ArvinMeritor posts loss; to sell wheels unit

DETROIT (Reuters) - ArvinMeritor Inc ARM.N posted a quarterly net loss on Tuesday due to steep production cuts by its automaker customers, and forecast a wider operating loss for the current quarter, sending its shares down 4 percent.

The auto-parts maker said it had reached a deal to sell its wheels business for $180 million to improve liquidity, and it was taking other action to remain in compliance with its financial covenants, including cost cuts and asset sales.

ArvinMeritor has been trying to cut its ties to the volatile light-vehicle market and focus on commercial vehicle parts over the past year as the downturn in the U.S. auto industry deepened, saddling automakers and parts suppliers with mounting losses.

The company said it has also received expressions of interest for its light-vehicle body parts unit from a number of potential suitors.

"Our industry is still reeling from the effects of the economic downturn and is continuing to be impacted by the change that unfolds each and every day," ArvinMeritor Chief Executive Chip McClure said on a conference call.

"While we anticipate market conditions will continue to remain tough through the fourth quarter, we are taking the actions to help offset the impact and remain in compliance with the credit line financial covenant at the end of the year," McClure said.

The company posted a loss of $162 million, or $2.23 per share, for the third quarter that ended June 30, compared with a year-earlier profit of $44 million, or 60 cents a share.

The result reflected losses of $134 million from discontinued operations, including charges related to the divesture of its chassis operations.

Excluding one-time items, the company lost 25 cents per share from continuing operations. Revenue fell 47 percent to $993 million.

ArvinMeritor said it expects loss per share before special items to be greater in the current quarter than the April-to-June quarter.

ArvinMeritor said it expected the sale of the wheels business to Brazilian commercial vehicle parts maker Iochpe-Maxion (MYPK3.SA) to close on or before September 23.

In the latest quarter, the company has also sold businesses representing about 72 percent of the sales of its chassis operations.

"Our divestiture actions had positive impact on the liquidity by eliminating ongoing cash burn," McClure said.

"This divestiture will provide us an opportunity to enhance our liquidity, but also accelerates our company's strategy to focus on the commercial vehicle market."

He added that "a number of potential suitors" have expressed interest in ArvinMeritor's light-vehicle body parts business, but the process was still in an early stage.

Auto-parts suppliers have suffered from steep production cuts this year by all major carmakers, with U.S. vehicle sales down about 35 percent through the first half of 2009 to their lowest rates since the early 1980s.

The parts sector has taken blows in recent months from extensive plant shutdowns associated with the bankruptcies of General Motors GM.UL and Chrysler.

Shares of ArvinMeritor were down 3.63 percent, or 25 cents, at $6.65 on the New York Stock Exchange.

(Reporting by Soyoung Kim; Editing by Lisa Von Ahn and Maureen Bavdek)