10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended April 3, 2016

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	(I.R.S. Employer Identification
organization)	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)

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 X No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Registration S-T during the preceding twelve months (or for such shorter period that the registrant was required to submit and post such files).

Yes X No

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

Large accelerated filer	X	Accelerated filer
Non-accelerated filer		Smaller reporting company

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

Yes No X

91,473,543 shares of Common Stock, $1.00 par value, of Meritor, Inc. were outstanding on April 3, 2016.

INDEX

			Page No.
PART I.	FINANCIAL INFORMATION:
	Item 1.	Financial Statements:
		Condensed Consolidated Statement of Operations - - Three and Six Months Ended March 31, 2016 and 2015	3
		Condensed Consolidated Statement Of Comprehensive Income (Loss) - - Three and Six Months Ended March 31, 2016 and 2015	4
		Condensed Consolidated Balance Sheet - - March 31, 2016 and September 30, 2015	5
		Condensed Consolidated Statement of Cash Flows - - Six Months Ended March 31, 2016 and 2015	6
		Condensed Consolidated Statement of Equity (Deficit) - - Six Months Ended March 31, 2016 and 2015	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	50
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	67
	Item 4.	Controls and Procedures	69
PART II.	OTHER INFORMATION:
	Item 1.	Legal Proceedings	70
	Item 1A.	Risk Factors	70
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70
	Item 5.	Other Information	71
	Item 6.	Exhibits	72
Signatures			73

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 March 31,						Six Months Ended March 31,
	2016			2015			2016			2015
	(Unaudited)
Sales	$	821		$	864		$	1,630		$	1,743
Cost of sales	(700		)	(749		)	(1,405		)	(1,513		)
GROSS MARGIN	121			115			225			230
Selling, general and administrative	(60		)	(57		)	(116		)	(122		)
Restructuring costs	(2		)	(3		)	(3		)	(6		)
Other operating income (expense), net	(3		)	—			(3		)	1
OPERATING INCOME	56			55			103			103
Other income (expense), net	(2		)	2			(1		)	4
Equity in earnings of affiliates	7			9			17			18
Interest expense, net	(21		)	(21		)	(43		)	(40		)
INCOME BEFORE INCOME TAXES	40			45			76			85
Provision for income taxes	(7		)	(6		)	(14		)	(13		)
INCOME FROM CONTINUING OPERATIONS	33			39			62			72
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax	(1		)	4			(3		)	1
NET INCOME	32			43			59			73
Less: Net income attributable to noncontrolling interests	—			—			(1		)	(1		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	32		$	43		$	58		$	72
NET INCOME ATTRIBUTABLE TO MERITOR, INC.
Net income from continuing operations	$	33		$	39		$	61		$	71
Income (Loss) from discontinued operations	(1		)	4			(3		)	1
Net income	$	32		$	43		$	58		$	72
BASIC EARNINGS (LOSS) PER SHARE
Continuing operations	$	0.36		$	0.40		$	0.66		$	0.73
Discontinued operations	(0.01		)	0.04			(0.03		)	0.01
Basic earnings per share	$	0.35		$	0.44		$	0.63		$	0.74
DILUTED EARNINGS (LOSS) PER SHARE
Continuing operations	$	0.36		$	0.38		$	0.65		$	0.70
Discontinued operations	(0.01		)	0.04			(0.03		)	0.01
Diluted earnings per share	$	0.35		$	0.42		$	0.62		$	0.71
Basic average common shares outstanding	91.3			97.9			91.9			97.9
Diluted average common shares outstanding	92.5			102.9			93.5			102.0

See notes to condensed consolidated financial statements.

3

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(in millions)

	Three Months Ended March 31,						Six Months Ended March 31,
	2016			2015			2016			2015
	(Unaudited)
Net income	$	32		$	43		$	59		$	73
Other comprehensive income (loss):
Foreign currency translation adjustments:
Attributable to Meritor, Inc.	10			(33		)	4			(67		)
Attributable to noncontrolling interest	—			—			—			(1		)
Other reclassification adjustment	—			—			—			1
Pension and other postretirement benefit related adjustments	9			11			18			23
Unrealized gain (loss) on investments and foreign exchange contracts	(1		)	—			2			(1		)
Other comprehensive income (loss), net of tax	18			(22		)	24			(45		)
Total comprehensive income	50			21			83			28
Less: Comprehensive income attributable to noncontrolling interest	—			—			(1		)	—
Comprehensive income attributable to Meritor, Inc.	$	50		$	21		$	82		$	28

See notes to condensed consolidated financial statements.

4

MERITOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions)

	March 31, 2016			September 30, 2015
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	94		$	193
Receivables, trade and other, net	426			461
Inventories	362			338
Other current assets	53			50
TOTAL CURRENT ASSETS	935			1,042
NET PROPERTY	427			419
GOODWILL	399			402
OTHER ASSETS	332			332
TOTAL ASSETS	$	2,093		$	2,195
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Short-term debt	$	25		$	15
Accounts and notes payable	511			574
Other current liabilities	253			279
TOTAL CURRENT LIABILITIES	789			868
LONG-TERM DEBT	978			1,036
RETIREMENT BENEFITS	611			632
OTHER LIABILITIES	316			305
TOTAL LIABILITIES	2,694			2,841
COMMITMENTS AND CONTINGENCIES (See Note 20)
EQUITY (DEFICIT):
Common stock (March 31, 2016 and September 30, 2015, 99.6 and 98.8 shares issued and 91.5 and 94.6 shares outstanding, respectively)	99			99
Additional paid-in capital	871			865
Accumulated deficit	(756		)	(814		)
Treasury stock, at cost (March 31, 2016 and September 30, 2015, 8.1 and 4.2shares, respectively)	(98		)	(55		)
Accumulated other comprehensive loss	(742		)	(766		)
Total deficit attributable to Meritor, Inc.	(626		)	(671		)
Noncontrolling interests	25			25
TOTAL DEFICIT	(601		)	(646		)
TOTAL LIABILITIES AND DEFICIT	$	2,093		$	2,195

See notes to condensed consolidated financial statements.

5

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)

	Six Months Ended March 31,
	2016			2015
	(Unaudited)
OPERATING ACTIVITIES
CASH PROVIDED BY OPERATING ACTIVITIES (See Note 9)	$	39		$	29
INVESTING ACTIVITIES
Capital expenditures	(47		)	(23		)
Other investing activities	3			—
Net investing cash flows provided by discontinued operations	4			4
CASH USED FOR INVESTING ACTIVITIES	(40		)	(19		)
FINANCING ACTIVITIES
Repayment of notes	(55		)	(16		)
Repurchase of common stock	(43		)	(16		)
Other financing activities	(2		)	(6		)
CASH USED FOR FINANCING ACTIVITIES	(100		)	(38		)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	2			(12		)
CHANGE IN CASH AND CASH EQUIVALENTS	(99		)	(40		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	193			247
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	94		$	207

See notes to condensed consolidated financial statements.

6

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY (DEFICIT)

(In millions)

(Unaudited)

	Common Stock		Additional Paid-in Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Loss			Total Deficit Attributable to Meritor, Inc.			Noncontrolling Interests			Total
Beginning balance at September 30, 2015	$	99	$	865		$	(814	)	$	(55	)	$	(766	)	$	(671	)	$	25		$	(646	)
Comprehensive income	—		—			58			—			24			82			1			83
Equity based compensation expense	—		6			—			—			—			6			—			6
Repurchase of common stock	—		—			—			(43		)	—			(43		)	—			(43		)
Noncontrolling interest dividend	—		—			—			—			—			—			(1		)	(1		)
Ending Balance at March 31, 2016	$	99	$	871		$	(756	)	$	(98	)	$	(742	)	$	(626	)	$	25		$	(601	)
Beginning balance at September 30, 2014	$	97	$	918		$	(878	)	$	—		$	(749	)	$	(612	)	$	27		$	(585	)
Comprehensive income (loss)	—		—			72			—			(44		)	28			—			28
Vesting of restricted stock	2		(2		)	—			—			—			—			—			—
Repurchase of convertible notes	—		(2		)	—			—			—			(2		)	—			(2		)
Equity based compensation expense	—		5			—			—			—			5			—			5
Repurchase of common stock	—		—			—			(16		)	—			(16		)	—			(16		)
Noncontrolling interest dividends	—		—			—			—			—			—			(1		)	(1		)
Other equity adjustments	—		1			—			—			—			1			—			1
Ending Balance at March 31, 2015	$	99	$	920		$	(806	)	$	(16	)	$	(793	)	$	(596	)	$	26		$	(570	)

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.

Certain businesses are reported in discontinued operations in the condensed consolidated statement of operations, condensed consolidated statement of cash flows and related notes for all periods presented. Additional information regarding discontinued operations is discussed in Note 4.

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 Annual Report on Form 10-K, for the fiscal year ended September 30, 2015, as amended. The condensed consolidated balance sheet data as of September 30, 2015 was derived from audited financial statements but does not include all annual disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the three and six months ended March 31, 2016 are not necessarily indicative of the results for the full year.

The company’s fiscal year ends on the Sunday nearest September 30. The second quarter of fiscal years 2016 and 2015 ended on April 3, 2016 and March 29, 2015, respectively. All year and quarter references relate to the company’s fiscal year and fiscal quarters, unless otherwise stated. For ease of presentation, September 30 and March 31 are used consistently throughout this report to represent the fiscal year end and second 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 March 31,		Six Months Ended March 31,
	2016	2015	2016	2015
Basic average common shares outstanding	91.3	97.9	91.9	97.9
Impact of restricted shares, restricted share units and performance share units	1.2	1.9	1.6	2.0
Impact of stock options	—	0.1	—	0.1
Impact of convertible notes	—	3.0	—	2.0
Diluted average common shares outstanding	92.5	102.9	93.5	102.0

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

8

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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, 2015 to September 30, 2018, measured at the end of the performance period. The number of performance share units will depend on Adjusted EBITDA margin and Adjusted diluted earnings per share from continuing operations at the following weights: 50% associated with achieving an Adjusted EBITDA margin target and 50% associated with achieving an Adjusted diluted earnings per share from continuing operations target. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.7 million performance share units.

In November 2014, 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 $13.74, which was the company’s share price on the grant date of December 1, 2014. The Board of Directors also approved a grant of 0.4 million restricted share units to these executives. The restricted share units vest at the earlier of three years from the date of grant or upon termination of employment with the company under certain circumstances. The fair value of each restricted share unit was $13.74, which was the company’s share price on the grant date of December 1, 2014.

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, 2014 to September 30, 2017, measured at the end of the performance period. The number of performance share units will depend on Adjusted EBITDA margin and Adjusted diluted earnings per share from continuing operations at the following weights: 75% associated with achieving an Adjusted EBITDA margin target and 25% associated with achieving an Adjusted diluted earnings per share from continuing operations target. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.6 million performance share units.

In November 2013, 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 $7.97, which was the company’s share price on the grant date of December 1, 2013.

The actual number of performance share units that will vest depends upon the company’s performance relative to the established M2016 goals for the three-year performance period of October 1, 2013 to September 30, 2016, measured at the end of the performance period. The number of performance share units will depend on meeting the established M2016 goals at the following weights: 50% associated with achieving an Adjusted EBITDA margin target, 25% associated with achieving a net debt including retirement benefit liabilities target, and 25% associated with achieving an incremental booked revenue target. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 1.8 million performance share units including incremental share units that were issued subsequent to the December 1, 2013 grant date. There were 1.1 million and 1.0 million shares related to these performance share units included in the diluted earnings per share calculation for the three and six months ended March 31, 2016, respectively, as certain payout thresholds were achieved in the second quarter of fiscal year 2016 relative to the Adjusted EBITDA, net debt reduction and incremental booked revenue targets. There were 1.0 million and 0.8 million shares related to these performance share units included in the diluted earnings per share calculation for the three and six months ended March 31, 2015, respectively, as certain payout thresholds were achieved in the second quarter of fiscal year 2015.

For the three months ended March 31, 2016, the dilutive impact of previously issued restricted shares, restricted share units, and performance share units was 1.2 million, compared to 1.9 million share units for the same period in the prior fiscal year. For the six months ended March 31, 2016, the dilutive impact of previously issued restricted shares, restricted share units, and performance share units was 1.6 million, compared to 2.0 million share units for the same period in the prior fiscal year. For the three and six months ended March 31, 2016, compensation cost related to restricted shares, restricted share units, performance share units and stock options was $3 million and $6 million, respectively, compared to $3 million and $5 million, respectively for the three and six months ended March 31, 2015.

9

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

For each of the three- and six-month period ended March 31, 2016, options to purchase 0.7 million and 0.3 million shares of common stock, respectively, were excluded in the computation of diluted earnings per share because their exercise price exceeded the average market price for the periods and thus their inclusion would be anti-dilutive.

For the three and six months ended March 31, 2016 the company’s convertible senior unsecured notes were excluded from the computation of diluted earnings per share, as the company’s average stock price during this period was less than conversion price for the notes. For the three and six months ended March 31, 2015, 3.0 million and 2.0 million shares, respectively, were included in the computation of diluted earnings per share because the average stock price during this period exceeded the conversion price for the 7.875 percent convertible notes due 2026.

3. New Accounting Standards

Accounting standards to be implemented

In April, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing. The ASU provides guidance regarding the identification of performance and licensing obligations. The amendments in this update affect the guidance in ASU 2014-09, which is not effective yet. The effective date and the transition requirements for the amendments in ASU 2016-10 are the same as the effective date and transition requirements in ASU 2014-09 as described below. Therefore, the company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2018 in connection with its planned implementation of ASU 2014-09 and is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. The ASU intends to simplify how share-based payments are accounted for. The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. Early adoption is permitted. The company is assessing the potential impact of this new guidance on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net) to clarify certain aspects of the principal-versus-agent guidance in its new revenue recognition standard. The amendments in this update affect the guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for the amendments in ASU 2016-08 are the same as the effective date and transition requirements of ASU 2014-09. Therefore, the company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2018 in connection with its planned implementation of ASU 2014-09. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-07, Investments-Equity Method and Joint Ventures (Topic 323), Simplifying the Transition to the Equity Method of Accounting. The ASU will eliminate the requirement to apply the equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment. The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815), Contingent Put and Call Options in Debt Instruments. The ASU clarifies that an exercise contingency itself does not need to be evaluated to determine whether it is in an embedded derivative, just the underlying option.The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In March 2016, the FASB issued ASU 2016-05, Derivatives and Hedging (Topic 815), Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. The update clarifies that a change in a counterparty to a derivative instrument designated as a hedging instrument would not require the entity to dedesignate the hedging relationship and discontinue the application of hedge accounting. The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

10

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The update will require lessees to recognize a right-of-use asset and lease liability for substantially all leases. The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2018, including interim periods within those fiscal periods. Early adoption is permitted. The company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2019 and is currently assessing the potential impact of this new guidance on its consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities, which requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. The guidance is effective for fiscal periods beginning after December 15, 2017, including interim periods within those fiscal periods. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, as part of its Simplification Initiative, which updates Income Taxes (Topic 740) guidance to eliminate the requirement for an entity to separate deferred tax liabilities and tax assets between current and noncurrent amounts in a classified balance sheet. Deferred taxes will be presented as noncurrent under the new standard. The guidance is effective for fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. Early adoption is permitted. The company plans to implement this standard in the fourth quarter of fiscal year 2016 and is assessing the potential impact of this new guidance on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which requires entities that measure inventory using first-in, first-out (FIFO) or average cost to measure inventory at the lower of cost and net realizable value. The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. The company is assessing the potential impact of this new guidance on its consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40), which provides guidance about management's responsibility in evaluating whether there is substantial doubt relating to an entity’s ability to continue as a going concern and to provide related footnote disclosures as applicable. ASU 2014-15 is effective for the interim and fiscal periods ending after December 15, 2016. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In June 2014, the FASB issued ASU 2014-12, Compensation - Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved After the Requisite Service Period. This guidance requires that an award with a performance target that affects vesting, and that could be achieved after the requisite service period, such as when an employee retires, but may still vest if and when the performance target is achieved, be treated as an award with performance conditions that affect vesting and the company apply existing guidance under ASC Topic 718, Compensation - Stock Compensation. The guidance is effective for fiscal periods beginning after December 15, 2015, including interim periods within those fiscal periods and may be applied either prospectively or retrospectively. The company is assessing the potential impact of this new guidance on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which requires companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service and requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. ASU 2014-09 was originally effective for fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year making it effective for fiscal periods beginning after December 15, 2017, including interim periods within those fiscal periods, while also providing for early adoption but not before the original effective date. The company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2018 and is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

Accounting standards implemented during fiscal year 2016

In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which updates Business Combination (Topic 805) guidance to eliminate the requirement to restate prior period financial statements for measurement period adjustments. The guidance should be applied prospectively to measurement period adjustments that occur

11

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

after the effective date. The guidance is effective for fiscal periods beginning after December 15, 2015, including interim periods within those fiscal periods. Early adoption is permitted. The company adopted this standard in the first quarter of the fiscal year 2016. This guidance did not have a material impact on the company's consolidated financial statements.

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This guidance changes the definition of a discontinued operation to include only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity's operations and financial results. The guidance also requires new disclosure of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. This guidance is to be applied prospectively and is effective for fiscal periods beginning on or after December 15, 2014, including interim periods within those fiscal periods. The company adopted this guidance in the first quarter of fiscal year 2016. The impact of this new guidance on the company's consolidated financial statements is dependent upon future business divestitures. Previous divestitures and amounts currently included in discontinued operations were not impacted.

4. Discontinued Operations

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

	Three Months Ended March 31,					Six Months Ended March 31,
	2016			2015		2016			2015
Sales	$	—		$	—	$	—		$	1
Income (loss) before income taxes	$	(1	)	$	3	$	(4	)	$	—
Benefit from income taxes	—			1		1			1
Income (loss) from discontinued operations attributable to Meritor, Inc.	$	(1	)	$	4	$	(3	)	$	1

Loss from discontinued operations attributable to the company for the three and six months ended March 31, 2016 was primarily related to changes in estimates related to legal costs incurred in connection with a previously divested business. Income from discontinued operations attributable to the company for the three and six months ended March 31, 2015 was primarily attributable to the settlement of indemnities on certain contingencies of previously divested businesses.

Total discontinued operations assets as of March 31, 2016 and September 30, 2015 were $1 million and $4 million, respectively, and total discontinued operations liabilities as of March 31, 2016 and September 30, 2015 were $6 million and $10 million, respectively.

5. Goodwill

In accordance with FASB Accounting Standards Codification (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.

12

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

	Commercial Truck & Industrial			Aftermarket & Trailer		Total
Beginning balance at September 30, 2015	$	239		$	163	$	402
Foreign currency translation	(3		)	—		(3		)
Balance at March 31, 2016	$	236		$	163	$	399

6. Restructuring Costs

Restructuring reserves, primarily related to unpaid employee termination benefits attributable mainly to the company's Commercial Truck & Industrial segment were $9 million at March 31, 2016 and $10 million at September 30, 2015, respectively. The changes in restructuring reserves for the six months ended March 31, 2016 and 2015 are as follows (in millions):

	Employee Termination Benefits			Plant Shutdown & Other		Total
Beginning balance at September 30, 2015	$	10		$	—	$	10
Activity during the period:
Charges to continuing operations	2			1		3
Cash payments – continuing operations	(4		)	—		(4		)
Total restructuring reserves at March 31, 2016	8			1		9
Less: non-current restructuring reserves	(3		)	—		(3		)
Restructuring reserves – current, at March 31, 2016	$	5		$	1	$	6
Balance at September 30, 2014	$	11		$	—	$	11
Activity during the period:
Charges to continuing operations	6			—		6
Cash payments – continuing operations	(3		)	—		(3		)
Other	(2		)	—		(2		)
Total restructuring reserves at March 31, 2015	12			—		12
Less: non-current restructuring reserves	(2		)	—		(2		)
Restructuring reserves – current, at March 31, 2015	$	10		$	—	$	10

2016 Restructuring Costs: During the first six months of fiscal year 2016, the company recorded restructuring costs of $3 million primarily associated with a labor reduction programs in China in the Commercial Truck & Industrial and Aftermarket and Trailer segments.

Consolidation of Certain Operations in 2015: During the first quarter of fiscal year 2015, the company recorded severance charges of $3 million associated with the elimination of approximately 50 hourly and 20 salaried positions in the Commercial Truck & Industrial segment in connection with the consolidation of certain gearing and machining operations in North America. Restructuring actions associated with this program were substantially complete as of September 30, 2015.

Closure of a Corporate Engineering Facility in 2015: During the second quarter of fiscal year 2015, the company notified approximately 30 salaried and contract employees that their positions were being eliminated due to the planned closure of a corporate engineering facility. The company recorded severance expenses of $1 million associated with this plan for the six months ended March 31, 2015. Restructuring actions associated with this program were substantially complete as of September 30, 2015.

13

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

European Labor Reduction in 2015: During the second quarter of fiscal year 2015, the company initiated a European headcount reduction plan intended to reduce labor costs in response to continued soft markets in the region. The company eliminated approximately 20 hourly and 20 salaried positions and recorded $2 million of expected severance expenses in the Commercial Truck & Industrial segment in the second quarter of fiscal year 2015. Restructuring actions associated with this program were substantially complete as of June 30, 2015.

7. 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 prior years, the company established valuation allowances against its U.S. net deferred tax assets and the net deferred tax assets of its 100-percent-owned subsidiaries in France, the United Kingdom and certain other countries. In evaluating its ability to recover these 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. Continued improvement in the company’s operating results could lead to reversal of some or all of these valuation allowances in the future. However, the company continues to maintain the valuation allowances in these 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. In addition, the company performs the same analysis in jurisdictions not in a valuation allowance to determine if a valuation allowance is required.

Although the company was profitable in the U.S. in 2014 and 2015, it has not generated enough positive evidence to warrant a reversal of the U.S. valuation allowance, so it continues to record a full valuation allowance against the U.S. net deferred tax assets. While the weight of negative evidence related to cumulative losses continues to decrease, the company believes that the objectively-measured negative evidence outweighs the subjectively-determined positive evidence.

For the three months ended March 31, 2016, the company had approximately $17 million of net pre-tax income compared to $24 million of net pre-tax income in the same period in fiscal year 2015 in tax jurisdictions in which tax expense (benefit) is not recorded.

For the six months ended March 31, 2016, the company had approximately $28 million of net pre-tax income compared to $36 million of net pre-tax income in the same period in fiscal year 2015 in tax jurisdictions in which tax expense is not recorded. Income arising from these jurisdictions resulted in an adjustment to the valuation allowance, rather than an adjustment to income tax expense.

8. Accounts Receivable Factoring and Securitization

Off-balance sheet arrangements 

Swedish Factoring Facility: The company has an arrangement to sell trade receivables due from AB Volvo through one of its European subsidiaries. Under this arrangement, which terminates on June 28, 2016, the company can sell up to, at any point in time, €155 million ($176 million) of eligible trade receivables. On March 29, 2016, Meritor signed an amendment to increase the commitment to €155 million from €150 million. All other terms of the arrangement remain unchanged. The company is working to extend this arrangement before its current maturity date. The receivables under this program are sold at face value and are excluded from the condensed consolidated balance sheet. The company had utilized €107 million ($121 million) and €108 million ($121 million) of this accounts receivable factoring facility as of March 31, 2016 and September 30, 2015, respectively.

14

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

     The above facility is backed by a 364-day liquidity commitment from Nordea Bank which extends through December 2016. The commitment is subject to standard terms and conditions for this type of arrangement.

U.S. Factoring Facility: On February 19, 2016, the company entered into a new Receivables Purchase Agreement with Nordea Bank replacing a similar agreement that expired February 28, 2016. Under this new arrangement, which terminates on February 19, 2019, the company can sell up to, at any point in time, €80 million ($91 million) of eligible trade receivables from AB Volvo and its U.S. subsidiaries through one of the company's U.S. subsidiaries, an increase of €15 million compared to the previous agreement. The amount of eligible receivables sold may exceed Nordea Bank’s commitment at Nordea Bank’s discretion. The receivables under this program are sold at face value and are excluded from the condensed consolidated balance sheet. The company had utilized €42 million ($48 million) and €74 million ($83 million) of this accounts receivable factoring facility as of March 31, 2016 and September 30, 2015, respectively.

   United Kingdom Factoring Facility: The company has an arrangement to sell trade receivables from AB Volvo and its European subsidiaries through one of its United Kingdom subsidiaries. Under this arrangement, which expires in February 2018, the company can sell up to, at any point in time, €25 million ($28 million) of eligible trade receivables. The receivables under this program are sold at face value and are excluded from the condensed consolidated balance sheet. The company had utilized €6 million ($7 million) and €8 million ($8 million) of this accounts receivable factoring facility as of March 31, 2016 and September 30, 2015, respectively. The agreement is subject to standard terms and conditions for these types of arrangements, including a sole discretion clause whereby the bank retains the right to not purchase receivables, which has not been invoked since the inception of the program.

Italy Factoring Facility: The company has an arrangement to sell trade receivables from AB Volvo and its European subsidiaries through one of its Italian subsidiaries. Under this arrangement, which expires in June 2017, the company can sell up to, at any point in time, €30 million ($34 million) of eligible trade receivables. The receivables under this program are sold at face value and are excluded from the condensed consolidated balance sheet. The company had utilized €17 million ($19 million) and €22 million ($24 million) of this accounts receivable factoring facility as of March 31, 2016 and September 30, 2015, respectively. The agreement is subject to standard terms and conditions for these types of arrangements including a sole discretion clause whereby the bank retains the right to not purchase receivables, which has not been invoked since the inception of the program.

     In addition to the above facilities, a number of the company’s subsidiaries, primarily in Europe, factor eligible accounts receivable with financial institutions. Certain receivables are factored without recourse to the company and are excluded from accounts receivable in the condensed consolidated balance sheet. The amount of factored receivables excluded from accounts receivable under these arrangements was $14 million and $18 million at March 31, 2016 and September 30, 2015, respectively.

     Total costs associated with all of the off-balance sheet arrangements described above were $2 million and $1 million in the three months ended March 31, 2016 and 2015, respectively, and $4 million and $3 million in the six months ended March 31, 2016 and 2015, respectively, and are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

15

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On-balance sheet arrangements

The company has a $100 million U.S. accounts receivables securitization facility. On December 4, 2015, the company entered into an amendment which extends the facility expiration date to December 4, 2018. The maximum permitted priority-debt-to-EBITDA ratio as of the last day of each fiscal quarter under the facility is 2.25 to 1.00. This program is provided by PNC Bank, National Association, as Administrator and Purchaser, and the other Purchasers and Purchaser Agents from time to time (participating lenders), which are party to the agreement. Under this program, the company has the ability to sell an undivided percentage ownership interest in substantially all of its trade receivables (excluding the receivables due from AB Volvo and subsidiaries eligible for sale under the U.S. accounts receivable factoring facility) of certain U.S. subsidiaries to ArvinMeritor Receivables Corporation ("ARC"), a wholly-owned, special purpose subsidiary. ARC funds these purchases with borrowings from participating lenders under a loan agreement. This program also includes a letter of credit facility pursuant to which ARC may request the issuance of letters of credit issued for the company’s U.S. subsidiaries (originators) or their designees, which when issued will constitute a utilization of the facility for the amount of letters of credit issued. Amounts outstanding under this agreement are collateralized by eligible receivables purchased by ARC and are reported as short-term debt in the condensed consolidated balance sheet. At March 31, 2016 and September 30, 2015, no amounts, including letters of credit, were outstanding under this program. This securitization program contains a cross default to the revolving credit facility. At certain times during any given month, the company may sell eligible accounts receivable under this program to fund intra-month working capital needs. In such months, the company would then typically utilize the cash received from customers throughout the month to repay the borrowings under the program. Accordingly, during any given month, the company may borrow under this program, amounts exceeding the amounts shown as outstanding at fiscal quarter ends.

9. Operating Cash Flow

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

	Six Months Ended March 31,
	2016			2015
OPERATING ACTIVITIES
Net income	$	59		$	73
Less: Income (loss) from discontinued operations, net of tax	(3		)	1
Income from continuing operations	62			72
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization	31			32
Restructuring costs	3			6
Loss on debt extinguishment	—			1
Gain on sale of property	(2		)	—
Equity in earnings of affiliates	(17		)	(18		)
Pension and retiree medical expense	10			14
Other adjustments to income from continuing operations	4			5
Dividends received from equity method investments	19			10
Pension and retiree medical contributions	(22		)	(24		)
Restructuring payments	(4		)	(3		)
Changes in off-balance sheet accounts receivable factoring	(51		)	40
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, foreign currency adjustments and discontinued operations	7			(99		)
Operating cash flows provided by continuing operations	40			36
Operating cash flows used for discontinued operations	(1		)	(7		)
CASH PROVIDED BY OPERATING ACTIVITIES	$	39		$	29

16

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

10. 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):

	March 31, 2016		September 30, 2015
Finished goods	$	146	$	133
Work in process	31		28
Raw materials, parts and supplies	185		177
Total	$	362	$	338

11. Other Current Assets

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

	March 31, 2016		September 30, 2015
Current deferred income tax assets	$	20	$	20
Asbestos-related recoveries (see Note 20)	14		13
Prepaid and other	19		17
Other current assets	$	53	$	50

12. Net Property

Net property is summarized as follows (in millions):

	March 31, 2016			September 30, 2015
Property at cost:
Land and land improvements	$	31		$	31
Buildings	221			214
Machinery and equipment	852			864
Company-owned tooling	116			116
Construction in progress	67			62
Total	1,287			1,287
Less: accumulated depreciation	(860		)	(868		)
Net property	$	427		$	419

17

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

13. Other Assets

Other assets are summarized as follows (in millions):

	March 31, 2016		September 30, 2015
Investments in non-consolidated joint ventures	$	98	$	96
Asbestos-related recoveries (see Note 20)	37		42
Unamortized revolver debt issuance costs	8		10
Capitalized software costs, net	27		28
Non-current deferred income tax assets, net	28		28
Assets for uncertain tax positions	3		3
Prepaid pension costs	114		110
Other	17		15
Other assets	$	332	$	332

In accordance with FASB ASC Topic 350-40, costs relating to internally developed or purchased software in the preliminary project stage and the post-implementation stage are expensed as incurred. Costs in the application development stage that meet the criteria for capitalization are capitalized and amortized using the straight-line basis over the estimated economic useful life of the software.

The company holds a variable interest in a joint venture accounted for under the equity method of accounting. The joint venture manufactures components for commercial vehicle applications primarily on behalf of the company. The variable interest relates to a supply arrangement between the company and the joint venture whereby the company supplies certain components to the joint venture on a cost-plus basis. The company is not the primary beneficiary of the joint venture, as the joint venture partner has shared or absolute control over key manufacturing operations, labor relationships, financing activities and certain other functions of the joint venture. Therefore, the company does not consolidate the joint venture. At March 31, 2016 and September 30, 2015, the company’s investment in the joint venture was $45 million and $42 million, respectively.

14. Unconsolidated Significant Subsidiary

Article 10 of Regulation S-X (Rule 10-01(b)(1)) requires separate interim period summarized income statement information for each 50-percent-or-less-owned subsidiary not consolidated that would have been a significant subsidiary for annual periods in accordance with Rule 3-09 of Regulation S-X. In accordance with this guidance, the company’s non-consolidated joint venture Meritor WABCO Vehicle Control Systems’ summarized income statement information is as follows (in millions):

	Three Months Ended March 31,				Six Months Ended March 31,
	2016		2015		2016		2015
	(Unaudited)
Sales	$	83	$	88	$	168	$	170
Gross margin	$	21	$	19	$	43	$	37
Income from continuing operations	$	13	$	13	$	29	$	24
Net income	$	13	$	13	$	29	$	24

18

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

15. Other Current Liabilities

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

	March 31, 2016		September 30, 2015
Compensation and benefits	$	98	$	122
Income taxes	13		9
Taxes other than income taxes	23		23
Accrued interest	14		14
Product warranties (see Note 16)	19		22
Environmental reserves (see Note 20)	8		9
Restructuring (see Note 6)	6		7
Asbestos-related liabilities (see Note 20)	17		17
Indemnity obligations (see Note 20)	2		2
Other	53		54
Other current liabilities	$	253	$	279

The company records estimated product warranty costs at the time of shipment of products to customers. Warranty reserves are primarily based on factors that include past claims experience, sales history, product manufacturing and engineering changes and industry developments. Liabilities for product recall campaigns are recorded at the time the company’s obligation is probable and can be reasonably estimated. Policy repair actions to maintain customer relationships are recorded as other liabilities at the time an obligation is probable and can be reasonably estimated. Product warranties, including recall campaigns, not expected to be paid within one year are recorded as a non-current liability.

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

	Six Months Ended March 31,
	2016			2015
Total product warranties – beginning of period	$	48		$	51
Accruals for product warranties	7			7
Payments	(9		)	(9		)
Change in estimates and other	1			—
Total product warranties – end of period	47			49
Less: Non-current product warranties	(28		)	(26		)
Product warranties – current	$	19		$	23

16. Other Liabilities

Other liabilities are summarized as follows (in millions):

	March 31, 2016		September 30, 2015
Asbestos-related liabilities (see Note 20)	$	121	$	109
Restructuring (see Note 6)	3		3
Non-current deferred income tax liabilities	99		99
Liabilities for uncertain tax positions	15		15
Product warranties (see Note 15)	28		26
Environmental (see Note 20)	8		8
Indemnity obligations (see Note 20)	12		13
Other	30		32
Other liabilities	$	316	$	305

19

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

17. Long-Term Debt

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

	March 31, 2016			September 30, 2015
4.625 percent convertible notes due 2026 (1)	$	—		$	55
4.0 percent convertible notes due 2027(2)(4)	142			142
7.875 percent convertible notes due 2026(2)(5)	128			127
6.75 percent notes due 2021(3)(6)	270			270
6.25 percent notes due 2024(3)(7)	442			442
Capital lease obligation	17			17
Export financing arrangements and other	21			18
Unamortized discount on convertible notes	(17		)	(20		)
Subtotal	1,003			1,051
Less: current maturities	(25		)	(15		)
Long-term debt	$	978		$	1,036

⁽¹⁾ The 4.625 percent, convertible notes contained a put and call feature, which allowed for earlier redemption beginning in 2016. Substantially all of these notes were redeemed on March 1, 2016.

⁽²⁾ The 4.0 percent and 7.875 percent convertible notes contain a put and call feature, which allows for earlier redemption beginning in 2019 and 2020, respectively.

⁽³⁾ The 6.75 percent and 6.25 percent notes contain a call option, which allows for early redemption.

⁽⁴⁾ The 4.0 percent convertible notes due 2027 are presented net of $1 million unamortized issuance costs as of March 31, 2016 and September 30, 2015.

⁽⁵⁾ The 7.875 percent convertible notes due 2026 are presented net of $2 million and $3 million unamortized issuance costs as of March 31, 2016 and September 30, 2015, respectively, and$10 million original issuance discount as of March 31, 2016 and September 30, 2015.

⁽⁶⁾ The 6.75 percent notes due 2021 are presented net of $5 million unamortized issuance costs as of March 31, 2016 and September 30, 2015.

⁽⁷⁾ The 6.25 percent notes due 2024 are presented net of $8 million unamortized issuance costs as of March 31, 2016 and September 30, 2015.

Revolving Credit Facility

On May 22, 2015, the company entered into a second amendment of its senior secured revolving credit facility. Pursuant to the revolving credit agreement as amended, the company has a $499 million revolving credit facility, $40 million of which matures in April 2017 for banks not electing to extend their commitments under the revolving credit facility, and $459 million of which matures in February 2019. The availability under this facility is dependent upon various factors, including principally performance against certain financial covenants as highlighted below. Prior to May 22, 2015, $89 million of the $499 million revolving credit facility was scheduled to mature in April 2017 for banks not electing to extend their commitments under the revolving credit facility, and $410 million was scheduled to mature in February 2019.

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

The availability under the revolving credit facility is also subject to a collateral test, pursuant to which borrowings on the revolving credit facility cannot exceed 1.0x the collateral test value. The collateral test is performed on a quarterly basis. At March 31, 2016, the revolving credit facility was collateralized by approximately $647 million of the company's assets, primarily consisting of eligible domestic U.S. accounts receivable, inventory, plant, property and equipment, intellectual property and the company's investment in all or a portion of certain of its wholly-owned subsidiaries.

20

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Borrowings under the revolving credit facility are subject to interest based on quoted LIBOR rates plus a margin and a commitment fee on undrawn amounts, both of which are based upon the company’s current corporate credit rating. At March 31, 2016, the margin over LIBOR rate was 325 basis points, and the commitment fee was 50 basis points. Overnight revolving credit loans are at the prime rate plus a margin of 225 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).

No borrowings were outstanding under the revolving credit facility at March 31, 2016 and September 30, 2015. The amended and extended revolving credit facility includes $100 million of availability for the issuance of letters of credit. At March 31, 2016 and September 30, 2015, there were no letters of credit outstanding under the revolving credit facility.

Debt Securities

In December 2014, the company filed a shelf registration statement with the Securities and Exchange Commission, registering an unlimited amount of debt and/or equity securities that the company may offer in one or more offerings on terms to be determined at the time of sale. The December 2014 shelf registration statement superseded and replaced the shelf registration statement filed in February 2012, as amended.

Repurchase of Debt Securities

In February 2015, the company repurchased $15 million principal amount of the company's 4.0 percent convertible notes due 2027. The notes were repurchased at a premium equal to approximately 6 percent of their principal amount. The repurchase of $15 million principal amount of the company's 4.0 percent convertible notes was accounted for as an extinguishment of debt, and accordingly the company recognized an insignificant net loss on debt extinguishment, the majority of which is premium. The net loss on debt extinguishment is included in the consolidated statement of operations in interest expense, net. The repurchase was made under the company's equity and equity-linked repurchase authorizations (see Note 21).

On March 1, 2016, substantially all of the $55 million of principal amount 4.625 percent convertible notes were repurchased at 100 percent of the face value of the notes. The repurchase was made under the company's equity and equity linked repurchase authorizations (see Note 21). The amount remaining available for repurchases under these authorizations was $39 million at March 31, 2016.

