35
Total lease payments	96
Less: Impact of discounting future lease payments	(18)
Present value of lease liabilities	78
Finance Leases
2020 (excluding the three months ended December 31, 2019)	2
2021	3
2022	2
2023	1
2024	0
Thereafter	0
Total lease payments	8
Less: Impact of discounting future lease payments	(1)
Present value of lease liabilities	$ 7

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Supplemental Guarantor Condensed Consolidating Financial Statements - Condensed Consolidating Statement of Operations (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Sales
Sales	$ 901	$ 1,038
Cost of sales	(774)	(897)
GROSS MARGIN	127	141
Selling, general and administrative	(70)	(34)
Other operating income, net	(5)	0
OPERATING INCOME	52	107
Other income, net	10	11
Equity in earnings of affiliates	6	9
Interest income (expense), net	(14)	(14)
INCOME BEFORE INCOME TAXES	54	113
Benefit (provision) for income taxes	(13)	(21)
Equity income from continuing operations of subsidiaries	0	0
INCOME FROM CONTINUING OPERATIONS	41	92
INCOME FROM DISCONTINUED OPERATIONS, net of tax	0	0
NET INCOME	41	92
Less: Net income attributable to noncontrolling interests	(2)	(2)
Net income	39	90
Eliminations
Sales
Sales	(58)	(89)
Cost of sales	58	89
GROSS MARGIN	0	0
Selling, general and administrative	0	0
Other operating income, net	0
OPERATING INCOME	0	0
Other income, net	0	0
Equity in earnings of affiliates	0	0
Interest income (expense), net	0	0
INCOME BEFORE INCOME TAXES	0	0
Benefit (provision) for income taxes	0	0
Equity income from continuing operations of subsidiaries	(126)	(191)
INCOME FROM CONTINUING OPERATIONS	(126)	(191)
INCOME FROM DISCONTINUED OPERATIONS, net of tax	0	0
NET INCOME	(126)	(191)
Less: Net income attributable to noncontrolling interests	0	0
Net income	(126)	(191)
Parent
Sales
Sales	0	0
Parent | Eliminations
Sales
Sales	0	0
Parent | Reportable Legal Entities
Sales
Sales	0	0
Cost of sales	(16)	(15)
GROSS MARGIN	(16)	(15)
Selling, general and administrative	(24)	(25)
Other operating income, net	0
OPERATING INCOME	(40)	(40)
Other income, net	0	0
Equity in earnings of affiliates	0	0
Interest income (expense), net	(31)	(32)
INCOME BEFORE INCOME TAXES	(71)	(72)
Benefit (provision) for income taxes	12	11
Equity income from continuing operations of subsidiaries	98	151
INCOME FROM CONTINUING OPERATIONS	39	90
INCOME FROM DISCONTINUED OPERATIONS, net of tax	0	0
NET INCOME	39	90
Less: Net income attributable to noncontrolling interests	0	0
Net income	39	90
Guarantors
Sales
Sales	535	589
Guarantors | Eliminations
Sales
Sales	23	32
Guarantors | Reportable Legal Entities
Sales
Sales	558	621
Cost of sales	(469)	(534)
GROSS MARGIN	89	87
Selling, general and administrative	(29)	(27)
Other operating income, net	0
OPERATING INCOME	60	60
Other income, net	7	5
Equity in earnings of affiliates	4	7
Interest income (expense), net	11	12
INCOME BEFORE INCOME TAXES	82	84
Benefit (provision) for income taxes	(15)	(12)
Equity income from continuing operations of subsidiaries	28	40
INCOME FROM CONTINUING OPERATIONS	95	112
INCOME FROM DISCONTINUED OPERATIONS, net of tax	0	0
NET INCOME	95	112
Less: Net income attributable to noncontrolling interests	0	0
Net income	95	112
Non- Guarantors
Sales
Sales	366	449
Non- Guarantors | Eliminations
Sales
Sales	35	57
Non- Guarantors | Reportable Legal Entities
Sales
Sales	401	506
Cost of sales	(347)	(437)
GROSS MARGIN	54	69
Selling, general and administrative	(17)	18
Other operating income, net	(5)
OPERATING INCOME	32	87
Other income, net	3	6
Equity in earnings of affiliates	2	2
Interest income (expense), net	6	6
INCOME BEFORE INCOME TAXES	43	101
Benefit (provision) for income taxes	(10)	(20)
Equity income from continuing operations of subsidiaries	0	0
INCOME FROM CONTINUING OPERATIONS	33	81
INCOME FROM DISCONTINUED OPERATIONS, net of tax	0	0
NET INCOME	33	81
Less: Net income attributable to noncontrolling interests	(2)	(2)
Net income	$ 31	$ 79

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Restructuring Costs (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Activity during the period:
Charges to continuing operations	$ 5	$ 0
Cash payments – continuing operations	(7)	(1)
Total
Restructuring Reserve [Roll Forward]
Beginning balance	8	4
Activity during the period:
Charges to continuing operations	5	0
Cash payments – continuing operations	(7)	(1)
Other	(1)
Ending balance	5	3
Less: non-current restructuring reserves	0	(1)
Restructuring reserves – current	$ 5	$ 2

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Inventories (Details) - USD ($) $ in Millions	Dec. 31, 2019	Sep. 30, 2019
Inventory Disclosure [Abstract]
Finished goods	$ 159	$ 153
Work in process	44	39
Raw materials, parts and supplies	353	334
Total inventories	$ 556	$ 526

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Subsequent Event (Details) - TransPower - USD ($) $ in Millions	Jan. 16, 2020	Dec. 31, 2019
Variable Interest Entity, Not Primary Beneficiary
Subsequent Event [Line Items]
Maximum exposure to loss		$ 12
Subsequent Event
Subsequent Event [Line Items]
Percentage of voting equity interest acquired	10000.00%
Purchase price	$ 16

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Business Segment Information (Tables)

3 Months Ended

Dec. 31, 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 December 31, 2019
External Sales	$	590	$	311	$	—		$	901
Intersegment Sales	32		6		(38		)	—
Total Sales	$	622	$	317	$	(38	)	$	901
Three Months Ended December 31, 2018 (1)
External Sales	$	744	$	294	$	—		$	1,038
Intersegment Sales	35		9		(44		)	—
Total Sales	$	779	$	303	$	(44	)	$	1,038

⁽¹⁾ Amounts for the three months ended December 31, 2018 have been recast to reflect reportable segment changes.

Segment Income Attributable to Parent

	Three Months Ended December 31,
	2019			2018 (3)
Segment adjusted EBITDA:
Commercial Truck	$	56		$	77
Aftermarket, Industrial and Trailer	40			40
Segment adjusted EBITDA	96			117
Unallocated legacy and corporate expense, net (1)	2			2
Interest expense, net	(14		)	(14		)
Provision for income taxes	(13		)	(21		)
Depreciation and amortization	(24		)	(22		)
Noncontrolling interests	(2		)	(2		)
Loss on sale of receivables	(1		)	(1		)
Restructuring	(5		)	—
Asbestos related liability remeasurement (2)	—			31
Income from continuing operations attributable to Meritor, Inc.	$	39		$	90

⁽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 three months ended December 31, 2018 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 months ended December 31, 2018 have been recast to reflect reportable segment changes.

Schedule of Segment Assets

	December 31, 2019			September 30, 2019
Segment Assets:
Commercial Truck	$	1,700		$	1,659
Aftermarket, Industrial and Trailer	839			815
Total segment assets	2,539			2,474
Corporate (1)	597			567
Less: Accounts receivable sold under off-balance sheet factoring programs (2)	(240		)	(226		)
Total assets	$	2,896		$	2,815

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

⁽²⁾ 

At December 31, 2019 and September 30, 2019, segment assets include $240 million and $226 million, respectively, of accounts receivable sold under off-balance sheet accounts receivable factoring programs (see Note 11). These sold receivables are included in segment assets as the CODM reviews segment assets inclusive of these balances.