Capital Leases

On March 20, 2012, the company entered into an arrangement to finance equipment acquisitions for various U.S. locations. Under this arrangement, the company can request financing from GE Capital Commercial, Inc. (GE Capital) for progress payments for equipment under construction, not to exceed $10 million at any time. The financing rate is equal to the 30-day LIBOR plus 475 basis points per annum. Under this arrangement, the company can also enter into lease arrangements with GE Capital for completed equipment. The lease term is 60 months and the lease interest rate is equal to the 5-year Swap Rate published by the Federal Reserve Board plus 564 basis points. The company had $8 million and $10 million outstanding under this capital lease arrangement as of March 31, 2016 and September 30, 2015, respectively. In addition, the company had another $9 million and $7 million outstanding through other capital lease arrangements at March 31, 2016 and September 30, 2015, respectively.

Letter of Credit Facilities

On February 21, 2014, the company entered into an arrangement to amend and restate the letter of credit facility with Citicorp USA, Inc., as administrative agent and issuing bank, and the other lenders party thereto. Under the terms of this amended credit agreement, the company has the right to obtain the issuance, renewal, extension and increase of letters of credit up to an aggregate availability of $30 million through December 19, 2015. From December 20, 2015 through March 19, 2019, the aggregate availability is $25 million. This facility contains covenants and events of default generally similar to those existing in the company’s public debt indentures. There were $22 million and $24 million of letters of credit outstanding under this facility at March 31, 2016 and September 30, 2015, respectively. The company had another $6 million of letters of credit outstanding through other letter of credit facilities at March 31, 2016 and September 30, 2015.

21

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Export Financing Arrangements

The company entered into a number of export financing arrangements through its Brazilian subsidiary during fiscal year 2014.  The export financing arrangements are issued under an incentive program of the Brazilian government to fund working capital for Brazilian companies in exportation programs. The arrangements bear interest at 5.5 percent and have maturity dates in 2016 and 2017. There was $19 million and $18 million outstanding under these arrangements at March 31, 2016 and September 30, 2015, respectively.

Other

One of the company's consolidated joint ventures in China participates in a bills of exchange program to settle its obligations with its trade suppliers. These programs are common in China and generally require the participation of local banks. Under these programs, the company's joint venture issues notes payable through the participating banks to its trade suppliers. If the issued notes payable remain unpaid on their respective due dates, this could constitute an event of default under the company’s revolving credit facility if the defaulted amount exceeds $35 million per bank. As of March 31, 2016 and September 30, 2015, the company had $8 million and $13 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):

	March 31, 2016				September 30, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	94	$	94	$	193	$	193
Short-term debt	25		24		15		15
Long-term debt	978		958		1,036		1,123
Foreign exchange forward contracts (asset)	—		—		1		1
Foreign exchange forward contracts (liability)	2		2		3		3
Short-term foreign currency option contracts (asset)	—		—		1		1
Long-term foreign currency option contracts (asset)	—		—		1		1

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

	March 31, 2016			September 30, 2015
	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported
Derivative Asset
Foreign exchange forward contract	—	—	—	1	—	1
Derivative Liabilities
Foreign exchange forward contract	2	—	2	3	—	3

Fair Value

The current 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.

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MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

• 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 March 31, 2016 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	94	$	—	$	—
Short-term debt	—		—		24
Long-term debt	—		946		12
Foreign exchange forward contracts (liability)	—		2		—

Fair value of financial instruments by the valuation hierarchy at March 31, 2015 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	207	$	—	$	—
Short-term debt	—		—		5
Long-term debt	—		1,093		38
Foreign exchange forward contracts (asset)	—		5		—
Short-term foreign currency option contracts (asset)	—		—		2
Long-term foreign currency option contracts (asset)	—		—		2

The tables below provide a reconciliation of changes in fair value of the Level 3 financial assets and liabilities measured at fair value in the condensed consolidated balance sheet for the three and six months ended March 31, 2016 and 2015, respectively. No transfers of assets between any of the Levels occurred during these periods.

Three months ended March 31, 2016 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)		Total
Fair Value as of December 31, 2015	$	2		$	—	$	2
Total unrealized gains (losses):
Included in other income	(2		)	—		(2		)
Transfer in and / or out of Level 3 (1)	—			—		—
Fair Value as of March 31, 2016	$	—		$	—	$	—

23

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Three months ended March 31, 2015 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)			Total
Fair Value as of December 31, 2014	$	4		$	1		$	5
Total unrealized gains (losses):
Included in other income	(1		)	—			(1		)
Total realized gains (losses):
Included in other income	3			—			3
Included in cost of sales	3			—			3
Purchases, issuances, sales and settlements:
Purchases	4			—			4
Settlements	(9		)	(1		)	(10		)
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	(2		)	2			—
Fair Value as of March 31, 2015	$	2		$	2		$	4

Six months ended March 31, 2016 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)			Total
Fair Value as of September 30, 2015	$	1		$	1		$	2
Total unrealized gains (losses):
Included in other income	(2		)	—			$	(2	)
Included in cost of sales	—			(1		)	(1		)
Purchases, issuances, sales and settlements:
Purchases	1			—			$	1
Transfer in and / or out of Level 3 (1)	—			—			—
Fair Value as of March 31, 2016	$	—		$	—		$	—

Six months ended March 31, 2015 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)			Total
Fair Value as of September 30, 2014	$	2		$	1		$	3
Total realized gains (losses):
Included in other income	3			—			3
Included in cost of sales	3			—			3
Purchases, issuances, sales and settlements:
Purchases	5			—			5
Settlements	(10		)	(1		)	(11		)
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	(1		)	2			1
Fair Value as of March 31, 2015	$	2		$	2		$	4

⁽¹⁾ Transfers as of the last day of the reporting period.

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. The company did not have any cash equivalents at March 31, 2016 or September 30, 2015.

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MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 one year or less to hedge its exposure to changes in foreign currency exchange rates. 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 a cash flow hedge, the effective portion of changes in the fair value of the contracts is recorded in Accumulated Other Comprehensive Loss in the statement of shareowners’ equity and is recognized in operating income when the underlying forecasted transaction impacts earnings.

Foreign currency option contracts — The company uses option contracts to mitigate foreign currency exposure on expected future Indian rupee denominated purchases. The contracts were entered into during the third quarter of fiscal year 2014 with effective dates from the start of fiscal year 2015 through the end of fiscal year 2017. In the second quarter of fiscal year 2015, the company monetized its outstanding foreign currency option contracts and entered into a new series of foreign currency option contracts with effective dates from the start of the third quarter of fiscal year 2015 through the end of fiscal year 2017. The fair value of the foreign currency option contracts is based on a third-party proprietary model, which incorporates inputs at varying unobservable weights of quoted spot rates, market volatility, forward rates, and time utilizing market instruments with similar quality and maturity characteristics. 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 consolidated statement of operations. In the first six months of fiscal year 2016, net unrealized losses totaled $1 million, all of which occurred during the first quarter of fiscal year 2016.

From time to time, the company will hedge against its foreign currency exposure related to translations to U.S. dollars of financial results denominated in foreign currencies. In the first quarter of fiscal year 2015, the company entered into a series of foreign currency option contracts with a total notional amount of $48 million to reduce volatility in the translation of Brazilian real earnings to U.S. dollars. These foreign currency option contracts did not qualify for a hedge accounting election but were expected to mitigate foreign currency translation exposure of Brazilian real earnings to U.S. dollars. In the second quarter of fiscal year 2015, the company monetized these outstanding foreign currency option contracts and entered into a new series of foreign currency option contracts with effective dates from the start of the third quarter of fiscal year 2015 through the end of fiscal year 2015. In the third and fourth quarters of fiscal year 2015, the company monetized these outstanding foreign currency option contracts. As of March 31, 2016 and September 30, 2015, there were no Brazilian real foreign currency option contracts outstanding.

Also, in the fourth quarter of fiscal year 2015, the company entered into a series of foreign currency contracts with total notional amounts of $30 million and $27 million to mitigate the risk of volatility in the translation of Swedish krona and euro earnings to U.S. dollars, respectively. During the first quarter of fiscal year 2016, the company entered into additional foreign currency contracts with total notional amounts of $19 million and $21 million to mitigate the risk of volatility in the translation of the Swedish krona and euro earnings to U.S. dollars, respectively. These foreign currency option contracts do not qualify for a hedge accounting election but are expected to mitigate foreign currency translation exposure of Swedish krona and euro earnings to U.S. dollars during fiscal year 2016. For the three and six months ended March 31, 2016, net unrealized losses totaled $2 million. The fair value of the foreign currency option contracts is based on a third-party proprietary model, which incorporates inputs at varying unobservable weights of quoted spot rates, market volatility, forward rates, and time utilizing market instruments with similar quality and maturity characteristics. Changes in fair value associated with these contracts are recorded in the consolidated statement of operations in other income, net.

25

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

19. Retirement Benefit Liabilities

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

	March 31, 2016			September 30, 2015
Retiree medical liability	$	429		$	438
Pension liability	208			219
Other	13			14
Subtotal	650			671
Less: current portion (included in compensation and benefits, Note 15)	(39		)	(39		)
Retirement benefits	$	611		$	632

The components of net periodic pension and retiree medical expense included in Selling, general and administrative expenses for the three months ended March 31 are as follows (in millions):

	2016					2015
	Pension			Retiree Medical		Pension			Retiree Medical
Interest cost	27			5		18			5
Assumed return on plan assets	(25		)	—		(28		)	—
Recognized actuarial loss	6			3		7			5
Total expense (income)	$	8		$	8	$	(3	)	$	10

The components of net periodic pension and retiree medical expense included in Selling, general and administrative expenses for the six months ended March 31 are as follows (in millions):

	2016					2015
	Pension			Retiree Medical		Pension			Retiree Medical
Interest cost	33			9		36			10
Assumed return on plan assets	(50		)	—		(56		)	—
Recognized actuarial loss	12			6		14			10
Total expense (income)	$	(5	)	$	15	$	(6	)	$	20

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.

26

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

     The company has been designated as a potentially responsible party at nine 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. Management estimates the total reasonably possible costs the company could incur for the remediation of Superfund sites at March 31, 2016 to be approximately $17 million, of which $2 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 March 31, 2016 to be approximately $28 million, of which $14 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 0.5 to 2.5 percent and is approximately $8 million at March 31, 2016. The undiscounted estimate of these costs is approximately $8 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, 2015	$	2	$	14		$	16
Payments and other	—		(3		)	(3		)
Accruals	—		3			3
Balance at March 31, 2016	$	2	$	14		$	16

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.

Asbestos

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

Maremont had approximately 5,800 and 5,600 pending asbestos-related claims at March 31, 2016 and September 30, 2015, respectively. Although Maremont has been named in these cases, in the cases where actual injury has been alleged, very few claimants have established that a Maremont product caused their injuries. Plaintiffs’ lawyers often sue dozens or even hundreds of defendants in individual lawsuits, seeking damages against all named defendants irrespective of the disease or injury and irrespective of any causal connection with a particular product. For these reasons, the total number of claims filed is not necessarily the most meaningful factor in determining Maremont’s asbestos-related liability.

27

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

     Maremont’s asbestos-related reserves and corresponding asbestos-related recoveries are summarized as follows (in millions):

	March 31, 2016		September 30, 2015
Pending and future claims	$	71	$	71
Billed but unpaid claims	2		3
Asbestos-related liabilities	$	73	$	74
Asbestos-related insurance recoveries	$	37	$	41

A portion of the asbestos-related recoveries and reserves are included in Other Current Assets and Liabilities, with the majority of the amounts recorded in Other Assets and Liabilities (see Notes 11, 13, 15 and 16).

Pending and Future Claims: Maremont has engaged Bates White LLC (“Bates White”), a consulting firm with extensive experience estimating costs associated with asbestos litigation, to assist with determining the estimated cost of resolving pending and future asbestos-related claims that have been, and could reasonably be expected to be, filed against Maremont. Bates White prepares these cost estimates annually in September. Although it is not possible to estimate the full range of costs because of various uncertainties, Bates White advised Maremont that it would be possible to determine an estimate of a reasonable forecast of the cost of the probable settlement and defense costs of resolving pending and future asbestos-related claims, based on historical data and certain assumptions with respect to events that may occur in the future.

     As of September 30, 2015, Bates White provided a reasonable and probable estimate that consisted of a range of equally likely possibilities of Maremont’s obligation for asbestos personal injury claims over the next ten years of $71 million to $100 million. Management recognized a liability of $71 million as of each of March 31, 2016 and September 30, 2015 for pending and future claims over the next ten years. The ultimate cost of resolving pending and future claims is estimated based on the history of claims and expenses for plaintiffs represented by law firms in jurisdictions with an established history with Maremont. Historically, Maremont has recognized incremental insurance receivables associated with recoveries expected for asbestos-related liabilities as the estimate of asbestos-related liabilities for pending and future claims changes. However, Maremont currently expects that its settled insurance coverage will not be sufficient to fully offset its expected asbestos-related liabilities through the end of the ten-year forecasted liability period.

Assumptions: The following assumptions were made by Maremont after consultation with Bates White and are included in their study:

• Pending and future claims were estimated for a ten-year period ending in fiscal year 2025;

• Maremont believes that the litigation environment could change significantly beyond ten years and that the reliability of estimates of future probable expenditures in connection with asbestos-related personal injury claims will decline for each year further in the future. As a result, estimating a probable liability beyond ten years is difficult and uncertain;

• On a per claim basis, defense and processing costs for pending and future claims will be at the level consistent with Maremont’s prior experience;

• Potential payments made to claimants from other sources, including other defendants and 524(g) trusts favorably impact Maremont’s estimated liability in the future; and

• The ultimate indemnity cost of resolving nonmalignant claims with plaintiffs’ law firms in jurisdictions without an established history with Maremont cannot be reasonably estimated.

Recoveries: Maremont has insurance that reimburses a substantial portion of the costs incurred defending against asbestos-related claims. The insurance receivable related to asbestos-related liabilities is $37 million and $41 million as of March 31, 2016 and September 30, 2015, respectively. The receivable is for coverage provided by one insurance carrier based on a coverage in place agreement. Maremont currently expects to exhaust the remaining limits provided by this coverage sometime in the next ten years. The difference between the estimated liability and insurance receivable is primarily related to exhaustion of settled insurance coverage within the forecasted period and proceeds from settled insurance policies. Amounts received from insurance settlements generally reduce recorded insurance receivables.

28

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Maremont maintained insurance coverage with other insurance carriers that management believes also covers indemnity and defense costs. During fiscal year 2013, Maremont re-initiated lawsuits against these carriers, seeking a declaration of its rights to coverage for asbestos claims and to facilitate an orderly and timely collection of insurance proceeds. One of these insurance policies has been partially settled in cash. On December 12, 2015, Maremont received $17 million, of which $5 million was recognized as reduction in asbestos expense and $12 million was recorded as a liability to the insurance carrier as it is required to be returned to the carrier if additional asbestos liability is not incurred. The settlement also provides additional recovery for Maremont if certain spending thresholds are met.

     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 Maremont could change significantly from its past experience, due, for example, to changes in the mix of claims filed against Maremont in terms of plaintiffs’ law firms, jurisdictions and diseases; legislative or regulatory developments; Maremont’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 and future claims, the cost to resolve claims and the amount of available insurance prove to be incorrect, the actual amount of liability for Maremont’s 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.

Rockwell International (“Rockwell”) — ArvinMeritor, Inc. (“AM”), a subsidiary of Meritor, along with many other companies, has also been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos used in certain components of Rockwell products many years ago. Liability for these claims was transferred at the time of the spin-off of the automotive business from Rockwell in 1997. Rockwell had approximately 3,200 and 3,000 pending active asbestos claims in lawsuits that name AM, together with many other companies, as defendants at March 31, 2016 and September 30, 2015, respectively.

A significant portion of the claims do not identify any of Rockwell’s products or specify which of the claimants, if any, were exposed to asbestos attributable to Rockwell’s products, and past experience has shown that the vast majority of the claimants will likely never identify any of Rockwell’s 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’s 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.

     The Rockwell legacy asbestos-related reserves and corresponding asbestos-related recoveries are summarized as follows (in millions):

	March 31, 2016		September 30, 2015
Pending and future claims	$	55	$	55
Billed but unpaid claims	3		3
Asbestos-related liabilities	$	58	$	58
Asbestos-related insurance recoveries	$	14	$	14

Pending and Future Claims: The company has engaged Bates White to assist with determining whether it would be possible to estimate the cost of resolving pending and future Rockwell legacy asbestos-related claims that have been, and could reasonably be expected to be, filed against the company. Bates White prepares these cost estimates annually in September. As of September 30, 2015, Bates White provided a reasonable and probable estimate that consisted of a range of equally likely possibilities of Rockwell’s obligation for asbestos personal injury claims over the next ten years of $55 million to $74 million. Management recognized a liability for the pending and future claims over the next ten years of $55 million as of each of March 31, 2016 and September 30, 2015. The ultimate cost of resolving pending and future claims is estimated based on the history of claims and expenses for plaintiffs represented by law firms in jurisdictions with an established history with Rockwell.

29

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Assumptions: The following assumptions were made by the company after consultation with Bates White and are included in their study:

• Pending and future claims were estimated for a ten-year period ending in fiscal year 2025;

• The company believes that the litigation environment could change significantly beyond ten years and that the reliability of estimates of future probable expenditures in connection with asbestos-related personal injury claims will decline for each year further in the future. As a result, estimating a probable liability beyond ten years is difficult and uncertain;

• On a per claim basis, defense and processing costs for pending and future claims will be at the level consistent with the company’s prior experience;

• Potential payments made to claimants from other sources, including other defendants and 524(g) trusts favorably impact the company’s estimated liability in the future; and

• The ultimate indemnity cost of resolving nonmalignant claims with plaintiff’s law firms in jurisdictions without an established history with Rockwell cannot be reasonably estimated.

Recoveries: The insurance receivable related to asbestos-related liabilities was $14 million as of each of March 31, 2016 and September 30, 2015. Included in these amounts are insurance receivables of $9 million as of each of March 31, 2016 and September 30, 2015 that are associated with policies in dispute. Rockwell has insurance coverage that management believes covers indemnity and defense costs, over and above self-insurance retentions, for most of these claims. The company has initiated claims against certain of these carriers to enforce the insurance policies, which are in various stages of the litigation process. The company expects to recover some portion of the defense and indemnity costs it has incurred to date, over and above self-insured retentions, and some portion of the costs for defending asbestos claims going forward. The amounts recognized for policies in dispute are based on consultation with advisors, status of settlement negotiations with certain insurers and underlying analysis performed by management. The remaining receivable recognized is related to coverage provided by one carrier based on a coverage-in-place insurance arrangement. 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's asbestos-related claims, and the effect on the company, could differ materially from current estimates and, therefore, could have a material impact on the company’s financial condition and results of operations.

Indemnifications

The company has provided indemnifications 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.

In December 2005, the company guaranteed a third party’s obligation to reimburse another party for payment of health and prescription drug benefits to a group of retired employees. The retirees were former employees of a wholly-owned subsidiary of the company prior to it being acquired by the company. The wholly-owned subsidiary, which was part of the company’s light vehicle aftermarket business, was sold by the company in fiscal year 2006. Prior to May 2009, except as set forth hereinafter, the third party met its obligations to reimburse the other party. In May 2009, the third party filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code requiring the company to recognize its obligations under the guarantee. The company recorded a $28 million liability in fiscal year 2009 for this matter. At March 31, 2016 and September 30, 2015, the remaining estimated liability for this matter was approximately $13 million.

   In connection with the sale of its interest in MSSC in October 2009, the company provided certain indemnities to the buyer for its share of potential obligations related to pension funding shortfall, environmental and other contingencies, and valuation of certain accounts receivable and inventories. At March 31, 2016, the company had no exposure under this indemnity. At September 30, 2015, the company's exposure was approximately $1 million, which is included in other liabilities in the condensed consolidated balance sheet.

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

Other

The company identified certain sales transactions for which value added tax was required to be remitted to certain tax jurisdictions for tax years 2009 through 2015. At March 31, 2016 and September 30, 2015, the company’s estimate of the probable liability was $10 million.

30

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In March 2016, the company was served with a complaint filed against the company and other defendants in the United States District Court for the Eastern District of Michigan. The complaint is a proposed class action and alleges that the company violated federal and state antitrust and other laws in connection with a former business of the company’s that manufactured and sold exhaust systems for automobiles. The alleged class is comprised of persons and entities that purchased or leased a passenger vehicle during a specified time period. In April the Company was served with a virtually identical suit also naming the company as a defendant on behalf of a purported class of automobile dealers. The company is reviewing the complaints and developing its response and intends to vigorously defend the claims. At this point, the company cannot estimate the ultimate impact on the company, and there can be no assurance that the ultimate resolution of these matters will not have a material adverse effect on the consolidated financial position, results of operations or liquidity.

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. 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 is reviewing the complaints and developing its response and intends to vigorously defend the claims. The ultimate outcome of this litigation, and consequently, an estimate of the possible loss, if any, related to this litigation, cannot reasonably be determined at this time and no assurance can be given that the ultimate outcome would not materially adversely affect the company.

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. Shareowners' Equity

Equity and Equity-Linked Repurchase Authorizations

In June 2014, the company’s Board of Directors authorized the repurchase of up to $210 million of its equity and equity-linked securities (including convertible debt securities), subject to the achievement of its M2016 net debt reduction target and compliance with legal and regulatory requirements and its debt covenants. In September 2014, the company’s Board authorized the repurchase of up to $40 million of its equity or equity-linked securities (including convertible debt securities) under the $210 million authorization that may be made annually without regard to achievement of the M2016 net debt reduction target. These authorizations have no stated expiration. During the six months ended March 31, 2016, the company repurchased 3.9 million shares of common stock for $43 million (including commission costs) pursuant to these authorizations. As of March 31, 2016, the company has repurchased 8.1 million shares of common stock for $98 million (including commission costs), $19 million principal amount of its 4.0 percent convertible notes due 2027, and substantially all of the $55 million principal amount of its 4.625 percent convertible notes due 2026 pursuant to the equity and equity-linked repurchase authorizations. The amount remaining available for repurchase under the authorization was $39 million as of March 31, 2016.

In January 2015, the Offering Committee of the company’s Board of Directors approved a repurchase program for up to $150 million aggregate principal amount of any of its public debt securities (including convertible debt securities) from time to time through open market purchases or privately negotiated transactions or otherwise, until September 30, 2016, subject to compliance with legal and regulatory requirements and the company's debt covenants. This repurchase program is in addition to the equity and equity-linked repurchase authorizations described above. The amount remaining available for repurchases under this program is $150 million as of March 31, 2016 and September 30, 2015.

31

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 three months ended March 31, 2016 and 2015 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at December 31, 2015	$	(60	)	$	(696	)	$	(4	)	$	(760	)
Other comprehensive income (loss) before reclassification	10			—			(1		)	9
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			9			—			9
Net current-period other comprehensive income (loss)	$	10		$	9		$	(1	)	$	18
Balance at March 31, 2016	$	(50	)	$	(687	)	$	(5	)	$	(742	)

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
Actuarial losses	9		(a)
	9		Total before tax
	—		Tax (benefit) expense
Total reclassifications for the period	$	9	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).

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at December 31, 2014	$	8		$	(777	)	$	(2	)	$	(771	)
Other comprehensive income before reclassification	(33		)	(1		)	—			(34		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			12			—			12
Net current-period other comprehensive income	$	(33	)	$	11		$	—		$	(22	)
Balance at March 31, 2015	$	(25	)	$	(766	)	$	(2	)	$	(793	)

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
Actuarial losses	$	12	(b)
	12		Total before tax
	—		Tax expense
	12		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).

32

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The components of AOCL and the changes in AOCL by components, net of tax, for six months ended March 31, 2016 and 2015 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at September 30, 2015	$	(54	)	$	(705	)	$	(7	)	(766		)
Other comprehensive income (loss) before reclassification	4			—			2			6
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			18			—			18
Net current-period other comprehensive income (loss)	$	4		$	18		$	2		$	24
Balance at March 31, 2016	$	(50	)	$	(687	)	$	(5	)	$	(742	)

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
Actuarial losses	18		(a)
	18		Total before tax
	—		Tax (benefit) expense
Total reclassifications for the period	$	18	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).

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at September 30, 2014	$	41		$	(789	)	$	(1	)	$	(749	)
Other comprehensive income before reclassification	(67		)	(1		)	(1		)	(69		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	1			24			—			25
Net current-period other comprehensive income	$	(66	)	$	23		$	(1	)	$	(44	)
Balance at March 31, 2015	$	(25	)	$	(766	)	$	(2	)	$	(793	)

33

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Actuarial losses	$	24	(b)
	24		Total before tax
	—		Tax expense
	24		Net of tax
Foreign Currency Translation Related Adjustment
Other reclassification adjustment	$	1
	1		Total before tax
	—		Tax expense
	1		Net of tax
Total reclassifications for the period	$	25	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).

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.

      The company has two reportable segments at March 31, 2016, as follows:

• The Commercial Truck & Industrial segment supplies drivetrain systems and components, including axles, drivelines and braking and suspension systems, primarily for medium- and heavy-duty trucks, military, construction, bus and coach, fire and emergency 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; and

• The Aftermarket & Trailer segment supplies axles, brakes, drivelines, suspension parts and other replacement parts to commercial vehicle and industrial aftermarket customers. This segment also supplies a wide variety of undercarriage products and systems for trailer applications in North America.

     Segment 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 and asset impairment charges. The company uses Segment 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 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.

34

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

     Segment information is summarized as follows (in millions):

	Commercial Truck & Industrial		Aftermarket & Trailer		Eliminations			Total
Three Months Ended March 31, 2016
External Sales	$	610	$	211	$	—		$	821
Intersegment Sales	21		7		(28		)	—
Total Sales	$	631	$	218	$	(28	)	$	821
Three Months Ended March 31, 2015
External Sales	$	660	$	204	$	—		$	864
Intersegment Sales	21		8		(29		)	—
Total Sales	$	681	$	212	$	(29	)	$	864

	Commercial Truck & Industrial		Aftermarket & Trailer		Eliminations			Total
Six Months Ended March 31, 2016
External Sales	$	1,223	$	407	$	—		$	1,630
Intersegment Sales	41		14		(55		)	—
Total Sales	$	1,264	$	421	$	(55	)	$	1,630
Six months ended March 31, 2015
External Sales	$	1,338	$	405	$	—		$	1,743
Intersegment Sales	46		15		(61		)	—
Total Sales	$	1,384	$	420	$	(61	)	$	1,743

35

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Three Months Ended March 31,						Six Months Ended March 31,
	2016			2015			2016			2015
Segment EBITDA:
Commercial Truck & Industrial	$	56		$	57		$	108		$	113
Aftermarket & Trailer	28			30			48			55
Segment EBITDA	84			87			156			168
Unallocated legacy and corporate costs, net (1)	(3		)	—			1			(2		)
Interest expense, net	(21		)	(21		)	(43		)	(40		)
Provision for income taxes	(7		)	(6		)	(14		)	(13		)
Depreciation and amortization	(16		)	(17		)	(31		)	(32		)
Noncontrolling interests	—			—			(1		)	(1		)
Loss on sale of receivables	(2		)	(1		)	(4		)	(3		)
Restructuring costs	(2		)	(3		)	(3		)	(6		)
Income from continuing operations attributable to Meritor, Inc.	$	33		$	39		$	61		$	71

⁽¹⁾ Unallocated legacy and corporate costs, net represents items that are not directly related to the company's business segments. These costs 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.

Segment Assets:	March 31, 2016			September 30, 2015
Commercial Truck & Industrial	$	1,509		$	1,569
Aftermarket & Trailer	454			448
Total segment assets	1,963			2,017
Corporate (1)	340			434
Less: Accounts receivable sold under off-balance sheet factoring programs(2)	(210		)	(256		)
Total assets	$	2,093		$	2,195

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

⁽²⁾  At March 31, 2016 and September 30, 2015, segment assets include $210 million and $256 million, respectively, of accounts receivable sold under off-balance sheet accounts receivable factoring programs (see Note 8). These sold receivables are included in segment assets as the CODM reviews segment assets inclusive of these balances.

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).

Schedule I of Rule 5-04 of Regulation S-X requires that condensed financial information of the registrant ("Parent") on a stand alone basis be filed when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. Certain subsidiaries in China, India and Brazil are restricted by law from transfer of cash by dividends, loans, or advances to Parent, which exceeded 25 percent of consolidated net assets of Parent as of September 30, 2015. As of March 31, 2016, the company's proportionate share of net assets restricted from transfer by law was $37 million.

36

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In lieu of providing separate audited financial statements for the Parent and Guarantors, the company has included the accompanying condensed consolidating financial statements as permitted by Regulation S-X Rules 3-10 and 5-04. 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.

37

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In millions)

(Unaudited)

	Three Months Ended March 31, 2016
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	420		$	401		$	—		$	821
Subsidiaries	—			28			16			(44		)	—
Total sales	—			448			417			(44		)	821
Cost of sales	(12		)	(369		)	(363		)	44			(700		)
GROSS MARGIN	(12		)	79			54			—			121
Selling, general and administrative	(19		)	(21		)	(20		)	—			(60		)
Restructuring costs	—			(1		)	(1		)	—			(2		)
Other operating expense	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(34		)	57			33			—			56
Other income (expense), net	35			(9		)	(28		)	—			(2		)
Equity in earnings of affiliates	—			7			—			—			7
Interest income (expense), net	(28		)	7			—			—			(21		)
INCOME (LOSS) BEFORE INCOME TAXES	(27		)	62			5			—			40
Provision for income taxes	—			—			(7		)	—			(7		)
Equity income (loss) from continuing operations of subsidiaries	60			(6		)	—			(54		)	—
INCOME (LOSS) FROM CONTINUING OPERATIONS	33			56			(2		)	(54		)	33
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	(2		)	(1		)	3			(1		)
NET INCOME (LOSS)	32			54			(3		)	(51		)	32
Less: Net income attributable to noncontrolling interests	—			—			—			—			—
NET INCOME (LOSS) ATTRIBUTABLE TO MERITOR, INC.	$	32		$	54		$	(3	)	$	(51	)	$	32

38

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Three Months Ended March 31, 2016
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income (loss)	$	32	$	54	$	(3	)	$	(51	)	$	32
Other comprehensive income (loss)	18		23		(10		)	(13		)	18
Total comprehensive income (loss)	50		77		(13		)	(64		)	50
Less: Comprehensive income attributable to noncontrolling interests	—		—		—			—			—
Comprehensive income (loss) attributable to Meritor, Inc.	$	50	$	77	$	(13	)	$	(64	)	$	50

39

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In millions)

(Unaudited)

	Three Months Ended March 31, 2015
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	418		$	446		$	—		$	864
Subsidiaries	—			31			17			(48		)	—
Total sales	—			449			463			(48		)	864
Cost of sales	(10		)	(380		)	(407		)	48			(749		)
GROSS MARGIN	(10		)	69			56			—			115
Selling, general and administrative	(16		)	(26		)	(15		)	—			(57		)
Restructuring costs	(1		)	—			(2		)	—			(3		)
OPERATING INCOME (LOSS)	(27		)	43			39			—			55
Other income (expense), net	37			(9		)	(26		)	—			2
Equity in earnings of affiliates	—			8			1			—			9
Interest income (expense), net	(29		)	6			2			—			(21		)
INCOME (LOSS) BEFORE INCOME TAXES	(19		)	48			16			—			45
Provision for income taxes	(1		)	—			(5		)	—			(6		)
Equity income from continuing operations of subsidiaries	59			8			—			(67		)	—
INCOME FROM CONTINUING OPERATIONS	39			56			11			(67		)	39
INCOME FROM DISCONTINUED OPERATIONS, net of tax	4			5			3			(8		)	4
NET INCOME	43			61			14			(75		)	43
Less: Net income attributable to noncontrolling interests	—			—			—			—			—
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	43		$	61		$	14		$	(75	)	$	43

40

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Three Months Ended March 31, 2015
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
Net income	$	43		$	61		$	14	$	(75	)	$	43
Other comprehensive income (loss)	(22		)	(65		)	27		38			(22		)
Total comprehensive income (loss)	21			(4		)	41		(37		)	21
Less: Comprehensive income attributable to noncontrolling interests	—			—			—		—			—
Comprehensive income (loss) attributable to Meritor, Inc.	$	21		$	(4	)	$	41	$	(37	)	$	21

41

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In millions)

(Unaudited)

	Six Months Ended March 31, 2016
	Parent				Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—			$	837		$	793		$	—		$	1,630
Subsidiaries	—				55			32			(87		)	—
Total sales	—				892			825			(87		)	1,630
Cost of sales	(26		)	—	(746		)	(720		)	87			(1,405		)
GROSS MARGIN	(26		)		146			105			—			225
Selling, general and administrative	(39		)		(42		)	(35		)	—			(116		)
Restructuring costs	—				(1		)	(2		)	—			(3		)
Other operating expense	(3		)		—			—			—			(3		)
OPERATING INCOME (LOSS)	(68		)		103			68			—			103
Other income (loss), net	34				(9		)	(26		)	—			(1		)
Equity in earnings of affiliates	—				16			1			—			17
Interest income (expense), net	(59		)		15			1			—			(43		)
INCOME (LOSS) BEFORE INCOME TAXES	(93		)		125			44			—			76
Provision for income taxes	—				—			(14		)	—			(14		)
Equity income from continuing operations of subsidiaries	154				21			—			(175		)	—
INCOME FROM CONTINUING OPERATIONS	61				146			30			(175		)	62
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(3		)		(5		)	(4		)	9			(3		)
Net income	58				141			26			(166		)	59
Less: Net income attributable to noncontrolling interests	—				—			(1		)	—			(1		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	58			$	141		$	25		$	(166	)	$	58

42

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Six Months Ended March 31, 2016
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	58	$	141	$	26		$	(166	)	$	59
Other comprehensive income (loss)	24		12		(2		)	(10		)	24
Total comprehensive income	82		153		24			(176		)	83
Less: Comprehensive income attributable to noncontrolling interests	—		—		(1		)	—			(1		)
Comprehensive income attributable to Meritor, Inc.	$	82	$	153	$	23		$	(176	)	$	82

43

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In millions)

(Unaudited)

	Six months ended March 31, 2015
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	821		$	922		$	—		$	1,743
Subsidiaries	—			61			33			(94		)	—
Total sales	—			882			955			(94		)	1,743
Cost of sales	(24		)	(751		)	(832		)	94			(1,513		)
GROSS MARGIN	(24		)	131			123			—			230
Selling, general and administrative	(34		)	(54		)	(34		)	—			(122		)
Restructuring costs	(1		)	(3		)	(2		)	—			(6		)
Other operating income	—			—			1			—			1
OPERATING INCOME (LOSS)	(59		)	74			88			—			103
Equity in earnings of affiliates	—			15			3			—			18
Other income (loss), net	37			(9		)	(24		)	—			4
Interest income (expense), net	(58		)	13			5			—			(40		)
INCOME (LOSS) BEFORE INCOME TAXES	(80		)	93			72			—			85
Provision for income taxes	(1		)	—			(12		)	—			(13		)
Equity income from continuing operations of subsidiaries	152			53			—			(205		)	—
INCOME FROM CONTINUING OPERATIONS	71			146			60			(205		)	72
INCOME FROM DISCONTINUED OPERATIONS, net of tax	1			2			—			(2		)	1
NET INCOME	72			148			60			(207		)	73
Less: Net income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	72		$	148		$	59		$	(207	)	$	72

44

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Six months ended March 31, 2015
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
Net income	$	72		$	148		$	60	$	(207	)	$	73
Other comprehensive income (loss)	(44		)	(92		)	18		73			(45		)
Total comprehensive income	28			56			78		(134		)	28
Less: Comprehensive income attributable to noncontrolling interests	—			—			—		—			—
Comprehensive income attributable to Meritor, Inc.	$	28		$	56		$	78	$	(134	)	$	28

45

MERITOR, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

(In millions)

(Unaudited)

	March 31, 2016
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	24		$	5		$	65	$	—		$	94
Receivables trade and other, net	—			30			396		—			426
Inventories	—			165			197		—			362
Other current assets	4			22			27		—			53
TOTAL CURRENT ASSETS	28			222			685		—			935
NET PROPERTY	19			187			221		—			427
GOODWILL	—			219			180		—			399
OTHER ASSETS	55			133			144		—			332
INVESTMENTS IN SUBSIDIARIES	2,384			329			—		(2,713		)	—
TOTAL ASSETS	$	2,486		$	1,090		$	1,230	$	(2,713	)	$	2,093
CURRENT LIABILITIES:
Short-term debt	$	1		$	4		$	20	$	—		$	25
Accounts and notes payable	41			182			288		—			511
Other current liabilities	85			61			107		—			253
TOTAL CURRENT LIABILITIES	127			247			415		—			789
LONG-TERM DEBT	967			4			7		—			978
RETIREMENT BENEFITS	583			—			28		—			611
INTERCOMPANY PAYABLE (RECEIVABLE)	1,401			(1,986		)	585		—			—
OTHER LIABILITIES	34			238			44		—			316
EQUITY (DEFICIT) ATTRIBUTABLE TO        MERITOR, INC.	(626		)	2,587			126		(2,713		)	(626		)
NONCONTROLLING INTERESTS	—			—			25		—			25
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	2,486		$	1,090		$	1,230	$	(2,713	)	$	2,093

46

MERITOR, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

(In millions)

(Unaudited)

	September 30, 2015
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	73		$	6		$	114	$	—		$	193
Receivables trade and other, net	1			40			420		—			461
Inventories	—			159			179		—			338
Other current assets	4			20			26		—			50
TOTAL CURRENT ASSETS	78			225			739		—			1,042
NET PROPERTY	15			183			221		—			419
GOODWILL	—			219			183		—			402
OTHER ASSETS	61			129			142		—			332
INVESTMENTS IN SUBSIDIARIES	2,354			313			—		(2,667		)	—
TOTAL ASSETS	$	2,508		$	1,069		$	1,285	$	(2,667	)	$	2,195
CURRENT LIABILITIES:
Short-term debt	$	1		$	4		$	10	$	—		$	15
Accounts and notes payable	55			213			306		—			574
Other current liabilities	93			83			103		—			279
TOTAL CURRENT LIABILITIES	149			300			419		—			868
LONG-TERM DEBT	1,017			6			13		—			1,036
RETIREMENT BENEFITS	603			—			29		—			632
INTERCOMPANY PAYABLE (RECEIVABLE)	1,365			(1,886		)	521		—			—
OTHER LIABILITIES	45			217			43		—			305
EQUITY (DEFICIT) ATTRIBUTABLE TO        MERITOR, INC.	(671		)	2,432			235		(2,667		)	(671		)
NONCONTROLLING INTERESTS	—			—			25		—			25
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	2,508		$	1,069		$	1,285	$	(2,667	)	$	2,195

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MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In millions)

(Unaudited)

	Six Months Ended March 31, 2016
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	(20	)	$	18		$	41		$	—	$	39
INVESTING ACTIVITIES
Capital expenditures	(12		)	(22		)	(13		)	—		(47		)
Other investing activities	—			4			(1		)	—		3
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(12		)	(17		)	(11		)	—		(40		)
FINANCING ACTIVITIES
Repayment of notes	(55		)	—			—			—		(55		)
Repurchase of Common Stock	(43		)	—			—			—		(43		)
Intercompany advances	81			—			(81		)	—		—
Other financing activities	—			(2		)	—			—		(2		)
CASH USED FOR FINANCING ACTIVITIES	(17		)	(2		)	(81		)	—		(100		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			2			—		2
CHANGE IN CASH AND CASH EQUIVALENTS	(49		)	(1		)	(49		)	—		(99		)
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	73			6			114			—		193
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	24		$	5		$	65		$	—	$	94

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MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In millions)

(Unaudited)

	Six months ended March 31, 2015
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY        OPERATING ACTIVITIES	$	7		$	10		$	12		$	—	$	29
INVESTING ACTIVITIES
Capital expenditures	(1		)	(10		)	(12		)	—		(23		)
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(1		)	(9		)	(9		)	—		(19		)
FINANCING ACTIVITIES
Repayment of notes	(16		)	—			—			—		(16		)
Repurchase of common stock	(16		)	—			—			—		(16		)
Intercompany advances	54			—			(54		)	—		—
Other financing activities	—			(2		)	(4		)	—		(6		)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	22			(2		)	(58		)	—		(38		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			(12		)	—		(12		)
CHANGE IN CASH AND CASH EQUIVALENTS	28			(1		)	(67		)	—		(40		)
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	71			5			171			—		247
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	99		$	4		$	104		$	—	$	207

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 March 31, 2016 and September 30, 2015, Parent-only obligations included $611 million and $631 million of pension and retiree medical benefits, respectively (see Note 19). All debt is debt of the Parent other than $35 million and $33 million at March 31, 2016 and September 30, 2015, respectively (see Note 17), and is primarily related to capital lease obligations and lines of credit. There were $17 million cash dividends paid to the Parent by subsidiaries and investments accounted for by the equity method for the six months ended March 31, 2016 and $37 million for the six months ended March 31, 2015.

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MERITOR, INC.

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

OVERVIEW

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

2nd Quarter Fiscal Year 2016 Results

Our sales for the second quarter of fiscal year 2016 were $821 million, a decrease compared to $864 million in the same period in the prior fiscal year. The decrease in sales was driven by lower production in the North America Class 8 truck market and South America and the effect of foreign exchange translation particularly in Brazil partially offset by increased market share in the North America market.

Adjusted EBITDA (see Non-GAAP Financial Measures below) for the second quarter of fiscal year 2016 was $81 million compared to $87 million in the same period in the prior fiscal year. Our Adjusted EBITDA margin (see Non-GAAP Financial Measures below) in the second quarter of fiscal year 2016 was 9.9 percent compared to 10.1 percent in the same period a year ago. The decline in Adjusted EBITDA and Adjusted EBITDA margin was driven by lower production volumes in North and South America and a non-recurring foreign currency hedge gain in the second quarter of 2015, which were partially offset by lower material, labor and burden costs.

Net income from continuing operations attributable to the company for the second quarter of fiscal year 2016 was $33 millioncompared to $39 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 second quarter of fiscal year 2016 was$38 million compared to $43 million in the same period in the prior fiscal year.

Cash flow provided by operating activities was $44 million in the second quarter of fiscal year 2016 compared to cash flows provided by operating activities of $38 million in the same period last year.

Equity and Equity-Linked Repurchase Authorization

On March 1, 2016, substantially all of the $55 million of the 4.625% convertible notes were repurchased at 100 percent of the face value of the notes. The repurchase was part of the $210 million equity and equity linked repurchase program. The amount remaining available for repurchase under the authorization was $39 million at March 31, 2016.

Trends and Uncertainties

   Industry Production Volumes

     The following table reflects estimated on-highway commercial truck production volumes for selected original equipment (OE) markets for the three and six months ended March 31, 2016 and 2015 based on available sources and management’s estimates.

	Three Months Ended March 31,		Percent		Six Months Ended March 31,		Percent
	2016	2015	Change		2016	2015	Change
Estimated Commercial Truck production (in thousands):
North America, Heavy-Duty Trucks	64	79	(19	)%	136	156	(13	)%
North America, Medium-Duty Trucks	64	57	12	%	124	115	8	%
North America, Trailers	68	69	(1	)%	144	141	2	%
Western Europe, Heavy- and Medium-Duty Trucks	108	94	15	%	224	195	15	%
South America, Heavy- and Medium-Duty Trucks	15	24	(38	)%	30	52	(42	)%
India, Heavy- and Medium-Duty Trucks	94	74	27	%	168	132	27	%

North America:

We expect production volumes in North America to return to more normalized levels by historical standards in fiscal year 2016, which represents significantly decreased levels compared to those experienced in fiscal year 2015, particularly in the second half of fiscal year 2016.

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MERITOR, INC.

Western Europe:

During fiscal year 2016, we expect production volumes in Western Europe to increase compared to the levels experienced in fiscal year 2015.

South America:

During fiscal year 2016, we expect the markets in South America to remain consistent with the depressed levels experienced in the second half of fiscal year 2015.

China:

During fiscal year 2016, we expect production volumes in China to remain relatively flat compared with levels experienced in fiscal year 2015.

India:

During fiscal year 2016, we expect production volumes in India to continue to improve compared to the levels experienced in fiscal year 2015.

Industry-Wide Issues

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

• Uncertainty around the global market outlook;

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

• Disruptions in the financial markets and their impact on the availability and cost of credit;

• Volatile energy and increasing transportation costs;

• Impact of currency exchange rate volatility;

• Consolidation and globalization of OEMs and their suppliers; and

• Significant pension and retiree medical health care costs.

Other

Other significant factors that could affect our results and liquidity in fiscal year 2016 and beyond include:

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

• Failure to obtain new business;

• Our ability to manage possible adverse effects on our European operations, or financing arrangements related thereto, in the event one or more countries exit the European monetary union;

• Our ability to implement planned productivity, cost reduction, and other margin improvement initiatives;

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

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

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

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

• Competitively driven price reductions to our customers;

• Potential price increases from our suppliers;

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

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

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MERITOR, INC.

• Uncertainties of asbestos claim litigation and the outcome of litigation with insurance companies regarding the scope of coverage and the long-term solvency of our insurance carriers; and

• Restrictive government actions by foreign countries (such as restrictions on transfer of funds and trade protection measures, including 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, Adjusted diluted earnings (loss) per share from continuing operations, Adjusted EBITDA, Adjusted EBITDA margin, and Free cash flow.

     Adjusted income (loss) from continuing operations and Adjusted diluted earnings (loss) per share from continuing operations are defined as reported income or 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, 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. 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, management believes that Adjusted EBITDA, Adjusted EBITDA margin and Adjusted diluted earnings (loss) per share from continuing operations are meaningful measures of performance as they are commonly utilized by management and the investment community to analyze operating performance in our industry. Further, management uses these non-GAAP financial measures for planning and forecasting future periods. Management believes that Free cash flow is useful in analyzing our ability to service and repay debt and return value directly to shareholders.

     Adjusted income (loss) from continuing operations, Adjusted diluted earnings (loss) per share from continuing operations and Adjusted EBITDA 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 operating performance or to cash flows as a measure of liquidity. 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, these non-GAAP cash flow measures do not reflect cash used to repay debt or cash received from the divestitures of businesses or sales of other assets and thus do 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 March 31,						Six Months Ended March 31,
	2016			2015 (1)			2016			2015 (1)
Adjusted income from continuing operations attributable to the company, net of tax	$	38		$	43		$	69		$	79
Restructuring costs	(2		)	(3		)	(3		)	(6		)
Non-cash tax expense	(3		)	(1		)	(5		)	(2		)
Income from continuing operations attributable to the company	$	33		$	39		$	61		$	71
Adjusted diluted earnings per share from continuing operations	$	0.41		$	0.42		$	0.74		$	0.77
Impact of adjustments on diluted earnings per share	(0.05		)	(0.04		)	(0.09		)	(0.07		)
Diluted earnings per share from continuing operations	$	0.36		$	0.38		$	0.65		$	0.70

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MERITOR, INC.

⁽¹⁾  The three and six months ended March 31, 2015 have been recast to reflect non-cash tax expense.

Free cash flow is reconciled to cash flows used for operating activities below (in millions).

	Three Months Ended March 31,						Six Months Ended March 31,
	2016			2015			2016			2015
Cash provided by operating activities	$	44		$	38		$	39		$	29
Capital expenditures	(25		)	(11		)	(47		)	(23		)
Free cash flow	$	19		$	27		$	(8	)	$	6

Adjusted EBITDA is reconciled to net income attributable to Meritor, Inc. in Results of Operations below.

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MERITOR, INC.

Results of Operations

The following is a summary of our financial results (in millions, except per share amounts):

	Three Months Ended March 31,						Six Months Ended March 31,
	2016			2015			2016			2015
SALES:
Commercial Truck & Industrial	$	631		$	681		$	1,264		$	1,384
Aftermarket & Trailer	218			212			421			420
Intersegment Sales	(28		)	(29		)	(55		)	(61		)
SALES	$	821		$	864		$	1,630		$	1,743
SEGMENT EBITDA:
Commercial Truck & Industrial	$	56		$	57		$	108		$	113
Aftermarket & Trailer	28			30			48			55
SEGMENT EBITDA:	84			87			156			168
Unallocated legacy and corporate costs, net (1)	(3		)	—			1			(2		)
ADJUSTED EBITDA:	81			87			157			166
Interest expense, net	(21		)	(21		)	(43		)	(40		)
Provision for income taxes	(7		)	(6		)	(14		)	(13		)
Depreciation and amortization	(16		)	(17		)	(31		)	(32		)
Noncontrolling interests	—			—			(1		)	(1		)
Loss on sale of receivables	(2		)	(1		)	(4		)	(3		)
Restructuring costs	(2		)	(3		)	(3		)	(6		)
INCOME FROM CONTINUING OPERATIONS, net of tax, attributable to Meritor, Inc.	33			39			61			71
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax, attributable to Meritor, Inc.	(1		)	4			(3		)	1
NET INCOME attributable to Meritor, Inc.	$	32		$	43		$	58		$	72
DILUTED EARNINGS (LOSS) PER SHARE attributable to Meritor, Inc.:
Continuing operations	$	0.36		$	0.38		$	0.65		$	0.70
Discontinued operations	(0.01		)	0.04			(0.03		)	0.01
Diluted earnings per share	$	0.35		$	0.42		$	0.62		$	0.71
DILUTED AVERAGE COMMON SHARES OUTSTANDING	92.5			102.9			93.5			102.0

⁽¹⁾  Unallocated legacy and corporate costs, net represents items that are not directly related to our business segments. These costs primarily include asbestos-related charges, pension and retiree medical costs associated with sold businesses and other legacy costs for environmental charges.

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MERITOR, INC.

Three Months Ended March 31, 2016 Compared to Three Months Ended March 31, 2015

Sales

The following table reflects total company and business segment sales for the three months ended March 31, 2016 and 2015 (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 March 31,									Dollar Change Due To
	2016		2015		Dollar Change			% Change		Currency			Volume/ Other
Sales:
Commercial Truck & Industrial
North America	$	357	$	384	$	(27	)	(7	)%	$	—		$	(27	)
Europe	140		144		(4		)	(3	)%	(3		)	(1		)
South America	32		49		(17		)	(35	)%	(12		)	(5		)
China	18		25		(7		)	(28	)%	(1		)	(6		)
India	42		38		4			11	%	(3		)	7
Other	21		20		1			5	%	(1		)	2
Total External Sales	$	610	$	660	$	(50	)	(8	)%	$	(20	)	$	(30	)
Intersegment Sales	21		21		—			—	%	(1		)	1
Total Sales	$	631	$	681	$	(50	)	(7	)%	$	(21	)	$	(29	)
Aftermarket & Trailer
North America	$	181	$	176	$	5		3	%	$	(2	)	$	7
Europe	30		28		2			7	%	(1		)	3
Total External Sales	$	211	$	204	$	7		3	%	$	(3	)	$	10
Intersegment Sales	7		8		(1		)	(13	)%	(1		)	—
Total Sales	$	218	$	212	$	6		3	%	$	(4	)	$	10
Total External Sales	$	821	$	864	$	(43	)	(5	)%	$	(23	)	$	(20	)

Commercial Truck & Industrial sales were $631 million in the second quarter of fiscal year 2016, down 7 percent compared to the second quarter of fiscal year 2015. The decrease in sales was driven by lower production in the North America Class 8 truck market and South America and the effect of foreign exchange translation particularly in Brazil partially offset by increased market share in the North America market.

Aftermarket & Trailer sales were $218 million in the second quarter of fiscal year 2016, up 3percent compared to the second quarter of fiscal year 2015. The increase in sales was primarily driven by higher trailer production in North America.

Cost of Sales and Gross Profit

     Cost of sales primarily represents materials, labor and overhead production costs associated with the company’s products and production facilities. Cost of sales for the three months ended March 31, 2016 was $700 million compared to $749 million in the same period in the prior fiscal year, representing a decrease of 6.5 percent. Total cost of sales was 85.3 and 86.7 percent of sales for the three month periods ended March 31, 2016 and 2015, respectively.

     The following table summarizes significant factors contributing to the changes in costs of sales during the second quarter of fiscal year 2016 compared to the same quarter in the prior year (in millions):

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MERITOR, INC.

	Cost of Sales
Three Months Ended March 31, 2015	$	749
Volume, mix and other, net	(30		)
Foreign exchange	(19		)
Three Months Ended March 31, 2016	$	700

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

	Change in Cost of Sales
Lower material costs	$	(45	)
Lower labor and overhead costs	(10		)
Other, net	6
Total change in costs of sales	$	(49	)

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 March 31, 2016 decreased $45 million compared to the same period in the prior fiscal year primarily due to lower volumes, the movement in foreign currency rates, material economics and material performance programs.

Labor and overhead costsdecreased $10 million compared to the same period in the prior fiscal year primarily due to the movement in foreign currency rates and savings associated with labor and burden cost reduction programs.

Gross margin for the three-month periods ended March 31, 2016 and 2015 was $121 million and $115 million, respectively. Gross margin, as a percentage of sales, was 14.7 and 13.3 percent for the three-month periods ended March 31, 2016 and 2015, respectively. This improvement in gross margin percentage was primarily driven by lower material, labor and burden costs.

Other Income Statement Items

Selling, general and administrative expenses ("SG&A") for the three months ended March 31, 2016 and 2015 are summarized as follows (dollars in millions):

	Three Months Ended					Three Months Ended
	March 31, 2016					March 31, 2015					Increase (Decrease)
SG&A	Amount			% of sales		Amount			% of sales
Loss on sale of receivables	$	(2	)	(0.2	)%	$	(1	)	(0.1	)%	$	1		0.1 pts
Short and long-term variable      compensation	(7		)	(0.9	)%	(4		)	(0.5	)%	3			0.4 pts
All other SG&A	(51		)	(6.2	)%	(52		)	(6.0	)%	(1		)	0.2 pts
Total SG&A	$	(60	)	(7.3	)%	$	(57	)	(6.6	)%	$	3		0.7 pts

      All other SG&A, which represents normal selling, general and administrative expense, remained relatively flat year-over-year as a percentage of sales.

Restructuring costs of $2 million and $3 million were recorded in the three months ended March 31, 2016 and 2015, respectively. These costs primarily related to employee severance costs recognized by our Commercial Truck & Industrial segment.

Operating income increased by $1 million from $55 million in the second quarter of fiscal year 2015 to $56 million in the same period in fiscal year 2016. Key items affecting operating income are discussed above.

Equity in earnings of affiliates decreased by $2 million from $9 million in the second quarter of fiscal year 2015 to $7 million in the same period in fiscal year 2016.

Interest expense, net was $21 million in the second quarter of fiscal years 2016 and 2015.

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MERITOR, INC.

Provision for income taxes was $7 million in the second quarter of fiscal year 2016 compared to $6 million in the same period in the prior fiscal year. The increase in tax expense is primarily attributable to the recording of tax expense in jurisdictions in which we previously recognized a valuation allowance.

Income from continuing operations (before noncontrolling interests) decreased by $6 million from $39 million in the second quarter of fiscal year 2015 to $33 million in the same period in fiscal year 2016. The reasons for the decrease are discussed above.

Loss from discontinued operations, net of tax was $1 million in the second quarter of fiscal year 2016. For the same period in fiscal year 2015, income from discontinued operations, net of tax was $4 million, which primarily related to the resolution of indemnities from certain previously divested businesses.

Net income attributable to Meritor, Inc. decreased by $11 million from $43 million in the second quarter of fiscal year 2015 to $32 million in the same period in fiscal year 2016. The various factors affecting net income are discussed above.

Segment EBITDA and EBITDA Margins

Segment 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, and asset impairment charges. We use Segment EBITDA as the primary basis for the Chief Operating Decision Maker ("CODM") to evaluate the performance of each of our reportable segments. Segment EBITDA margin is defined as Segment EBITDA divided by consolidated sales from continuing operations.

     The following table reflects Segment EBITDA and Segment EBITDA margins for the three months ended March 31, 2016 and 2015 (in millions).

	Segment EBITDA							Segment EBITDA Margins
	Three Months Ended March 31,							Three Months Ended March 31,
	2016		2015		Change			2016		2015		Change
Commercial Truck & Industrial	$	56	$	57	$	(1	)	8.9	%	8.4	%	0.5 pts
Aftermarket & Trailer	28		30		(2		)	12.8	%	14.2	%	(1.4) pts
Segment EBITDA	$	84	$	87	$	(3	)	10.2	%	10.1	%	0.1 pts

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

	Commercial Truck & Industrial			Aftermarket & Trailer			TOTAL
Segment EBITDA– Quarter ended March 31, 2015	$	57		$	30		$	87
Lower earnings from unconsolidated affiliates	(2		)	—			(2		)
Impact of foreign currency option contracts gains (prior year)	(5		)	(1		)	(6		)
Impact of foreign currency translation	(2		)	—			(2		)
Volume, mix, pricing and other	8			(1		)	7
Segment EBITDA – Quarter ended March 31, 2016	$	56		$	28		$	84

Commercial Truck & Industrial Segment EBITDA was $56 million in the second quarter of fiscal year 2016, down $1 million from the same period in the prior fiscal year. Segment EBITDA margin increased to 8.9 percent compared to 8.4 percent in the same period in the prior fiscal year. The increase in Segment EBITDA margin was driven primarily by lower material, labor and burden costs, which more than offset the one-time foreign exchange hedge gains recognized in the second quarter of 2015.

  Aftermarket & Trailer Segment EBITDA was $28 million in the second quarter of fiscal year 2016, down $2 million from the same period in the prior fiscal year. Segment EBITDA margin decreased to 12.8 percent compared to 14.2 percent in the same period in the prior fiscal year. The decrease in Segment EBITDA and Segment EBITDA margin was primarily driven by unfavorable product mix.

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Six Months Ended March 31, 2016 Compared to Six Months Ended March 31, 2015

Sales

The following table reflects total company and business segment sales for the six months ended March 31, 2016 and 2015 (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.

	Six Months Ended March 31,									Dollar Change Due To
	2016		2015		Dollar Change			% Change		Currency			Volume/ Other
Sales:
Commercial Truck & Industrial
North America	$	722	$	747	$	(25	)	(3	)%	$	—		$	(25	)
Europe	286		304		(18		)	(6	)%	(24		)	6
South America	56		124		(68		)	(55	)%	(26		)	(42		)
China	39		52		(13		)	(25	)%	(2		)	(11		)
India	78		68		10			15	%	(6		)	16
Other	42		43		(1		)	(2	)%	(5		)	4
Total External Sales	$	1,223	$	1,338	$	(115	)	(9	)%	$	(63	)	$	(52	)
Intersegment Sales	41		46		(5		)	(11	)%	(6		)	1
Total Sales	$	1,264	$	1,384	$	(120	)	(9	)%	$	(69	)	$	(51	)
Aftermarket & Trailer
North America	$	350	$	346	$	4		1	%	$	(6	)	$	10
Europe	57		59		(2		)	(3	)%	(5		)	3
Total External Sales	$	407	$	405	$	2		—	%	$	(11	)	$	13
Intersegment Sales	14		15		(1		)	(7	)%	(5		)	4
Total Sales	$	421	$	420	$	1		—	%	$	(16	)	$	17
Total External Sales	$	1,630	$	1,743	$	(113	)	(6	)%	$	(74	)	$	(39	)

Commercial Truck & Industrial sales were $1,264 million in the first six months of fiscal year 2016, down 9 percent compared to the first six months of fiscal year 2015. The decrease in sales was impacted by lower production in the North America Class 8 truck market and South America and the effect of foreign exchange translation primarily driven by the strong U.S. dollar relative to the Brazilian real and euro.

Aftermarket & Trailer sales were $421 million in the second quarter of fiscal year 2016, consistent with sales in the first six months of fiscal year 2015. Sales were relatively flat as higher trailer production in North America offset the unfavorable impact of the strengthening U.S. dollar against the euro compared to the same period in the prior fiscal year.

Cost of Sales and Gross Profit

     Cost of sales primarily represents materials, labor and overhead production costs associated with the company’s products and production facilities. Cost of sales for the six months ended March 31, 2016 was $1,405 million compared to $1,513 million in the same period in the prior fiscal year, representing a decrease of 7 percent. Total cost of sales was 86.2 and 86.8 percent of sales for the six month periods ended March 31, 2016 and 2015, respectively.

     The following table summarizes significant factors contributing to the changes in costs of sales during the first six months of fiscal year 2016 compared to the same period in the prior year (in millions):

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	Cost of Sales
Six months ended March 31, 2015	$	1,513
Volume, mix and other, net	(46		)
Foreign exchange	(62		)
Six Months Ended March 31, 2016	$	1,405

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

	Change in Cost of Sales
Lower material costs	$	(89	)
Lower labor and overhead costs	(24		)
Other, net	5
Total change in costs of sales	$	(108	)

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 six months ended March 31, 2016 decreased $89 million compared to the same period in the prior fiscal year primarily due to lower volumes, movement in foreign currency rates, material economics and material performance programs.

Labor and overhead costsdecreased $24 million compared to the same period in the prior fiscal year primarily due to the movement in foreign currency rates and savings associated with labor and burden cost reduction programs.

Gross margin for the six-month periods ended March 31, 2016 and 2015 was $225 million and $230 million, respectively. Gross margin, as a percentage of sales, was 13.8 and 13.2 percent for the six-month periods ended March 31, 2016 and 2015, respectively. This improvement in gross margin percentage was primarily driven by lower material, labor and burden costs.

Other Income Statement Items

SG&A for the six months ended March 31, 2016 and 2015 are summarized as follows (dollars in millions):

	Six Months Ended					Six Months Ended
	March 31, 2016					March 31, 2015					Increase (Decrease)
SG&A	Amount			% of sales		Amount			% of sales
Loss on sale of receivables	$	(4	)	(0.2	)%	$	(3	)	(0.2	)%	$	1		0.0 pts
Short and long-term variable      compensation	(15		)	(0.9	)%	(12		)	(0.7	)%	3			0.2 pts
Insurance settlement	5			0.3	%	—			—	%	(5		)	(0.3) pts
All other SG&A	(102		)	(6.3	)%	(107		)	(6.1	)%	(5		)	0.2 pts
Total SG&A	$	(116	)	(7.1	)%	$	(122	)	(7.0	)%	$	(6	)	0.1 pts

In the first quarter of fiscal year 2016, we recognized $5 million related to an insurance settlement for recoveries for defense and indemnity costs associated with Maremont asbestos liabilities.

      All other SG&A, which represents normal selling, general and administrative expense, remained relatively flat year over year as a percentage of sales.

Restructuring costs of $3 million compared to $6 million were recorded during the first six months of March 31, 2016 and 2015, respectively. The costs incurred in the first six months of fiscal year 2016 primarily related to employee severance costs split between our Commercial Truck & Industrial segment and Aftermarket & Trailer segment. During the first six months of fiscal year 2015, $5 million of restructuring costs were recognized by our Commercial Truck & Industrial segment and $1 million by our corporate locations, primarily related to employee severance.

Operating income was $103 million in the first six months of fiscal year 2016 and 2015. Key items affecting operating income are discussed above.

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Equity in earnings of affiliates decreased by $1 million from $18 million in the first six months of fiscal year 2015 to $17 million in the same period in fiscal year 2016.

Interest expense, net increased by $3 million from $40 million in the first six months of fiscal year 2015 to $43 million in the same period in fiscal year 2016. In the third and fourth quarters of fiscal year 2015, we issued new debt, the proceeds of which we used to fund contributions to our pension plans and to repurchase certain other debt obligations. This resulted in a higher long-term debt balance in the first six months of fiscal year 2016 compared to the same period in fiscal year 2015.

Provision for income taxes was $14 million in the first six months of fiscal years 2016 compared to $13 million in the same period in the prior fiscal year. The increase in tax expense was primarily attributable to the recording of tax expense in jurisdictions in which we previously recognized a valuation allowance.

Income from continuing operations (before noncontrolling interests) decreased by $10 million from $72 million in the first six months of fiscal year 2015 to $62 million in the same period in fiscal year 2016. The reasons for the decrease are discussed above.

Loss from discontinued operations, net of tax was $3 million in the first six months of fiscal year 2016. For the same period in fiscal year 2015, income from discontinued operations, net of tax was $1 million, which included approximately $4 million of income related to the resolution of indemnities from certain previously divested businesses.

Net income attributable to Meritor, Inc. decreased by $14 million from $72 million in the first six months of fiscal year 2015 to $58 million in the same period in fiscal year 2016. The various factors affecting net income are discussed above.

Segment EBITDA and EBITDA Margins

     The following table reflects Segment EBITDA and Segment EBITDA margins for the six months ended March 31, 2016 and 2015 (dollars in millions).

	Segment EBITDA							Segment EBITDA Margins
	Six Months Ended March 31,							Six Months Ended March 31,
	2016		2015		Change			2016		2015		Change
Commercial Truck & Industrial	$	108	$	113	$	(5	)	8.5	%	8.2	%	0.3 pts
Aftermarket & Trailer	48		55		(7		)	11.4	%	13.1	%	(1.7) pts
Segment EBITDA	$	156	$	168	$	(12	)	9.6	%	9.6	%	0.0 pts

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

	Commercial Truck & Industrial			Aftermarket & Trailer			TOTAL
Segment EBITDA– Six months ended March 31, 2015	$	113		$	55		$	168
Lower earnings from unconsolidated affiliates	(1		)	—			(1		)
Impact of foreign currency options gains (prior year)	(5		)	(1		)	(6		)
Impact of foreign currency translation	(7		)	(1		)	(8		)
Volume, mix, pricing and other	8			(5		)	3
Segment EBITDA – Six months ended March 31, 2016	$	108		$	48		$	156

Commercial Truck & Industrial Segment EBITDA was $108 million in the first six months of fiscal year 2016, down $5 million from the same period in the prior fiscal year. Segment EBITDA margin increased to 8.5 percent compared to 8.2 percent in the same period in the prior fiscal year. The increase in Segment EBITDA margin was primarily driven by lower material, labor and burden costs, partially offset by a non-recurring foreign currency hedge gain in the second quarter of 2015.

  Aftermarket & Trailer Segment EBITDA was $48 million in the first six months of fiscal year 2016, down $7 million from the same period in the prior fiscal year. Segment EBITDA margin decreased to 11.4 percent compared to 13.1 percent in the same period in the prior fiscal year. The decrease in Segment EBITDA and Segment EBITDA margin was primarily driven by unfavorable product mix, foreign currency impacts, and one-time costs associated with the launch of a new warehouse system.

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Financial Condition

Cash Flows (in millions)

	Six Months Ended March 31,
	2016			2015
OPERATING CASH FLOWS
Income from continuing operations	$	62		$	72
Depreciation and amortization	31			32
Restructuring costs	3			6
Equity in earnings of affiliates	(17		)	(18		)
Pension and retiree medical expense	10			14
Dividends received from equity method investments	19			10
Pension and retiree medical contributions	(22		)	(24		)
Restructuring payments	(4		)	(3		)
Decrease (increase) in working capital	13			(63		)
Changes in off-balance sheet accounts receivable factoring	(51		)	40
Other, net	(4		)	(30		)
Cash flows provided by continuing operations	40			36
Cash flows used for discontinued operations	(1		)	(7		)
CASH PROVIDED BY OPERATING ACTIVITIES	$	39		$	29

Cash provided by operating activities in the first six months of fiscal year 2016 was $39 million compared to $29 million in the same period of fiscal year 2015, the increase is due in part to $17 million received related to an insurance settlement for recoveries for defense and indemnity costs associated with Maremont asbestos liabilities.

	Six Months Ended March 31,
	2016			2015
INVESTING CASH FLOWS
Capital expenditures	$	(47	)	$	(23	)
Other investing activities	3			—
Net investing cash flows provided by discontinued operations	4			4
CASH USED FOR INVESTING ACTIVITIES	$	(40	)	$	(19	)

Cash used forinvesting activitieswas$40 millionin the first six months of fiscal year 2016compared to$19 million in the same period in fiscal year 2015 due largely to an increase in capital expenditures as we invest in new product development to support our revenue growth initiatives.

	Six Months Ended March 31,
	2016			2015
FINANCING CASH FLOWS
Repayment of notes	$	(55	)	$	(16	)
Repurchase of common stock	(43		)	(16		)
Other financing activities	(2		)	(6		)
CASH USED FOR FINANCING ACTIVITIES	$	(100	)	$	(38	)

Cash used for financing activities was $100 million in the first six months of fiscal year 2016 compared to $38 million in the same period of fiscal year 2015. The increase in cash used for financing activities is primarily related to the repurchase of substantially all of the $55 million of principal amount 4.625 percent convertible notes and the $43 million (including commission costs) of cash used to repurchase 3.9 million shares of our common stock in the first quarter of fiscal year 2016 compared to the $16 million (including commission costs) on the repurchase of 1.2 million shares in the first six months of fiscal year 2015.

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Liquidity

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

	March 31,			September 30,
	2016			2015
Fixed-rate debt securities	$	712		$	712
Fixed-rate convertible notes	270			324
Unamortized discount on convertible notes	(17		)	(20		)
Other borrowings	38			35
Total debt	$	1,003		$	1,051

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, restructuring and product development programs. We expect fiscal year 2016 capital expenditures for our business segments to be approximately $90 million.

     We generally fund our operating and capital needs with cash on hand, cash flow 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 2014, we filed a shelf registration statement with the Securities and Exchange Commission, registering an unlimited 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.  The December 2014 shelf registration statement superseded and replaced the shelf registration statement filed in February 2012, as amended.

     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 February 2019.

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     Sources of liquidity as of March 31, 2016, in addition to cash on hand, are as follows (in millions):

	Total Facility Size		Utilized as of 3/31/16		Readily Available as of 3/31/16		Current Expiration
On-balance sheet arrangements:
Revolving credit facility (1)	$	499	$	—	$	499	February 2019 (1)
Committed U.S. accounts receivable securitization (2)	100		—		74		December 2018
Total on-balance sheet arrangements	$	599	$	—	$	573
Off-balance sheet arrangements: (2)
Swedish Factoring Facility	$	176	$	121	$	—	December 2016
U.S. Factoring Facility (3)	91		48		—		February 2019
U.K. Factoring Facility	28		7		—		February 2018
Italy Factoring Facility	34		19		—		June 2017
Other uncommitted factoring facilities	23		14		—		Various
Letter of credit facility	25		22		3		March 2019
Total off-balance sheet arrangements	377		231		3
Total available sources	$	976	$	231	$	576

(1) The availability under the revolving credit facility is subject to a collateral test and a priority debt-to-EBITDA ratio covenant and a reduction to $459 million in April 2017 as discussed under Revolving Credit Facility below.

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

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

Cash and Liquidity Needs – Our cash and liquidity needs have been affected by the level, variability and timing of our customers’ worldwide vehicle production and other factors outside of our control. At March 31, 2016, we had $94 million in cash and cash equivalents.

At March 31, 2016, we had approximately $44 million of our cash and cash equivalents held in jurisdictions outside of the U.S. that, if repatriated, could result in withholding taxes. It is our intent to reinvest those cash balances in our foreign operations and we will continue to meet our liquidity needs in the U.S. through ongoing cash flows from operations in the U.S., external borrowings or both.

Our availability under the revolving credit facility is subject to a collateral test and 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 those covenants as of the quarter end, we have full availability (up to the amount of collateral under the collateral test) 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 March 31, 2016, we were in compliance with all covenants under our credit agreement.

Equity and Equity-Linked Repurchase Authorization – In June 2014, our Board of Directors authorized the repurchase of up to $210 million of our equity and equity-linked securities (including convertible debt securities), subject to the achievement of our M2016 net debt reduction target and compliance with legal and regulatory requirements and our debt covenants. In September 2014, our Board authorized the repurchase of up to $40 million of our equity or equity-linked securities (including convertible debt securities) under the $210 million authorization that may be made annually without regard to achievement of the M2016 net debt reduction target. These authorizations have no stated expiration. As of March 31, 2016, we had repurchased 8.1 million shares of common stock for $98 million (including commission costs), $19 million principal amount of our 4.0 percent convertible notes due 2027, and substantially all of the $55 million principal amount of our 4.625 percent convertible notes due 2026 pursuant to the equity and equity-linked repurchase authorizations (see Note 17 of the Notes to Condensed Consolidated Financial Statements in Part I of this Quarterly Report). The amount remaining available for repurchase under the authorization was $39 million as of March 31, 2016.

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Debt Repurchase Programs - In January 2015, the Offering Committee of our Board of Directors approved a repurchase program for up to $150 million aggregate principal amount of any of our public debt securities (including convertible debt securities) from time to time through open market purchases or privately negotiated transactions or otherwise, until September 30, 2016, subject to compliance with legal and regulatory requirements and our debt covenants. This repurchase program is in addition to the equity and equity-linked repurchase authorizations described above. The amount remaining available for repurchases under the program was $150 million as of March 31, 2016.

2026 Convertible Notes Repurchase Authorization - In May 2015, the Offering Committee of our Board of Directors approved a repurchase program for up to $175 million aggregate principal amount at maturity of our 7.875 percent convertible notes due 2026 from time to time prior to September 30, 2015, subject to compliance with legal and regulatory requirements and our debt covenants. This repurchase program was in addition to the equity and equity-linked repurchase authorizations and debt repurchase program described above. This repurchase authorization expired on September 30, 2015.

Issuances of 2024 Notes - In fiscal year2014, we completed a public offering of debt securities consisting of the issuance of $225 million principal amount of 10-year, 6.25 percent notes due 2024 (the "Initial 2024 Notes"). The proceeds from the sale of the Initial 2024 Notes were $225 million and, together with cash on hand, were used to repurchase $250 million principal amount of our outstanding 10.625 percent notes due 2018.

In fiscal year 2015, we completed a public offering consisting of the issuance of an additional $225 million aggregate principal amount of 6.25 percent notes due 2024 (the "Additional 2024 Notes"), in an underwritten public offering. The proceeds from the sale of the Additional 2024 Notes were used to replenish available cash used to pay $179 million, including premium and fees, to repurchase $110 million principal amount at maturity of our 7.875 percent convertible notes due 2026. We used the remaining net proceeds, along with cash, to purchase annuities to satisfy our obligations under our Canadian and German pension plans.

These Additional 2024 Notes constitute a further issuance of, and are fungible with, the $225 million aggregate principal amount of the Initial 2024 Notes that we issued on February 13, 2014 and form a single series with the Initial 2024 Notes (collectively, the “2024 Notes”). The Additional 2024 Notes have terms identical to the Initial 2024 Notes, other than issue date and offering price, and have the same CUSIP number as the Initial 2024 Notes. Upon completion of the offering, the aggregate principal amount of outstanding notes of this series was $450 million.

The 2024 Notes constitute senior unsecured obligations of Meritor and rank equally in right of payment with our existing and future senior unsecured indebtedness, and effectively junior to existing and future secured indebtedness. They are guaranteed on a senior unsecured basis by each of our subsidiaries from time to time guaranteeing the senior secured credit facility. Prior to February 15, 2017, we may redeem up to approximately $79 million aggregate principal amount of the 2024 Notes with the net cash proceeds of one or more public sales of our common stock at a redemption price equal to 106.25 percent of the principal amount, plus accrued and unpaid interest, if any, provided that at least approximately $146 million aggregate principal amount of the 2024 Notes remains outstanding after each such redemption. Prior to February 15, 2019, we may redeem, at our option, from time to time, the 2024 Notes, in whole or in part, at a redemption price equal to of 100 percent of principal amount of the 2024 Notes to be redeemed, plus the applicable premium as of the redemption date on the 2024 Notes to be redeemed, and any accrued and unpaid interest. On or after February 15, 2019, 2020, 2021 and 2022, we have the option to redeem the 2024 Notes, in whole or in part, at the redemption price of 103.125 percent, 102.083 percent, 101.042 percent, and 100.000 percent, respectively.

If a Change of Control (as defined in the indenture under which the 2024 Notes were issued) occurs, unless we have exercised our right to redeem the securities, each holder of the 2024 Notes may require us to repurchase some or all of such holder's securities at a purchase price equal to 101 percent of the principal amount to be repurchased, plus accrued and unpaid interest, if any.