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Financial Instruments (Tables)

3 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Value of Financial Instruments

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

	December 31, 2019				September 30, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	108	$	108	$	108	$	108
Short-term debt	178		208		41		60
Long-term debt	901		987		902		953
Foreign exchange forward contracts (other assets)	2		2		—		—
Foreign currency option contracts (other assets)	1		1		—		—
Cross-currency swaps (other assets)	6		6		10		10
Cross-currency swaps (other liabilities)	5		5		5		5

Offsetting of Derivative Assets and Liabilities

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

	December 31, 2019			September 30, 2019
	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported
Derivative Assets
Foreign exchange forward contracts	2	—	2	—	—	—
Cross-currency swaps	6	—	6	10	—	10
Foreign currency option contracts	1	—	1	—	—	—
Derivative Liabilities
Cross-currency swaps	5	—	5	5	—	5

Fair Value of Financial Instruments by Valuation Hierarchy

Fair value of financial instruments by the valuation hierarchy at December 31, 2019 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	108	$	—	$	—
Short-term debt	—		132		76
Long-term debt	—		818		169
Foreign exchange forward contracts (other assets)	—		2		—
Foreign exchange forward contracts (other liabilities)	—		—		—
Foreign currency option contracts (other assets)	—		1		—
Cross-currency swaps (other assets)	—		6		—
Cross-currency swaps (other liabilities)	—		5		—

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

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	108	$	—	$	—
Short-term debt	—		49		11
Long-term debt	—		782		171
Foreign exchange forward contracts (other liabilities)	—		—		—
Foreign currency option contracts (other assets)	—		—		—
Cross-currency swaps (other assets)	—		10		—
Cross-currency swaps (other liabilities)	—		5		—

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Other Assets (Tables)

3 Months Ended

Dec. 31, 2019

Other Assets, Noncurrent [Abstract]

Summary of Other Assets

Other assets are summarized as follows (in millions):

	December 31, 2019		September 30, 2019
Investments in non-consolidated joint ventures	$	115	$	110
Deferred income tax assets, net	139		122
Prepaid pension costs	163		149
Other	297		225
Other assets	$	714	$	606

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Net Property

3 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

Net Property

Net Property

     Net property is summarized as follows (in millions):

	December 31, 2019			September 30, 2019
Property at cost:
Land and land improvements	$	31		$	31
Buildings	228			224
Machinery and equipment	962			935
Company-owned tooling	142			136
Construction in progress	67			74
Total	1,430			1,400
Less: accumulated depreciation	(913		)	(885		)
Net property	$	517		$	515

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Long-Term Debt

3 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

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

	December 31, 2019			September 30, 2019
3.25 percent convertible notes due 2037	$	319		$	319
7.875 percent convertible notes due 2026	23			23
Term loan due 2024	172			175
6.25 percent notes due 2024	445			444
Financing lease obligation	7			7
Borrowings and securitization	145			9
Unamortized discount on convertible notes	(32		)	(34		)
Subtotal	1,079			943
Less: current maturities	(178		)	(41		)
Long-term debt	$	901		$	902

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 December 31, 2019 as the holders are entitled to convert all or a portion of their 7.875 Percent Convertible Notes at any time beginning January 1, 2020 and prior to the close of business on March 31, 2020 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 December 31, 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 also classified as current as of September 30, 2019.

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.

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, which was utilized 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 credit 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 revolving credit 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 revolving credit agreement. At December 31, 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 23).

At December 31, 2019, there were $65 million in borrowings outstanding under the revolving credit facility. At September 30, 2019, 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 December 31, 2019 and September 30, 2019, there were no letters of credit outstanding under the revolving credit facility.

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 December 31, 2019 and September 30, 2019, the company had $18 million and $30 million, respectively, outstanding under this program at more than one bank.

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Shareholders' Equity

3 Months Ended

Dec. 31, 2019

Equity [Abstract]

Shareholders' Equity

Shareholders' Equity

There were no dividends declared or paid in the first quarter of fiscal years 2020 and 2019. 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 November 7, 2019, the Board of Directors authorized the repurchase of up to $325 million of the company's common stock, which was an increase from the prior $250 million authorization approved on July 26, 2019. Repurchases can be made 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. During fiscal year 2019, the company repurchased 1.3 million shares of common stock for $25 million (including commission costs) pursuant to this common stock repurchase authorization. During the first quarter of fiscal year 2020, the company repurchased 4.9 million shares of common stock for $100 million (including commission costs) pursuant to this authorization. As of December 31, 2019, the amount remaining available for repurchases under this common stock repurchase authorization was $200 million.

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. The remaining authority under the common stock repurchase authorization was superseded by the July 2019 authorization described above. As of December 31, 2019 and September 30, 2019, the amount remaining available for repurchase under this debt repurchase authorization was $76 million.

Accumulated Other Comprehensive Loss ("AOCL")

The components of AOCL and the changes in AOCL by components, net of tax, for the three months ended December 31, 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, 2019	$	(107	)	$	(572	)	$	(2	)	$	(681	)
Other comprehensive income before reclassification	21			—			—			21
Amounts reclassified from accumulated other comprehensive loss	—			3			2			5
Net current-period other comprehensive income	21			3			2			26
Balance at December 31, 2019	$	(86	)	$	(569	)	$	—		$	(655	)

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 benefit	$	(9	)	(a)
Actuarial losses	12			(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 19 for additional details), which is recorded in other income (expense), net.

	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	(4		)	(1		)	—		(5		)
Amounts reclassified from accumulated other comprehensive loss	—			1			1		2
Net current-period other comprehensive income	$	(4	)	$	—		$	1	$	(3	)
Balance at December 31, 2018	$	(94	)	$	(476	)	$	1	$	(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 benefit	$	(9	)	(b)
Actuarial losses	$	10		(b)
	1			Total before tax
	—			Tax benefit
Total reclassifications for the period	$	1		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 19 for additional details), which is recorded in other income (expense), net.

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Accounts Receivable Factoring and Securitization

3 Months Ended

Dec. 31, 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 12/31/19				Utilized as of 12/31/19				Utilized as of 9/30/19
		EUR		USD		EUR		USD		EUR		USD
On-balance sheet arrangement
Committed U.S. accounts receivable securitization (1)	December 2022	N/A		$	115	N/A		$	84	N/A		$	13
Total on-balance sheet arrangement: (1)		N/A		$	115	N/A		$	84	N/A		$	13
Off-balance sheet arrangements
Committed Swedish factoring facility (2)(3)	March 2020 (5)	€	155	$	169	€	128	$	140	€	109	$	119
Committed U.S. factoring facility (2)	February 2023	N/A		75		N/A		55		N/A		58
Uncommitted U.K. factoring facility	February 2022	25		27		3		4		6		6
Uncommitted Italy factoring facility	June 2022	30		33		21		23		21		23
Other uncommitted factoring facilities (4)	None	N/A		N/A		17		18		18		20
Total off-balance sheet arrangements		€	210	$	304	€	169	$	240	€	154	$	226

⁽¹⁾ Availability subject to adequate eligible accounts receivable available for sale. The utilized amount includes $4 million of letters of credit as of December 31, 2019 and September 30, 2019.

⁽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 June 22, 2020.

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

⁽⁵⁾ The company is working to extend this arrangement before its current maturity date.

Off-balance sheet arrangements 

Total costs associated with all of the off-balance sheet arrangements described above were $1 million for the three months ended December 31, 2019 and 2018, and are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Operations.