Issuance of 2021 Notes - In May 2013, we completed a public offering of debt securities consisting of the issuance of $275 million principal amount of 8-year, 6.75 percent notes due 2021 (the "2021 Notes"). The 2021 Notes were offered and sold pursuant to our shelf registration statement that was effective at the time of the offering. The proceeds from the sale of the 2021 Notes were $275 million and were primarily used to repurchase $167 million principal amount of our 8.125 percent notes due 2015 through a cash tender offer. The 2021 Notes constitute senior unsecured obligations of the company and rank equally in right of payment with its existing and future senior unsecured indebtedness and effectively junior to existing and future secured indebtedness to the extent of the security therefor. They are guaranteed on a senior unsecured basis by each of the company's subsidiaries from time to time guaranteeing the senior secured credit facility. Prior to June 15, 2016, the company may redeem up to 35 percent of the aggregate principal amount of the 2021 Notes issued on the initial issue date with the net cash proceeds of one or more public sales of our common stock at a redemption price equal to 106.75 percent of the principal amount, plus accrued and unpaid interest, if any, provided that at least 65% of the aggregate principal amount of the 2021 Notes issued on the initial issue date remains outstanding after each such redemption. On or after June 15, 2016, 2017, 2018 and 2019, the company has the option to redeem the 2021 Notes, in whole or in part, at the redemption price of 105.063 percent, 103.375 percent, 101.688 percent, and 100.000 percent, respectively.

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If a Change of Control (as defined in the indenture under which the 2021 Notes were issued) occurs, unless the company has exercised its right to redeem the securities, each holder of the 2021 Notes may require the company to repurchase some or all of such holder's securities at a purchase price equal to 101 percent of the principal amount, plus accrued and unpaid interest, if any.

Repurchase of 2026 Notes - In fiscal year 2015, we repurchased $110 million principal amount at maturity of our 7.875 percent convertible notes due 2026, of which $85 million were repurchased at a premium equal to approximately 64 percent of their principal amount in the third quarter of fiscal year 2015, and $25 million were repurchased at a premium equal to approximately 58 percent of their principal amount in the fourth quarter of fiscal year 2015. The premium paid over par reflects the market price of these notes, which includes the embedded option value of the security. Since the conversion option with a conversion price of $12 per share was in the money at the time of repurchase, this drove a significant premium. These repurchases were accounted for as extinguishments of debt, and accordingly, we recognized a net loss on debt extinguishment of $24 million in fiscal year 2015. The net loss on debt extinguishment was included in the consolidated statement of operations in interest expense, net. The repurchases were made under our 2026 convertible notes repurchase authorization described above.

Repurchase of 2027 Notes - In fiscal year 2015, we repurchased $19 million principal amount of our 4.0 percent convertible notes due 2027. The repurchases were accounted for as extinguishments of debt, and accordingly, we recognized an insignificant net loss on debt extinguishment. The net loss on debt extinguishment was included in the consolidated statement of operations in interest expense, net.

Revolving Credit Facility – On May 22, 2015, we entered into a second amendment of our senior secured revolving credit facility. Pursuant to the revolving credit agreement as amended, we have a $499 million revolving credit facility, $40 million of which matures in April 2017 for banks that elected not to extend their commitments under the revolving credit facility, and $459 million of which matures in February 2019. The availability under this facility is dependent upon various factors, including principally performance against certain financial covenants as highlighted below. Prior to May 22, 2015, $89 million of the $499 million revolving credit facility was scheduled to mature in April 2017 for banks that elected not to extend their commitments under the revolving credit facility, and $410 million was scheduled to mature in February 2019.

 The availability under the revolving credit facility is subject to certain financial covenants based on (i) the ratio of our priority debt (consisting principally of amounts outstanding under the revolving credit facility, U.S. accounts receivable securitization and factoring programs, and third-party non-working capital foreign debt) to EBITDA and (ii) the amount of annual capital expenditures. We are required to maintain a total priority-debt-to-EBITDA ratio, as defined in the agreement, of 2.25 to 1.00 or less as of the last day of each fiscal quarter throughout the term of the agreement. At March 31, 2016, we were in compliance with all covenants under the revolving credit facility with a ratio of approximately 0.21x for the priority debt-to-EBITDA ratio covenant.

     The availability under the revolving credit facility is also subject to a collateral test, pursuant to which borrowings on the revolving credit facility cannot exceed 1.0x the collateral test value. The collateral test is performed on a quarterly basis. At March 31, 2016, the revolving credit facility was collateralized by approximately $647 million of our assets, primarily consisting of eligible domestic U.S. accounts receivable, inventory, plant, property and equipment, intellectual property and our investment in all or a portion of certain of its wholly-owned subsidiaries.

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 our current corporate credit rating. At March 31, 2016, the margin over LIBOR rate was 325 basis points, and the commitment fee was 50 basis points. Overnight revolving credit loans are at the prime rate plus a margin of 225 basis points.

Certain of our subsidiaries, as defined in the revolving credit agreement, irrevocably and unconditionally guarantee amounts outstanding under the revolving credit facility. Similar subsidiary guarantees are provided for the benefit of the holders of the publicly-held notes outstanding under our indentures (see Note 23 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report).

No borrowings were outstanding under the revolving credit facility at March 31, 2016 and September 30, 2015. The amended and extended revolving credit facility includes $100 million of availability for the issuance of letters of credit. At March 31, 2016 and September 30, 2015, there were no letters of credit outstanding under the revolving credit facility.

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U.S. Securitization Program – We have a $100 million U.S. accounts receivables securitization facility. On December 4, 2015, the company entered into an amendment which extends the facility expiration date to December 4, 2018. The maximum permitted priority-debt-to-EBITDA ratio as of the last day of each fiscal quarter under the facility is 2.25 to 1.00. This program is provided by PNC Bank, National Association, as Administrator and Purchaser, and the other Purchasers and Purchaser Agents from time to time (participating lenders), which are party to the agreement. Under this program, we have the ability to sell an undivided percentage ownership interest in substantially all of our trade receivables (excluding the receivables due from AB Volvo and subsidiaries eligible for sale under the U.S. accounts receivable factoring facility) of certain U.S. subsidiaries to ArvinMeritor Receivables Corporation ("ARC"), a wholly-owned, special purpose subsidiary. ARC funds these purchases with borrowings from participating lenders under a loan agreement. This program also includes a letter of credit facility pursuant to which ARC may request the issuance of letters of credit issued for our U.S. subsidiaries (originators) or their designees, which when issued will constitute a utilization of the facility for the amount of letters of credit issued. Amounts outstanding under this agreement are collateralized by eligible receivables purchased by ARC and are reported as short-term debt in the condensed consolidated balance sheet. At March 31, 2016 and September 30, 2015, no amounts, including letters of credit, were outstanding under this program. This securitization program contains a cross default to our revolving credit facility. At March 31, 2016, we were in compliance with all covenants under our credit agreement (see Note 17 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report). At certain times during any given month, we may sell eligible accounts receivable under this program to fund intra-month working capital needs. In such months, we would then typically utilize the cash received from our customers throughout the month to repay the borrowings under the program. Accordingly, during any given month, we may borrow under this program in amounts exceeding the amounts shown as outstanding at fiscal quarter ends.

Capital Leases – On March 20, 2012, we entered into an arrangement to finance equipment acquisitions for various U.S. locations. Under this arrangement, we can request financing from GE Capital Commercial, Inc. (GE Capital) for progress payments for equipment under construction, not to exceed $10 million at any time. The financing rate is equal to the 30-day LIBOR plus 475 basis points per annum. Under this arrangement, we can also enter into lease arrangements with GE Capital for completed equipment. The lease term is 60 months and the lease interest rate is equal to the 5-year Swap Rate published by the Federal Reserve Board plus 564 basis points. We had $8 million and $10 million outstanding under this capital lease arrangement as of March 31, 2016 and September 30, 2015, respectively. In addition, we had another $9 million and $7 million outstanding through other capital lease arrangements at March 31, 2016 and September 30, 2015, respectively.

Export financing arrangements – Certain of our current export financing arrangements were entered into through our Brazilian subsidiary pursuant to an incentive program of the Brazilian government to fund working capital for Brazilian companies in exportation programs. The arrangements bear interest at 5.5 percent and have maturity dates in 2016 and 2017. There was $19 million and $18 million, respectively, outstanding under these arrangements at March 31, 2016 and September 30, 2015.

Other – One of our consolidated joint ventures in China participates in a bills of exchange program to settle its obligations with its trade suppliers. These programs are common in China and generally require the participation of local banks. Under these programs, our joint venture issues notes payable through the participating banks to its trade suppliers. If the issued notes payable remain unpaid on their respective due dates, this could constitute an event of default under our revolving credit facility if the defaulted amount exceeds $35 million per bank. As of March 31, 2016 and September 30, 2015, we had $8 million and $13 million, respectively, outstanding under this program at more than one bank.

Credit Ratings – At March 31, 2016, our Standard & Poor’s corporate credit rating, senior secured credit rating, and senior unsecured credit rating were B+, BB and B, respectively. Our Moody’s Investors Service corporate credit rating, senior secured credit rating, and senior unsecured credit rating were B1, Ba1 and B2, 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 March 31, 2016 of $210 million, of which $170 million was attributable to committed factoring facilities involving the sale of AB Volvo accounts receivables. The remaining amount of $40 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 364-day liquidity commitment from Nordea Bank which was renewed through December2016. Commitments under all of our factoring facilities are subject to standard terms and conditions for these types of arrangements (including, in case of the U.K. and Italy commitments, a sole discretion clause whereby the bank retains the right to not purchase receivables, which has not been invoked since the inception of the respective programs).

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Letter of Credit Facilities – On February 21, 2014, we amended and restated our 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, we had the right to obtain the issuance, renewal, extension and increase of letters of credit up to an aggregate availability of $30 million through December 19, 2015. From December 20, 2015 through March 19, 2019, the aggregate availability is $25 million. This facility contains covenants and events of default generally similar to those existing in our public debt indentures. We had $22 million and $24 million of letters of credit outstanding under this facility at March 31, 2016 and September 30, 2015, respectively. In addition, we had another $6 million of letters of credit outstanding through other letter of credit facilities at March 31, 2016 and September 30, 2015.

Contingencies

Contingencies related to environmental, asbestos and other matters are discussed in Note 20 of the Notes to Condensed Consolidated Financial Statements in Part I of this Quarterly Report.

Critical Accounting Policies

Our defined benefit pension plans and retirement medical plans are accounted for on an actuarial basis, which requires the selection of various assumptions, including the mortality of participants. The mortality assumptions for participants in our U.S. plans incorporates future mortality improvements from tables published by the Society of Actuaries (SOA). We periodically review the mortality experience of our U.S. plans’ participants against these assumptions.

In October 2014, the SOA issued new mortality and mortality improvement tables. We reviewed the new SOA mortality and mortality improvement tables and utilized our actuary to conduct a study based on our plan participants. We determined that the best representation of our plans' mortality was to utilize the new SOA mortality and mortality improvement tables as the reference table for credibility-weighted mortality rates, blended with our specific mortality based on the study conducted by our actuary. We incorporated the updated tables into our 2015 year-end measurement of the plans’ benefit obligations.

New Accounting Pronouncements

New Accounting Pronouncements are discussed in Note 3 of the Notes to Condensed Consolidated Financial Statements in Item 1. Financial Statements.

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 consolidated financial statements. As a result, appreciation of the U.S. dollar against these foreign currencies generally will have a negative impact on our reported revenues and operating income while depreciation of the U.S. dollar against these foreign currencies will generally have a positive effect on reported revenues and operating income. In the second quarter of fiscal year 2016, our reported financial results were affected by the strengthening of the U.S. dollar year over year against most currencies, particularly the Brazilian real.

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 our foreign currency forward contracts. Under this cash flow hedging program, we designate the foreign currency contracts (the "contracts") as cash flow hedges of underlying forecasted foreign currency purchases and sales. The effective portion of changes in the fair value of the contracts is recorded in Accumulated Other Comprehensive Loss ("AOCL") in the statement of shareowners’ equity and is recognized in operating income when the underlying forecasted transaction impacts earnings. The contracts generally mature within 12 months.

We use foreign currency option contracts to mitigate foreign currency exposure on expected future Indian rupee denominated purchases. The contracts were entered into during the third quarter of fiscal year 2014 with effective dates from the start of fiscal year 2015 through the end of fiscal year 2017. In the second quarter of fiscal year 2015, we monetized our outstanding foreign currency option contracts and entered into a new series of foreign currency option contracts with effective dates from the start of the third quarter of fiscal year 2015 through the end of fiscal year 2017. Changes in fair value associated with these contracts are recorded in cost of sales in the consolidated statements of operations.

From time to time, we hedge against foreign currency exposure related to translations to U.S. dollars of our financial results denominated in foreign currencies. In the first quarter of fiscal year 2015, due to the volatility of the Brazilian real as compared to the U.S. dollar, we entered into a series of foreign currency option contracts that did not qualify for hedge accounting but were expected to mitigate foreign currency translation exposure of Brazilian real earnings to U.S. dollars. In the second quarter of fiscal

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year 2015, we monetized these outstanding foreign currency option contracts and entered into a new series of foreign currency option contracts with effective dates from the start of the third quarter of fiscal year 2015 through the end of fiscal year 2015. In the third and fourth quarters of fiscal year 2015, we monetized these outstanding foreign currency option contracts. As of March 31, 2016 and September 30, 2015, there were no Brazilian real foreign currency option contracts outstanding.

In the fourth quarter of fiscal year 2015 and first quarter of fiscal year 2016, due to the risk of volatility of the Swedish krona and euro as compared to the U.S. dollar, we entered into a series of foreign currency option contracts that do not qualify for hedge accounting but are expected to mitigate foreign currency translation exposure of Swedish krona and euro earnings to U.S. dollars. Changes in fair value associated with these contracts are recorded in other income, net, in the consolidated statements of operations.

Interest rate risk relates to the gain/increase or loss/decrease we could incur on 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)	$	1.1		$	(1.1	)	Fair Value
Forward contracts in Euro (1)	(2.6		)	2.6			Fair Value
Foreign currency denominated debt (2)	2.7			(2.7		)	Fair Value
Foreign currency option contracts in USD	(0.3		)	3.4			Fair Value
Foreign currency option contracts in Euro	(0.2		)	1.0			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)	$	(28.2	)	$	29.3		Fair Value
Debt – variable rate	—			—			Cash flow
Interest rate swaps	—			—			Fair Value

(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 March 31, 2016, the fair value of outstanding foreign currency denominated debt was $27 million. A 10% decrease in quoted currency exchange rates would result in a decrease of $3 million in foreign currency denominated debt. At March 31, 2016, a 10% increase in quoted currency exchange rates would result in an increase of $3 million in foreign currency denominated debt.

(3) At March 31, 2016, the fair value of outstanding debt was $982 million. A 50 basis points decrease in quoted interest rates would result in an increase of $29 million in the fair value of fixed rate debt. A 50 basis points increase in quoted interest rates would result in a decrease of $28 million in the fair value of fixed rate debt.

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Item 4. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2016. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of March 31, 2016, 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 March 31, 2016 that materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

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

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Except as set forth in Note 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, 2015, as amended.

Item 1A. Risk Factors

There have been no material changes in risk factors involving the company or its subsidiaries from those previously disclosed in the company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2015, as amended.

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 March 31, 2016:

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)
January 1- 31, 2016	—	$	—	—	$	—
February 1- 29, 2016	—	$	—	—	$	—
March 1- 31, 2016	—	$	—	—	$	—
Total	—			—

(1) On June 23, 2014, we announced that our Board of Directors authorized the repurchase of up to $210 million of our equity and equity-linked securities (including convertible debt securities), subject to the achievement of our M2016 net debt reduction target and compliance with legal and regulatory requirements and our debt covenants. In September 2014, our Board authorized the repurchase of up to $40 million of our equity or equity-linked securities (including convertible debt securities) under the $210 million authorization that may be made annually without regard to achievement of the M2016 net debt reduction target. These authorizations have no stated expiration. For the six months ended March 31, 2016, we repurchased 3.9 million shares of common stock for $42 million. As of March 31, 2016, we have repurchased 8.1 million shares of common stock for $97 million, $19 million principal amount of our 4.0 percent convertible notes due 2027 and substantially all of the $55 million principal amount of our 4.625 percent convertible notes due 2026 pursuant to the equity and equity-linked repurchase authorizations. The amount remaining available for repurchase under the authorization was $39 million as of March 31, 2016.

     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 second quarter of fiscal 2016 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 second quarter of fiscal 2016 to satisfy tax obligations upon the vesting of restricted shares. The company does not believe such purchases or transactions described above are issuer repurchases for the purposes of this Item 2 of Part II of this Quarterly Report on Form 10-Q.

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Item 5. Other Information

Cautionary Statement

This Quarterly Report on Form 10-Q contains statements relating to future results of the company (including certain projections and business trends) that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words or phrases such as “believe,” “expect,” “anticipate,” “estimate,” “should,” “are likely to be,” “will” and similar expressions. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to reliance on major original equipment manufacturer (“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 our European operations, or financing arrangements related thereto, in the event one or more countries exit the European monetary union; risks inherent in operating abroad (including foreign currency exchange rates, implications of foreign regulations relating to pensions and potential disruption of production and supply due to terrorist attacks or acts of aggression); rising costs of pension and other postemployment benefits; the ability to achieve the expected benefits of restructuring actions; the demand for commercial and specialty vehicles for which we supply products; whether our liquidity will be affected by declining vehicle productions in the future; OEM program delays; demand for and market acceptance of new and existing products; successful development 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 difficulties competing with companies that have avoided their existing contracts in bankruptcy and reorganization proceedings; 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 litigation with respect to environmental or asbestos-related 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. See also the following portions of our Annual Report on Form 10-K for the year ended September 30, 2015, as amended: Item 1. Business, “Customers; Sales and Marketing”; “Competition”; “Raw Materials and Supplies”; “Employees”; “Environmental Matters”; “International Operations”; and “Seasonality; Cyclicality”; Item 1A.Risk Factors; Item 3. Legal Proceedings; and Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 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, filed as Exhibit 3-a to Meritor’s Annual Report on Form 10-K for the fiscal year ended September 30, 2015, is incorporated herein by reference.
3-b	Amended and Restated By-laws of Meritor, filed as Exhibit 3-b to Meritor's Current Report on Form 8-K filed on April 22, 2016 is incorporated herein by reference.
10-a**	Receivables Purchase Agreement dated as of February 19, 2016, by and among Meritor Heavy Vehicle Braking Systems (U.S.A.), LLC and Meritor Heavy Vehicle Systems, LLC, as sellers, and Nordea Bank AB, as purchaser.
10-b**	Amendment No. 2 dated as of March 29, 2016 to Receivables Purchase Agreement dated as of June 28, 2011 among Meritor HVS AB, as seller, Viking Asset Purchaser No. 7 IC, as purchaser, and Citicorp Trustee Company Limited, as programme trustee.
10-c	Letter Agreement dated as of April 21, 2016 between Meritor, Inc. and Ivor J. Evans filed as Exhibit 10-a to Meritor’s Current Report on Form 8-K filed on April 22, 2016, is incorporated herein by reference
12**	Computation of ratio of earnings to fixed charges
23**	Consent of Bates White LLC
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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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:	May 5, 2016	By:	/s/	Richard D. Rose
				Richard D. Rose
				Interim Senior Vice President, General Counsel and Secretary
				(For the registrant)
Date:	May 5, 2016	By:	/s/	Paul D. Bialy
				Paul D. Bialy
				Vice President, Controller and Principal Accounting Officer
Date:	May 5, 2016	By:	/s/	Kevin A. Nowlan
				Kevin A. Nowlan
				Senior Vice President and Chief Financial Officer

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EX-10.A

CLIFFORDCLIFFORD CHANCE LLP

CHANCE

Exhibit 10-a

		EXECUTION VERSION
DATED AS OF 19 FEBRUARY 2016 BY AND AMONG
MERITOR HEAVY VEHICLE BRAKING SYSTEMS (U.S.A.), LLC AND MERITOR HEAVY VEHICLE SYSTEMS, LLC AS SELLERS AND NORDEA BANK AB (PUBL) AS PURCHASER
	RECEIVABLES PURCHASE AGREEMENT

CONTENTS
Clause	Page

1. Definitions And Construction    2

2. Purchase And Sale    11

3. Conditions Precedent To Initial Purchase    12

4. Payments to the purchaser, etc.    14

5. Representations, Warranties And Undertakings    14

6. Remedies for untrue representation, etc.    17

7. Further Assurance; Security Interest    17

8. Notices    19

9. Assignment And Supplements    19

10. Amendments And Modifications    19

11. Rights Cumulative, Waivers    20

12. Apportionment    20

13. Partial Invalidity    20

14. Confidentiality    20

15. Governing Law; Jurisdiction; Waiver Of Jury Trial    22

16. Termination    22

17. Integration    23

18. Binding Effect    23

19. Counterparts    23

Schedule 1 Eligibility Criteria 25

Schedule 2 Conclusion Of Purchase – Offer And Acceptance, Purchase Price And Perfection 27

Part 1 Conclusion of Purchase – offer and acceptance 27

Part 2 Purchase Price 28

Part 3 Perfection 29

Schedule 3 Representations, Warranties And Undertakings 33

Part 1 Representations and Warranties relating to the Sellers 33

Part 2 Representations and Warranties relating to the Purchased Receivables 36

Part 3 Representations and Warranties relating to the Purchaser 38

Schedule 4 [Form Of Solvency Certificate 39

Schedule 5 Sellers' Place Of Business; Records Location; Tax ID Number 40

87441-3-5256-v7.0 87441-3-5256-v7.0 87441-3-5256-v7.0

RECEIVABLES PURCHASE AGREEMENT

This RECEIVABLES PURCHASE AGREEMENT, dated as of 19 February, 2016, is made by and among MERITOR HEAVY VEHICLE BRAKING SYSTEMS (U.S.A.), LLC, a Delaware limited liability company formerly known as Meritor Heavy Vehicle Braking Systems (U.S.A.), Inc. and MERITOR HEAVY VEHICLE SYSTEMS, LLC, a Delaware limited liability company (each a "Seller", and collectively, the "Sellers"), and NORDEA BANK AB (PUBL) (the "Purchaser"), a Swedish limited liability company.

PRELIMINARY STATEMENTS

Each Seller is prepared to make Offers of Receivables to the Purchaser. The Purchaser will issue Acceptances to the relevant Seller, in each case on the terms and subject to the conditions set forth herein.

Accordingly, parties agree as follows:

1. DEFINITIONS AND CONSTRUCTION

1.1 Definitions

In this Agreement the following terms have the following meanings:

"Acceptance" means an acceptance issued by the Purchaser to the relevant Seller through the PrimeRevenue System or in any other form acceptable to the Purchaser in response to an Offer.

"Adverse Claim"means any lien, security interest or other charge or encumbrance, or other right or claim in, of or on any asset or property of a Person in favor of another Person.

"Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such first Person.

"Aggregate Euro Outstanding Amount" means, at any time, the aggregate of the Euro Outstanding Amount of all of the Purchased Receivables at that time.

"Aggregate Outstanding Amount"means, at any time, the aggregate of the Outstanding Amount of all the Purchased Receivables at that time.

"Anti-Corruption Laws"means all laws, rules and regulations from time to time, as amended, concerning or relating to bribery or corruption, including but not limited to the U.S. Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010 and all other applicable anti-bribery and corruption laws;

"Bail-In Action" means the exercise of any Write-down and Conversion Powers.

"Bail-In Legislation" means in relation to an EEA Member Country which has implemented, or which at any time implements, the Article 55 Requirement, establishing a framework for the recovery and resolution of credit institutions and investment firms ,

87441-3-5256-v7.0 87441-3-5256-v7.0 87441-3-5256-v7.0

the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from time to time

"Business Day"means a day on which banks are open in Copenhagen, Stockholm, Jersey, New York City and London for the transaction of business of the nature required by the Transaction Documents.

"Calculation Date"means a Purchase Date provided that if such day is not a Business Day it shall be the next Business Day following such day.

"CMSAs" means the Mack Trucks CMSA, the Volvo Group North America CMSA and any other Customer Managed Service Agreement entered into between a Permitted Obligor and PrimeRevenue, and "CMSA" means any of them.

"Collections"means the aggregate of all amounts paid by the relevant obligors in respect of any and all Purchased Receivables relating to the Purchaser plus any amounts payable to the Purchaser by the relevant Seller but not yet paid to the Purchaser following settlement of the final amount of any claim under any of the warranties, covenants and indemnities contained in this Agreement.

"Defaulted Receivable"means a Purchased Receivable in respect of which there is a Permitted Obligor Default.

"Delinquent Receivable" means, at any time, a Receivable in respect of which all or any part of the Outstanding Amount is not paid on its due date.

"Dollars" or "US$" means the lawful currency of the United States.

"Economic Sanctions Law"means any economic or financial sanctions administered, enacted or enforced by OFAC, the US Department of State, any other agency of the US government, the United Nations, the European Union or any member state thereof, or any other national economic sanctions authority. Notwithstanding the foregoing, Economic Sanctions Law shall not include any economic or financial sanctions administered by the Russian Federation or any authority of the Russian Federation;

"Eligibility Criteria"means the eligibility criteria in respect of the Purchased Receivables set out in Schedule 1 of this Agreement.

"EEA Member Country" means any member state of the European Union, Iceland, Liechtenstein and Norway.

"EU Bail-In Legislation Schedule" means the document described as such and published by the Loan Market Association (or any successor person) from time to time.

"euro"or "EUR"means the single currency of any member state of the European Union that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union.

87441-3-5256-v7.0 87441-3-5256-v7.0 87441-3-5256-v7.0

"Euro Outstanding Amount"means, in relation to any Purchased Receivable, the Outstanding Amount of such Purchased Receivable converted into euro at the Foreign Exchange Rate in respect of such Purchased Receivable.

"Face Amount" means the face amount in respect of the Receivables.

"Fee Letter"means the fee letter entered into between the Purchaser and the Sellers on or about the date hereof.

"FI Agreement" means the financial institution agreement dated 11 January 2012 and entered into between the Purchaser and PrimeRevenue.

"Financial Indebtedness" means (i) moneys borrowed, (ii) finance or capital leases, (iii) receivables sold or discounted (other than on a non-recourse basis), (iv) other transactions having the commercial effect of a borrowing, (v) the marked to market value of derivative transactions entered into in connection with protection against or benefit from fluctuation in any rate or price, (vi) counter-indemnity obligations in respect of guarantees or other instruments issued by a bank or financial institution, and (vii) liabilities under guarantees or indemnities for any of the obligations referred to in items (i) to (vi).

"Foreign Exchange Rate"means for any Purchased Receivable, the rate at which Dollars are to be exchanged into euro pursuant to any foreign exchange agreement entered into in respect of such Purchased Receivable on or about the Purchase Date in respect of such Purchased Receivable.

"LIBOR"means: (i) the rate per annum which appears on Page LIBOR01 on Reuters Screen; or (ii) if no such rate appears on the Reuters Screen, the arithmetic mean (rounded upward to four decimal places) of the rates quoted by the Reference Banks to leading banks in the London interbank market, at or about 11:00 a.m. London time on the Business Day immediately prior to the applicable Calculation Date for the offering of Dollar deposits for the relevant period.

"Mack Trucks CMSA" means the Customer Managed Service Agreement entered or to be entered into between Mack Trucks, Inc. and PrimeRevenue, pursuant to which each Seller is defined as a Supplier.

"Margin"shall be as set out in the Fee Letter.

"Moody’s"means Moody’s Investors Service Limited and includes any successor to its rating business.

"Nordea Group"means Nordea Bank AB, Nordea Bank Danmark A/S, Nordea Bank Finland Plc and Nordea Bank Norge ASA.

"Offer"means, as to any Seller, an irrevocable offer from such Seller to the Purchaser for the sale of Receivables and given by such Seller to the Purchaser through the PrimeRevenue System or in any other form acceptable to the Purchaser and "to Offer" and "Offered" shall have the corresponding meaning.

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"Outstanding Amount"means at any time in respect of any Receivable or Purchased Receivable, the total amount due and owing by the relevant Permitted Obligor at that time in respect of the relevant Receivable or Purchased Receivable. For the avoidance of doubt, the Outstanding Amount for any Purchased Receivable shall not be reduced by virtue of any set off or counterclaim which reduces the amount recoverable in respect of that Purchased Receivable.

"Performance Guarantor"means Meritor, Inc., an Indiana corporation.

"Performance Undertaking"means the performance undertaking dated as of 19 February, 2016 , executed by the Performance Guarantor in favor of the Purchaser.

"Permitted Currency" means Dollars.

"Permitted Obligors"means Volvo Group North America Inc., Mack Trucks, Inc. and any other company within the Volvo group that has entered into a Customer Managed Service Agreement (in all material respects corresponding to the CMSAs) with PrimeRevenue and that has been approved in writing by the Purchaser and the Sellers.

"Permitted Obligor Default"means, at any time, when a Permitted Obligor is unable to pay its debts as they fall due or otherwise acknowledges its insolvency or by or against whom any administration, insolvency, bankruptcy, receivership, arrangement, liquidation or similar procedures have been instituted or for whom a receiver, liquidator or similar person has been appointed in respect of all or a substantial part of its assets.

"Person" means any natural person, partnership, joint venture, corporation, trust, unincorporated association, limited liability company, or other organization.

"PrimeRevenue"means PrimeRevenue, Inc. a company incorporated under the laws of the state of Delaware having its registered office at 1349 West Peachtree St., Suite 900, Atlanta, GA, USA.

"PrimeRevenue System"means the system for the sale and transfer of receivables as described in the CMSAs, each Supplier Agreement and the FI Agreement.

"Purchase Date"means each date upon which a sale and purchase of Receivables is concluded pursuant to Clause 2.2 of this Agreement.

"Purchase Price"means the aggregate Receivables Purchase Price paid or to be paid by the Purchaser to the relevant Seller in respect of all Purchased Receivables with respect to a particular Settlement Date.

"Purchased Receivables"means all Receivables which are the subject to any sale and purchase (or any purported sale and purchase) pursuant to Clause 2.2 of this Agreement and any other Receivables in respect of which the Receivables Purchase Price has been paid or will be paid by the Purchaser to the relevant Seller.

"Receivable"means, as to any Seller, any account or receivable owed to such Seller in the ordinary course of business by any Permitted Obligor including all Related Security and all other rights of such Seller pertaining to such Receivable (evidenced as a "Payment

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Obligation", as defined in the respective CMSA) in accordance with the respective CMSA, including but not limited to all of such Seller's rights under Section 18(f) of the respective CMSA.

"Receivables Purchase Price"shall be calculated as to each Purchased Receivable as follows: CA - (CA x IR / (360/DM)); where

DM = actual number of days to and including the relevant maturity date of such Purchased Receivables

CA = the Certified Amount (as defined in and within the meaning of the relevant Supplier Agreement) of such Purchased Receivable

IR = means the interest rate, which shall be three (3) months LIBOR plus the Margin

"Records"means, as to any Seller: (a) all files, correspondence, notes of dealing and other documents, books, books of account, registers, records and other information; and (b) all computer tapes, discs, computer programmes, data processing software and related property rights, owned by or under the control and disposition of such Seller, in each case only to the extent relating to the Purchased Receivables.

"Reference Banks"means a minimum of four of the banks (including, in each case, Nordea Bank AB (publ)) which quote rates for the offering of deposits in Dollars to leading banks in the London interbank market for the relevant period immediately prior to the time set out in the definition of LIBOR on the applicable Calculation Date.

"Related Security"means, with respect to any Receivable, (a) all present and future accounts, instruments, documents, chattel paper and general intangibles relating to the Receivable and (b) all proceeds of any of the foregoing.

"Resolution Authority" means any body which has authority to exercise any Write-down and Conversion Powers.

"Sanctioned Territory"means, as of any date of determination, any country or other territory subject to a general export, import, financial or investment embargo under Economic Sanctions Law, which territories, as of the date of this Agreement, include Cuba, Iran, Sudan and Syria;

"S&P"or "Standard & Poor's"means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor company of such rating business.

"Security Interest" means any mortgage, charge, floating charge, assignment or assignation by way of security, lien, pledge, hypothecation, right of set-off (or analogous right), retention of title, flawed asset or blocked-deposit arrangement or any other encumbrance or security interest or security arrangement whatsoever created or arising under any relevant law or any agreement or arrangement having the effect of or performing the economic function of conferring security howsoever created or arising.

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"Sellers"means Meritor Heavy Vehicle Braking Systems (USA),LLC and Meritor Heavy Vehicle Systems, LLC in each case in its capacity as a seller under this Agreement and not in any other capacity, and "Seller" means any of them.

"Seller Potential Suspension Event"means any event which, with the giving of notice and/or lapse of time and/or making of any determination and/or any certification, would constitute a Seller Suspension Event or a Termination Event under paragraph (c) or (d) of that definition.

"Seller Suspension Event"means any of the following events:

(a) Failure to pay: Any Seller fails to pay any amount due and payable under this Agreement or the relevant Supplier Agreement within three (3) Business Days of the due date or a demand in writing.

(b) Failure to perform other obligations: Any Seller fails to observe or perform any of its other material obligations under this Agreement or the relevant Supplier Agreement or under any undertaking or arrangement entered into in connection therewith and, in the case of a failure capable of being remedied, within ten (10) days after receipt by such Seller of a request in writing from the Purchaser, that the same be remedied, it has not been remedied to the Purchaser's reasonable satisfaction.

(c) Representations, warranties or statements proving to be incorrect: Any representation, warranty or statement which is made (or deemed or acknowledged to have been made) by any Seller under this Agreement or the relevant Supplier Agreement or which is contained in any certificate, statement or notice provided by such Seller under or in connection with this Agreement or the relevant Supplier Agreement proves to be incorrect to an extent which, in the reasonable opinion of the Purchaser, is likely to affect the ability of such Seller to perform its obligations under any of the Transaction Documents to which it is a party in a manner which is material and adverse in the context of the Transaction or which is likely materially and adversely to affect the collectability of the Purchased Receivables or any of them.

(d) Provisions becoming unenforceable: Any provision of any of the Transaction Documents to which any Seller is a party is or becomes, for any reason, invalid or unenforceable and for so long as such provision remains invalid and unenforceable to an extent which, in the reasonable opinion of the Purchaser, is likely materially and adversely to affect the ability of any Seller (acting in any capacity under any of the Transaction Documents to which it is a party) to perform its obligations under any of the Transaction Documents to which it is a party in a manner which is material and adverse in the context of the Transaction or which is likely to materially and adversely affect the collectability of the Purchased Receivables or any of them.

(e) Suspension or expropriation of business operations: Any Seller or the Performance Guarantor changes, suspends or threatens to suspend a substantial part of the present business operations which it now conducts directly or

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indirectly, or any governmental authority expropriates all or a substantial part of its assets and the result of any of the foregoing is, in the reasonable opinion of the Purchaser, likely to affect the ability of any Seller or the Performance Guarantor to observe or perform its obligations under any of the Transaction Documents to which it is a party in a manner which is material and adverse in the context of the Transaction or which is likely to materially and adversely affect the collectability of the Purchased Receivables or any of them.

(a) Enforcement by creditors: Any form of execution or arrest is levied or enforced upon or sued out against all and any assets of any Seller or the Performance Guarantor and is not discharged within twenty (20) days of being levied, or any Security Interest which may for the time being affect any material part of its assets becomes enforceable and steps are lawfully taken by the creditor to enforce the same. No Seller Suspension Event will occur under this paragraph (f) if the aggregate amount of the claim enforced is less than EUR 35,000,000 or the equivalent in any other currency.

(b) Arrangement with Creditors: Any Seller or the Performance Guarantor proposes or makes any arrangement or composition with, or any assignment or trust for the benefit of, its creditors generally involving (not necessarily exclusively) indebtedness which such Seller or the Performance Guarantor, as the case may be, would not otherwise be able to repay or service in accordance with the terms thereof.

(c) Winding-up: A petition is presented (unless contested in good faith and discharged or stayed within twenty (20) days) or a meeting is convened for the purpose of considering a resolution or other steps are taken for the winding up of any Seller or the Performance Guarantor (other than for the purposes of and followed by a solvent reconstruction previously approved in writing by the Purchaser (such approval not to be unreasonably withheld or delayed), unless during or following such reconstruction such Seller or the Performance Guarantor, as the case may be, becomes or is declared to be insolvent).

"Settlement Date"means, in respect of a Purchased Receivable, the first (1st) Business Day after the relevant Calculation Date.

"Supplier Agreement"means, as to each Seller, the supplier agreement entered or to be entered into between such Seller and PrimeRevenue, pursuant to which each of the Permitted Obligors is defined as a Customer.

"Tax"or "tax"includes all forms of tax, duty or charge on gross or net income, profits or gains, distributions, receipts, sales, use, occupation, franchise, value added, personal property and instruments, and any levy, impost, duty, charge or withholding of any nature whatsoever chargeable by any authority, whether in Sweden, the United States, Jersey or elsewhere, together with all penalties, charges and interest relating to any of the foregoing.

"Termination Date"means the earliest date on which a Termination Event occurs.

"Termination Event"means the occurrence of any of the following:

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(a) three (3) years having elapsed from the date of the execution of this Agreement;

(b) a failure by any Seller to perform any of its material obligations within ten (10) Business Days after notification in writing of such failure to perform;

(c) in relation to any Seller or the Performance Guarantor, any corporate or other company action being taken or becoming pending, any other steps being taken or any legal proceedings being commenced or threatened or becoming pending for (i) the insolvency, bankruptcy, liquidation, dissolution, administration or reorganization of such Seller or the Performance Guarantor, as the case may be (other than for the purposes of and followed by a solvent reconstruction previously approved in writing by the Purchaser (such approval not to be unreasonably withheld or delayed) unless during or following such reconstruction such Seller or the Performance Guarantor, as the case may be, becomes or is declared to be insolvent), (ii) such Seller or the Performance Guarantor to enter into any composition or arrangement with its creditors generally, or (iii) the appointment of a receiver, administrative receiver, trustee or similar officer in respect of such Seller or the Performance Guarantor or substantially all of its property, undertaking or assets, which appointment, action, step or proceeding is not being contested in good faith by such Seller or the Performance Guarantor, as the case may be, and, if so contested, is not dismissed or withdrawn within thirty (30) days;

(d) any CMSA, any Supplier Agreement or the Performance Undertaking being amended to the detriment of the Purchaser or if any CMSA, the FI Agreement or any Supplier Agreement is terminated for whatever reason or if any third party right in any CMSA, any Supplier Agreement or the Performance Undertaking in relation to which the Purchaser is a beneficiary becomes invalid or unenforceable;

(e) a Seller Suspension Event has occurred and is continuing for a period of sixty (60) days or longer, subject to written notice being given by the Purchaser; and

(f) (i) any Financial Indebtedness of any Seller or the Performance Guarantor is not paid when due nor within any originally applicable grace period, or is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described); (ii) any commitment for any Financial Indebtedness of any Seller or the Performance Guarantor is cancelled or suspended by a creditor as a result of an event of default (however described); or (iii) any creditor of any Seller or the Performance Guarantor becomes entitled to declare any Financial Indebtedness of any Affiliate of such Seller or the Performance Guarantor due and payable prior to its specified maturity as a result of an event of default (however described); provided, however no Termination Event will occur under this paragraph (f) if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (i) to (iii) above is less than EUR 35,000,000 or the equivalent in any other currency.

"Total Commitment" means EUR 80,000,000, as such amount may be reduced as provided in this definition. The Total Commitment also will be reduced (A) at the request

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of all of the Sellers or (B) if the Purchaser in connection with an annual review (such annual review to be made at each anniversary of this Agreement) determines that the twelve (12) months rolling average of the Aggregate Outstanding Amount ("Outstanding Average") is less than seventy (70) per cent of the Total Commitment, at which time the Total Commitment will be reduced by an amount equal to fifty (50) per cent of the difference between the Outstanding Average and the Total Commitment. The Total Commitment may be increased as agreed in writing between the Sellers and the Purchaser from time to time.

"Transaction"means the transactions relating to this Agreement envisaged by the Transaction Documents whereby any or all of the Sellers may sell certain Receivables to the Purchaser and the Purchaser may purchase such Receivables.

"Transaction Documents"means the documents relating to the Transaction, including this Agreement, the Performance Undertaking, the FI Agreement, the CMSAs and the Supplier Agreements and any agreement or document executed pursuant to or in connection with any of these documents.

"UCC" means the Uniform Commercial Code, as the same may be in effect from time to time in the State of New York, provided that if, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of the Purchaser's security interest in any Receivables is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term "UCC" shall mean the Uniform Commercial Code in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions related to such provisions.

"United States" means the United States of America.

"U.S. Legal Opinion" means the legal opinion dated on or about the date hereof issued by Clifford Chance LLP and Dykema Gossett PLLC and addressed to Nordea Bank Danmark A/S, Nordea Bank AB (publ) and the Purchaser as to certain matters of New York and federal law.

"Volvo Group North America CMSA" means the Customer Managed Service Agreement entered or to be entered into between Volvo Group North America Inc. and PrimeRevenue, pursuant to which each Seller is defined as a Supplier.

"Write-down and Conversion Powers" means in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule.

1.2 Construction

1.2.1 References in this Agreement to any person shall include references to his successors, transferees and assignees and any person deriving title under or through him.

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1.2.2 References in this Agreement to any statutory provision shall be deemed also to refer to any statutory modification or re-enactment thereof or any statutory instrument, order or regulation made thereunder or under any such re-enactment.

1.2.3 References in this Agreement to any agreement or other document shall be deemed also to refer to such agreement or document as amended, varied, supplemented, replaced or novated from time to time.

1.2.4 All terms used in Article 9 of the UCC and not specifically defined herein are used herein as defined in such Article 9.

1.3 No exclusivity

Nothing in this agreement restricts the Purchaser from acquiring, from persons other than the Sellers, accounts or receivables owed by Permitted Obligors.

2. PURCHASE AND SALE

2.1 Purchase of Receivables

Subject to the terms and conditions of this Agreement, and within the limits of the Total Commitment, the Purchaser agrees that it will purchase Receivables from the Sellers on a continuous basis from the date hereof until the Termination Date, it being understood and agreed that the limits of the Total Commitment shall apply to all Sellers in the aggregate and that the Purchaser shall have no obligation to purchase Receivables that are the subject of any Offer of any Seller to the extent that, immediately after giving effect to such proposed purchase, the Aggregate Euro Outstanding Amount of all Purchased Receivables of all Sellers would exceed the Total Commitment. If an Offer of Receivables of any Seller would result in the Aggregate Euro Outstanding Amount of all Purchased Receivables of all Sellers exceeding the Total Commitment, then at the option of the Purchaser acting in its sole discretion, (i) the Offer may be modified such that only certain Receivables, in an aggregate amount such that the Total Commitment will not be exceeded, will be purchased, such that no partial Receivable shall be the subject of an Offer or purchased hereunder, or (ii) the Purchaser may decide to accept the Offer and purchase such Receivables, but for the avoidance of doubt shall have no obligation to do so.

2.2 Conclusion of purchase - offer and acceptance

The sale and purchase of Receivables shall in each case be concluded as set out in Part 1 of Schedule 2.

2.3 Purchase Price

The Purchase Price for Purchased Receivables shall be paid and calculated as set out in Part 2 of Schedule 2.

2.4 UCC

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All transactions contemplated or evidenced by this Agreement, including the sale or other transfer by any Seller to the Purchaser of Receivables hereunder, shall be subject to Article 9 of the UCC and other applicable laws. The Purchaser and its assigns shall have, in additional to the rights and remedies which they may have under this Agreement, all other rights and remedies provided to a secured creditor under the UCC and other applicable law, which rights and remedies shall be cumulative.

2.5 Perfection and Notice

Each sale and purchase of Receivables pursuant to this Clause 2 shall be perfected through the actions described in Part 3 of Schedule 2.

2.6 Seller's receipt of payment in respect of Purchased Receivables

In the event that, notwithstanding the notification referred to in Clause 2.5, any Seller receives from the Permitted Obligors any payment in respect of Purchased Receivables, such Seller shall pay to the Purchaser promptly following such a receipt, all such Collections received by it in respect of the Purchased Receivables to the account as notified by the Purchaser pursuant to Clause 4.2.

3. CONDITIONS PRECEDENT TO INITIAL PURCHASE

3.1 The effectiveness of this Agreement is subject to the satisfaction (as determined in the reasonable opinion of the Purchaser) of the following conditions precedent:

3.1.1 The Purchaser has received evidence that each Seller and the Performance Guarantor have validly executed and delivered all of the Transaction Documents to which it is a party;

3.1.2 The Purchaser has received certified copies of the resolutions of the board of directors of each Seller and the Performance Guarantor approving the Transaction Documents to which it is a party and certified copies of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to the Transaction Documents to which it is a party;

3.1.3 The Purchaser has received a certificate of the Secretary or the Assistant Secretary of each Seller and the Performance Guarantor certifying the names and true signatures of its officers authorized to sign the Transaction Documents to which it is a party;

3.1.4 The Purchaser has received a copy of the by-laws of each Seller and the Performance Guarantor, certified by its Secretary or Assistant Secretary;

3.1.5 The Purchaser has received a copy of the articles of incorporation (or any other applicable organisational document) of each Seller and the Performance Guarantor, certified as of a recent date by the Secretary of State or other appropriate official of the State of incorporation of such Seller, and a certificate as to the good standing of such Seller or the Performance Guarantor from such Secretary of State or other official, dated as of a recent date.

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3.1.6 The Purchaser has received a solvency certificate from each Seller and the Performance Guarantor, substantially in the form of Schedule 4;

3.1.7 The Purchaser has received the U.S. Legal Opinion; and

3.1.8 The Purchaser has received such other approvals, such other legal opinions of reputable law firm(s) as to the laws of the jurisdiction(s) each of them deem relevant, and such other documents as the Purchaser may request.

3.2 Completion of the transfer and acquisition of the Receivables intended to be purchased on any Purchase Date is subject to the satisfaction (as determined in the reasonable opinion of the Purchaser) of the following conditions precedent:

3.2.1 The relevant Seller has made an Offer and the Purchaser has given an Acceptance with respect to the related Receivables;

3.2.2 All actions that are required to be completed pursuant to Part 3 of Schedule 2 prior to any purchase of the related Receivables have been completed;

3.2.3 The representations and warranties of the Sellers in, or incorporated or referenced in, Clause 5 of this Agreement are correct on and as of the Purchase Date as though made on and as of such date;

3.2.4 No Termination Event shall have occurred, nor shall the Termination Date have occurred; and

3.2.5 No law, regulation, directive, communication or action shall have been imposed or taken by any court, governmental authority or administrative body which (i) may render any of the terms and conditions of the Transaction Documents illegal or unenforceable, (ii) prohibit or prevent the purchase of Receivables hereunder or (iii) otherwise restrain, prevent or impose materially adverse conditions upon the Transaction.

Notwithstanding the foregoing, unless otherwise specified by the Purchaser in a written notice to the relevant Seller, each sale or other transfer shall occur automatically at all times prior to the occurrence of a Termination Event or the Termination Date, with the result that the title to all Receivables shall vest in the Purchaser automatically on the related Purchase Date without any further action of any kind by such Seller or the Purchaser, whether or not the conditions precedent to such sale or other transfer were in fact satisfied on such date and notwithstanding any delay in making payment of the Purchase Price for such Receivables (but without impairing the Purchaser's obligation to pay such Purchase Price in accordance with the terms hereof).

4. PAYMENTS TO THE PURCHASER, ETC.

4.1 All amounts to be paid to the Purchaser under this Agreement shall be paid when due to the relevant account and at the times specified below.

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4.2 Any amounts payable to the Purchaser under this Agreement shall be remitted to the accounts notified in writing to the relevant Seller by the Purchaser no later than the time indicated in such notice.

4.3 All payments made by each Seller under this Agreement shall be made without set-off, counterclaim or withholding. If a Seller is compelled by law or otherwise to make any deduction, the Sellers shall pay any additional amount as will result in the net amount received by the Purchaser being equal to the full amount which would have been received had there been no deduction or withholding.

5. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS

5.1 Warranties relating to the Sellers

As at each Purchase Date, the relevant Seller shall make the representations and warranties to the Purchaser in the terms set out in Part 1 of Schedule 3 in relation to such Seller and with reference to the facts and circumstances subsisting on such Purchase Date.

5.2 Warranties relating to Purchased Receivables

As at each Purchase Date, the relevant Seller shall make the representations and warranties severally to the Purchaser in the terms set out in Part 2 of Schedule 3 with respect to the Receivables to be sold by it and purchased by the Purchaser on such Purchase Date with reference to the facts and circumstances subsisting on such Purchase Date.

5.3 Obligation to notify in case of incorrect representations, etc.

Each Seller shall forthwith notify the Purchaser if any of the representations and warranties referred to in this Clause 5 were incorrect when made promptly upon becoming aware thereof.

5.4 Covenants and undertakings

Each Seller covenants and undertakes with and to the Purchaser as follows:

5.4.1 Indemnity against claims: Purchaser shall have no obligation or liability with respect to any Purchased Receivables nor will the Purchaser be required to perform any of the obligations of such Seller (or any of its agents) under any such contracts save, in each case, as specifically provided in this Agreement. Such Seller will on demand indemnify and keep indemnified the Purchaser against any cost, claim, loss, expense, liability or damages (including legal costs and out-of-pocket expenses) (except to the extent that such cost, claim, loss, expense, liability or damage shall have arisen as a consequence of any breach of this Agreement by, or as a result of the willful misconduct or negligence of the Purchaser) reasonably and properly incurred or suffered by the Purchaser as a consequence of any claim or counterclaim or action of whatsoever nature made or taken by a Permitted Obligor or any third party arising out of or in connection with any Purchased Receivables or any services which are the subject of such

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Purchased Receivables, other than a claim or counterclaim arising as a result of the insolvency of such Permitted Obligor;

5.4.2 Indemnity against breach: such Seller will on demand indemnify and keep indemnified the Purchaser against any cost, claim, loss, expense, liability or damages (including legal costs and out-of-pocket expenses) reasonably and properly incurred or suffered by the Purchaser as a consequence of any breach by such Seller of this Agreement or any other Transaction Document (to which the Seller is a party) (except to the extent that such cost, claim, loss, expense, liability or damages shall not have arisen as a consequence of any breach of this Agreement by, or as a result of the willful misconduct or negligence of the Purchaser);

5.4.3 No set-off: such Seller shall not take any action which would cause any set-off, counterclaim, credit, discount, allowance, right of retention or compensation, right to make any deduction, equity or any other justification for the non-payment of any of the amounts payable under any Purchased Receivable (whether by the relevant Permitted Obligor or otherwise) without the prior written consent of the Purchaser;

5.4.4 Authorizations, approvals, licenses, consents etc.: such Seller shall obtain, comply with the terms of, and maintain in full force and effect, all authorizations, approvals, licenses and consents required in or by the laws and regulations of the State of Delaware, the State of Michigan, the federal law of the United States and any other applicable law to enable it to perform its obligations under this Agreement;

5.4.5 No other dealing: such Seller will not dispose, sell, transfer or assign, create any interest in (including Security Interest), or deal with any of the Purchased Receivables in any manner whatsoever or purport to do so except as permitted by this Agreement;

5.4.6 No other action: such Seller will not knowingly take any action which may prejudice the validity or recoverability of any Purchased Receivable or which may otherwise adversely affect the benefit which the Purchaser may derive from such Purchased Receivable pursuant to this Agreement;

5.4.7 Tax payments: such Seller will pay or procure the payment (as required by law) of all federal, state, local, and foreign sales, use, excise, utility, gross receipts or other taxes imposed by any authority in relation to the Purchased Receivables, the FI Agreements or this Agreement;

5.4.8 Notice of default: such Seller shall promptly upon becoming aware of the same inform the Purchaser of any Termination Event or any other occurrence which might adversely affect its ability to perform its obligations under this Agreement and from time to time, if so requested by the Purchaser, confirm to the Purchaser in writing that, save as otherwise stated in such confirmation, no such occurrence has occurred and is continuing;

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5.4.9 Delivery of reports: such Seller shall deliver to the Purchaser, sufficient copies of each of the following documents, in each case at the time of issue thereof:

(a) every report, circular, notice or like document issued by such Seller to its creditors generally; and

(b) (if the Purchaser so requires) a certificate from its CFO stating that such Seller as at the date of its latest consolidated audited accounts was in compliance with the covenants and undertakings in this Agreement (or if it was not in compliance indicating the extent of the breach).

5.4.10 Provision of further information: subject to applicable legislation, such Seller shall provide the Purchaser with such financial and other information concerning such Seller and its affairs as the Purchaser may from time to time reasonably require and which is available to such Seller.

5.4.11 Notice of misrepresentation: such Seller shall promptly upon becoming aware of the same notify the Purchaser of any misrepresentation by such Seller under or in connection with any Transaction Document to which it is a party.

5.4.12 Sanctions: such Seller shall not:

(a) directly or indirectly use any proceeds of the sale of Purchased Receivables, or lend, contribute or otherwise make available such proceeds to any other person, entity, joint venture or organisation (a) to fund, finance or facilitate any agreement, transaction, dealing or relationship with or involving, or for the benefit of, any Sanctioned Person (or involving any property thereof), or involving any Sanctioned Territory, or (b) in any manner that would result in a violation of Economic Sanctions Law or Anti-Corruption Law by any person, including the Purchaser, whether as creditor, advisor or otherwise; or

(b) engage in any transaction, activity or conduct that violates any Economic Sanctions Law or Anti-Corruption Law.

5.5 Representations and Warranties relating to the Purchaser

5.5.1 As at each Purchase Date and each Calculation Date, the Purchaser shall make the representations and warranties to the relevant Seller in the terms set out in Part 3 of Schedule 3 with reference to the facts and circumstances subsisting on each such Purchase Date and Calculation Date.

5.5.2 The relevant Seller shall have the option to terminate this Agreement upon any material breach of the representations and warranties referred to in this Clause 5.5 by the Purchaser, provided such material breach has a material adverse effect on such Seller.

5.6 Commitment Fee

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The Sellers shall pay to the Purchaser a commitment fee computed at a per annum rate of 60bps. of the excess of the Total Commitment over the Aggregate Euro Outstanding Amount. Such commitment fee shall accrue from day to day and be calculated daily on the basis of actual days elapsed over a 360-day year and be payable monthly in arrears on the third Business Day of each month, beginning on the date of this Agreement, to such account as the Purchaser may designate in writing.

6. REMEDIES FOR UNTRUE REPRESENTATION, ETC.

6.1 If at any time after the Settlement Date in respect of any Purchased Receivable it shall become apparent that any of the representations and warranties set out in Part 2 of Schedule 3 relating to or otherwise affecting such Purchased Receivable was untrue or incorrect when made by reference to the facts and circumstances subsisting at the date on which such representations and warranties were given, the relevant Seller shall, within five (5) Business Days of receipt of written notice thereof from the Purchaser, remedy or procure the remedy of the matter giving rise thereto if such matter is capable of remedy and, if such matter is not capable of remedy or is not remedied within the said period of five (5) Business Days, then following due date of such Purchased Receivable such Seller shall pay to the Purchaser an amount equal to the difference (if any) between (i) the amount due for payment in respect of such Purchased Receivable on such due date and (ii) the amount of Collections received in respect of such Purchased Receivable on or before such due date, to the extent such difference was caused by, or has any connection with, the breach of the relevant representation and warranty. If any Seller shall otherwise become aware of such untrue or incorrect representation and warranty other than by written notification from the Purchaser, it shall immediately notify the Purchaser of such untrue or incorrect representation and warranty. In the event the Transaction is terminated prior to the date on which an amount under this Clause 6 would have been payable by any Seller, such Seller shall pay such amount following receipt of the said written notice from the Purchaser on or before the date the Transaction is terminated or promptly thereafter.

6.2 Notwithstanding Clause 6.1, if at any time after the Purchase Date but prior to collection of payments in full in relation to any Purchased Receivables it shall become apparent that the representation and warranty set out in paragraph 4 of Part 2 of Schedule 3 relating to or otherwise affecting such Purchased Receivable was untrue or incorrect when made by reference to the facts and circumstances subsisting at the date on which such representations and warranties were given, then the relevant Seller shall repurchase such Purchased Receivable for a price equal to (a) the Face Amount in respect of such Purchased Receivable less (b) any Collections received by the Purchaser in respect thereof, and see to it that notice of such repurchase is given to the relevant Permitted Obligor. Any Collections received by the Purchaser in respect of such repurchased Purchased Receivables after the relevant Seller has paid the price for such repurchase shall be paid to such Seller promptly upon receipt.

7. FURTHER ASSURANCE; SECURITY INTEREST

7.1 Each Seller hereby undertakes not to take any steps or cause any steps to be taken in respect of the Purchased Receivables or the services supplied thereunder that could or will result in:

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7.1.1 any termination, waiver, amendment or variation in relation to any Purchased Receivables;

7.1.2 any assignment or sale of any Purchased Receivables; or

7.1.3 any disposal of its right, title, interest, benefit or power in any Purchased Receivables.

7.2 In addition to any records or information available through the PrimeRevenue System, each Seller undertakes at the request of the Purchaser to produce and deliver Records concerning the Purchased Receivables as the Purchaser may reasonably request for enforcement or accounting purposes.

7.3 In the event that such Records as referred to in Clause 7.2 are not produced reasonably promptly, each Seller shall permit any persons nominated by the Purchaser at any time during normal business hours upon five (5) Business Days written notice to enter any premises owned or occupied by it or its agents where the Records and other information concerning Purchased Receivables are kept to have access (subject to appropriate supervision provided by such Seller and provided that such Seller shall not unreasonably delay the provision of such supervision) to, examine and make copies of all Records relating to the Purchased Receivables and the performance by such Seller of its obligations hereunder. Such access shall include the right to have access to and use (subject to appropriate supervision provided by such Seller and provided that such Seller shall not unreasonably delay the provision of such supervision) all computer passwords necessary to gain access to the relevant computer records.

7.4 It is the intention of the parties hereto that each sale or other transfer of Purchased Receivables made hereunder shall constitute a sale of "accounts" or "payment intangibles" (as each such term is used in Article 9 of the UCC) and not as a grant of security interest, which sale is absolute and irrevocable and provides the Purchaser with the full benefits of ownership of the Purchased Receivables. In view of the intention of the parties hereto that each sale or other transfer of Purchased Receivables made hereunder shall constitute a sale of such Purchased Receivables rather than loans secured thereby, each Seller hereby agrees to note in its financial statements that the Purchased Receivables have been sold to the Purchaser.

7.5 Against the possibility that, contrary to the mutual intent of the parties, as expressed in Clause 7.4, the purchase of any of the Purchased Receivables is not characterized as a sale by any relevant governmental, judicial or other authority for any reason whatsoever, whether for limited purposes or otherwise, or such sale shall for any reason be ineffective, each Seller hereby grants to the Purchaser and its assigns a Security Interest in and right of setoff under Article 9 of the UCC with respect to, all of the following property, now existing or hereafter arising (collectively, the "Collateral"): the Purchased Receivables, all Collections with respect thereto, and (to the extent not included in the foregoing) all proceeds of the foregoing. This Agreement shall constitute a security agreement under applicable law, all of the Collateral shall secure payment and performance of all of the Sellers' obligations at any time owing to the Purchaser, fixed or contingent, arising hereunder, in connection herewith or by operation of law or otherwise, including the punctual payment when due of all amounts payable by it hereunder and each reference

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herein to the 'purchase' of the Purchased Receivables hereunder shall be deemed to be a reference to a grant of a security interest in such Purchased Receivable . The grant of this security interest is a supplemental protection to the Purchaser and is not meant to negate or affect in any way the intended sale of the Purchased Receivables by the Sellers to the Purchaser.

8. NOTICES

Any notices to be given pursuant to this Agreement to any of the parties hereto shall be sufficiently served or given if delivered by hand or sent by prepaid first-class post or by facsimile transmission and shall be deemed to be given (in case of notice delivered by hand or post) when delivered or (in the case of any notice by facsimile transmission) upon receipt in legible form and shall be delivered or sent:

The Purchaser:	Nordea Bank AB (publ) Address: c/o Nordea Bank Danmark A/S Christiansbro, Strandgade 3 DK-1401 Copenhagen Fax: +45 33 33 26 97 For the attention of: Structured Finance Servicer Email: sfs@nordea.com
The Sellers (as applicable):	Meritor Heavy Vehicle Braking Systems (U.S.A.), LLC, 2135 West Maple Road Troy, Michigan 48084-7186 Telephone: (248) 435-1000 Facsimile No: 248-435-0989
	Meritor Heavy Vehicle Systems, LLC 2135 West Maple Road Troy, Michigan 48084-7186 Telephone: (248) 435-1000 Facsimile No: 248-435-0989

or to such other address or facsimile number or for the attention of such other person as may from time to time be notified by any party to each of the other parties by written notice in accordance with the provisions of this Clause 8.

9. ASSIGNMENT AND SUPPLEMENTS

This Agreement may not be assigned by any Seller without the prior written consent of the Purchaser.

10. AMENDMENTS AND MODIFICATIONS

No amendment, modification, variation or waiver of this Agreement shall be effective unless it is in writing and signed by (or by some person duly authorized by) each of the parties hereto.

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11. RIGHTS CUMULATIVE, WAIVERS

The respective rights of each party under or pursuant to this Agreement are cumulative, and are in addition to their respective rights under the general law. The respective rights of each party under or pursuant to this Agreement shall not be capable of being waived or varied otherwise than by an express waiver or variation in writing; and, in particular, any failure to exercise or any delay in exercising any of such rights shall not operate as a waiver or variation of that or any other such right.

12. APPORTIONMENT

The parties agree that if a Permitted Obligor, owing a payment obligation which is due in respect of one or more Purchased Receivables, submits an incomplete or inaccurate information regarding the Receivable to the PrimeRevenue System or otherwise makes a general payment to the Purchaser (or any Seller) and makes no apportionment between them as to which Purchased Receivables such payment relates, then such payment shall be treated as though the Permitted Obligor had appropriated the same as payment of Purchased Receivables in relation to the Purchaser in order of maturity (starting with the Purchased Receivables having the earliest maturity date).

13. PARTIAL INVALIDITY

If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect in any jurisdiction, such invalidity, illegality or unenforceability in such jurisdiction shall not render invalid, illegal or unenforceable such provisions in any other jurisdiction or affect the remaining provisions of this Agreement. Such invalid, illegal or unenforceable provision shall be replaced by the parties with a provision which comes as close as reasonably possible to the commercial intentions of the invalid, illegal or unenforceable provision.

14. CONFIDENTIALITY

None of the parties shall disclose to any person, firm or company whatsoever, or make use of (other than in accordance with the Transaction Documents) any information relating to the business, finances or other matters of a confidential nature of any other party to this Agreement of which it may in the course of its duties under this Agreement or otherwise have become possessed (including, without limitation and without prejudice to the generality of the foregoing any information concerning the identity or creditworthiness of any Permitted Obligor (all and any of the foregoing being "Confidential Information")) and all the parties shall use all reasonable endeavors to prevent any such disclosure or use provided however that the provisions of this Clause 14 shall not apply:

14.1.1 Permitted parties: to the disclosure of any information to any person who is a party to any of the Transaction Documents (to the extent such Transaction Documents relates to the Transaction as contemplated by this Agreement);

14.1.2 Known information: to the disclosure of any information already known to the recipient otherwise than as a result of entering into any of the Transaction

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Documents (to the extent such Transaction Documents relates to the Transaction as contemplated by this Agreement);

14.1.3 Public knowledge: to the disclosure of any information which is or becomes public knowledge otherwise than as a result of the conduct of the recipient;

14.1.4 Legal requirement: to the extent that the recipient is required to disclose the same pursuant to any law or order of any court of competent jurisdiction or pursuant to any direction or requirement (whether or not having the force of law) of any central bank or any governmental or other regulatory or taxation authority in any part of the world (including, without limitation, any official bank examiners or regulators);

14.1.5 Rights and duties: to the extent that the recipient needs to disclose the same for the exercise, protection or enforcement of any of its rights under any of the Transaction Documents or, for the purpose of discharging, in such manner as it reasonably thinks fit, its duties or obligations under or in connection with the Transaction Documents in each case to such persons as require to be informed of such information for such purposes (including for these purposes, without limitation, disclosure to any rating agency);

14.1.6 Professional advisers: to the disclosure of any information to professional advisers, legal advisors or auditors of the relevant party in relation to, and for the purpose of, advising such party or complying with their duties as auditors;

14.1.7 Financial institutions: to the disclosure in general terms of any information to financial institutions servicing the relevant party in relation to finances, insurance, pension schemes and other financial services;

14.1.8 Written consent: to the disclosure of any information with the written consent of all of the parties hereto;

14.1.9 Rating Agencies: to the disclosure of any information which either of the Rating Agencies may require to be disclosed to it;

14.1.10 Group companies: to the disclosure of information to companies belonging to the same group of companies as the Sellers or the Purchaser;

14.1.11 Permitted Obligors: to the disclosure of information to Permitted Obligors necessary for the performance of the Sellers' obligations hereunder, or reasonably incidental thereto; and

14.1.12 Future purchasers: to the disclosure of any information to any purchaser or potential purchaser of Receivables from the Purchaser.

15. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL

15.1 This Agreement is governed by and shall be construed in accordance with the law of the State of New York, including Sections 5-1401 and 5-1402 of the New York General Obligations Law.

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15.2 Each of the parties hereto consents to the nonexclusive jurisdiction of (i) the courts of the State of Michigan and the courts of the United States of America sitting in Michigan (and any applicable courts having jurisdiction thereover) and (ii) the courts of the State of New York sitting in the Borough of Manhattan and the courts of the United States of America for the Southern District of New York (and any applicable courts having jurisdiction thereover) with respect to any controversy arising out of or relating to this Agreement or to any transaction in connection herewith, and irrevocably submits to the jurisdiction of such courts and agrees that any right, judgment or other notice of legal process shall be sufficiently served on such party if sent to it at its respective address specified in Clause 8.

15.3 EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ANY PARTY PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.

16. CONTRACTUAL RECOGNITION OF BAIL-IN

Notwithstanding any other term of any Transaction Document or any other agreement, arrangement or understanding between the parties, each party acknowledges and accepts that any liability of any party to any other party under or in connection with the Transaction Documents may be subject to Bail-In Action by the relevant Resolution Authority and acknowledges and accepts to be bound by the effect of:

(a) any Bail-In Action in relation to any such liability, including (without limitation):

(i) a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;

(ii) a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and

(iii)    a cancellation of any such liability.

(b) a variation of any term of any Transaction Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability."

17. TERMINATION

This Agreement shall remain in full force and effect until the Termination Date, provided, however, that the rights and remedies of a party with respect to any breach of any warranty made by another party in or pursuant to this Agreement, the provisions of Clause 14 and the indemnification and payment provisions of this Agreement shall be continuing and shall survive any termination of this Agreement.

18. INTEGRATION

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This Agreement and each other Transaction Document contain the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings.

19. BINDING EFFECT

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns (including any trustee in bankruptcy).

20. COUNTERPARTS

This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement.

[Signature page follows]

This Agreement has been entered into on the date stated at the beginning of this Agreement.

For and on behalf of

MERITOR HEAVY VEHICLE BRAKING SYSTEMS (U.S.A.), LLC.

By:     /s/ Carl D. Anderson, II            

Name: Carl D. Anderson, II

Title: Vice President and Treasurer

For and on behalf of

MERITOR HEAVY VEHICLE SYSTEMS, LLC

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By:     /s/ Carl D. Anderson, II            

Name: Carl D. Anderson, II

Title: Vice President and Treasurer

For and on behalf of

NORDEA BANK AB (PUBL)

By:     /s/ Fredrik Dahlstrom            

Name: Fredrik Dahlstrom

Title: Director, Head of Securitisation

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Schedule 1ELIGIBILITY CRITERIA

Each Seller represents and warrants that each Receivable that is the subject of an Offer by such Seller and Acceptance satisfies the following Eligibility Criteria on the relevant Purchase Date:

1. The terms of the Receivable provide for payment in full by the Permitted Obligor not later than 120 days after the date of creation of such Receivable or as otherwise approved by the Purchaser.

2. The Receivable is neither a Defaulted Receivable nor a Delinquent Receivable.

3. The Receivable is denominated and payable in a Permitted Currency and is fully identified as such in the PrimeRevenue System and in the records of such Seller.

4. An invoice relating to the Receivable has been issued and has been approved by the relevant Permitted Obligor.

5. The Receivable is segregated and identifiable and can be validly transferred without the consent of the Permitted Obligor by such Seller to the Purchaser.

6. The Receivable is not subject to set-off, counterclaim (other than Credit Memo Amounts as such term is defined in the respective CMSA) or withholding taxes other than as generally provided for under Swedish law or United States law (as applicable) and is a legally enforceable obligation of the Permitted Obligor.

7. The Receivable is owed by a Permitted Obligor who as at the Purchase Date to the knowledge of such Seller is not bankrupt or in liquidation, has not filed for a suspension of payments or petitioned for the opening of procedures for a compulsory composition of debts or is subject to similar or analogous proceedings or as otherwise approved by the Purchaser.

8. The governing law of the Receivable is Swedish law or North Carolina law.

9. The Receivable is a non-interest bearing (other than default or penalty interest) trade receivable arising in the ordinary course of such Seller's business, the Outstanding Amount of which remains as debt.

10. The delivery of the goods and/or services giving rise to the Receivable has been made and invoiced, has not been cancelled or rejected by the Permitted Obligor and the invoice provides for full payment by the Permitted Obligor.

11. The Receivable has been created in accordance with all applicable laws and all consents, approvals and authorizations required of or to be maintained by such Seller have been obtained and are in full force and effect and are not subject to any restriction that would be material to the origination, enforceability or assignability of such Receivable.

12. The Receivable has not been, in whole or in part, pledged, mortgaged, charged, assigned, discounted, subrogated or attached or transferred in any way (except to the

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extent released, revoked or rescinded as of the relevant Purchase Date) and is otherwise free and clear of any Adverse Claims exercisable against such Seller by any party.

13. The Receivable constitutes the legal, valid, binding and enforceable obligation of the Permitted Obligor to pay on the due date the Outstanding Amount of the Receivable as at the Purchase Date and is not subject to any defense, dispute, lien, right of rescission, set-off or counterclaim (other than Credit Memo Amounts as such term is defined in the respective CMSA) or enforcement order.

14. The Receivable has been owned exclusively by such Seller since its origination and until the relevant Purchase Date.

15. Collections in respect of the Receivable can be identified as being attributable to the Receivable as soon as practically possible following their receipt and in any event not later than three (3) Business Days following their receipt.

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SCHEDULE 2CONCLUSION OF PURCHASE – OFFER AND ACCEPTANCE, PURCHASE PRICE AND PERFECTION

PART 1CONCLUSION OF PURCHASE – OFFER AND ACCEPTANCE

1. Each Seller may from time to time make an Offer to the Purchaser and the Purchaser will, subject to the satisfaction of the conditions precedent set forth in Sections 3.1 and 3.2 and this Part 1, accept such Offer by an Acceptance.

2. Any Acceptance by the Purchaser shall always be subject to all of the following conditions being satisfied or waived:

(a) any Acceptance must be made before the Termination Date and no Acceptance which is communicated or generated on or after the Termination Date shall be valid;

(b) no Seller Potential Suspension Event or Seller Suspension Event having occurred and being continuing;

(c) immediately following such purchase, the Total Commitment shall be equal to or greater than the Aggregate Euro Outstanding Amount; and

(d) the relevant Receivable shall meet all of the Eligibility Criteria.

3. Notwithstanding anything to the contrary in this Agreement, if the Purchaser pays the Purchase Price for a Receivable and it is subsequently determined that any of the conditions set out above or in Sections 3.1 and 3.2 was not satisfied, the parties hereto agree that the transfer of such Receivable from the relevant Seller to the Purchaser will be valid. The Purchaser acknowledges that the Receivables can be repurchased in accordance with Section 6.2.

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PART 2PURCHASE PRICE

1. The Purchase Price shall be paid in cash by or on behalf of the Purchaser to the relevant Seller on the relevant Settlement Date. Payment shall be made (subject to deductions, including for the settlement of fees, as agreed by the relevant Seller in any Transaction Document) to the bank account number set out below or as otherwise agreed from time to time between the Purchaser, and the Seller and notified to PrimeRevenue.

Bank:

ABA #:

Swift:

For Credit to:

2. Each Receivables Purchase Price shall be calculated by the PrimeRevenue System on behalf of the Purchaser on the Calculation Date and PrimeRevenue shall inform the relevant Seller and each Purchaser of the Receivables Purchase Price through the PrimeRevenue System on such Calculation Date.

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PART 3PERFECTION

1. Prior to the transfer and acquisition of any Receivables, the Purchaser and each Seller shall send a notice letter to (each of) the Permitted Obligor(s) that is/are the debtor(s) of the relevant Receivables, with the following content:

NOTICE

Date: [●], 20[●]

To: [SPECIFY NAME OF PERMITTED OBLIGOR]

Re: NOTICE OF SALES AND TRANSFERS OF RECEIVABLES AND RIGHTS UNDER A CUSTOMER MANAGED SERVICES AGREEMENT

A. Pursuant to a Receivables Purchase Agreement (the "RPA") between Meritor Heavy Vehicle Braking Systems (U.S.A.), LLC and Meritor Heavy Vehicle Systems, LLC (each, a "Seller", and collectively, the "Sellers") and Nordea Bank AB (Publ), as purchaser (the "Purchaser"), dated as of [●], 20[●], each Seller has agreed to sell and the Purchaser has agreed to purchase receivables (the "Receivables") owed by [specify name of Permitted Obligor] ("Obligor") to such Seller (in its capacity as supplier to Obligor).

B. Offer and acceptance of sales and purchases of Receivable(s) will be made from time to time through a system (the "System") provided by PrimeRevenue, Inc ("PrimeRevenue"). Obligor has on [[●], 20[●] [as to Volvo Group North America]] [●], 20[●] [as to Mack Trucks] entered into a Customer Managed Services Agreement (the "CMSA") with PrimeRevenue regarding the use of the System. Through the CMSA (Section 18(f)) the Obligor has made certain undertakings, covenants, representations and warranties to the Sellers (the "Seller CMSA Rights") as regards inter alia the Receivables and the use of the System.

C. In connection with a sale of Receivable(s) under the RPA through the System, the System will generate a notice of transfer (the "Transfer Notice") that will be sent to the Obligor. A specimen of such Transfer Notice is attached hereto as Appendix 1.

D. In accordance with and without limiting, expanding or otherwise amending the terms and conditions of the CMSA, this is to notify the Obligor that each Transfer Notice shall have the following meanings:

(i) the Receivable(s) defined therein (as clarified in Appendix 1) (the "Purchased Receivables") has/have been sold and transferred to the Purchaser identified in the Transfer Notice (see Appendix 1);

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(ii) consequently, all payments attributable to the Purchased Receivables shall be made to the Purchaser in its capacity as owner of such receivables (as set forth in the CMSA and in particular Section 2(b) thereof);

(iii) all payments to the Purchaser referred to in this notice shall (until otherwise instructed) be made in Dollars to the bank account numbers set out below with Nordea Bank Finland PLC - New York Branch:

Bank:

Address:

Account No.:

Swift:

ABA#:

(iv) all Seller CMSA Rights attributable to the Purchased Receivables are pursuant to the RPA included in and an integral part of the Purchased Receivables and thus also sold and transferred to the Purchaser (the "Transferred Seller CMSA Rights").

Place/date:    ; , 20[●]

MERITOR HEAVY VEHICLE BRAKING SYSTEMS, (U.S.A.), LLC.	[NORDEA]
By: Name: Title:	By:
MERITOR HEAVY VEHICLE SYSTEMS, LLC.
By: Name: Title:

We hereby confirm;

(i)    receipt of the above notice;

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(ii)    that we will act in accordance therewith;

(iii)    our agreement as regards the meaning of the Transfer Notice; and

(iv) our obligations vis-à-vis the Purchaser as regards each of the Transferred Seller CMSA Rights.

Place/date:    ;    , 20[●]

[SPECIFY NAME OF PERMITTED OBLIGOR]

By:     

Name:

Title:

and the Sellers shall procure that each such Permitted Obligor acknowledge and countersign the notice letter as anticipated therein.

2. The relevant Seller shall procure that simultaneously (or as soon thereafter as is technically possible) with the issuance of an Acceptance, a Transfer Notice (as defined in the above notice) shall be issued by the PrimeRevenue System to the relevant Permitted Obligor.

3. For the perfection of the transfer of all Receivables, each Seller shall procure that (i) the Purchaser shall have an effective, perfected, valid, legally binding and enforceable first-priority ownership interest in, to and under all of the Receivables, (ii) all registrations, recordings and filings shall have been made in all places wherein such registrations, recordings and filings are necessary to create and perfect the ownership interests of the Purchaser in, to and under the Purchased Receivables, (iii) the Purchaser shall have received financing statements under the Uniform Commercial Code in appropriate form for filing in such jurisdictions as the Purchaser may request, it being understood and agreed by such Seller and the Purchaser that the Purchaser is authorized to file such financing statements on behalf of such Seller in the appropriate jurisdictions, and (iv) the Purchaser shall have received copies of such Uniform Commercial Code search reports and such tax lien, judgment, litigation and other search reports in such jurisdictions as the Purchaser may request.