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
OPERATING ACTIVITIES
Net income	$ 41	$ 92
Less: Income from discontinued operations, net of tax	0	0
INCOME FROM CONTINUING OPERATIONS	41	92
Adjustments to income from continuing operations to arrive at cash provided by (used for) operating activities:
Depreciation and amortization	24	22
Deferred income tax expense	3	3
Restructuring costs	5	0
Equity in earnings of affiliates	(6)	(9)
Pension and retiree medical income	(10)	(9)
Asbestos related liability remeasurement	0	(31)
Other adjustments to income from continuing operations	3	5
Dividends received from equity method investments	0	1
Pension and retiree medical contributions	(3)	(3)
Restructuring payments	(7)	(1)
Changes in off-balance sheet accounts receivable securitization and factoring programs	7	38
Changes in receivables, inventories and accounts payable	(31)	(52)
Changes in other current assets and liabilities	(28)	(40)
Changes in other assets and liabilities	(16)	(4)
Operating cash flows provided by (used for) continuing operations	(18)	12
Operating cash flows used for discontinued operations	(1)	(1)
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	(19)	11
INVESTING ACTIVITIES
Capital expenditures	(16)	(23)
Cash paid for investment in Transportation Power, Inc.	0	(3)
Other investing activities	0	(1)
CASH USED FOR INVESTING ACTIVITIES	(16)	(27)
FINANCING ACTIVITIES
Securitization	72	33
Borrowings against revolving line of credit	65	45
Term loan payments	(3)	0
Other financing activities	0	(1)
Net change in debt	134	77
Repurchase of common stock	(100)	(50)
CASH PROVIDED BY FINANCING ACTIVITIES	34	27
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1	1
CHANGE IN CASH AND CASH EQUIVALENTS	0	12
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	108	115
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$ 108	$ 127

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Equity Based Compensation

3 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Equity Based Compensation

Equity Based Compensation

In November 2019, 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 $25.25, which was the company’s share price on the grant date of December 1, 2019. The Board of Directors also approved a grant of 0.3 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 $25.25, which was the company's share price on the grant date of December 1, 2019.

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, 2019 to September 30, 2022, measured at the end of the performance period. The number of performance share units that vest will depend on adjusted EBITDA margin, new business wins, free cash flow conversion and adjusted diluted earnings per share from continuing operations which are all weighted at 25%. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.4 million performance share units.

For the three months ended December 31, 2019 and December 31, 2018, the dilutive impact of previously issued restricted shares, restricted share units and performance share units was 1.6 million and 2.1 million shares, respectively. For the three months ended December 31, 2019 and December 31, 2018, compensation cost related to restricted shares, restricted share units and performance share units was $3 million and $5 million, respectively.

For the three months ended December 31, 2019 and December 31, 2018, 0.9 million and 0.6 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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CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - USD ($) shares in Millions, $ in Millions	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Income Statement [Abstract]
Sales	$ 901	$ 1,038
Cost of sales	(774)	(897)
GROSS MARGIN	127	141
Selling, general and administrative	(70)	(34)
Other operating expense, net	(5)	0
OPERATING INCOME	52	107
Other income, net	10	11
Equity in earnings of affiliates	6	9
Interest expense, net	(14)	(14)
INCOME BEFORE INCOME TAXES	54	113
Provision for income taxes	(13)	(21)
INCOME FROM CONTINUING OPERATIONS	41	92
INCOME FROM DISCONTINUED OPERATIONS, net of tax	0	0
NET INCOME	41	92
Less: Net income attributable to noncontrolling interests	(2)	(2)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	39	90
NET INCOME ATTRIBUTABLE TO MERITOR, INC.
Net income from continuing operations	39	90
Income from discontinued operations	0	0
Net income	$ 39	$ 90
BASIC EARNINGS PER SHARE
Continuing operations (in usd per share)	$ 0.50	$ 1.06
Discontinued operations (in usd per share)	0	0
Basic earnings per share (in usd per share)	0.50	1.06
DILUTED EARNINGS PER SHARE
Continuing operations (in usd per share)	0.48	1.03
Discontinued operations (in usd per share)	0	0
Diluted earnings per share (in usd per share)	$ 0.48	$ 1.03
Basic average common shares outstanding (in shares)	78.2	84.8
Diluted average common shares outstanding (in shares)	80.7	87.5

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Goodwill

3 Months Ended

Dec. 31, 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.

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	$	261	$	232		$	493
Accumulated impairment losses	—		(15		)	(15		)
Beginning Balance at September 30, 2019	261		217			478
AxleTech measurement period adjustment (see Note 10)	—		2			2
Foreign currency translation	4		2			6
Ending Balance at December 31, 2019	$	265	$	221		$	486

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Restructuring Costs (Tables)

3 Months Ended

Dec. 31, 2019

Restructuring and Related Activities [Abstract]

Schedule of Changes in Restructuring Reserves

The changes in restructuring reserves for the three months ended December 31, 2019 and 2018 are as follows (in millions):

	Total
Beginning Balance at September 30, 2019	$	8
Activity during the period:
Charges to continuing operations	5
Cash payments – continuing operations	(7		)
Other	(1		)
Total restructuring reserves at December 31, 2019	5
Less: non-current restructuring reserves	—
Restructuring reserves – current, at December 31, 2019	$	5
Balance at September 30, 2018	$	4
Activity during the period:
Charges to continuing operations	—
Cash payments – continuing operations	(1		)
Total restructuring reserves at December 31, 2018	3
Less: non-current restructuring reserves	(1		)
Restructuring reserves – current, at December 31, 2018	$	2

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Earnings per Share (Tables)

3 Months Ended

Dec. 31, 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 December 31,
	2019	2018
Basic average common shares outstanding	78.2	84.8
Impact of restricted shares, restricted share units and performance share units	1.6	2.1
Impact of convertible notes	0.9	0.6
Diluted average common shares outstanding	80.7	87.5

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Equity Based Compensation - Additional information (Details) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended
	Dec. 01, 2019	Dec. 31, 2019	Dec. 31, 2018	Nov. 30, 2019
Class of Stock [Line Items]
Impact of restricted shares, restricted share units and performance share units (in shares)		1,600,000	2,100,000
Share-based compensation expense		$ 3	$ 5
Impact of convertible notes (in shares)		900,000	600,000
Convertible Notes Payable | 7.875% Convertible Notes Due 2026
Class of Stock [Line Items]
Interest rate		7.875%
Executive Officer
Class of Stock [Line Items]
Number or shares issuable per performance share unit (in shares)				1
Exercise price (in usd per share)	$ 25.25
Executive Officer | Restricted Share Units (RSUs)
Class of Stock [Line Items]
Shares granted (in shares)	300,000
Vesting period	3 years
Executive Officer | Performance Shares
Class of Stock [Line Items]
Exercise price (in usd per share)	$ 25.25
Executive Officer | Performance Shares | Performance period of October 1, 2019 to September 30, 2022
Class of Stock [Line Items]
Shares authorized for grant (in shares)	400,000
Executive Officer | Performance Shares | Performance period of October 1, 2019 to September 30, 2022 | Performance Objective One
Class of Stock [Line Items]
Award vesting rights percentage		25.00%
Executive Officer | Performance Shares | Performance period of October 1, 2019 to September 30, 2022 | Minimum
Class of Stock [Line Items]
Performance-based vesting percentage		0.00%
Executive Officer | Performance Shares | Performance period of October 1, 2019 to September 30, 2022 | Maximum
Class of Stock [Line Items]
Performance-based vesting percentage		200.00%