4. Each Seller shall procure that at such time(s) as the Purchaser determines all other actions the Purchaser in its reasonable opinion deems necessary or desirable in order for the transfer and acquisition of the Receivables to be perfected in all respects is/are taken.

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SCHEDULE 3REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS

PART 1REPRESENTATIONS AND WARRANTIES RELATING TO THE SELLERS

The following representations and warranties are given by each Seller:

3. Status: Such Seller is a limited liability company duly formed, validly existing and in good standing under the laws of the jurisdiction of its organization.

4. Powers and authorizations: Such Seller has the requisite power and authority under its certificate of formation, limited liability company agreement and otherwise, and all necessary company authority has been obtained and action taken, for it to sign and deliver, and perform the transactions contemplated in this Agreement.

5. Legal validity: The obligations of such Seller under this Agreement constitute, or when executed by it will (subject to any reservations of law expressed in the U.S. Legal Opinion) constitute, the legal, valid and binding obligations of such Seller and are enforceable against it.

6. Non-violation: The execution, signing and delivery of this Agreement and the performance of any of the transactions contemplated herein do not and will not contravene or breach or constitute a default under or conflict or be inconsistent with or cause to be exceeded any limitation on it or the powers of its officers imposed by or contained in:

(a) any law, statute or regulation to which it or any of its assets or revenues is subject or any order, judgment, injunction, decree, resolution, or award of any court or any administrative authority or organization which applies to it or any of its assets or revenues; or

(b) any agreement or any other document or obligation to which it is a party or by which any of its assets or revenues is bound or affected if this may have a material adverse effect on the rights of the Purchaser; or

(c) any document which contains or establishes or regulates its activities, including its certificate of formation and limited liability company agreement.

7. Adverse Claim. The execution and delivery of this Agreement and the performance of any of the transactions contemplated herein do not and will not result in the creation or imposition of any Adverse Claim (except as created pursuant to the Transaction Documents ) upon any property or assets, whether now owned or hereafter acquired, of such Seller.

8. Consents: Such Seller has duly obtained, made or taken each authorization, approval, consent, registration, recording, filing, deliveries or notarization which it is required to obtain (or make) in connection with the entry into, or performance of the transactions contemplated in, the Transaction Documents to which it is a party, except for the filing of UCC financing statements as contemplated by the Transaction Documents.

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9. Litigation: No litigation, arbitration or administrative proceeding or claim of or before any court, tribunal or governmental body which, if adversely determined, would materially and adversely affect the ability of such Seller to observe or perform its obligations under the Transaction Documents to which it is a party, is presently in progress or pending.

10. Accounts: The latest audited financial statements of such Seller then available have been prepared on a basis consistently applied in accordance with accounting principles generally accepted in the United States and give a true and fair view of the results of its operations for that year and the state of its affairs at that date.

11. Solvency: Such Seller is able to pay its debts as they fall due and it will not be unable to pay its debts as they fall due in consequence of any obligation or transaction contemplated in this Agreement.

12. Material adverse change to such Seller: There has been no change in the financial condition or operations of such Seller since 27 September 2015, so as to have a material and adverse effect on the ability of such Seller to perform its obligations under the Transaction Documents to which it is a party.

13. No misleading information: Any factual information in writing provided by such Seller in connection with the entry into any of the transactions envisaged by the Transaction Documents was true and accurate in all material respects as at the date it was provided or as at the date (if any) at which it was stated.

14. Insolvency and other procedures: No action has been taken or is pending, no other steps have been taken and no legal proceedings have been commenced (in each case by such Seller or, so far as such Seller is aware, by any other person) for (i) the insolvency, bankruptcy, liquidation, administration or reorganization of such Seller, or (ii) such Seller to enter into any composition or arrangement with its creditors generally, or (iii) the appointment of a receiver, supervisor, trustee or similar officer in respect of such Seller or substantially all of its property, undertaking or assets.

15. Payment to Seller. With respect to each Receivable sold to the Purchaser hereunder, the Receivable Purchase Price received by such Seller constitutes reasonably equivalent value in consideration therefore. No transfer hereunder by such Seller of any Receivable is or may be voidable under any section of the Bankruptcy Reform Act of 1978 (11 U.S.C. secs. 101 et seq.), as amended.

16. Pari passu ranking: Each of the payment obligations of such Seller under this Agreement will rank at least pari passu with its unsecured payment obligations to all its other unsecured creditors save those whose claims are preferred solely by any bankruptcy, insolvency or similar laws of general application.

17. No default: No event has occurred which constitutes, or which with the giving of notice and/or the lapse of time and/or a relevant determination would constitute, a contravention of, or default under, any such law, statute, decree, rule, regulation, order, judgment, injunction, resolution, determination or award or any agreement, document or instrument by which such Seller or any of its assets is bound, being a contravention or default which would have a material adverse effect on the business, assets or condition (financial or

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other) of the Purchaser or materially and adversely affect its ability to observe or perform its obligations under this Agreement.

18. Use of Proceeds. No portion of any Purchase Price payment hereunder will be used (i) for a purpose that violates, or would be inconsistent with, any law, rule or regulation applicable to such Seller or (ii) to acquire any security in any transaction which is subject to Section 12, 13 or 14 of the Securities Exchange Act of 1934, as amended.

19. Not a Holding Company or an Investment Company. Such Seller is not a "holding company" or a "subsidiary holding company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or any successor statute. Such Seller is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or any successor statute.

20. Sanctions. Such Seller is not, and to the knowledge of its executive officers, none of its Affiliates are, listed on the "Specially Designated Nationals and Blocked Persons" list maintained by the Office of Foreign Assets Control of the United States Department of the Treasury ("OFAC"), or on the Consolidated List of Financial Sanctions Targets maintained by the UK Treasury, or on any list of targeted persons issued under the Economic Sanctions Law of any other country or is domiciled in a Sanctioned Territory, nor are any of (a) the goods and services sold by such Seller to the Permitted Obligors in connection with any Receivables subject to this Agreement or (b) the Permitted Obligors from jurisdictions or targeted countries with respect to which sanctions programs restricting the sale, purchase or financing of goods are maintained by OFAC or pursuant to any Economic Sanctions Law, or located within or operating from a Sanctioned Territory or otherwise targeted under any Economic Sanctions Law.

19. Anti-corruption Laws. Neither such Seller nor, to the knowledge of its executive officers, any of its directors, officers, employees, agents or other representatives when acting on its behalf, is in violation of any applicable Anti-Corruption Laws.

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PART 2REPRESENTATIONS AND WARRANTIES RELATING TO THE PURCHASED RECEIVABLES

The following representations and warranties are given by each Seller:

5. Particulars correct: The particulars of the Purchased Receivables set out in the Offers of such Seller and in the PrimeRevenue System (to the extent submitted by such Seller) are true and accurate in all material respects, as of the date thereof.

6. No default: Such Seller is not aware of any default, breach or violation in respect of any Purchased Receivable (other than any default relating to lateness in payment) or of any event, which with the giving of notice and/or the expiration of any applicable grace period, would constitute such a default, breach or violation, such default, breach or violation being of a nature that (i) is material and (ii) affects the value of the Purchased Receivable or its collectability.

7. Obligation performed: Such Seller has performed all its obligations under or in connection with the Purchased Receivables unless any such obligation is not material and does not affect the value of any Purchased Receivable or its collectability.

8. Compliance with Eligibility Criteria: Each Purchased Receivable complies, as at the relevant Purchase Date, in all respects with the Eligibility Criteria.

9. Maintenance of records: In addition to any records relating to the Purchased Receivables maintained in the PrimeRevenue System, such Seller has maintained records relating to each Purchased Receivable which are accurate and complete in all material respects, are sufficient to enable such Purchased Receivables to be identified and enforced against the relevant Permitted Obligor and such records are held by or to the order of such Seller.

10. Accounting: In addition to any records relating to the Purchased Receivables maintained in the PrimeRevenue System, such Seller shall maintain an accounting system which separates the Purchased Receivables and accounting for collections related thereto from other receivables or assets of such Seller so that the Purchaser at any time can verify the Outstanding Amount of the Purchased Receivables and such Seller's compliance with this Agreement.

11. No waiver: Such Seller has not waived any of its rights in relation to the Purchased Receivables.

12. Perfection: Such Seller has performed all its actions as set out in Clause 2.5 of this Agreement as of the Purchase Date.

13. Place of Business; Records Location. The principal place of business and chief executive office of such Seller and the offices where it keeps all of its Records are located as the address(es) listed on Schedule 5 or such other locations of which the Purchaser has been notified in accordance with Sub clause (10) below. Such Seller's Federal Employer Identification Number is correctly set forth on Schedule 5.

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14. Change of Name, Offices or Records. Such Seller shall not change its (i) state of organization, name, (iii) identity or structure (within the meaning of Article 9 of the applicable UCC) or relocate its chief executive office at any time while the location of its chief executive office is relevant to perfection of the Purchaser's interest in the Receivables and the related Collections or any office where Records of such Seller are kept, unless it shall have: (A) given the Purchaser and its assignees at least thirty (30) days' prior written notice thereof and (B) delivered to the Purchaser and its assignee all financing statements, instruments and other documents reasonably requested by the Purchaser or its assignees.

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PART 3REPRESENTATIONS AND WARRANTIES RELATING TO THE PURCHASER

The following representations and warranties are given by the Purchaser:

1. Status: The Purchaser is a company duly incorporated and validly existing under the laws of its jurisdiction of incorporation.

2. Powers and authorisations: The Purchaser has the requisite power and authority and all necessary corporate and constitutional authority has been obtained and action taken, for it to sign and deliver, and perform the transactions contemplated in, this Agreement.

3. Legal validity: The obligations of the Purchaser under this Agreement constitute, or when executed by it will constitute, the legal, valid and binding obligations of the Purchaser and, subject to any laws or other procedures affecting generally the enforcement of creditors' rights and principles of equity are enforceable against it.

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SCHEDULE 4[FORM OF SOLVENCY CERTIFICATE

To:    Nordea Bank AB (Publ)                    Date: ,20[●]                                                

From: [Meritor Heavy Vehicle Braking Systems (U.S.A.), LLC] [Meritor Heavy Vehicle Systems, LLC] [Meritor, Inc.]

Dear Sirs

Reference is made to [the Receivables Purchase Agreement dated as of [●], 20[●], entered into between Meritor Heavy Vehicle Braking Systems (U.S.A.), LLC and Meritor Heavy Vehicle Systems, LLC, [●] and [●] (the "Receivables Purchase Agreement")] [the Performance Undertaking dated as of [●], 20[●], entered into by Meritor, Inc. in favor of [●] (the "Performance Undertaking")]

The undersigned hereby certifies that it is able to pay its debts as they fall due and it will not be unable to pay its debts as they fall due in consequence of any obligation or transaction contemplated in [the Receivables Purchase Agreement] [the Performance Undertaking].

Very truly yours

[MERITOR HEAVY VEHICLE BRAKING SYSTEMS (U.S.A.), LLC] [MERITOR HEAVY VEHICLE SYSTEMS, LLC] [MERITOR, INC.]

By:     

Name:

Title:]

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SCHEDULE 5SELLERS' PLACE OF BUSINESS; RECORDS LOCATION; TAX ID NUMBER

4.	Meritor Heavy Vehicle Braking Systems (U.S.A.), LLC
	Place of Business:	2135 West Maple Road Troy, Michigan 48084-7186
	Location of Records:	2135 West Maple Road Troy, Michigan 48084-7186
	Federal Employer Identification Number:	38-3441039
5.	Meritor Heavy Vehicle Systems, LLC
	Place of Business:	2135 West Maple Road Troy, Michigan 48084-7186
	Location of Records:	2135 West Maple Road Troy, Michigan 48084-7186
	Federal Employer Identification Number:	38-3371768

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EX-10.B

AMENDMENT AGREEMENT NO. 2

dated as of 29 March 2016

between

Meritor HVS AB

as Seller

and

Viking Asset Purchaser No. 7 IC

an incorporated cell of Viking Global Finance ICC

as Purchaser

and

Citicorp Trustee Company Limited

as Programme Trustee

(the “Amendment Agreement”)

1. BACKGROUND AND DEFINITIONS

1.1 The parties hereto have entered into a receivables purchase agreement dated 28 June 2011 between Meritor HVS AB as Seller, Viking Asset Purchaser No. 7 IC, an incorporated cell of Viking Global Finance ICC, as Purchaser and Citicorp Trustee Company Limited as Programme Trustee as amended, restated and supplemented from time to time (the “Receivables Purchase Agreement”).

1.2 The parties now wish to amend the Receivables Purchase Agreement in accordance with the provisions set out herein.

1.3 Capitalised terms shall, unless the context otherwise requires, have the meaning given to them in the Receivables Purchase Agreement.

2. AMENDMENT

2.1 The parties hereto agree that with effect as of the date of this Amendment Agreement the definition of Total Commitments under Clause 1.1 Definitions of the Receivables Purchase Agreement shall be amended as follows:

“Total Commitments” means the part of the aggregate of the Commitments as reserved by the Accounts Administrator to be used in relation to the Transaction, being EUR One hundred and fifty five million (155,000,000). The Total Commitments may (to the extent possible) be increased as agreed between the Seller and the Accounts Administrator from time to time.    

1. MISCELLANEOUS

1.4 For the avoidance of doubt, the Receivables Purchase Agreement, as amended and extended from time to time, shall remain in full force and effect and the provisions set out in this Amendment Agreement shall only take effect as specified herein.

1.5 This Amendment Agreement may be executed in any number of counterparts and all such counterparts taken together shall be deemed to constitute one and the same instrument.

IN WITNESS WHEREOF the parties have executed this Amendment Agreement on the respective dates specified below with effect from the date specified in Clause 2.1 above.

For and behalf of

Meritor HVS AB

By: /s/ Eric Moss_____________________

Name: Eric Moss

Title: Authorized Signer

For and behalf of

Viking Asset Purchaser No. 7 IC

By: /s/ M. Jabey_____________________

Name: M. Jabey

Title: Sweden

For and behalf of

Citicorp Trustee Company Limited

By: /s/ David Mares_____________________

Name: David Mares

Title: Director

EX-12

Exhibit 12

Meritor, Inc.

Computation of Ratio of Earnings to Fixed Charges

Six Months Ended March 31, 2016

(Amounts in millions, except the ratio)

Earnings Available for Fixed Charges (A):
Pre-tax income from continuing operations	$	76
Add:
Distributed income of affiliates		19
Less:
Equity in earnings of affiliates		(17	)
		78
Add: fixed charges included in earnings:
Interest expense		45
Interest element of rentals		2
Total		47
Total earnings available for fixed charges:	$	125
Fixed Charges (B):
Fixed charges included in earnings	$	47
Capitalized interest		—
Total fixed charges	$	47
Ratio of Earnings to Fixed Charges		2.66

(A) “Earnings” are defined as pre-tax income from continuing operations, adjusted for minority earnings and share of income from equity investees and fixed charges excluding capitalized interest.

(B) “Fixed charges” are defined as interest on borrowings (whether expensed or capitalized), the portion of rental expense applicable to interest, and amortization of debt issuance costs.

EX-23

Exhibit 23

CONSENT OF EXPERT

We consent to the references to our firm and to our reports with respect to estimation of the liability for pending and reasonably estimable unasserted future asbestos-related claims, which are included or incorporated by reference in Note 20 of the Notes to Condensed Consolidated Financial Statements in the Quarterly Report on Form 10-Q of Meritor, Inc. (“Meritor”) for the fiscal quarter ended April 3, 2016 and to the incorporation by reference of such reference into the following Registration Statements of Meritor:

Form	Registrations No.	Purpose
S-3	333-200858	Registration of common stock, preferred stock, warrants, debt securities and guarantees
S-8	333-192458	Amended and Restated 2010 Long-Term Incentive Plan
S-8	333-171713	Amended 2010 Long-Term Incentive Plan
S-8	333-164333	2010 Long-Term Incentive Plan
S-8	333-141186	2007 Long-Term Incentive Plan
S-8	333-107913	Meritor, Inc. Savings Plan
S-8	333-123103	Meritor, Inc. Hourly Employees Savings Plan
S-8	333-49610	1997 Long-Term Incentives Plan
S-8	333-42012	Employee Stock Benefit Plan, 1988 Stock Benefit Plan and 1998 Employee Stock Benefit Plan

BATES WHITE LLC
By:	/s/ Charles E. Bates
		Charles E. Bates, Ph.D.
		Chairman

Date: May 5, 2016

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 April 3, 2016;

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: May 5, 2016

/s/ Jeffrey A. Craig

Jeffrey A. Craig

Chief Executive Officer and President

EX-31.B

Exhibit 31-b

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO

RULE 13a-14(a) UNDER THE EXCHANGE ACT

I, Kevin A. Nowlan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Meritor, Inc. for the quarterly period ended April 3, 2016;

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: May 5, 2016

/s/ Kevin A. Nowlan

Kevin A. Nowlan

Senior Vice President and 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 April 3, 2016 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

Chief Executive Officer and

President

Date: May 5, 2016

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, Kevin A. Nowlan, hereby certify that:

1. The Quarterly Report of Meritor, Inc. on Form 10-Q for the quarterly period ended April 3, 2016 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/ Kevin A. Nowlan

Kevin A. Nowlan

Senior Vice President and

Chief Financial Officer

Date: May 5, 2016

XML

DOCUMENT AND ENTITY INFORMATION - shares	6 Months Ended
	Mar. 31, 2016	Apr. 03, 2016
Document and Entity Information [Abstract]
Entity registrant name	MERITOR INC
Entity central index key	0001113256
Current fiscal year end date	--09-30
Entity filer category	Large Accelerated Filer
Trading symbol	MTOR
Entity common stock, shares outstanding		91,473,543
Document period end date	Mar. 31, 2016
Document fiscal year focus	2016
Document type	10-Q
Document fiscal period focus	Q2
Amendment flag	false

XML

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - USD ($) shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Income Statement [Abstract]
Sales	$ 821	$ 864	$ 1,630	$ 1,743
Cost of sales	(700)	(749)	(1,405)	(1,513)
GROSS MARGIN	121	115	225	230
Selling, general and administrative	(60)	(57)	(116)	(122)
Restructuring costs	(2)	(3)	(3)	(6)
Other operating income (expense), net	(3)	0	(3)	1
OPERATING INCOME	56	55	103	103
Other income (expense), net	(2)	2	(1)	4
Equity in earnings of affiliates	7	9	17	18
Interest expense, net	(21)	(21)	(43)	(40)
INCOME (LOSS) BEFORE INCOME TAXES	40	45	76	85
Provision for income taxes	(7)	(6)	(14)	(13)
INCOME FROM CONTINUING OPERATIONS	33	39	62	72
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax	(1)	4	(3)	1
NET INCOME	32	43	59	73
Less: Net income attributable to noncontrolling interests	0	0	(1)	(1)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	32	43	58	72
NET INCOME ATTRIBUTABLE TO MERITOR, INC.
Net income from continuing operations	33	39	61	71
Income (Loss) from discontinued operations	(1)	4	(3)	1
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$ 32	$ 43	$ 58	$ 72
BASIC EARNINGS (LOSS) PER SHARE
Continuing operations (in dollars per share)	$ 0.36	$ 0.40	$ 0.66	$ 0.73
Discontinued operations (in dollars per share)	(0.01)	0.04	(0.03)	0.01
Basic earnings per share (in dollars per share)	0.35	0.44	0.63	0.74
DILUTED EARNINGS (LOSS) PER SHARE
Continuing operations (in dollars per share)	0.36	0.38	0.65	0.70
Discontinued operations (in dollars per share)	(0.01)	0.04	(0.03)	0.01
Diluted earnings per share (in dollars per share)	$ 0.35	$ 0.42	$ 0.62	$ 0.71
Basic average common shares outstanding (in shares)	91.3	97.9	91.9	97.9
Diluted average common shares outstanding (in shares)	92.5	102.9	93.5	102.0

XML

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Statement of Comprehensive Income [Abstract]
Net income	$ 32	$ 43	$ 59	$ 73
Foreign currency translation adjustments:
Attributable to Meritor, Inc.	10	(33)	4	(67)
Attributable to noncontrolling interest	0	0	0	(1)
Other reclassification adjustment	0	0	0	1
Pension and other postretirement benefit related adjustments	9	11	18	23
Unrealized gain (loss) on investments and foreign exchange contracts	(1)	0	2	(1)
Other comprehensive income (loss), net of tax	18	(22)	24	(45)
Total comprehensive income	50	21	83	28
Less: Comprehensive income attributable to noncontrolling interest	0	0	(1)	0
Comprehensive income attributable to Meritor, Inc.	$ 50	$ 21	$ 82	$ 28

XML

CONDENSED CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions	Mar. 31, 2016	Sep. 30, 2015
CURRENT ASSETS:
Cash and cash equivalents	$ 94	$ 193
Receivables, trade and other, net	426	461
Inventories	362	338
Other current assets	53	50
TOTAL CURRENT ASSETS	935	1,042
NET PROPERTY	427	419
GOODWILL	399	402
OTHER ASSETS	332	332
TOTAL ASSETS	2,093	2,195
CURRENT LIABILITIES:
Short-term debt	25	15
Accounts and notes payable	511	574
Other current liabilities	253	279
TOTAL CURRENT LIABILITIES	789	868
LONG-TERM DEBT	978	1,036
RETIREMENT BENEFITS	611	632
OTHER LIABILITIES	316	305
TOTAL LIABILITIES	$ 2,694	$ 2,841
COMMITMENTS AND CONTINGENCIES (See Note 20)
EQUITY (DEFICIT):
Common stock (March 31, 2016 and September 30, 2015, 99.6 and 98.8 shares issued and 91.5 and 94.6 shares outstanding, respectively)	$ 99	$ 99
Additional paid-in capital	871	865
Accumulated deficit	(756)	(814)
Treasury stock, at cost (March 31, 2016 and September 30, 2015, 8.1 and 4.2 shares, respectively)	(98)	(55)
Accumulated other comprehensive loss	(742)	(766)
Total deficit attributable to Meritor, Inc.	(626)	(671)
Noncontrolling interests	25	25
TOTAL DEFICIT	(601)	(646)
TOTAL LIABILITIES AND DEFICIT	$ 2,093	$ 2,195

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CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) - shares shares in Millions	Mar. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Common Shares Issued (in shares)	99.6	98.8
Common Shares Outstanding (in shares)	91.5	94.6
Treasury stock (in shares)	8.1	4.2

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions	6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
OPERATING ACTIVITIES
CASH PROVIDED BY OPERATING ACTIVITIES (See Note 9)	$ 39	$ 29
INVESTING ACTIVITIES
Capital expenditures	(47)	(23)
Other investing activities	3	0
Net investing cash flows provided by discontinued operations	4	4
CASH USED FOR INVESTING ACTIVITIES	(40)	(19)
FINANCING ACTIVITIES
Repayment of notes	(55)	(16)
Repurchase of common stock	(43)	(16)
Other financing activities	(2)	(6)
CASH USED FOR FINANCING ACTIVITIES	(100)	(38)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	2	(12)
CHANGE IN CASH AND CASH EQUIVALENTS	(99)	(40)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	193	247
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$ 94	$ 207

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CONDENSED CONSOLIDATED STATEMENT OF EQUITY (DEFICIT) (Unaudited) - USD ($) $ in Millions	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Treasury Stock	Accumulated Other Comprehensive Loss	Total Deficit Attributable to Meritor, Inc.	Noncontrolling Interests
Beginning balance at Sep. 30, 2014	$ (585)	$ 97	$ 918	$ (878)	$ 0	$ (749)	$ (612)	$ 27
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	28			72		(44)	28
Vesting of restricted stock		2	(2)
Repurchase of convertible notes	(2)		(2)				(2)
Equity based compensation expense	5		5				5
Repurchase of common stock	(16)				(16)		(16)
Noncontrolling interest dividend	(1)							(1)
Other equity adjustments	1		1				1
Ending Balance at Mar. 31, 2015	(570)	99	920	(806)	(16)	(793)	(596)	26
Beginning balance at Sep. 30, 2015	(646)	99	865	(814)	(55)	(766)	(671)	25
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	83			58		24	82	1
Equity based compensation expense	6		6				6
Repurchase of common stock	(43)				(43)		(43)
Noncontrolling interest dividend	(1)							(1)
Ending Balance at Mar. 31, 2016	$ (601)	$ 99	$ 871	$ (756)	$ (98)	$ (742)	$ (626)	$ 25

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Basis of Presentation

6 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

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

Certain businesses are reported in discontinued operations in the condensed consolidated statement of operations, condensed consolidated statement of cash flows and related notes for all periods presented. Additional information regarding discontinued operations is discussed in Note 4.

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 Annual Report on Form 10-K, for the fiscal year ended September 30, 2015, as amended. The condensed consolidated balance sheet data as of September 30, 2015 was derived from audited financial statements but does not include all annual disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the three and six months ended March 31, 2016 are not necessarily indicative of the results for the full year.

The company’s fiscal year ends on the Sunday nearest September 30. The second quarter of fiscal years 2016 and 2015 ended on April 3, 2016 and March 29, 2015, respectively. All year and quarter references relate to the company’s fiscal year and fiscal quarters, unless otherwise stated. For ease of presentation, September 30 and March 31 are used consistently throughout this report to represent the fiscal year end and second fiscal quarter end, respectively.

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Earnings per Share

6 Months Ended

Mar. 31, 2016

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 March 31,		Six Months Ended March 31,
	2016	2015	2016	2015
Basic average common shares outstanding	91.3	97.9	91.9	97.9
Impact of restricted shares, restricted share units and performance share units	1.2	1.9	1.6	2.0
Impact of stock options	—	0.1	—	0.1
Impact of convertible notes	—	3.0	—	2.0
Diluted average common shares outstanding	92.5	102.9	93.5	102.0

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

The actual number of performance share units that will vest depends upon the company’s performance relative to the established performance metrics for the three-year performance period of October 1, 2015 to September 30, 2018, measured at the end of the performance period. The number of performance share units will depend on Adjusted EBITDA margin and Adjusted diluted earnings per share from continuing operations at the following weights: 50% associated with achieving an Adjusted EBITDA margin target and 50% associated with achieving an Adjusted diluted earnings per share from continuing operations target. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.7 million performance share units.

In November 2014, 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 $13.74, which was the company’s share price on the grant date of December 1, 2014. The Board of Directors also approved a grant of 0.4 million restricted share units to these executives. The restricted share units vest at the earlier of three years from the date of grant or upon termination of employment with the company under certain circumstances. The fair value of each restricted share unit was $13.74, which was the company’s share price on the grant date of December 1, 2014.

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, 2014 to September 30, 2017, measured at the end of the performance period. The number of performance share units will depend on Adjusted EBITDA margin and Adjusted diluted earnings per share from continuing operations at the following weights: 75% associated with achieving an Adjusted EBITDA margin target and 25% associated with achieving an Adjusted diluted earnings per share from continuing operations target. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.6 million performance share units.

In November 2013, 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 $7.97, which was the company’s share price on the grant date of December 1, 2013.

The actual number of performance share units that will vest depends upon the company’s performance relative to the established M2016 goals for the three-year performance period of October 1, 2013 to September 30, 2016, measured at the end of the performance period. The number of performance share units will depend on meeting the established M2016 goals at the following weights: 50% associated with achieving an Adjusted EBITDA margin target, 25% associated with achieving a net debt including retirement benefit liabilities target, and 25% associated with achieving an incremental booked revenue target. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 1.8 million performance share units including incremental share units that were issued subsequent to the December 1, 2013 grant date. There were 1.1 million and 1.0 million shares related to these performance share units included in the diluted earnings per share calculation for the three and six months ended March 31, 2016, respectively, as certain payout thresholds were achieved in the second quarter of fiscal year 2016 relative to the Adjusted EBITDA, net debt reduction and incremental booked revenue targets. There were 1.0 million and 0.8 million shares related to these performance share units included in the diluted earnings per share calculation for the three and six months ended March 31, 2015, respectively, as certain payout thresholds were achieved in the second quarter of fiscal year 2015.

For the three months ended March 31, 2016, the dilutive impact of previously issued restricted shares, restricted share units, and performance share units was 1.2 million, compared to 1.9 million share units for the same period in the prior fiscal year. For the six months ended March 31, 2016, the dilutive impact of previously issued restricted shares, restricted share units, and performance share units was 1.6 million, compared to 2.0 million share units for the same period in the prior fiscal year. For the three and six months ended March 31, 2016, compensation cost related to restricted shares, restricted share units, performance share units and stock options was $3 million and $6 million, respectively, compared to $3 million and $5 million, respectively for the three and six months ended March 31, 2015.

For each of the three- and six-month period ended March 31, 2016, options to purchase 0.7 million and 0.3 million shares of common stock, respectively, were excluded in the computation of diluted earnings per share because their exercise price exceeded the average market price for the periods and thus their inclusion would be anti-dilutive.

For the three and six months ended March 31, 2016 the company’s convertible senior unsecured notes were excluded from the computation of diluted earnings per share, as the company’s average stock price during this period was less than conversion price for the notes. For the three and six months ended March 31, 2015, 3.0 million and 2.0 million shares, respectively, were included in the computation of diluted earnings per share because the average stock price during this period exceeded the conversion price for the 7.875 percent convertible notes due 2026.

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New Accounting Standards

6 Months Ended

Mar. 31, 2016

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Standards

New Accounting Standards

Accounting standards to be implemented

In April, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing. The ASU provides guidance regarding the identification of performance and licensing obligations. The amendments in this update affect the guidance in ASU 2014-09, which is not effective yet. The effective date and the transition requirements for the amendments in ASU 2016-10 are the same as the effective date and transition requirements in ASU 2014-09 as described below. Therefore, the company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2018 in connection with its planned implementation of ASU 2014-09 and is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. The ASU intends to simplify how share-based payments are accounted for. The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. Early adoption is permitted. The company is assessing the potential impact of this new guidance on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net) to clarify certain aspects of the principal-versus-agent guidance in its new revenue recognition standard. The amendments in this update affect the guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for the amendments in ASU 2016-08 are the same as the effective date and transition requirements of ASU 2014-09. Therefore, the company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2018 in connection with its planned implementation of ASU 2014-09. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-07, Investments-Equity Method and Joint Ventures (Topic 323), Simplifying the Transition to the Equity Method of Accounting. The ASU will eliminate the requirement to apply the equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment. The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815), Contingent Put and Call Options in Debt Instruments. The ASU clarifies that an exercise contingency itself does not need to be evaluated to determine whether it is in an embedded derivative, just the underlying option.The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In March 2016, the FASB issued ASU 2016-05, Derivatives and Hedging (Topic 815), Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. The update clarifies that a change in a counterparty to a derivative instrument designated as a hedging instrument would not require the entity to dedesignate the hedging relationship and discontinue the application of hedge accounting. The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The update will require lessees to recognize a right-of-use asset and lease liability for substantially all leases. The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2018, including interim periods within those fiscal periods. Early adoption is permitted. The company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2019 and is currently assessing the potential impact of this new guidance on its consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities, which requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. The guidance is effective for fiscal periods beginning after December 15, 2017, including interim periods within those fiscal periods. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, as part of its Simplification Initiative, which updates Income Taxes (Topic 740) guidance to eliminate the requirement for an entity to separate deferred tax liabilities and tax assets between current and noncurrent amounts in a classified balance sheet. Deferred taxes will be presented as noncurrent under the new standard. The guidance is effective for fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. Early adoption is permitted. The company plans to implement this standard in the fourth quarter of fiscal year 2016 and is assessing the potential impact of this new guidance on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which requires entities that measure inventory using first-in, first-out (FIFO) or average cost to measure inventory at the lower of cost and net realizable value. The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. The company is assessing the potential impact of this new guidance on its consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40), which provides guidance about management's responsibility in evaluating whether there is substantial doubt relating to an entity’s ability to continue as a going concern and to provide related footnote disclosures as applicable. ASU 2014-15 is effective for the interim and fiscal periods ending after December 15, 2016. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In June 2014, the FASB issued ASU 2014-12, Compensation - Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved After the Requisite Service Period. This guidance requires that an award with a performance target that affects vesting, and that could be achieved after the requisite service period, such as when an employee retires, but may still vest if and when the performance target is achieved, be treated as an award with performance conditions that affect vesting and the company apply existing guidance under ASC Topic 718, Compensation - Stock Compensation. The guidance is effective for fiscal periods beginning after December 15, 2015, including interim periods within those fiscal periods and may be applied either prospectively or retrospectively. The company is assessing the potential impact of this new guidance on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which requires companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service and requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. ASU 2014-09 was originally effective for fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year making it effective for fiscal periods beginning after December 15, 2017, including interim periods within those fiscal periods, while also providing for early adoption but not before the original effective date. The company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2018 and is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

Accounting standards implemented during fiscal year 2016

In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which updates Business Combination (Topic 805) guidance to eliminate the requirement to restate prior period financial statements for measurement period adjustments. The guidance should be applied prospectively to measurement period adjustments that occur after the effective date. The guidance is effective for fiscal periods beginning after December 15, 2015, including interim periods within those fiscal periods. Early adoption is permitted. The company adopted this standard in the first quarter of the fiscal year 2016. This guidance did not have a material impact on the company's consolidated financial statements.

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This guidance changes the definition of a discontinued operation to include only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity's operations and financial results. The guidance also requires new disclosure of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. This guidance is to be applied prospectively and is effective for fiscal periods beginning on or after December 15, 2014, including interim periods within those fiscal periods. The company adopted this guidance in the first quarter of fiscal year 2016. The impact of this new guidance on the company's consolidated financial statements is dependent upon future business divestitures. Previous divestitures and amounts currently included in discontinued operations were not impacted.

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Discontinued Operations

6 Months Ended

Mar. 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

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

	Three Months Ended March 31,					Six Months Ended March 31,
	2016			2015		2016			2015
Sales	$	—		$	—	$	—		$	1
Income (loss) before income taxes	$	(1	)	$	3	$	(4	)	$	—
Benefit from income taxes	—			1		1			1
Income (loss) from discontinued operations attributable to Meritor, Inc.	$	(1	)	$	4	$	(3	)	$	1

Loss from discontinued operations attributable to the company for the three and six months ended March 31, 2016 was primarily related to changes in estimates related to legal costs incurred in connection with a previously divested business. Income from discontinued operations attributable to the company for the three and six months ended March 31, 2015 was primarily attributable to the settlement of indemnities on certain contingencies of previously divested businesses.

Total discontinued operations assets as of March 31, 2016 and September 30, 2015 were $1 million and $4 million, respectively, and total discontinued operations liabilities as of March 31, 2016 and September 30, 2015 were $6 million and $10 million, respectively.

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Goodwill

6 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill

In accordance with FASB Accounting Standards Codification (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 & Industrial			Aftermarket & Trailer		Total
Beginning balance at September 30, 2015	$	239		$	163	$	402
Foreign currency translation	(3		)	—		(3		)
Balance at March 31, 2016	$	236		$	163	$	399

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Restructuring Costs

6 Months Ended

Mar. 31, 2016

Restructuring and Related Activities [Abstract]

Restructuring Costs

Restructuring Costs

Restructuring reserves, primarily related to unpaid employee termination benefits attributable mainly to the company's Commercial Truck & Industrial segment were $9 million at March 31, 2016 and $10 million at September 30, 2015, respectively. The changes in restructuring reserves for the six months ended March 31, 2016 and 2015 are as follows (in millions):

	Employee Termination Benefits			Plant Shutdown & Other		Total
Beginning balance at September 30, 2015	$	10		$	—	$	10
Activity during the period:
Charges to continuing operations	2			1		3
Cash payments – continuing operations	(4		)	—		(4		)
Total restructuring reserves at March 31, 2016	8			1		9
Less: non-current restructuring reserves	(3		)	—		(3		)
Restructuring reserves – current, at March 31, 2016	$	5		$	1	$	6
Balance at September 30, 2014	$	11		$	—	$	11
Activity during the period:
Charges to continuing operations	6			—		6
Cash payments – continuing operations	(3		)	—		(3		)
Other	(2		)	—		(2		)
Total restructuring reserves at March 31, 2015	12			—		12
Less: non-current restructuring reserves	(2		)	—		(2		)
Restructuring reserves – current, at March 31, 2015	$	10		$	—	$	10

2016 Restructuring Costs: During the first six months of fiscal year 2016, the company recorded restructuring costs of $3 million primarily associated with a labor reduction programs in China in the Commercial Truck & Industrial and Aftermarket and Trailer segments.

Consolidation of Certain Operations in 2015: During the first quarter of fiscal year 2015, the company recorded severance charges of $3 million associated with the elimination of approximately 50 hourly and 20 salaried positions in the Commercial Truck & Industrial segment in connection with the consolidation of certain gearing and machining operations in North America. Restructuring actions associated with this program were substantially complete as of September 30, 2015.

Closure of a Corporate Engineering Facility in 2015: During the second quarter of fiscal year 2015, the company notified approximately 30 salaried and contract employees that their positions were being eliminated due to the planned closure of a corporate engineering facility. The company recorded severance expenses of $1 million associated with this plan for the six months ended March 31, 2015. Restructuring actions associated with this program were substantially complete as of September 30, 2015.

European Labor Reduction in 2015: During the second quarter of fiscal year 2015, the company initiated a European headcount reduction plan intended to reduce labor costs in response to continued soft markets in the region. The company eliminated approximately 20 hourly and 20 salaried positions and recorded $2 million of expected severance expenses in the Commercial Truck & Industrial segment in the second quarter of fiscal year 2015. Restructuring actions associated with this program were substantially complete as of June 30, 2015.

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Income Taxes

6 Months Ended

Mar. 31, 2016

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 prior years, the company established valuation allowances against its U.S. net deferred tax assets and the net deferred tax assets of its 100-percent-owned subsidiaries in France, the United Kingdom and certain other countries. In evaluating its ability to recover these 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. Continued improvement in the company’s operating results could lead to reversal of some or all of these valuation allowances in the future. However, the company continues to maintain the valuation allowances in these 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. In addition, the company performs the same analysis in jurisdictions not in a valuation allowance to determine if a valuation allowance is required.

Although the company was profitable in the U.S. in 2014 and 2015, it has not generated enough positive evidence to warrant a reversal of the U.S. valuation allowance, so it continues to record a full valuation allowance against the U.S. net deferred tax assets. While the weight of negative evidence related to cumulative losses continues to decrease, the company believes that the objectively-measured negative evidence outweighs the subjectively-determined positive evidence.

For the three months ended March 31, 2016, the company had approximately $17 million of net pre-tax income compared to $24 million of net pre-tax income in the same period in fiscal year 2015 in tax jurisdictions in which tax expense (benefit) is not recorded.

For the six months ended March 31, 2016, the company had approximately $28 million of net pre-tax income compared to $36 million of net pre-tax income in the same period in fiscal year 2015 in tax jurisdictions in which tax expense is not recorded. Income arising from these jurisdictions resulted in an adjustment to the valuation allowance, rather than an adjustment to income tax expense.

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Accounts Receivable Factoring and Securitization

6 Months Ended

Mar. 31, 2016

Accounts Receivable Securitization and Factoring Disclosure [Abstract]

Accounts Receivable Factoring and Securitization

Accounts Receivable Factoring and Securitization

Off-balance sheet arrangements 

Swedish Factoring Facility: The company has an arrangement to sell trade receivables due from AB Volvo through one of its European subsidiaries. Under this arrangement, which terminates on June 28, 2016, the company can sell up to, at any point in time, €155 million ($176 million) of eligible trade receivables. On March 29, 2016, Meritor signed an amendment to increase the commitment to €155 million from €150 million. All other terms of the arrangement remain unchanged. The company is working to extend this arrangement before its current maturity date. The receivables under this program are sold at face value and are excluded from the condensed consolidated balance sheet. The company had utilized €107 million ($121 million) and €108 million ($121 million) of this accounts receivable factoring facility as of March 31, 2016 and September 30, 2015, respectively.

     The above facility is backed by a 364-day liquidity commitment from Nordea Bank which extends through December 2016. The commitment is subject to standard terms and conditions for this type of arrangement.

U.S. Factoring Facility: On February 19, 2016, the company entered into a new Receivables Purchase Agreement with Nordea Bank replacing a similar agreement that expired February 28, 2016. Under this new arrangement, which terminates on February 19, 2019, the company can sell up to, at any point in time, €80 million ($91 million) of eligible trade receivables from AB Volvo and its U.S. subsidiaries through one of the company's U.S. subsidiaries, an increase of €15 million compared to the previous agreement. The amount of eligible receivables sold may exceed Nordea Bank’s commitment at Nordea Bank’s discretion. The receivables under this program are sold at face value and are excluded from the condensed consolidated balance sheet. The company had utilized €42 million ($48 million) and €74 million ($83 million) of this accounts receivable factoring facility as of March 31, 2016 and September 30, 2015, respectively.

   United Kingdom Factoring Facility: The company has an arrangement to sell trade receivables from AB Volvo and its European subsidiaries through one of its United Kingdom subsidiaries. Under this arrangement, which expires in February 2018, the company can sell up to, at any point in time, €25 million ($28 million) of eligible trade receivables. The receivables under this program are sold at face value and are excluded from the condensed consolidated balance sheet. The company had utilized €6 million ($7 million) and €8 million ($8 million) of this accounts receivable factoring facility as of March 31, 2016 and September 30, 2015, respectively. The agreement is subject to standard terms and conditions for these types of arrangements, including a sole discretion clause whereby the bank retains the right to not purchase receivables, which has not been invoked since the inception of the program.

Italy Factoring Facility: The company has an arrangement to sell trade receivables from AB Volvo and its European subsidiaries through one of its Italian subsidiaries. Under this arrangement, which expires in June 2017, the company can sell up to, at any point in time, €30 million ($34 million) of eligible trade receivables. The receivables under this program are sold at face value and are excluded from the condensed consolidated balance sheet. The company had utilized €17 million ($19 million) and €22 million ($24 million) of this accounts receivable factoring facility as of March 31, 2016 and September 30, 2015, respectively. The agreement is subject to standard terms and conditions for these types of arrangements including a sole discretion clause whereby the bank retains the right to not purchase receivables, which has not been invoked since the inception of the program.

     In addition to the above facilities, a number of the company’s subsidiaries, primarily in Europe, factor eligible accounts receivable with financial institutions. Certain receivables are factored without recourse to the company and are excluded from accounts receivable in the condensed consolidated balance sheet. The amount of factored receivables excluded from accounts receivable under these arrangements was $14 million and $18 million at March 31, 2016 and September 30, 2015, respectively.

     Total costs associated with all of the off-balance sheet arrangements described above were $2 million and $1 million in the three months ended March 31, 2016 and 2015, respectively, and $4 million and $3 million in the six months ended March 31, 2016 and 2015, respectively, and are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

On-balance sheet arrangements

The company has a $100 million U.S. accounts receivables securitization facility. On December 4, 2015, the company entered into an amendment which extends the facility expiration date to December 4, 2018. The maximum permitted priority-debt-to-EBITDA ratio as of the last day of each fiscal quarter under the facility is 2.25 to 1.00. This program is provided by PNC Bank, National Association, as Administrator and Purchaser, and the other Purchasers and Purchaser Agents from time to time (participating lenders), which are party to the agreement. Under this program, the company has the ability to sell an undivided percentage ownership interest in substantially all of its trade receivables (excluding the receivables due from AB Volvo and subsidiaries eligible for sale under the U.S. accounts receivable factoring facility) of certain U.S. subsidiaries to ArvinMeritor Receivables Corporation ("ARC"), a wholly-owned, special purpose subsidiary. ARC funds these purchases with borrowings from participating lenders under a loan agreement. This program also includes a letter of credit facility pursuant to which ARC may request the issuance of letters of credit issued for the company’s U.S. subsidiaries (originators) or their designees, which when issued will constitute a utilization of the facility for the amount of letters of credit issued. Amounts outstanding under this agreement are collateralized by eligible receivables purchased by ARC and are reported as short-term debt in the condensed consolidated balance sheet. At March 31, 2016 and September 30, 2015, no amounts, including letters of credit, were outstanding under this program. This securitization program contains a cross default to the revolving credit facility. At certain times during any given month, the company may sell eligible accounts receivable under this program to fund intra-month working capital needs. In such months, the company would then typically utilize the cash received from customers throughout the month to repay the borrowings under the program. Accordingly, during any given month, the company may borrow under this program, amounts exceeding the amounts shown as outstanding at fiscal quarter ends.

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Operating Cash Flow

6 Months Ended

Mar. 31, 2016

Operating Cash Flow Disclosure [Abstract]

Operating Cash Flow

Operating Cash Flow

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

	Six Months Ended March 31,
	2016			2015
OPERATING ACTIVITIES
Net income	$	59		$	73
Less: Income (loss) from discontinued operations, net of tax	(3		)	1
Income from continuing operations	62			72
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization	31			32
Restructuring costs	3			6
Loss on debt extinguishment	—			1
Gain on sale of property	(2		)	—
Equity in earnings of affiliates	(17		)	(18		)
Pension and retiree medical expense	10			14
Other adjustments to income from continuing operations	4			5
Dividends received from equity method investments	19			10
Pension and retiree medical contributions	(22		)	(24		)
Restructuring payments	(4		)	(3		)
Changes in off-balance sheet accounts receivable factoring	(51		)	40
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, foreign currency adjustments and discontinued operations	7			(99		)
Operating cash flows provided by continuing operations	40			36
Operating cash flows used for discontinued operations	(1		)	(7		)
CASH PROVIDED BY OPERATING ACTIVITIES	$	39		$	29

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Inventories

6 Months Ended

Mar. 31, 2016

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):

	March 31, 2016		September 30, 2015
Finished goods	$	146	$	133
Work in process	31		28
Raw materials, parts and supplies	185		177
Total	$	362	$	338

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Other Current Assets

6 Months Ended

Mar. 31, 2016

Other Current Assets Disclosure [Abstract]

Other Current Assets

Other Current Assets

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

	March 31, 2016		September 30, 2015
Current deferred income tax assets	$	20	$	20
Asbestos-related recoveries (see Note 20)	14		13
Prepaid and other	19		17
Other current assets	$	53	$	50

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Net Property

6 Months Ended

Mar. 31, 2016

Property, Plant and Equipment [Abstract]

Net Property

Net Property

Net property is summarized as follows (in millions):

	March 31, 2016			September 30, 2015
Property at cost:
Land and land improvements	$	31		$	31
Buildings	221			214
Machinery and equipment	852			864
Company-owned tooling	116			116
Construction in progress	67			62
Total	1,287			1,287
Less: accumulated depreciation	(860		)	(868		)
Net property	$	427		$	419

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Other Assets

6 Months Ended

Mar. 31, 2016

Other Assets, Noncurrent [Abstract]

Other Assets

Other Assets

Other assets are summarized as follows (in millions):

	March 31, 2016		September 30, 2015
Investments in non-consolidated joint ventures	$	98	$	96
Asbestos-related recoveries (see Note 20)	37		42
Unamortized revolver debt issuance costs	8		10
Capitalized software costs, net	27		28
Non-current deferred income tax assets, net	28		28
Assets for uncertain tax positions	3		3
Prepaid pension costs	114		110
Other	17		15
Other assets	$	332	$	332

In accordance with FASB ASC Topic 350-40, costs relating to internally developed or purchased software in the preliminary project stage and the post-implementation stage are expensed as incurred. Costs in the application development stage that meet the criteria for capitalization are capitalized and amortized using the straight-line basis over the estimated economic useful life of the software.

The company holds a variable interest in a joint venture accounted for under the equity method of accounting. The joint venture manufactures components for commercial vehicle applications primarily on behalf of the company. The variable interest relates to a supply arrangement between the company and the joint venture whereby the company supplies certain components to the joint venture on a cost-plus basis. The company is not the primary beneficiary of the joint venture, as the joint venture partner has shared or absolute control over key manufacturing operations, labor relationships, financing activities and certain other functions of the joint venture. Therefore, the company does not consolidate the joint venture. At March 31, 2016 and September 30, 2015, the company’s investment in the joint venture was $45 million and $42 million, respectively.

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Unconsolidated Significant Subsidiary

6 Months Ended

Mar. 31, 2016

Equity Method Investment, Summarized Financial Information, Income Statement [Abstract]

Unconsolidated Significant Subsidiary

Unconsolidated Significant Subsidiary

Article 10 of Regulation S-X (Rule 10-01(b)(1)) requires separate interim period summarized income statement information for each 50-percent-or-less-owned subsidiary not consolidated that would have been a significant subsidiary for annual periods in accordance with Rule 3-09 of Regulation S-X. In accordance with this guidance, the company’s non-consolidated joint venture Meritor WABCO Vehicle Control Systems’ summarized income statement information is as follows (in millions):

	Three Months Ended March 31,				Six Months Ended March 31,
	2016		2015		2016		2015
	(Unaudited)
Sales	$	83	$	88	$	168	$	170
Gross margin	$	21	$	19	$	43	$	37
Income from continuing operations	$	13	$	13	$	29	$	24
Net income	$	13	$	13	$	29	$	24

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Other Current Liabilities

6 Months Ended

Mar. 31, 2016

Other Current Liabilities Disclosure [Abstract]

Other current liabilities

Other Current Liabilities

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

	March 31, 2016		September 30, 2015
Compensation and benefits	$	98	$	122
Income taxes	13		9
Taxes other than income taxes	23		23
Accrued interest	14		14
Product warranties (see Note 16)	19		22
Environmental reserves (see Note 20)	8		9
Restructuring (see Note 6)	6		7
Asbestos-related liabilities (see Note 20)	17		17
Indemnity obligations (see Note 20)	2		2
Other	53		54
Other current liabilities	$	253	$	279

The company records estimated product warranty costs at the time of shipment of products to customers. Warranty reserves are primarily based on factors that include past claims experience, sales history, product manufacturing and engineering changes and industry developments. Liabilities for product recall campaigns are recorded at the time the company’s obligation is probable and can be reasonably estimated. Policy repair actions to maintain customer relationships are recorded as other liabilities at the time an obligation is probable and can be reasonably estimated. Product warranties, including recall campaigns, not expected to be paid within one year are recorded as a non-current liability.

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

	Six Months Ended March 31,
	2016			2015
Total product warranties – beginning of period	$	48		$	51
Accruals for product warranties	7			7
Payments	(9		)	(9		)
Change in estimates and other	1			—
Total product warranties – end of period	47			49
Less: Non-current product warranties	(28		)	(26		)
Product warranties – current	$	19		$	23

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Other Liabilities

6 Months Ended

Mar. 31, 2016

Other Liabilities Disclosure [Abstract]

Other liabilities

Other Liabilities

Other liabilities are summarized as follows (in millions):

	March 31, 2016		September 30, 2015
Asbestos-related liabilities (see Note 20)	$	121	$	109
Restructuring (see Note 6)	3		3
Non-current deferred income tax liabilities	99		99
Liabilities for uncertain tax positions	15		15
Product warranties (see Note 15)	28		26
Environmental (see Note 20)	8		8
Indemnity obligations (see Note 20)	12		13
Other	30		32
Other liabilities	$	316	$	305

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Long-Term Debt

6 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

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

	March 31, 2016			September 30, 2015
4.625 percent convertible notes due 2026 (1)	$	—		$	55
4.0 percent convertible notes due 2027(2)(4)	142			142
7.875 percent convertible notes due 2026(2)(5)	128			127
6.75 percent notes due 2021(3)(6)	270			270
6.25 percent notes due 2024(3)(7)	442			442
Capital lease obligation	17			17
Export financing arrangements and other	21			18
Unamortized discount on convertible notes	(17		)	(20		)
Subtotal	1,003			1,051
Less: current maturities	(25		)	(15		)
Long-term debt	$	978		$	1,036

⁽¹⁾ The 4.625 percent, convertible notes contained a put and call feature, which allowed for earlier redemption beginning in 2016. Substantially all of these notes were redeemed on March 1, 2016.

⁽²⁾ The 4.0 percent and 7.875 percent convertible notes contain a put and call feature, which allows for earlier redemption beginning in 2019 and 2020, respectively.

⁽³⁾ The 6.75 percent and 6.25 percent notes contain a call option, which allows for early redemption.

⁽⁴⁾ The 4.0 percent convertible notes due 2027 are presented net of $1 million unamortized issuance costs as of March 31, 2016 and September 30, 2015.

⁽⁵⁾ The 7.875 percent convertible notes due 2026 are presented net of $2 million and $3 million unamortized issuance costs as of March 31, 2016 and September 30, 2015, respectively, and$10 million original issuance discount as of March 31, 2016 and September 30, 2015.

⁽⁶⁾ The 6.75 percent notes due 2021 are presented net of $5 million unamortized issuance costs as of March 31, 2016 and September 30, 2015.

⁽⁷⁾ The 6.25 percent notes due 2024 are presented net of $8 million unamortized issuance costs as of March 31, 2016 and September 30, 2015.

Revolving Credit Facility

On May 22, 2015, the company entered into a second amendment of its senior secured revolving credit facility. Pursuant to the revolving credit agreement as amended, the company has a $499 million revolving credit facility, $40 million of which matures in April 2017 for banks not electing to extend their commitments under the revolving credit facility, and $459 million of which matures in February 2019. The availability under this facility is dependent upon various factors, including principally performance against certain financial covenants as highlighted below. Prior to May 22, 2015, $89 million of the $499 million revolving credit facility was scheduled to mature in April 2017 for banks not electing to extend their commitments under the revolving credit facility, and $410 million was scheduled to mature in February 2019.

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

The availability under the revolving credit facility is also subject to a collateral test, pursuant to which borrowings on the revolving credit facility cannot exceed 1.0x the collateral test value. The collateral test is performed on a quarterly basis. At March 31, 2016, the revolving credit facility was collateralized by approximately $647 million of the company's assets, primarily consisting of eligible domestic U.S. accounts receivable, inventory, plant, property and equipment, intellectual property and the company's investment in all or a portion of certain of its wholly-owned subsidiaries.

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 the company’s current corporate credit rating. At March 31, 2016, the margin over LIBOR rate was 325 basis points, and the commitment fee was 50 basis points. Overnight revolving credit loans are at the prime rate plus a margin of 225 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).

No borrowings were outstanding under the revolving credit facility at March 31, 2016 and September 30, 2015. The amended and extended revolving credit facility includes $100 million of availability for the issuance of letters of credit. At March 31, 2016 and September 30, 2015, there were no letters of credit outstanding under the revolving credit facility.

Debt Securities

In December 2014, the company filed a shelf registration statement with the Securities and Exchange Commission, registering an unlimited amount of debt and/or equity securities that the company may offer in one or more offerings on terms to be determined at the time of sale. The December 2014 shelf registration statement superseded and replaced the shelf registration statement filed in February 2012, as amended.

Repurchase of Debt Securities

In February 2015, the company repurchased $15 million principal amount of the company's 4.0 percent convertible notes due 2027. The notes were repurchased at a premium equal to approximately 6 percent of their principal amount. The repurchase of $15 million principal amount of the company's 4.0 percent convertible notes was accounted for as an extinguishment of debt, and accordingly the company recognized an insignificant net loss on debt extinguishment, the majority of which is premium. The net loss on debt extinguishment is included in the consolidated statement of operations in interest expense, net. The repurchase was made under the company's equity and equity-linked repurchase authorizations (see Note 21).

On March 1, 2016, substantially all of the $55 million of principal amount 4.625 percent convertible notes were repurchased at 100 percent of the face value of the notes. The repurchase was made under the company's equity and equity linked repurchase authorizations (see Note 21). The amount remaining available for repurchases under these authorizations was $39 million at March 31, 2016.

Capital Leases

On March 20, 2012, the company entered into an arrangement to finance equipment acquisitions for various U.S. locations. Under this arrangement, the company can request financing from GE Capital Commercial, Inc. (GE Capital) for progress payments for equipment under construction, not to exceed $10 million at any time. The financing rate is equal to the 30-day LIBOR plus 475 basis points per annum. Under this arrangement, the company can also enter into lease arrangements with GE Capital for completed equipment. The lease term is 60 months and the lease interest rate is equal to the 5-year Swap Rate published by the Federal Reserve Board plus 564 basis points. The company had $8 million and $10 million outstanding under this capital lease arrangement as of March 31, 2016 and September 30, 2015, respectively. In addition, the company had another $9 million and $7 million outstanding through other capital lease arrangements at March 31, 2016 and September 30, 2015, respectively.

Letter of Credit Facilities

On February 21, 2014, the company entered into an arrangement to amend and restate the letter of credit facility with Citicorp USA, Inc., as administrative agent and issuing bank, and the other lenders party thereto. Under the terms of this amended credit agreement, the company has the right to obtain the issuance, renewal, extension and increase of letters of credit up to an aggregate availability of $30 million through December 19, 2015. From December 20, 2015 through March 19, 2019, the aggregate availability is $25 million. This facility contains covenants and events of default generally similar to those existing in the company’s public debt indentures. There were $22 million and $24 million of letters of credit outstanding under this facility at March 31, 2016 and September 30, 2015, respectively. The company had another $6 million of letters of credit outstanding through other letter of credit facilities at March 31, 2016 and September 30, 2015.

Export Financing Arrangements

The company entered into a number of export financing arrangements through its Brazilian subsidiary during fiscal year 2014.  The export financing arrangements are issued under an incentive program of the Brazilian government to fund working capital for Brazilian companies in exportation programs. The arrangements bear interest at 5.5 percent and have maturity dates in 2016 and 2017. There was $19 million and $18 million outstanding under these arrangements at March 31, 2016 and September 30, 2015, respectively.

Other

One of the company's consolidated joint ventures in China participates in a bills of exchange program to settle its obligations with its trade suppliers. These programs are common in China and generally require the participation of local banks. Under these programs, the company's joint venture issues notes payable through the participating banks to its trade suppliers. If the issued notes payable remain unpaid on their respective due dates, this could constitute an event of default under the company’s revolving credit facility if the defaulted amount exceeds $35 million per bank. As of March 31, 2016 and September 30, 2015, the company had $8 million and $13 million, respectively, outstanding under this program at more than one bank.

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Financial Instruments

6 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

Financial Instruments

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

	March 31, 2016				September 30, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	94	$	94	$	193	$	193
Short-term debt	25		24		15		15
Long-term debt	978		958		1,036		1,123
Foreign exchange forward contracts (asset)	—		—		1		1
Foreign exchange forward contracts (liability)	2		2		3		3
Short-term foreign currency option contracts (asset)	—		—		1		1
Long-term foreign currency option contracts (asset)	—		—		1		1

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

	March 31, 2016			September 30, 2015
	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported
Derivative Asset
Foreign exchange forward contract	—	—	—	1	—	1
Derivative Liabilities
Foreign exchange forward contract	2	—	2	3	—	3

Fair Value

The current 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 March 31, 2016 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	94	$	—	$	—
Short-term debt	—		—		24
Long-term debt	—		946		12
Foreign exchange forward contracts (liability)	—		2		—

Fair value of financial instruments by the valuation hierarchy at March 31, 2015 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	207	$	—	$	—
Short-term debt	—		—		5
Long-term debt	—		1,093		38
Foreign exchange forward contracts (asset)	—		5		—
Short-term foreign currency option contracts (asset)	—		—		2
Long-term foreign currency option contracts (asset)	—		—		2

The tables below provide a reconciliation of changes in fair value of the Level 3 financial assets and liabilities measured at fair value in the condensed consolidated balance sheet for the three and six months ended March 31, 2016 and 2015, respectively. No transfers of assets between any of the Levels occurred during these periods.

Three months ended March 31, 2016 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)		Total
Fair Value as of December 31, 2015	$	2		$	—	$	2
Total unrealized gains (losses):
Included in other income	(2		)	—		(2		)
Transfer in and / or out of Level 3 (1)	—			—		—
Fair Value as of March 31, 2016	$	—		$	—	$	—

Three months ended March 31, 2015 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)			Total
Fair Value as of December 31, 2014	$	4		$	1		$	5
Total unrealized gains (losses):
Included in other income	(1		)	—			(1		)
Total realized gains (losses):
Included in other income	3			—			3
Included in cost of sales	3			—			3
Purchases, issuances, sales and settlements:
Purchases	4			—			4
Settlements	(9		)	(1		)	(10		)
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	(2		)	2			—
Fair Value as of March 31, 2015	$	2		$	2		$	4

Six months ended March 31, 2016 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)			Total
Fair Value as of September 30, 2015	$	1		$	1		$	2
Total unrealized gains (losses):
Included in other income	(2		)	—			$	(2	)
Included in cost of sales	—			(1		)	(1		)
Purchases, issuances, sales and settlements:
Purchases	1			—			$	1
Transfer in and / or out of Level 3 (1)	—			—			—
Fair Value as of March 31, 2016	$	—		$	—		$	—

Six months ended March 31, 2015 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)			Total
Fair Value as of September 30, 2014	$	2		$	1		$	3
Total realized gains (losses):
Included in other income	3			—			3
Included in cost of sales	3			—			3
Purchases, issuances, sales and settlements:
Purchases	5			—			5
Settlements	(10		)	(1		)	(11		)
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	(1		)	2			1
Fair Value as of March 31, 2015	$	2		$	2		$	4

⁽¹⁾ Transfers as of the last day of the reporting period.

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. The company did not have any cash equivalents at March 31, 2016 or September 30, 2015.

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 one year or less to hedge its exposure to changes in foreign currency exchange rates. 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 a cash flow hedge, the effective portion of changes in the fair value of the contracts is recorded in Accumulated Other Comprehensive Loss in the statement of shareowners’ equity and is recognized in operating income when the underlying forecasted transaction impacts earnings.

Foreign currency option contracts — The company uses option contracts to mitigate foreign currency exposure on expected future Indian rupee denominated purchases. The contracts were entered into during the third quarter of fiscal year 2014 with effective dates from the start of fiscal year 2015 through the end of fiscal year 2017. In the second quarter of fiscal year 2015, the company monetized its outstanding foreign currency option contracts and entered into a new series of foreign currency option contracts with effective dates from the start of the third quarter of fiscal year 2015 through the end of fiscal year 2017. The fair value of the foreign currency option contracts is based on a third-party proprietary model, which incorporates inputs at varying unobservable weights of quoted spot rates, market volatility, forward rates, and time utilizing market instruments with similar quality and maturity characteristics. 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 consolidated statement of operations. In the first six months of fiscal year 2016, net unrealized losses totaled $1 million, all of which occurred during the first quarter of fiscal year 2016.

From time to time, the company will hedge against its foreign currency exposure related to translations to U.S. dollars of financial results denominated in foreign currencies. In the first quarter of fiscal year 2015, the company entered into a series of foreign currency option contracts with a total notional amount of $48 million to reduce volatility in the translation of Brazilian real earnings to U.S. dollars. These foreign currency option contracts did not qualify for a hedge accounting election but were expected to mitigate foreign currency translation exposure of Brazilian real earnings to U.S. dollars. In the second quarter of fiscal year 2015, the company monetized these outstanding foreign currency option contracts and entered into a new series of foreign currency option contracts with effective dates from the start of the third quarter of fiscal year 2015 through the end of fiscal year 2015. In the third and fourth quarters of fiscal year 2015, the company monetized these outstanding foreign currency option contracts. As of March 31, 2016 and September 30, 2015, there were no Brazilian real foreign currency option contracts outstanding.

Also, in the fourth quarter of fiscal year 2015, the company entered into a series of foreign currency contracts with total notional amounts of $30 million and $27 million to mitigate the risk of volatility in the translation of Swedish krona and euro earnings to U.S. dollars, respectively. During the first quarter of fiscal year 2016, the company entered into additional foreign currency contracts with total notional amounts of $19 million and $21 million to mitigate the risk of volatility in the translation of the Swedish krona and euro earnings to U.S. dollars, respectively. These foreign currency option contracts do not qualify for a hedge accounting election but are expected to mitigate foreign currency translation exposure of Swedish krona and euro earnings to U.S. dollars during fiscal year 2016. For the three and six months ended March 31, 2016, net unrealized losses totaled $2 million. The fair value of the foreign currency option contracts is based on a third-party proprietary model, which incorporates inputs at varying unobservable weights of quoted spot rates, market volatility, forward rates, and time utilizing market instruments with similar quality and maturity characteristics. Changes in fair value associated with these contracts are recorded in the consolidated statement of operations in other income, net.

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Retirement Benefit Liabilities

6 Months Ended

Mar. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Retirement Benefit Liabilities

Retirement Benefit Liabilities

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

	March 31, 2016			September 30, 2015
Retiree medical liability	$	429		$	438
Pension liability	208			219
Other	13			14
Subtotal	650			671
Less: current portion (included in compensation and benefits, Note 15)	(39		)	(39		)
Retirement benefits	$	611		$	632

The components of net periodic pension and retiree medical expense included in Selling, general and administrative expenses for the three months ended March 31 are as follows (in millions):

	2016					2015
	Pension			Retiree Medical		Pension			Retiree Medical
Interest cost	27			5		18			5
Assumed return on plan assets	(25		)	—		(28		)	—
Recognized actuarial loss	6			3		7			5
Total expense (income)	$	8		$	8	$	(3	)	$	10

The components of net periodic pension and retiree medical expense included in Selling, general and administrative expenses for the six months ended March 31 are as follows (in millions):

	2016					2015
	Pension			Retiree Medical		Pension			Retiree Medical
Interest cost	33			9		36			10
Assumed return on plan assets	(50		)	—		(56		)	—
Recognized actuarial loss	12			6		14			10
Total expense (income)	$	(5	)	$	15	$	(6	)	$	20

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Contingencies

6 Months Ended

Mar. 31, 2016

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 nine 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. Management estimates the total reasonably possible costs the company could incur for the remediation of Superfund sites at March 31, 2016 to be approximately $17 million, of which $2 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 March 31, 2016 to be approximately $28 million, of which $14 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 0.5 to 2.5 percent and is approximately $8 million at March 31, 2016. The undiscounted estimate of these costs is approximately $8 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, 2015	$	2	$	14		$	16
Payments and other	—		(3		)	(3		)
Accruals	—		3			3
Balance at March 31, 2016	$	2	$	14		$	16

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.

Asbestos

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

Maremont had approximately 5,800 and 5,600 pending asbestos-related claims at March 31, 2016 and September 30, 2015, respectively. Although Maremont has been named in these cases, in the cases where actual injury has been alleged, very few claimants have established that a Maremont product caused their injuries. Plaintiffs’ lawyers often sue dozens or even hundreds of defendants in individual lawsuits, seeking damages against all named defendants irrespective of the disease or injury and irrespective of any causal connection with a particular product. For these reasons, the total number of claims filed is not necessarily the most meaningful factor in determining Maremont’s asbestos-related liability.

     Maremont’s asbestos-related reserves and corresponding asbestos-related recoveries are summarized as follows (in millions):

	March 31, 2016		September 30, 2015
Pending and future claims	$	71	$	71
Billed but unpaid claims	2		3
Asbestos-related liabilities	$	73	$	74
Asbestos-related insurance recoveries	$	37	$	41

A portion of the asbestos-related recoveries and reserves are included in Other Current Assets and Liabilities, with the majority of the amounts recorded in Other Assets and Liabilities (see Notes 11, 13, 15 and 16).

Pending and Future Claims: Maremont has engaged Bates White LLC (“Bates White”), a consulting firm with extensive experience estimating costs associated with asbestos litigation, to assist with determining the estimated cost of resolving pending and future asbestos-related claims that have been, and could reasonably be expected to be, filed against Maremont. Bates White prepares these cost estimates annually in September. Although it is not possible to estimate the full range of costs because of various uncertainties, Bates White advised Maremont that it would be possible to determine an estimate of a reasonable forecast of the cost of the probable settlement and defense costs of resolving pending and future asbestos-related claims, based on historical data and certain assumptions with respect to events that may occur in the future.

     As of September 30, 2015, Bates White provided a reasonable and probable estimate that consisted of a range of equally likely possibilities of Maremont’s obligation for asbestos personal injury claims over the next ten years of $71 million to $100 million. Management recognized a liability of $71 million as of each of March 31, 2016 and September 30, 2015 for pending and future claims over the next ten years. The ultimate cost of resolving pending and future claims is estimated based on the history of claims and expenses for plaintiffs represented by law firms in jurisdictions with an established history with Maremont. Historically, Maremont has recognized incremental insurance receivables associated with recoveries expected for asbestos-related liabilities as the estimate of asbestos-related liabilities for pending and future claims changes. However, Maremont currently expects that its settled insurance coverage will not be sufficient to fully offset its expected asbestos-related liabilities through the end of the ten-year forecasted liability period.

Assumptions: The following assumptions were made by Maremont after consultation with Bates White and are included in their study:

• Pending and future claims were estimated for a ten-year period ending in fiscal year 2025;

• Maremont believes that the litigation environment could change significantly beyond ten years and that the reliability of estimates of future probable expenditures in connection with asbestos-related personal injury claims will decline for each year further in the future. As a result, estimating a probable liability beyond ten years is difficult and uncertain;

• On a per claim basis, defense and processing costs for pending and future claims will be at the level consistent with Maremont’s prior experience;

• Potential payments made to claimants from other sources, including other defendants and 524(g) trusts favorably impact Maremont’s estimated liability in the future; and

• The ultimate indemnity cost of resolving nonmalignant claims with plaintiffs’ law firms in jurisdictions without an established history with Maremont cannot be reasonably estimated.

Recoveries: Maremont has insurance that reimburses a substantial portion of the costs incurred defending against asbestos-related claims. The insurance receivable related to asbestos-related liabilities is $37 million and $41 million as of March 31, 2016 and September 30, 2015, respectively. The receivable is for coverage provided by one insurance carrier based on a coverage in place agreement. Maremont currently expects to exhaust the remaining limits provided by this coverage sometime in the next ten years. The difference between the estimated liability and insurance receivable is primarily related to exhaustion of settled insurance coverage within the forecasted period and proceeds from settled insurance policies. Amounts received from insurance settlements generally reduce recorded insurance receivables.

Maremont maintained insurance coverage with other insurance carriers that management believes also covers indemnity and defense costs. During fiscal year 2013, Maremont re-initiated lawsuits against these carriers, seeking a declaration of its rights to coverage for asbestos claims and to facilitate an orderly and timely collection of insurance proceeds. One of these insurance policies has been partially settled in cash. On December 12, 2015, Maremont received $17 million, of which $5 million was recognized as reduction in asbestos expense and $12 million was recorded as a liability to the insurance carrier as it is required to be returned to the carrier if additional asbestos liability is not incurred. The settlement also provides additional recovery for Maremont if certain spending thresholds are met.

     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 Maremont could change significantly from its past experience, due, for example, to changes in the mix of claims filed against Maremont in terms of plaintiffs’ law firms, jurisdictions and diseases; legislative or regulatory developments; Maremont’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 and future claims, the cost to resolve claims and the amount of available insurance prove to be incorrect, the actual amount of liability for Maremont’s 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.

Rockwell International (“Rockwell”) — ArvinMeritor, Inc. (“AM”), a subsidiary of Meritor, along with many other companies, has also been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos used in certain components of Rockwell products many years ago. Liability for these claims was transferred at the time of the spin-off of the automotive business from Rockwell in 1997. Rockwell had approximately 3,200 and 3,000 pending active asbestos claims in lawsuits that name AM, together with many other companies, as defendants at March 31, 2016 and September 30, 2015, respectively.

A significant portion of the claims do not identify any of Rockwell’s products or specify which of the claimants, if any, were exposed to asbestos attributable to Rockwell’s products, and past experience has shown that the vast majority of the claimants will likely never identify any of Rockwell’s 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’s 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.

     The Rockwell legacy asbestos-related reserves and corresponding asbestos-related recoveries are summarized as follows (in millions):

	March 31, 2016		September 30, 2015
Pending and future claims	$	55	$	55
Billed but unpaid claims	3		3
Asbestos-related liabilities	$	58	$	58
Asbestos-related insurance recoveries	$	14	$	14

Pending and Future Claims: The company has engaged Bates White to assist with determining whether it would be possible to estimate the cost of resolving pending and future Rockwell legacy asbestos-related claims that have been, and could reasonably be expected to be, filed against the company. Bates White prepares these cost estimates annually in September. As of September 30, 2015, Bates White provided a reasonable and probable estimate that consisted of a range of equally likely possibilities of Rockwell’s obligation for asbestos personal injury claims over the next ten years of $55 million to $74 million. Management recognized a liability for the pending and future claims over the next ten years of $55 million as of each of March 31, 2016 and September 30, 2015. The ultimate cost of resolving pending and future claims is estimated based on the history of claims and expenses for plaintiffs represented by law firms in jurisdictions with an established history with Rockwell.

Assumptions: The following assumptions were made by the company after consultation with Bates White and are included in their study:

• Pending and future claims were estimated for a ten-year period ending in fiscal year 2025;

• The company believes that the litigation environment could change significantly beyond ten years and that the reliability of estimates of future probable expenditures in connection with asbestos-related personal injury claims will decline for each year further in the future. As a result, estimating a probable liability beyond ten years is difficult and uncertain;

• On a per claim basis, defense and processing costs for pending and future claims will be at the level consistent with the company’s prior experience;

• Potential payments made to claimants from other sources, including other defendants and 524(g) trusts favorably impact the company’s estimated liability in the future; and

• The ultimate indemnity cost of resolving nonmalignant claims with plaintiff’s law firms in jurisdictions without an established history with Rockwell cannot be reasonably estimated.

Recoveries: The insurance receivable related to asbestos-related liabilities was $14 million as of each of March 31, 2016 and September 30, 2015. Included in these amounts are insurance receivables of $9 million as of each of March 31, 2016 and September 30, 2015 that are associated with policies in dispute. Rockwell has insurance coverage that management believes covers indemnity and defense costs, over and above self-insurance retentions, for most of these claims. The company has initiated claims against certain of these carriers to enforce the insurance policies, which are in various stages of the litigation process. The company expects to recover some portion of the defense and indemnity costs it has incurred to date, over and above self-insured retentions, and some portion of the costs for defending asbestos claims going forward. The amounts recognized for policies in dispute are based on consultation with advisors, status of settlement negotiations with certain insurers and underlying analysis performed by management. The remaining receivable recognized is related to coverage provided by one carrier based on a coverage-in-place insurance arrangement. 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's asbestos-related claims, and the effect on the company, could differ materially from current estimates and, therefore, could have a material impact on the company’s financial condition and results of operations.

Indemnifications

The company has provided indemnifications 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.

In December 2005, the company guaranteed a third party’s obligation to reimburse another party for payment of health and prescription drug benefits to a group of retired employees. The retirees were former employees of a wholly-owned subsidiary of the company prior to it being acquired by the company. The wholly-owned subsidiary, which was part of the company’s light vehicle aftermarket business, was sold by the company in fiscal year 2006. Prior to May 2009, except as set forth hereinafter, the third party met its obligations to reimburse the other party. In May 2009, the third party filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code requiring the company to recognize its obligations under the guarantee. The company recorded a $28 million liability in fiscal year 2009 for this matter. At March 31, 2016 and September 30, 2015, the remaining estimated liability for this matter was approximately $13 million.

   In connection with the sale of its interest in MSSC in October 2009, the company provided certain indemnities to the buyer for its share of potential obligations related to pension funding shortfall, environmental and other contingencies, and valuation of certain accounts receivable and inventories. At March 31, 2016, the company had no exposure under this indemnity. At September 30, 2015, the company's exposure was approximately $1 million, which is included in other liabilities in the condensed consolidated balance sheet.

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

Other

The company identified certain sales transactions for which value added tax was required to be remitted to certain tax jurisdictions for tax years 2009 through 2015. At March 31, 2016 and September 30, 2015, the company’s estimate of the probable liability was $10 million.

In March 2016, the company was served with a complaint filed against the company and other defendants in the United States District Court for the Eastern District of Michigan. The complaint is a proposed class action and alleges that the company violated federal and state antitrust and other laws in connection with a former business of the company’s that manufactured and sold exhaust systems for automobiles. The alleged class is comprised of persons and entities that purchased or leased a passenger vehicle during a specified time period. In April the Company was served with a virtually identical suit also naming the company as a defendant on behalf of a purported class of automobile dealers. The company is reviewing the complaints and developing its response and intends to vigorously defend the claims. At this point, the company cannot estimate the ultimate impact on the company, and there can be no assurance that the ultimate resolution of these matters will not have a material adverse effect on the consolidated financial position, results of operations or liquidity.

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. 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 is reviewing the complaints and developing its response and intends to vigorously defend the claims. The ultimate outcome of this litigation, and consequently, an estimate of the possible loss, if any, related to this litigation, cannot reasonably be determined at this time and no assurance can be given that the ultimate outcome would not materially adversely affect the company.