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Leases - Schedule of Supplemental Cash Flow (Details) $ in Millions	3 Months Ended
	Dec. 31, 2019 USD ($)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$ 5
Operating cash flows from finance leases	0
Financing cash flows from finance leases	1
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	4
Finance leases	$ 2

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Shareholders' Equity - Common Stock and Debt Repurchase Authorizations (Details) - USD ($) shares in Millions	3 Months Ended		12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Sep. 30, 2019	Nov. 07, 2019	Jul. 26, 2019	Nov. 02, 2018
Class of Stock [Line Items]
Dividends declared or paid	$ 0	$ 0
Debt Securities
Class of Stock [Line Items]
Debt repurchase program, amount authorized						$ 100,000,000
Remaining authorized repurchase amount under debt repurchase	$ 76,000,000		$ 76,000,000
Common Stock
Class of Stock [Line Items]
Authorized repurchase of securities, with debt reduction target (up to)				$ 325,000,000	$ 250,000,000	$ 200,000,000
Number of shares authorized to be repurchased (in shares)	4.9		1.3
Shares repurchased during period	$ 100,000,000		$ 25,000,000
Remaining authorized repurchase amount under the stock repurchase program	$ 200,000,000

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Long-Term Debt - Other (Details) - USD ($)	Dec. 31, 2019	Sep. 30, 2019
Debt Instrument [Line Items]
Long-term debt outstanding	$ 172,000,000	$ 175,000,000
China | Notes Payable to Banks | Other Export Financing Arrangements
Debt Instrument [Line Items]
Debt default, amount	35,000,000
Long-term debt outstanding	$ 18,000,000	$ 30,000,000

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Other Liabilities (Details) - USD ($) $ in Millions	Dec. 31, 2019	Sep. 30, 2019	Dec. 31, 2018
Other Liabilities Disclosure [Abstract]
Asbestos-related liabilities (see Note 20)	$ 81	$ 82
Product warranties (see Note 15)	29	32	$ 36
Other	189	112
Other liabilities	$ 299	$ 226

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Retirement Benefit Liabilities - Components of net periodic pension and retiree medical income (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Pension
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Interest cost	$ (11)	$ (13)
Assumed return on plan assets	24	24
Amortization of prior service benefit	0	0
Recognized actuarial loss	(8)	(6)
Total income	5	5
Retiree Medical
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Interest cost	0	(1)
Assumed return on plan assets	0	0
Amortization of prior service benefit	9	9
Recognized actuarial loss	(4)	(4)
Total income	$ 5	$ 4

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Financial Instruments - Additional Information (Details) - USD ($)	3 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019
Foreign exchange swap contracts
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Term of foreign exchange forward contract	18 months
Derivative, notional amount	$ 72,000,000	$ 0
Foreign currency option contracts | India, Rupees
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Derivative, notional amount	105,000,000	139,000,000
Foreign currency option contracts | Euro
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Derivative, notional amount	64,000,000	28,000,000
Cross-currency swaps
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Derivative, notional amount	$ 225,000,000	225,000,000	$ 225,000,000
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
Derivative, notional amount	$ 85,000,000	$ 110,000,000

XML

Business Segment Information - Segment Income Attributable to Parent (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Segment Reporting Information [Line Items]
Interest expense, net	$ (14)	$ (14)
Provision for income taxes	(13)	(21)
Depreciation and amortization	(24)	(22)
Noncontrolling interests	(2)	(2)
Restructuring	(5)	0
Asbestos related liability remeasurement	0	31
Net income	39	90
Operating Segments
Segment Reporting Information [Line Items]
Segment adjusted EBITDA	96	117
Operating Segments | Commercial Truck
Segment Reporting Information [Line Items]
Segment adjusted EBITDA	56	77
Operating Segments | Aftermarket, Industrial and Trailer
Segment Reporting Information [Line Items]
Segment adjusted EBITDA	40	40
Segment Reconciling Items
Segment Reporting Information [Line Items]
Unallocated legacy and corporate income, net	2	2
Interest expense, net	(14)	(14)
Provision for income taxes	(13)	(21)
Depreciation and amortization	(24)	(22)
Noncontrolling interests	(2)	(2)
Loss on sale of receivables	(1)	(1)
Restructuring	(5)	0
Asbestos related liability remeasurement	$ 0	31
Maremont Asbestos
Segment Reporting Information [Line Items]
Asbestos related liability remeasurement		$ 31

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Contingencies (Tables)

3 Months Ended

Dec. 31, 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, 2019	$	11		$	4	$	15
Payments and other	(1		)	—		(1		)
Accruals	1			—		1
Ending Balance at December 31, 2019	$	11		$	4	$	15

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Other Liabilities (Tables)

3 Months Ended

Dec. 31, 2019

Other Liabilities Disclosure [Abstract]

Summary of Other Liabilities

Other liabilities are summarized as follows (in millions):

	December 31, 2019		September 30, 2019
Asbestos-related liabilities (see Note 20)	$	81	$	82
Product warranties (see Note 15)	29		32
Other	189		112
Other liabilities	$	299	$	226

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Other Assets - Summary of Other Assets (Details) - USD ($) $ in Millions	Dec. 31, 2019	Sep. 30, 2019
Other Assets, Noncurrent [Abstract]
Investments in non-consolidated joint ventures	$ 115	$ 110
Deferred income tax assets, net	139	122
Prepaid pension costs	163	149
Other	297	225
Other assets	$ 714	$ 606

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Business Segment Information - Schedule of Segment Assets (Details) - USD ($) $ in Millions	Dec. 31, 2019	Sep. 30, 2019
Segment Reporting Information [Line Items]
Total assets	$ 2,896	$ 2,815
Operating Segments
Segment Reporting Information [Line Items]
Total assets	2,539	2,474
Operating Segments | Commercial Truck
Segment Reporting Information [Line Items]
Total assets	1,700	1,659
Operating Segments | Aftermarket, Industrial and Trailer
Segment Reporting Information [Line Items]
Total assets	839	815
Corporate
Segment Reporting Information [Line Items]
Total assets	597	567
Segment Reconciling Items
Segment Reporting Information [Line Items]
Less: Accounts receivable sold under off-balance sheet factoring programs	(240)	(226)
Accounts receivable sold under off-balance sheet factoring programs	$ 240	$ 226

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Goodwill - Additional Information (Details)	3 Months Ended
	Dec. 31, 2019 segment
Goodwill and Intangible Assets Disclosure [Abstract]
Number of reportable segments	2

XML

Acquisition (Details) - USD ($) $ in Millions		3 Months Ended
	Jul. 26, 2019	Dec. 31, 2019
Business Acquisition [Line Items]
Increase to goodwill		$ 2
AxleTech
Business Acquisition [Line Items]
Percentage of shares acquired	100.00%
Purchase price	$ 179
Adjustments decrease in receivables		2
Increase to goodwill		$ 2

XML

Supplemental Guarantor Condensed Consolidating Financial Statements - Condensed Consolidating Balance Sheet (Details) - USD ($) $ in Millions	Dec. 31, 2019	Sep. 30, 2019
CURRENT ASSETS:
Cash and cash equivalents	$ 108	$ 108
Receivables trade and other, net	478	551
Inventories	556	526
Other current assets	37	31
TOTAL CURRENT ASSETS	1,179	1,216
NET PROPERTY	517	515
GOODWILL	486	478
OTHER ASSETS	714	606
INVESTMENTS IN SUBSIDIARIES	0	0
TOTAL ASSETS	2,896	2,815
CURRENT LIABILITIES:
Short-term debt	178	41
Accounts and notes payable	540	610
Other current liabilities	264	285
TOTAL CURRENT LIABILITIES	982	936
LONG-TERM DEBT	901	902
RETIREMENT BENEFITS	330	336
INTERCOMPANY PAYABLE (RECEIVABLE)	0	0
OTHER LIABILITIES	299	226
EQUITY ATTRIBUTABLE TO MERITOR, INC.	352	385
NONCONTROLLING INTERESTS	32	30
TOTAL LIABILITIES AND EQUITY	2,896	2,815
Eliminations
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	(5,533)	(5,331)
TOTAL ASSETS	(5,533)	(5,331)
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
EQUITY ATTRIBUTABLE TO MERITOR, INC.	(5,533)	(5,331)
NONCONTROLLING INTERESTS	0	0
TOTAL LIABILITIES AND EQUITY	(5,533)	(5,331)
Parent | Reportable Legal Entities
CURRENT ASSETS:
Cash and cash equivalents	13	4
Receivables trade and other, net	3	3
Inventories	0	0
Other current assets	7	6
TOTAL CURRENT ASSETS	23	13
NET PROPERTY	22	21
GOODWILL	0	0
OTHER ASSETS	182	170
INVESTMENTS IN SUBSIDIARIES	4,575	4,432
TOTAL ASSETS	4,802	4,636
CURRENT LIABILITIES:
Short-term debt	97	32
Accounts and notes payable	19	53
Other current liabilities	74	77
TOTAL CURRENT LIABILITIES	190	162
LONG-TERM DEBT	897	898
RETIREMENT BENEFITS	305	312
INTERCOMPANY PAYABLE (RECEIVABLE)	2,997	2,833
OTHER LIABILITIES	61	46
EQUITY ATTRIBUTABLE TO MERITOR, INC.	352	385
NONCONTROLLING INTERESTS	0	0
TOTAL LIABILITIES AND EQUITY	4,802	4,636
Guarantors | Reportable Legal Entities
CURRENT ASSETS:
Cash and cash equivalents	5	4
Receivables trade and other, net	82	92
Inventories	308	292
Other current assets	10	10
TOTAL CURRENT ASSETS	405	398
NET PROPERTY	257	260
GOODWILL	337	337
OTHER ASSETS	252	225
INVESTMENTS IN SUBSIDIARIES	958	899
TOTAL ASSETS	2,209	2,119
CURRENT LIABILITIES:
Short-term debt	0	0
Accounts and notes payable	251	283
Other current liabilities	88	109
TOTAL CURRENT LIABILITIES	339	392
LONG-TERM DEBT	0	0
RETIREMENT BENEFITS	1	1
INTERCOMPANY PAYABLE (RECEIVABLE)	(3,012)	(3,005)
OTHER LIABILITIES	124	112
EQUITY ATTRIBUTABLE TO MERITOR, INC.	4,757	4,619
NONCONTROLLING INTERESTS	0	0
TOTAL LIABILITIES AND EQUITY	2,209	2,119
Non- Guarantors | Reportable Legal Entities
CURRENT ASSETS:
Cash and cash equivalents	90	100
Receivables trade and other, net	393	456
Inventories	248	234
Other current assets	20	15
TOTAL CURRENT ASSETS	751	805
NET PROPERTY	238	234
GOODWILL	149	141
OTHER ASSETS	280	211
INVESTMENTS IN SUBSIDIARIES	0	0
TOTAL ASSETS	1,418	1,391
CURRENT LIABILITIES:
Short-term debt	81	9
Accounts and notes payable	270	274
Other current liabilities	102	99
TOTAL CURRENT LIABILITIES	453	382
LONG-TERM DEBT	4	4
RETIREMENT BENEFITS	24	23
INTERCOMPANY PAYABLE (RECEIVABLE)	15	172
OTHER LIABILITIES	114	68
EQUITY ATTRIBUTABLE TO MERITOR, INC.	776	712
NONCONTROLLING INTERESTS	32	30
TOTAL LIABILITIES AND EQUITY	$ 1,418	$ 1,391

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Other Current Liabilities

3 Months Ended

Dec. 31, 2019

Other Liabilities, Current [Abstract]

Other Current Liabilities

Other Current Liabilities

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

	December 31, 2019		September 30, 2019
Compensation and benefits	$	87	$	125
Product warranties	17		18
Other	160		142
Other current liabilities	$	264	$	285

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):

	Three Months Ended December 31,
	2019			2018
Total product warranties – beginning of period	$	50		$	54
Accruals for product warranties	3			7
Payments	(7		)	(5		)
Change in estimates and other	—			(1		)
Total product warranties – end of period	46			55
Less: Non-current product warranties	(29		)	(36		)
Product warranties – current	$	17		$	19

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Retirement Benefit Liabilities

3 Months Ended

Dec. 31, 2019

Retirement Benefits [Abstract]

Retirement Benefit Liabilities

Retirement Benefit Liabilities

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

	December 31, 2019			September 30, 2019
Retiree medical liability	$	66		$	67
Pension liability	263			271
Other	18			14
Subtotal	347			352
Less: current portion (included in compensation and benefits, Note 15)	(17		)	(16		)
Retirement benefits	$	330		$	336

The components of net periodic pension and retiree medical income included in continuing operations for the three months ended December 31 are as follows (in millions):

	2019						2018
	Pension			Retiree Medical			Pension			Retiree Medical
Interest cost	$	(11	)	$	—		$	(13	)	$	(1	)
Assumed return on plan assets	24			—			24			—
Amortization of prior service benefit	—			9			—			9
Recognized actuarial loss	(8		)	(4		)	(6		)	(4		)
Total income	$	5		$	5		$	5		$	4

For the three months ended December 31, 2019 and 2018, the non-service cost components of the net periodic pension and Other Post-Employment Benefits ("OPEB") income were $10 million and $9 million, respectively, and are presented in Other income, net.

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Retirement Benefit Liabilities (Tables)

3 Months Ended

Dec. 31, 2019

Retirement Benefits [Abstract]

Summary of Retirement Benefit Liabilities

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

	December 31, 2019			September 30, 2019
Retiree medical liability	$	66		$	67
Pension liability	263			271
Other	18			14
Subtotal	347			352
Less: current portion (included in compensation and benefits, Note 15)	(17		)	(16		)
Retirement benefits	$	330		$	336

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 December 31 are as follows (in millions):

	2019						2018
	Pension			Retiree Medical			Pension			Retiree Medical
Interest cost	$	(11	)	$	—		$	(13	)	$	(1	)
Assumed return on plan assets	24			—			24			—
Amortization of prior service benefit	—			9			—			9
Recognized actuarial loss	(8		)	(4		)	(6		)	(4		)
Total income	$	5		$	5		$	5		$	4

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Other Current Liabilities (Tables)

3 Months Ended

Dec. 31, 2019

Other Liabilities, Current [Abstract]

Summary of Other Current Liabilities

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

	December 31, 2019		September 30, 2019
Compensation and benefits	$	87	$	125
Product warranties	17		18
Other	160		142
Other current liabilities	$	264	$	285

Summary of Changes in Product Warranties

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

	Three Months Ended December 31,
	2019			2018
Total product warranties – beginning of period	$	50		$	54
Accruals for product warranties	3			7
Payments	(7		)	(5		)
Change in estimates and other	—			(1		)
Total product warranties – end of period	46			55
Less: Non-current product warranties	(29		)	(36		)
Product warranties – current	$	17		$	19

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Supplemental Guarantor Condensed Consolidating Financial Statements - Additional Information (Details) - USD ($)	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Sep. 30, 2019
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	$ 305,000,000		$ 315,000,000
Proceeds from investment in subsidiary	0	$ 0
Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Debt and capital lease obligations, subsidiary portion	$ 85,000,000		$ 13,000,000

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Goodwill - Changes in the Carrying Value of Goodwill (Details) - USD ($) $ in Millions		3 Months Ended
	Sep. 30, 2019	Dec. 31, 2019
Goodwill [Line Items]
Goodwill	$ 493
Accumulated impairment losses	(15)
Goodwill [Roll Forward]
Goodwill net, Beginning balance		$ 478
AxleTech measurement period adjustment (see Note 10)		2
Foreign currency translation		6
Goodwill net, Ending balance	478	486
Commercial Truck
Goodwill [Line Items]
Goodwill	261
Accumulated impairment losses	0
Goodwill [Roll Forward]
Goodwill net, Beginning balance		261
AxleTech measurement period adjustment (see Note 10)		0
Foreign currency translation		4
Goodwill net, Ending balance	261	265
Aftermarket, Industrial and Trailer
Goodwill [Line Items]
Goodwill	232
Accumulated impairment losses	(15)
Goodwill [Roll Forward]
Goodwill net, Beginning balance		217
AxleTech measurement period adjustment (see Note 10)		2
Foreign currency translation		2
Goodwill net, Ending balance	$ 217	$ 221

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Accounts Receivable Factoring and Securitization (Details)	3 Months Ended
	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2019 EUR (€)	Dec. 31, 2019 USD ($)	Sep. 30, 2019 EUR (€)	Sep. 30, 2019 USD ($)
Accounts Receivable Factoring And Securitization [Line Items]
On-balance sheet arrangement, Total Facility Size				$ 115,000,000
On-balance sheet arrangement, Utilized				84,000,000		$ 13,000,000
Off-balance sheet arrangement, Total Facility Size			€ 210,000,000	304,000,000
Off-balance sheet arrangement, Utilized			169,000,000	240,000,000	€ 154,000,000	226,000,000
Costs associated with off balance sheet factoring arrangements	$ 1,000,000	$ 1,000,000
Committed U.S. accounts receivable securitization
Accounts Receivable Factoring And Securitization [Line Items]
On-balance sheet arrangement, Total Facility Size				115,000,000
On-balance sheet arrangement, Utilized				84,000,000		13,000,000
Committed U.S. accounts receivable securitization | Letter of Credit
Accounts Receivable Factoring And Securitization [Line Items]
Letters of credit outstanding				4,000,000		4,000,000
Committed Swedish factoring facility
Accounts Receivable Factoring And Securitization [Line Items]
Off-balance sheet arrangement, Total Facility Size			155,000,000	169,000,000
Off-balance sheet arrangement, Utilized			128,000,000	140,000,000	109,000,000	119,000,000
Liquidity commitment	364 days
Committed U.S. factoring facility
Accounts Receivable Factoring And Securitization [Line Items]
Off-balance sheet arrangement, Total Facility Size				75,000,000
Off-balance sheet arrangement, Utilized				55,000,000		58,000,000
Uncommitted U.K. factoring facility
Accounts Receivable Factoring And Securitization [Line Items]
Off-balance sheet arrangement, Total Facility Size			25,000,000	27,000,000
Off-balance sheet arrangement, Utilized			3,000,000	4,000,000	6,000,000	6,000,000
Uncommitted Italy factoring facility
Accounts Receivable Factoring And Securitization [Line Items]
Off-balance sheet arrangement, Total Facility Size			30,000,000	33,000,000
Off-balance sheet arrangement, Utilized			21,000,000	23,000,000	21,000,000	23,000,000
Other uncommitted factoring facilities
Accounts Receivable Factoring And Securitization [Line Items]
Off-balance sheet arrangement, Utilized			€ 17,000,000	$ 18,000,000	€ 18,000,000	$ 20,000,000

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Supplemental Guarantor Condensed Consolidating Financial Statements - Condensed Consolidating Statement of Cash Flows (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Condensed Cash Flow Statements, Captions [Line Items]
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$ (19)	$ 11
INVESTING ACTIVITIES
Capital expenditures	(16)	(23)
Cash paid for investment in Transportation Power, Inc.	0	(3)
Other investing activities	0	(1)
CASH USED FOR INVESTING ACTIVITIES	(16)	(27)
FINANCING ACTIVITIES
Securitization	72	33
Borrowings against revolving line of credit	65	45
Term loan payments	(3)	0
Repurchase of common stock	(100)	(50)
Intercompany advances	0	0
Other financing activities	0	(1)
CASH PROVIDED BY FINANCING ACTIVITIES	34	27
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1	1
CHANGE IN CASH AND CASH EQUIVALENTS	0	12
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	108	115
CASH AND CASH EQUIVALENTS AT END OF PERIOD	108	127
Eliminations
Condensed Cash Flow Statements, Captions [Line Items]
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	0	0
INVESTING ACTIVITIES
Capital expenditures	0	0
Cash paid for investment in Transportation Power, Inc.		0
Other investing activities		0
CASH USED FOR INVESTING ACTIVITIES	0	0
FINANCING ACTIVITIES
Securitization	0	0
Borrowings against revolving line of credit	0	0
Term loan payments	0
Repurchase of common stock	0	0
Intercompany advances	0	0
Other financing activities		0
CASH PROVIDED BY 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 (USED FOR) OPERATING ACTIVITIES	65	(9)
INVESTING ACTIVITIES
Capital expenditures	0	(1)
Cash paid for investment in Transportation Power, Inc.		(3)
Other investing activities		0
CASH USED FOR INVESTING ACTIVITIES	0	(4)
FINANCING ACTIVITIES
Securitization	0	0
Borrowings against revolving line of credit	65	45
Term loan payments	(3)
Repurchase of common stock	(100)	(50)
Intercompany advances	(18)	18
Other financing activities		0
CASH PROVIDED BY FINANCING ACTIVITIES	(56)	13
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	0	0
CHANGE IN CASH AND CASH EQUIVALENTS	9	0
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	4	24
CASH AND CASH EQUIVALENTS AT END OF PERIOD	13	24
Guarantors | Reportable Legal Entities
Condensed Cash Flow Statements, Captions [Line Items]
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	9	15
INVESTING ACTIVITIES
Capital expenditures	(8)	(12)
Cash paid for investment in Transportation Power, Inc.		0
Other investing activities		0
CASH USED FOR INVESTING ACTIVITIES	(8)	(12)
FINANCING ACTIVITIES
Securitization	0	0
Borrowings against revolving line of credit	0	0
Term loan payments	0
Repurchase of common stock	0	0
Intercompany advances	0	0
Other financing activities		(1)
CASH PROVIDED BY FINANCING ACTIVITIES	0	(1)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	0	0
CHANGE IN CASH AND CASH EQUIVALENTS	1	2
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	4	6
CASH AND CASH EQUIVALENTS AT END OF PERIOD	5	8
Non- Guarantors | Reportable Legal Entities
Condensed Cash Flow Statements, Captions [Line Items]
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	(93)	5
INVESTING ACTIVITIES
Capital expenditures	(8)	(10)
Cash paid for investment in Transportation Power, Inc.		0
Other investing activities		(1)
CASH USED FOR INVESTING ACTIVITIES	(8)	(11)
FINANCING ACTIVITIES
Securitization	72	33
Borrowings against revolving line of credit	0	0
Term loan payments	0
Repurchase of common stock	0	0
Intercompany advances	18	(18)
Other financing activities		0
CASH PROVIDED BY FINANCING ACTIVITIES	90	15
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1	1
CHANGE IN CASH AND CASH EQUIVALENTS	(10)	10
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	100	85
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$ 90	$ 95

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Other Current Liabilities - Summary of other current liabilities (Details) - USD ($) $ in Millions	Dec. 31, 2019	Sep. 30, 2019	Dec. 31, 2018
Other Liabilities, Current [Abstract]
Compensation and benefits	$ 87	$ 125
Product warranties	17	18	$ 19
Other	160	142
Other current liabilities	$ 264	$ 285

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Other Liabilities

3 Months Ended

Dec. 31, 2019

Other Liabilities Disclosure [Abstract]

Other Liabilities

Other Liabilities

Other liabilities are summarized as follows (in millions):

	December 31, 2019		September 30, 2019
Asbestos-related liabilities (see Note 20)	$	81	$	82
Product warranties (see Note 15)	29		32
Other	189		112
Other liabilities	$	299	$	226

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Contingencies

3 Months Ended

Dec. 31, 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 December 31, 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 December 31, 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 1.50 to 2.25 percent and is approximately $15 million at December 31, 2019. The undiscounted estimate of these costs is approximately $16 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, 2019	$	11		$	4	$	15
Payments and other	(1		)	—		(1		)
Accruals	1			—		1
Ending Balance at December 31, 2019	$	11		$	4	$	15

Environmental reserves are included in Other Current Liabilities (see Note 15) and Other Liabilities (see Note 16) 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.

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.

As of January 22, 2019, Maremont and its subsidiaries were deconsolidated from the Condensed Consolidated Balance Sheet and the results of Maremont's operations were eliminated from the Condensed Consolidated Statement of Operations as Maremont became subject to the control of a court. Deconsolidation had an insignificant impact on the Condensed Consolidated Statement of Operations.

The Plan was confirmed by the Bankruptcy Court 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 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.

     Rockwell International Corporation ("Rockwell") — ArvinMeritor, Inc. ("AM"), a predecessor of Meritor, along with many other companies, has 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 December 31, 2019 and September 30, 2019.

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, 2019. 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, 2019, the estimated probable range of equally likely possibilities of the company’s obligation for asbestos-related claims over the next 40 years is $91 million to $181 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 40 years of $90 million as of December 31, 2019 and $91 million as of September 30, 2019.

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 $60 million and $61 million as of December 31, 2019 and September 30, 2019, 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.

Indemnification

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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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, 2018	$ 317	$ 102	$ 787	$ 200	$ (236)	$ (566)	$ 287	$ 30
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	90			90		(3)	87	3
Equity based compensation expense	5		5				5
Vesting of equity based awards	0	2	(2)
Repurchase of common stock	(50)				(50)		(50)
Ending Balance at Dec. 31, 2018	362	104	790	290	(286)	(569)	329	33
Beginning balance at Sep. 30, 2019	415	104	803	491	(332)	(681)	385	30
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	67			39		26	65	2
Equity based compensation expense	3		3				3
Vesting of equity based awards	0	1	(1)
Repurchase of common stock	(100)				(100)		(100)
Other equity adjustments	(1)		(1)				(1)
Ending Balance at Dec. 31, 2019	$ 384	$ 105	$ 804	$ 530	$ (432)	$ (655)	$ 352	$ 32

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New Accounting Standards

3 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

New Accounting Standards

New Accounting Standards

Accounting standards implemented during fiscal year 2020

On October 1, 2019, the company implemented ASU 2016-02, Leases (Topic 842). The company elected the practical expedient package which allowed the company to not reassess whether existing contracts contain a lease and to not reassess classification of existing leases. The company also adopted ASU 2018-11 Leases (Topic 842) Targeted Improvements, electing to not separate lease and non-lease components in contracts that contain both and electing to not restate comparative periods when adopting ASU 2016-02. As a result, the company recognized a right-of-use asset and lease liability as a lessee for substantially all existing operating leases and has included new and expanded disclosures. (See Note 6)

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 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 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.

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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Statement of Comprehensive Income [Abstract]
Net income	$ 41	$ 92
Foreign currency translation adjustments:
Attributable to Meritor, Inc.	21	(4)
Attributable to noncontrolling interest	0	1
Pension and other postretirement benefit related adjustments	3	0
Unrealized gain on cash flow hedges	2
Unrealized gain on cash flow hedges		1
Other comprehensive income (loss), net of tax	26	(2)
Total comprehensive income	67	90
Less: Comprehensive income attributable to noncontrolling interest	(2)	(3)
Comprehensive income attributable to Meritor, Inc.	$ 65	$ 87

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Restructuring Costs

3 Months Ended

Dec. 31, 2019

Restructuring and Related Activities [Abstract]

Restructuring Costs

Restructuring Costs

Restructuring reserves, primarily related to unpaid employee termination benefits, were $5 million at December 31, 2019 and $8 million at September 30, 2019. Restructuring costs are recorded within Other operating expense, net within the Condensed Consolidated Statement of Operations. The changes in restructuring reserves for the three months ended December 31, 2019 and 2018 are as follows (in millions):

	Total
Beginning Balance at September 30, 2019	$	8
Activity during the period:
Charges to continuing operations	5
Cash payments – continuing operations	(7		)
Other	(1		)
Total restructuring reserves at December 31, 2019	5
Less: non-current restructuring reserves	—
Restructuring reserves – current, at December 31, 2019	$	5
Balance at September 30, 2018	$	4
Activity during the period:
Charges to continuing operations	—
Cash payments – continuing operations	(1		)
Total restructuring reserves at December 31, 2018	3
Less: non-current restructuring reserves	(1		)
Restructuring reserves – current, at December 31, 2018	$	2

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Inventories

3 Months Ended

Dec. 31, 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):

	December 31, 2019		September 30, 2019
Finished goods	$	159	$	153
Work in process	44		39
Raw materials, parts and supplies	353		334
Total	$	556	$	526

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Goodwill (Tables)

3 Months Ended

Dec. 31, 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	$	261	$	232		$	493
Accumulated impairment losses	—		(15		)	(15		)
Beginning Balance at September 30, 2019	261		217			478
AxleTech measurement period adjustment (see Note 10)	—		2			2
Foreign currency translation	4		2			6
Ending Balance at December 31, 2019	$	265	$	221		$	486

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New Accounting Standards (Policies)

3 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

New Accounting Standards

New Accounting Standards

Accounting standards implemented during fiscal year 2020

On October 1, 2019, the company implemented ASU 2016-02, Leases (Topic 842). The company elected the practical expedient package which allowed the company to not reassess whether existing contracts contain a lease and to not reassess classification of existing leases. The company also adopted ASU 2018-11 Leases (Topic 842) Targeted Improvements, electing to not separate lease and non-lease components in contracts that contain both and electing to not restate comparative periods when adopting ASU 2016-02. As a result, the company recognized a right-of-use asset and lease liability as a lessee for substantially all existing operating leases and has included new and expanded disclosures. (See Note 6)

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 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 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.

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)

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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Revenue (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Sep. 30, 2019
Disaggregation of Revenue [Line Items]
Sales	$ 901	$ 1,038
Trade receivables, net	451		$ 517
U.S.
Disaggregation of Revenue [Line Items]
Sales	535	590
Canada
Disaggregation of Revenue [Line Items]
Sales	14	18
Mexico
Disaggregation of Revenue [Line Items]
Sales	43	57
Total North America
Disaggregation of Revenue [Line Items]
Sales	592	665
Sweden
Disaggregation of Revenue [Line Items]
Sales	62	74
Italy
Disaggregation of Revenue [Line Items]
Sales	49	61
United Kingdom
Disaggregation of Revenue [Line Items]
Sales	35	44
Other Europe
Disaggregation of Revenue [Line Items]
Sales	38	22
Total Europe
Disaggregation of Revenue [Line Items]
Sales	184	201
Brazil
Disaggregation of Revenue [Line Items]
Sales	54	50
China
Disaggregation of Revenue [Line Items]
Sales	34	41
India
Disaggregation of Revenue [Line Items]
Sales	23	57
Other Asia-Pacific
Disaggregation of Revenue [Line Items]
Sales	14	24
Commercial Truck
Disaggregation of Revenue [Line Items]
Sales	590	744
Commercial Truck | U.S.
Disaggregation of Revenue [Line Items]
Sales	292	350
Commercial Truck | Canada
Disaggregation of Revenue [Line Items]
Sales	0	0
Commercial Truck | Mexico
Disaggregation of Revenue [Line Items]
Sales	34	47
Commercial Truck | Total North America
Disaggregation of Revenue [Line Items]
Sales	326	397
Commercial Truck | Sweden
Disaggregation of Revenue [Line Items]
Sales	62	74
Commercial Truck | Italy
Disaggregation of Revenue [Line Items]
Sales	45	57
Commercial Truck | United Kingdom
Disaggregation of Revenue [Line Items]
Sales	33	41
Commercial Truck | Other Europe
Disaggregation of Revenue [Line Items]
Sales	1	3
Commercial Truck | Total Europe
Disaggregation of Revenue [Line Items]
Sales	141	175
Commercial Truck | Brazil
Disaggregation of Revenue [Line Items]
Sales	53	50
Commercial Truck | China
Disaggregation of Revenue [Line Items]
Sales	34	41
Commercial Truck | India
Disaggregation of Revenue [Line Items]
Sales	22	57
Commercial Truck | Other Asia-Pacific
Disaggregation of Revenue [Line Items]
Sales	14	24
Aftermarket, Industrial and Trailer
Disaggregation of Revenue [Line Items]
Sales	311	294
Aftermarket, Industrial and Trailer | U.S.
Disaggregation of Revenue [Line Items]
Sales	243	240
Aftermarket, Industrial and Trailer | Canada
Disaggregation of Revenue [Line Items]
Sales	14	18
Aftermarket, Industrial and Trailer | Mexico
Disaggregation of Revenue [Line Items]
Sales	9	10
Aftermarket, Industrial and Trailer | Total North America
Disaggregation of Revenue [Line Items]
Sales	266	268
Aftermarket, Industrial and Trailer | Sweden
Disaggregation of Revenue [Line Items]
Sales	0	0
Aftermarket, Industrial and Trailer | Italy
Disaggregation of Revenue [Line Items]
Sales	4	4
Aftermarket, Industrial and Trailer | United Kingdom
Disaggregation of Revenue [Line Items]
Sales	2	3
Aftermarket, Industrial and Trailer | Other Europe
Disaggregation of Revenue [Line Items]
Sales	37	19
Aftermarket, Industrial and Trailer | Total Europe
Disaggregation of Revenue [Line Items]
Sales	43	26
Aftermarket, Industrial and Trailer | Brazil
Disaggregation of Revenue [Line Items]
Sales	1	0
Aftermarket, Industrial and Trailer | China
Disaggregation of Revenue [Line Items]
Sales	0	0
Aftermarket, Industrial and Trailer | India
Disaggregation of Revenue [Line Items]
Sales	1	0
Aftermarket, Industrial and Trailer | Other Asia-Pacific
Disaggregation of Revenue [Line Items]
Sales	$ 0	$ 0

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Leases - Remaining Lease term and Discount Rate (Details)	Dec. 31, 2019
Weighted-average remaining lease term (years):
Operating leases	8 years 8 months 12 days
Finance leases	2 years 8 months 12 days
Weighted-average discount rate:
Operating leases	4.50%
Finance leases	9.10%

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Financial Instruments - Fair Value of Financial Instruments by Valuation Hierarchy (Details) - USD ($) $ in Millions	Dec. 31, 2019	Sep. 30, 2019
Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 108	$ 108
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]
Derivative assets	0
Derivative liabilities	0	0
Level 1 | Foreign currency option contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Derivative assets	0	0
Level 1 | Cross-currency swaps
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Derivative assets	0	0
Derivative liabilities	0	0
Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	0	0
Short-term debt	132	49
Long-term debt	818	782
Level 2 | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Derivative assets	2
Derivative liabilities	0	0
Level 2 | Foreign currency option contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Derivative assets	1	0
Level 2 | Cross-currency swaps
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Derivative assets	6	10
Derivative liabilities	5	5
Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	0	0
Short-term debt	76	11
Long-term debt	169	171
Level 3 | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Derivative assets	0
Derivative liabilities	0	0
Level 3 | Foreign currency option contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Derivative assets	0	0
Level 3 | Cross-currency swaps
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Derivative assets	0	0
Derivative liabilities	$ 0	$ 0

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Business Segment Information - Summary of Segment Information (Details) $ in Millions	3 Months Ended
	Dec. 31, 2019 USD ($) segment	Dec. 31, 2018 USD ($)
Segment Reporting [Abstract]
Number of reportable segments | segment	2
Segment Reporting Information [Line Items]
Sales	$ 901	$ 1,038
Commercial Truck
Segment Reporting Information [Line Items]
Sales	590	744
Aftermarket, Industrial and Trailer
Segment Reporting Information [Line Items]
Sales	311	294
Eliminations
Segment Reporting Information [Line Items]
Sales	(38)	(44)
Eliminations | Commercial Truck
Segment Reporting Information [Line Items]
Sales	32	35
Eliminations | Aftermarket, Industrial and Trailer
Segment Reporting Information [Line Items]
Sales	6	9
Operating Segments
Segment Reporting Information [Line Items]
Sales	901	1,038
Operating Segments | Commercial Truck
Segment Reporting Information [Line Items]
Sales	622	779
Operating Segments | Aftermarket, Industrial and Trailer
Segment Reporting Information [Line Items]
Sales	$ 317	$ 303

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Contingencies - Summary of environmental reserves (Details) $ in Millions	3 Months Ended
	Dec. 31, 2019 USD ($)
Accrual for Environmental Loss Contingencies [Roll Forward]
Beginning balance	$ 15
Payments and other	(1)
Accruals	1
Ending balance	15
Superfund Sites
Accrual for Environmental Loss Contingencies [Roll Forward]
Beginning balance	11
Payments and other	(1)
Accruals	1
Ending balance	11
Non-Superfund Sites
Accrual for Environmental Loss Contingencies [Roll Forward]
Beginning balance	4
Payments and other	0
Accruals	0
Ending balance	$ 4

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Long-Term Debt - Revolving Credit Facility (Details)	3 Months Ended
	Dec. 31, 2019 USD ($)	Nov. 30, 2023 USD ($)	Sep. 30, 2019 USD ($)	Jun. 07, 2019 USD ($)
6.25 percent notes due 2024
Line of Credit Facility [Line Items]
Interest rate	6.25%
Revolving Credit Facility
Line of Credit Facility [Line Items]
Borrowings outstanding	$ 65,000,000		$ 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 percent notes due 2024
Line of Credit Facility [Line Items]
Borrowings outstanding		$ 75,000,000

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Other Current Liabilities - Summary of changes in product warranties (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Sep. 30, 2019
Movement in Standard Product Warranty Accrual [Roll Forward]
Total product warranties – beginning of period	$ 50	$ 54
Accruals for product warranties	3	7
Payments	(7)	(5)
Change in estimates and other	0	(1)
Total product warranties – end of period	46	55
Less: Non-current product warranties	(29)	(36)	$ (32)
Product warranties – current	$ 17	$ 19	$ 18

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Retirement Benefit Liabilities - Summary of retirement benefits (Details) - USD ($) $ in Millions	Dec. 31, 2019	Sep. 30, 2019
Retirement Benefits [Abstract]
Retiree medical liability	$ 66	$ 67
Pension liability	263	271
Other	18	14
Subtotal	347	352
Less: current portion (included in compensation and benefits, Note 15)	(17)	(16)
Retirement benefits	$ 330	$ 336