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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Shareowners' Equity

6 Months Ended

Mar. 31, 2016

Equity [Abstract]

Shareowners' Equity

Shareowners' Equity

Equity and Equity-Linked Repurchase Authorizations

In June 2014, the company’s Board of Directors authorized the repurchase of up to $210 million of its equity and equity-linked securities (including convertible debt securities), subject to the achievement of its M2016 net debt reduction target and compliance with legal and regulatory requirements and its debt covenants. In September 2014, the company’s Board authorized the repurchase of up to $40 million of its equity or equity-linked securities (including convertible debt securities) under the $210 million authorization that may be made annually without regard to achievement of the M2016 net debt reduction target. These authorizations have no stated expiration. During the six months ended March 31, 2016, the company repurchased 3.9 million shares of common stock for $43 million (including commission costs) pursuant to these authorizations. As of March 31, 2016, the company has repurchased 8.1 million shares of common stock for $98 million (including commission costs), $19 million principal amount of its 4.0 percent convertible notes due 2027, and substantially all of the $55 million principal amount of its 4.625 percent convertible notes due 2026 pursuant to the equity and equity-linked repurchase authorizations. The amount remaining available for repurchase under the authorization was $39 million as of March 31, 2016.

In January 2015, the Offering Committee of the company’s Board of Directors approved a repurchase program for up to $150 million aggregate principal amount of any of its public debt securities (including convertible debt securities) from time to time through open market purchases or privately negotiated transactions or otherwise, until September 30, 2016, subject to compliance with legal and regulatory requirements and the company's debt covenants. This repurchase program is in addition to the equity and equity-linked repurchase authorizations described above. The amount remaining available for repurchases under this program is $150 million as of March 31, 2016 and September 30, 2015.

Accumulated Other Comprehensive Loss (“AOCL”)

The components of AOCL and the changes in AOCL by components, net of tax, for three months ended March 31, 2016 and 2015 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at December 31, 2015	$	(60	)	$	(696	)	$	(4	)	$	(760	)
Other comprehensive income (loss) before reclassification	10			—			(1		)	9
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			9			—			9
Net current-period other comprehensive income (loss)	$	10		$	9		$	(1	)	$	18
Balance at March 31, 2016	$	(50	)	$	(687	)	$	(5	)	$	(742	)

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
Actuarial losses	9		(a)
	9		Total before tax
	—		Tax (benefit) expense
Total reclassifications for the period	$	9	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).

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at December 31, 2014	$	8		$	(777	)	$	(2	)	$	(771	)
Other comprehensive income before reclassification	(33		)	(1		)	—			(34		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			12			—			12
Net current-period other comprehensive income	$	(33	)	$	11		$	—		$	(22	)
Balance at March 31, 2015	$	(25	)	$	(766	)	$	(2	)	$	(793	)

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
Actuarial losses	$	12	(b)
	12		Total before tax
	—		Tax expense
	12		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).

The components of AOCL and the changes in AOCL by components, net of tax, for six months ended March 31, 2016 and 2015 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at September 30, 2015	$	(54	)	$	(705	)	$	(7	)	(766		)
Other comprehensive income (loss) before reclassification	4			—			2			6
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			18			—			18
Net current-period other comprehensive income (loss)	$	4		$	18		$	2		$	24
Balance at March 31, 2016	$	(50	)	$	(687	)	$	(5	)	$	(742	)

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
Actuarial losses	18		(a)
	18		Total before tax
	—		Tax (benefit) expense
Total reclassifications for the period	$	18	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).

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at September 30, 2014	$	41		$	(789	)	$	(1	)	$	(749	)
Other comprehensive income before reclassification	(67		)	(1		)	(1		)	(69		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	1			24			—			25
Net current-period other comprehensive income	$	(66	)	$	23		$	(1	)	$	(44	)
Balance at March 31, 2015	$	(25	)	$	(766	)	$	(2	)	$	(793	)

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
Actuarial losses	$	24	(b)
	24		Total before tax
	—		Tax expense
	24		Net of tax
Foreign Currency Translation Related Adjustment
Other reclassification adjustment	$	1
	1		Total before tax
	—		Tax expense
	1		Net of tax
Total reclassifications for the period	$	25	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).

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Business Segment Information

6 Months Ended

Mar. 31, 2016

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.

      The company has two reportable segments at March 31, 2016, as follows:

• The Commercial Truck & Industrial segment supplies drivetrain systems and components, including axles, drivelines and braking and suspension systems, primarily for medium- and heavy-duty trucks, military, construction, bus and coach, fire and emergency 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; and

• The Aftermarket & Trailer segment supplies axles, brakes, drivelines, suspension parts and other replacement parts to commercial vehicle and industrial aftermarket customers. This segment also supplies a wide variety of undercarriage products and systems for trailer applications in North America.

     Segment 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 and asset impairment charges. The company uses Segment 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 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 & Industrial		Aftermarket & Trailer		Eliminations			Total
Three Months Ended March 31, 2016
External Sales	$	610	$	211	$	—		$	821
Intersegment Sales	21		7		(28		)	—
Total Sales	$	631	$	218	$	(28	)	$	821
Three Months Ended March 31, 2015
External Sales	$	660	$	204	$	—		$	864
Intersegment Sales	21		8		(29		)	—
Total Sales	$	681	$	212	$	(29	)	$	864

	Commercial Truck & Industrial		Aftermarket & Trailer		Eliminations			Total
Six Months Ended March 31, 2016
External Sales	$	1,223	$	407	$	—		$	1,630
Intersegment Sales	41		14		(55		)	—
Total Sales	$	1,264	$	421	$	(55	)	$	1,630
Six months ended March 31, 2015
External Sales	$	1,338	$	405	$	—		$	1,743
Intersegment Sales	46		15		(61		)	—
Total Sales	$	1,384	$	420	$	(61	)	$	1,743

	Three Months Ended March 31,						Six Months Ended March 31,
	2016			2015			2016			2015
Segment EBITDA:
Commercial Truck & Industrial	$	56		$	57		$	108		$	113
Aftermarket & Trailer	28			30			48			55
Segment EBITDA	84			87			156			168
Unallocated legacy and corporate costs, net (1)	(3		)	—			1			(2		)
Interest expense, net	(21		)	(21		)	(43		)	(40		)
Provision for income taxes	(7		)	(6		)	(14		)	(13		)
Depreciation and amortization	(16		)	(17		)	(31		)	(32		)
Noncontrolling interests	—			—			(1		)	(1		)
Loss on sale of receivables	(2		)	(1		)	(4		)	(3		)
Restructuring costs	(2		)	(3		)	(3		)	(6		)
Income from continuing operations attributable to Meritor, Inc.	$	33		$	39		$	61		$	71

⁽¹⁾ Unallocated legacy and corporate costs, net represents items that are not directly related to the company's business segments. These costs 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.

Segment Assets:	March 31, 2016			September 30, 2015
Commercial Truck & Industrial	$	1,509		$	1,569
Aftermarket & Trailer	454			448
Total segment assets	1,963			2,017
Corporate (1)	340			434
Less: Accounts receivable sold under off-balance sheet factoring programs(2)	(210		)	(256		)
Total assets	$	2,093		$	2,195

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

⁽²⁾  At March 31, 2016 and September 30, 2015, segment assets include $210 million and $256 million, respectively, of accounts receivable sold under off-balance sheet accounts receivable factoring programs (see Note 8). These sold receivables are included in segment assets as the CODM reviews segment assets inclusive of these balances.

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Supplemental Guarantor Condensed Consolidating Financial Statements

6 Months Ended

Mar. 31, 2016

Condensed Financial Information of Parent Company Only 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).

Schedule I of Rule 5-04 of Regulation S-X requires that condensed financial information of the registrant ("Parent") on a stand alone basis be filed when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. Certain subsidiaries in China, India and Brazil are restricted by law from transfer of cash by dividends, loans, or advances to Parent, which exceeded 25 percent of consolidated net assets of Parent as of September 30, 2015. As of March 31, 2016, the company's proportionate share of net assets restricted from transfer by law was $37 million.

In lieu of providing separate audited financial statements for the Parent and Guarantors, the company has included the accompanying condensed consolidating financial statements as permitted by Regulation S-X Rules 3-10 and 5-04. 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 March 31, 2016
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	420		$	401		$	—		$	821
Subsidiaries	—			28			16			(44		)	—
Total sales	—			448			417			(44		)	821
Cost of sales	(12		)	(369		)	(363		)	44			(700		)
GROSS MARGIN	(12		)	79			54			—			121
Selling, general and administrative	(19		)	(21		)	(20		)	—			(60		)
Restructuring costs	—			(1		)	(1		)	—			(2		)
Other operating expense	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(34		)	57			33			—			56
Other income (expense), net	35			(9		)	(28		)	—			(2		)
Equity in earnings of affiliates	—			7			—			—			7
Interest income (expense), net	(28		)	7			—			—			(21		)
INCOME (LOSS) BEFORE INCOME TAXES	(27		)	62			5			—			40
Provision for income taxes	—			—			(7		)	—			(7		)
Equity income (loss) from continuing operations of subsidiaries	60			(6		)	—			(54		)	—
INCOME (LOSS) FROM CONTINUING OPERATIONS	33			56			(2		)	(54		)	33
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	(2		)	(1		)	3			(1		)
NET INCOME (LOSS)	32			54			(3		)	(51		)	32
Less: Net income attributable to noncontrolling interests	—			—			—			—			—
NET INCOME (LOSS) ATTRIBUTABLE TO MERITOR, INC.	$	32		$	54		$	(3	)	$	(51	)	$	32

	Three Months Ended March 31, 2016
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income (loss)	$	32	$	54	$	(3	)	$	(51	)	$	32
Other comprehensive income (loss)	18		23		(10		)	(13		)	18
Total comprehensive income (loss)	50		77		(13		)	(64		)	50
Less: Comprehensive income attributable to noncontrolling interests	—		—		—			—			—
Comprehensive income (loss) attributable to Meritor, Inc.	$	50	$	77	$	(13	)	$	(64	)	$	50

	Three Months Ended March 31, 2015
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	418		$	446		$	—		$	864
Subsidiaries	—			31			17			(48		)	—
Total sales	—			449			463			(48		)	864
Cost of sales	(10		)	(380		)	(407		)	48			(749		)
GROSS MARGIN	(10		)	69			56			—			115
Selling, general and administrative	(16		)	(26		)	(15		)	—			(57		)
Restructuring costs	(1		)	—			(2		)	—			(3		)
OPERATING INCOME (LOSS)	(27		)	43			39			—			55
Other income (expense), net	37			(9		)	(26		)	—			2
Equity in earnings of affiliates	—			8			1			—			9
Interest income (expense), net	(29		)	6			2			—			(21		)
INCOME (LOSS) BEFORE INCOME TAXES	(19		)	48			16			—			45
Provision for income taxes	(1		)	—			(5		)	—			(6		)
Equity income from continuing operations of subsidiaries	59			8			—			(67		)	—
INCOME FROM CONTINUING OPERATIONS	39			56			11			(67		)	39
INCOME FROM DISCONTINUED OPERATIONS, net of tax	4			5			3			(8		)	4
NET INCOME	43			61			14			(75		)	43
Less: Net income attributable to noncontrolling interests	—			—			—			—			—
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	43		$	61		$	14		$	(75	)	$	43

	Three Months Ended March 31, 2015
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
Net income	$	43		$	61		$	14	$	(75	)	$	43
Other comprehensive income (loss)	(22		)	(65		)	27		38			(22		)
Total comprehensive income (loss)	21			(4		)	41		(37		)	21
Less: Comprehensive income attributable to noncontrolling interests	—			—			—		—			—
Comprehensive income (loss) attributable to Meritor, Inc.	$	21		$	(4	)	$	41	$	(37	)	$	21

	Six Months Ended March 31, 2016
	Parent				Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—			$	837		$	793		$	—		$	1,630
Subsidiaries	—				55			32			(87		)	—
Total sales	—				892			825			(87		)	1,630
Cost of sales	(26		)	—	(746		)	(720		)	87			(1,405		)
GROSS MARGIN	(26		)		146			105			—			225
Selling, general and administrative	(39		)		(42		)	(35		)	—			(116		)
Restructuring costs	—				(1		)	(2		)	—			(3		)
Other operating expense	(3		)		—			—			—			(3		)
OPERATING INCOME (LOSS)	(68		)		103			68			—			103
Other income (loss), net	34				(9		)	(26		)	—			(1		)
Equity in earnings of affiliates	—				16			1			—			17
Interest income (expense), net	(59		)		15			1			—			(43		)
INCOME (LOSS) BEFORE INCOME TAXES	(93		)		125			44			—			76
Provision for income taxes	—				—			(14		)	—			(14		)
Equity income from continuing operations of subsidiaries	154				21			—			(175		)	—
INCOME FROM CONTINUING OPERATIONS	61				146			30			(175		)	62
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(3		)		(5		)	(4		)	9			(3		)
Net income	58				141			26			(166		)	59
Less: Net income attributable to noncontrolling interests	—				—			(1		)	—			(1		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	58			$	141		$	25		$	(166	)	$	58

	Six Months Ended March 31, 2016
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	58	$	141	$	26		$	(166	)	$	59
Other comprehensive income (loss)	24		12		(2		)	(10		)	24
Total comprehensive income	82		153		24			(176		)	83
Less: Comprehensive income attributable to noncontrolling interests	—		—		(1		)	—			(1		)
Comprehensive income attributable to Meritor, Inc.	$	82	$	153	$	23		$	(176	)	$	82

	Six months ended March 31, 2015
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	821		$	922		$	—		$	1,743
Subsidiaries	—			61			33			(94		)	—
Total sales	—			882			955			(94		)	1,743
Cost of sales	(24		)	(751		)	(832		)	94			(1,513		)
GROSS MARGIN	(24		)	131			123			—			230
Selling, general and administrative	(34		)	(54		)	(34		)	—			(122		)
Restructuring costs	(1		)	(3		)	(2		)	—			(6		)
Other operating income	—			—			1			—			1
OPERATING INCOME (LOSS)	(59		)	74			88			—			103
Equity in earnings of affiliates	—			15			3			—			18
Other income (loss), net	37			(9		)	(24		)	—			4
Interest income (expense), net	(58		)	13			5			—			(40		)
INCOME (LOSS) BEFORE INCOME TAXES	(80		)	93			72			—			85
Provision for income taxes	(1		)	—			(12		)	—			(13		)
Equity income from continuing operations of subsidiaries	152			53			—			(205		)	—
INCOME FROM CONTINUING OPERATIONS	71			146			60			(205		)	72
INCOME FROM DISCONTINUED OPERATIONS, net of tax	1			2			—			(2		)	1
NET INCOME	72			148			60			(207		)	73
Less: Net income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	72		$	148		$	59		$	(207	)	$	72

	Six months ended March 31, 2015
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
Net income	$	72		$	148		$	60	$	(207	)	$	73
Other comprehensive income (loss)	(44		)	(92		)	18		73			(45		)
Total comprehensive income	28			56			78		(134		)	28
Less: Comprehensive income attributable to noncontrolling interests	—			—			—		—			—
Comprehensive income attributable to Meritor, Inc.	$	28		$	56		$	78	$	(134	)	$	28

	March 31, 2016
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	24		$	5		$	65	$	—		$	94
Receivables trade and other, net	—			30			396		—			426
Inventories	—			165			197		—			362
Other current assets	4			22			27		—			53
TOTAL CURRENT ASSETS	28			222			685		—			935
NET PROPERTY	19			187			221		—			427
GOODWILL	—			219			180		—			399
OTHER ASSETS	55			133			144		—			332
INVESTMENTS IN SUBSIDIARIES	2,384			329			—		(2,713		)	—
TOTAL ASSETS	$	2,486		$	1,090		$	1,230	$	(2,713	)	$	2,093
CURRENT LIABILITIES:
Short-term debt	$	1		$	4		$	20	$	—		$	25
Accounts and notes payable	41			182			288		—			511
Other current liabilities	85			61			107		—			253
TOTAL CURRENT LIABILITIES	127			247			415		—			789
LONG-TERM DEBT	967			4			7		—			978
RETIREMENT BENEFITS	583			—			28		—			611
INTERCOMPANY PAYABLE (RECEIVABLE)	1,401			(1,986		)	585		—			—
OTHER LIABILITIES	34			238			44		—			316
EQUITY (DEFICIT) ATTRIBUTABLE TO        MERITOR, INC.	(626		)	2,587			126		(2,713		)	(626		)
NONCONTROLLING INTERESTS	—			—			25		—			25
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	2,486		$	1,090		$	1,230	$	(2,713	)	$	2,093

	September 30, 2015
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	73		$	6		$	114	$	—		$	193
Receivables trade and other, net	1			40			420		—			461
Inventories	—			159			179		—			338
Other current assets	4			20			26		—			50
TOTAL CURRENT ASSETS	78			225			739		—			1,042
NET PROPERTY	15			183			221		—			419
GOODWILL	—			219			183		—			402
OTHER ASSETS	61			129			142		—			332
INVESTMENTS IN SUBSIDIARIES	2,354			313			—		(2,667		)	—
TOTAL ASSETS	$	2,508		$	1,069		$	1,285	$	(2,667	)	$	2,195
CURRENT LIABILITIES:
Short-term debt	$	1		$	4		$	10	$	—		$	15
Accounts and notes payable	55			213			306		—			574
Other current liabilities	93			83			103		—			279
TOTAL CURRENT LIABILITIES	149			300			419		—			868
LONG-TERM DEBT	1,017			6			13		—			1,036
RETIREMENT BENEFITS	603			—			29		—			632
INTERCOMPANY PAYABLE (RECEIVABLE)	1,365			(1,886		)	521		—			—
OTHER LIABILITIES	45			217			43		—			305
EQUITY (DEFICIT) ATTRIBUTABLE TO        MERITOR, INC.	(671		)	2,432			235		(2,667		)	(671		)
NONCONTROLLING INTERESTS	—			—			25		—			25
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	2,508		$	1,069		$	1,285	$	(2,667	)	$	2,195

	Six Months Ended March 31, 2016
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	(20	)	$	18		$	41		$	—	$	39
INVESTING ACTIVITIES
Capital expenditures	(12		)	(22		)	(13		)	—		(47		)
Other investing activities	—			4			(1		)	—		3
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(12		)	(17		)	(11		)	—		(40		)
FINANCING ACTIVITIES
Repayment of notes	(55		)	—			—			—		(55		)
Repurchase of Common Stock	(43		)	—			—			—		(43		)
Intercompany advances	81			—			(81		)	—		—
Other financing activities	—			(2		)	—			—		(2		)
CASH USED FOR FINANCING ACTIVITIES	(17		)	(2		)	(81		)	—		(100		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			2			—		2
CHANGE IN CASH AND CASH EQUIVALENTS	(49		)	(1		)	(49		)	—		(99		)
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	73			6			114			—		193
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	24		$	5		$	65		$	—	$	94

	Six months ended March 31, 2015
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY        OPERATING ACTIVITIES	$	7		$	10		$	12		$	—	$	29
INVESTING ACTIVITIES
Capital expenditures	(1		)	(10		)	(12		)	—		(23		)
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(1		)	(9		)	(9		)	—		(19		)
FINANCING ACTIVITIES
Repayment of notes	(16		)	—			—			—		(16		)
Repurchase of common stock	(16		)	—			—			—		(16		)
Intercompany advances	54			—			(54		)	—		—
Other financing activities	—			(2		)	(4		)	—		(6		)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	22			(2		)	(58		)	—		(38		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			(12		)	—		(12		)
CHANGE IN CASH AND CASH EQUIVALENTS	28			(1		)	(67		)	—		(40		)
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	71			5			171			—		247
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	99		$	4		$	104		$	—	$	207

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 March 31, 2016 and September 30, 2015, Parent-only obligations included $611 million and $631 million of pension and retiree medical benefits, respectively (see Note 19). All debt is debt of the Parent other than $35 million and $33 million at March 31, 2016 and September 30, 2015, respectively (see Note 17), and is primarily related to capital lease obligations and lines of credit. There were $17 million cash dividends paid to the Parent by subsidiaries and investments accounted for by the equity method for the six months ended March 31, 2016 and $37 million for the six months ended March 31, 2015.

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Basis of Presentation (Policies)

6 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

New Accounting Standards

Accounting standards to be implemented

In April, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing. The ASU provides guidance regarding the identification of performance and licensing obligations. The amendments in this update affect the guidance in ASU 2014-09, which is not effective yet. The effective date and the transition requirements for the amendments in ASU 2016-10 are the same as the effective date and transition requirements in ASU 2014-09 as described below. Therefore, the company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2018 in connection with its planned implementation of ASU 2014-09 and is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. The ASU intends to simplify how share-based payments are accounted for. The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. Early adoption is permitted. The company is assessing the potential impact of this new guidance on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net) to clarify certain aspects of the principal-versus-agent guidance in its new revenue recognition standard. The amendments in this update affect the guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for the amendments in ASU 2016-08 are the same as the effective date and transition requirements of ASU 2014-09. Therefore, the company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2018 in connection with its planned implementation of ASU 2014-09. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-07, Investments-Equity Method and Joint Ventures (Topic 323), Simplifying the Transition to the Equity Method of Accounting. The ASU will eliminate the requirement to apply the equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment. The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815), Contingent Put and Call Options in Debt Instruments. The ASU clarifies that an exercise contingency itself does not need to be evaluated to determine whether it is in an embedded derivative, just the underlying option.The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In March 2016, the FASB issued ASU 2016-05, Derivatives and Hedging (Topic 815), Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. The update clarifies that a change in a counterparty to a derivative instrument designated as a hedging instrument would not require the entity to dedesignate the hedging relationship and discontinue the application of hedge accounting. The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The update will require lessees to recognize a right-of-use asset and lease liability for substantially all leases. The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2018, including interim periods within those fiscal periods. Early adoption is permitted. The company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2019 and is currently assessing the potential impact of this new guidance on its consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities, which requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. The guidance is effective for fiscal periods beginning after December 15, 2017, including interim periods within those fiscal periods. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, as part of its Simplification Initiative, which updates Income Taxes (Topic 740) guidance to eliminate the requirement for an entity to separate deferred tax liabilities and tax assets between current and noncurrent amounts in a classified balance sheet. Deferred taxes will be presented as noncurrent under the new standard. The guidance is effective for fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. Early adoption is permitted. The company plans to implement this standard in the fourth quarter of fiscal year 2016 and is assessing the potential impact of this new guidance on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which requires entities that measure inventory using first-in, first-out (FIFO) or average cost to measure inventory at the lower of cost and net realizable value. The standard is required to be adopted by public business entities in fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. The company is assessing the potential impact of this new guidance on its consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40), which provides guidance about management's responsibility in evaluating whether there is substantial doubt relating to an entity’s ability to continue as a going concern and to provide related footnote disclosures as applicable. ASU 2014-15 is effective for the interim and fiscal periods ending after December 15, 2016. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In June 2014, the FASB issued ASU 2014-12, Compensation - Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved After the Requisite Service Period. This guidance requires that an award with a performance target that affects vesting, and that could be achieved after the requisite service period, such as when an employee retires, but may still vest if and when the performance target is achieved, be treated as an award with performance conditions that affect vesting and the company apply existing guidance under ASC Topic 718, Compensation - Stock Compensation. The guidance is effective for fiscal periods beginning after December 15, 2015, including interim periods within those fiscal periods and may be applied either prospectively or retrospectively. The company is assessing the potential impact of this new guidance on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which requires companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service and requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. ASU 2014-09 was originally effective for fiscal periods beginning after December 15, 2016, including interim periods within those fiscal periods. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year making it effective for fiscal periods beginning after December 15, 2017, including interim periods within those fiscal periods, while also providing for early adoption but not before the original effective date. The company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2018 and is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

Accounting standards implemented during fiscal year 2016

In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which updates Business Combination (Topic 805) guidance to eliminate the requirement to restate prior period financial statements for measurement period adjustments. The guidance should be applied prospectively to measurement period adjustments that occur after the effective date. The guidance is effective for fiscal periods beginning after December 15, 2015, including interim periods within those fiscal periods. Early adoption is permitted. The company adopted this standard in the first quarter of the fiscal year 2016. This guidance did not have a material impact on the company's consolidated financial statements.

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This guidance changes the definition of a discontinued operation to include only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity's operations and financial results. The guidance also requires new disclosure of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. This guidance is to be applied prospectively and is effective for fiscal periods beginning on or after December 15, 2014, including interim periods within those fiscal periods. The company adopted this guidance in the first quarter of fiscal year 2016. The impact of this new guidance on the company's consolidated financial statements is dependent upon future business divestitures. Previous divestitures and amounts currently included in discontinued operations were not impacted.

Inventories

Inventories are stated at the lower of cost (using FIFO or average methods) or market (determined on the basis of estimated realizable values)

Environmental

Environmental

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

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Earnings per Share (Tables)

6 Months Ended

Mar. 31, 2016

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 March 31,		Six Months Ended March 31,
	2016	2015	2016	2015
Basic average common shares outstanding	91.3	97.9	91.9	97.9
Impact of restricted shares, restricted share units and performance share units	1.2	1.9	1.6	2.0
Impact of stock options	—	0.1	—	0.1
Impact of convertible notes	—	3.0	—	2.0
Diluted average common shares outstanding	92.5	102.9	93.5	102.0

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Discontinued Operations (Tables)

6 Months Ended

Mar. 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Summary of Discontinued Operations

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

	Three Months Ended March 31,					Six Months Ended March 31,
	2016			2015		2016			2015
Sales	$	—		$	—	$	—		$	1
Income (loss) before income taxes	$	(1	)	$	3	$	(4	)	$	—
Benefit from income taxes	—			1		1			1
Income (loss) from discontinued operations attributable to Meritor, Inc.	$	(1	)	$	4	$	(3	)	$	1

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Goodwill (Tables)

6 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of the changes in 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 & Industrial			Aftermarket & Trailer		Total
Beginning balance at September 30, 2015	$	239		$	163	$	402
Foreign currency translation	(3		)	—		(3		)
Balance at March 31, 2016	$	236		$	163	$	399

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Restructuring Costs (Tables)

6 Months Ended

Mar. 31, 2016

Restructuring and Related Activities [Abstract]

Schedule of changes in restructuring reserves

The changes in restructuring reserves for the six months ended March 31, 2016 and 2015 are as follows (in millions):

	Employee Termination Benefits			Plant Shutdown & Other		Total
Beginning balance at September 30, 2015	$	10		$	—	$	10
Activity during the period:
Charges to continuing operations	2			1		3
Cash payments – continuing operations	(4		)	—		(4		)
Total restructuring reserves at March 31, 2016	8			1		9
Less: non-current restructuring reserves	(3		)	—		(3		)
Restructuring reserves – current, at March 31, 2016	$	5		$	1	$	6
Balance at September 30, 2014	$	11		$	—	$	11
Activity during the period:
Charges to continuing operations	6			—		6
Cash payments – continuing operations	(3		)	—		(3		)
Other	(2		)	—		(2		)
Total restructuring reserves at March 31, 2015	12			—		12
Less: non-current restructuring reserves	(2		)	—		(2		)
Restructuring reserves – current, at March 31, 2015	$	10		$	—	$	10

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Operating Cash Flow (Tables)

6 Months Ended

Mar. 31, 2016

Operating Cash Flow Disclosure [Abstract]

Schedule Of Operating Cash Flow

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

	Six Months Ended March 31,
	2016			2015
OPERATING ACTIVITIES
Net income	$	59		$	73
Less: Income (loss) from discontinued operations, net of tax	(3		)	1
Income from continuing operations	62			72
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization	31			32
Restructuring costs	3			6
Loss on debt extinguishment	—			1
Gain on sale of property	(2		)	—
Equity in earnings of affiliates	(17		)	(18		)
Pension and retiree medical expense	10			14
Other adjustments to income from continuing operations	4			5
Dividends received from equity method investments	19			10
Pension and retiree medical contributions	(22		)	(24		)
Restructuring payments	(4		)	(3		)
Changes in off-balance sheet accounts receivable factoring	(51		)	40
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, foreign currency adjustments and discontinued operations	7			(99		)
Operating cash flows provided by continuing operations	40			36
Operating cash flows used for discontinued operations	(1		)	(7		)
CASH PROVIDED BY OPERATING ACTIVITIES	$	39		$	29

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Inventories (Tables)

6 Months Ended

Mar. 31, 2016

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):

	March 31, 2016		September 30, 2015
Finished goods	$	146	$	133
Work in process	31		28
Raw materials, parts and supplies	185		177
Total	$	362	$	338

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Other Current Assets (Tables)

6 Months Ended

Mar. 31, 2016

Other Current Assets Disclosure [Abstract]

Summary of other current assets

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

	March 31, 2016		September 30, 2015
Current deferred income tax assets	$	20	$	20
Asbestos-related recoveries (see Note 20)	14		13
Prepaid and other	19		17
Other current assets	$	53	$	50

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Net Property (Tables)

6 Months Ended

Mar. 31, 2016

Property, Plant and Equipment [Abstract]

Summary of Net Property

Net property is summarized as follows (in millions):

	March 31, 2016			September 30, 2015
Property at cost:
Land and land improvements	$	31		$	31
Buildings	221			214
Machinery and equipment	852			864
Company-owned tooling	116			116
Construction in progress	67			62
Total	1,287			1,287
Less: accumulated depreciation	(860		)	(868		)
Net property	$	427		$	419

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Other Assets (Tables)

6 Months Ended

Mar. 31, 2016

Other Assets, Noncurrent [Abstract]

Summary of other assets

Other assets are summarized as follows (in millions):

	March 31, 2016		September 30, 2015
Investments in non-consolidated joint ventures	$	98	$	96
Asbestos-related recoveries (see Note 20)	37		42
Unamortized revolver debt issuance costs	8		10
Capitalized software costs, net	27		28
Non-current deferred income tax assets, net	28		28
Assets for uncertain tax positions	3		3
Prepaid pension costs	114		110
Other	17		15
Other assets	$	332	$	332

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Unconsolidated Significant Subsidiary (Tables)

6 Months Ended

Mar. 31, 2016

Equity Method Investment, Summarized Financial Information, Income Statement [Abstract]

Summarized Income Statement Information of Non-Consolidated Joint Ventures

In accordance with this guidance, the company’s non-consolidated joint venture Meritor WABCO Vehicle Control Systems’ summarized income statement information is as follows (in millions):

	Three Months Ended March 31,				Six Months Ended March 31,
	2016		2015		2016		2015
	(Unaudited)
Sales	$	83	$	88	$	168	$	170
Gross margin	$	21	$	19	$	43	$	37
Income from continuing operations	$	13	$	13	$	29	$	24
Net income	$	13	$	13	$	29	$	24

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Other Current Liabilities (Tables)

6 Months Ended

Mar. 31, 2016

Other Current Liabilities Disclosure [Abstract]

Summary of other current liabilities

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

	March 31, 2016		September 30, 2015
Compensation and benefits	$	98	$	122
Income taxes	13		9
Taxes other than income taxes	23		23
Accrued interest	14		14
Product warranties (see Note 16)	19		22
Environmental reserves (see Note 20)	8		9
Restructuring (see Note 6)	6		7
Asbestos-related liabilities (see Note 20)	17		17
Indemnity obligations (see Note 20)	2		2
Other	53		54
Other current liabilities	$	253	$	279

Summary of product warranties

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

	Six Months Ended March 31,
	2016			2015
Total product warranties – beginning of period	$	48		$	51
Accruals for product warranties	7			7
Payments	(9		)	(9		)
Change in estimates and other	1			—
Total product warranties – end of period	47			49
Less: Non-current product warranties	(28		)	(26		)
Product warranties – current	$	19		$	23

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Other Liabilities (Tables)

6 Months Ended

Mar. 31, 2016

Other Liabilities Disclosure [Abstract]

Summary of other liabilities, noncurrent

Other liabilities are summarized as follows (in millions):

	March 31, 2016		September 30, 2015
Asbestos-related liabilities (see Note 20)	$	121	$	109
Restructuring (see Note 6)	3		3
Non-current deferred income tax liabilities	99		99
Liabilities for uncertain tax positions	15		15
Product warranties (see Note 15)	28		26
Environmental (see Note 20)	8		8
Indemnity obligations (see Note 20)	12		13
Other	30		32
Other liabilities	$	316	$	305

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Long-Term Debt (Tables)

6 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Schedule of long-term debt

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

	March 31, 2016			September 30, 2015
4.625 percent convertible notes due 2026 (1)	$	—		$	55
4.0 percent convertible notes due 2027(2)(4)	142			142
7.875 percent convertible notes due 2026(2)(5)	128			127
6.75 percent notes due 2021(3)(6)	270			270
6.25 percent notes due 2024(3)(7)	442			442
Capital lease obligation	17			17
Export financing arrangements and other	21			18
Unamortized discount on convertible notes	(17		)	(20		)
Subtotal	1,003			1,051
Less: current maturities	(25		)	(15		)
Long-term debt	$	978		$	1,036

⁽¹⁾ The 4.625 percent, convertible notes contained a put and call feature, which allowed for earlier redemption beginning in 2016. Substantially all of these notes were redeemed on March 1, 2016.

⁽²⁾ The 4.0 percent and 7.875 percent convertible notes contain a put and call feature, which allows for earlier redemption beginning in 2019 and 2020, respectively.

⁽³⁾ The 6.75 percent and 6.25 percent notes contain a call option, which allows for early redemption.

⁽⁴⁾ The 4.0 percent convertible notes due 2027 are presented net of $1 million unamortized issuance costs as of March 31, 2016 and September 30, 2015.

⁽⁵⁾ The 7.875 percent convertible notes due 2026 are presented net of $2 million and $3 million unamortized issuance costs as of March 31, 2016 and September 30, 2015, respectively, and$10 million original issuance discount as of March 31, 2016 and September 30, 2015.

⁽⁶⁾ The 6.75 percent notes due 2021 are presented net of $5 million unamortized issuance costs as of March 31, 2016 and September 30, 2015.

⁽⁷⁾ The 6.25 percent notes due 2024 are presented net of $8 million unamortized issuance costs as of March 31, 2016 and September 30, 2015.

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Financial Instruments (Tables)

6 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair value of financial instruments

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

	March 31, 2016				September 30, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	94	$	94	$	193	$	193
Short-term debt	25		24		15		15
Long-term debt	978		958		1,036		1,123
Foreign exchange forward contracts (asset)	—		—		1		1
Foreign exchange forward contracts (liability)	2		2		3		3
Short-term foreign currency option contracts (asset)	—		—		1		1
Long-term foreign currency option contracts (asset)	—		—		1		1

Offsetting of derivative assets and liabilities

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

	March 31, 2016			September 30, 2015
	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported	Gross Amounts Recognized	Gross Amounts Offset	Net Amounts Reported
Derivative Asset
Foreign exchange forward contract	—	—	—	1	—	1
Derivative Liabilities
Foreign exchange forward contract	2	—	2	3	—	3

Fair value of financial instruments by valuation hierarchy

Fair value of financial instruments by the valuation hierarchy at March 31, 2016 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	94	$	—	$	—
Short-term debt	—		—		24
Long-term debt	—		946		12
Foreign exchange forward contracts (liability)	—		2		—

Fair value of financial instruments by the valuation hierarchy at March 31, 2015 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	207	$	—	$	—
Short-term debt	—		—		5
Long-term debt	—		1,093		38
Foreign exchange forward contracts (asset)	—		5		—
Short-term foreign currency option contracts (asset)	—		—		2
Long-term foreign currency option contracts (asset)	—		—		2

Reconciliation of changes in fair value

No transfers of assets between any of the Levels occurred during these periods.

Three months ended March 31, 2016 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)		Total
Fair Value as of December 31, 2015	$	2		$	—	$	2
Total unrealized gains (losses):
Included in other income	(2		)	—		(2		)
Transfer in and / or out of Level 3 (1)	—			—		—
Fair Value as of March 31, 2016	$	—		$	—	$	—

Three months ended March 31, 2015 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)			Total
Fair Value as of December 31, 2014	$	4		$	1		$	5
Total unrealized gains (losses):
Included in other income	(1		)	—			(1		)
Total realized gains (losses):
Included in other income	3			—			3
Included in cost of sales	3			—			3
Purchases, issuances, sales and settlements:
Purchases	4			—			4
Settlements	(9		)	(1		)	(10		)
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	(2		)	2			—
Fair Value as of March 31, 2015	$	2		$	2		$	4

Six months ended March 31, 2016 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)			Total
Fair Value as of September 30, 2015	$	1		$	1		$	2
Total unrealized gains (losses):
Included in other income	(2		)	—			$	(2	)
Included in cost of sales	—			(1		)	(1		)
Purchases, issuances, sales and settlements:
Purchases	1			—			$	1
Transfer in and / or out of Level 3 (1)	—			—			—
Fair Value as of March 31, 2016	$	—		$	—		$	—

Six months ended March 31, 2015 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)			Total
Fair Value as of September 30, 2014	$	2		$	1		$	3
Total realized gains (losses):
Included in other income	3			—			3
Included in cost of sales	3			—			3
Purchases, issuances, sales and settlements:
Purchases	5			—			5
Settlements	(10		)	(1		)	(11		)
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	(1		)	2			1
Fair Value as of March 31, 2015	$	2		$	2		$	4

⁽¹⁾ Transfers as of the last day of the reporting period.

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Retirement Benefit Liabilities (Tables)

6 Months Ended

Mar. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Summary of retirement benefit liabilities

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

	March 31, 2016			September 30, 2015
Retiree medical liability	$	429		$	438
Pension liability	208			219
Other	13			14
Subtotal	650			671
Less: current portion (included in compensation and benefits, Note 15)	(39		)	(39		)
Retirement benefits	$	611		$	632

Components of net periodic pension and retiree medical expense

The components of net periodic pension and retiree medical expense included in Selling, general and administrative expenses for the three months ended March 31 are as follows (in millions):

	2016					2015
	Pension			Retiree Medical		Pension			Retiree Medical
Interest cost	27			5		18			5
Assumed return on plan assets	(25		)	—		(28		)	—
Recognized actuarial loss	6			3		7			5
Total expense (income)	$	8		$	8	$	(3	)	$	10

The components of net periodic pension and retiree medical expense included in Selling, general and administrative expenses for the six months ended March 31 are as follows (in millions):

	2016					2015
	Pension			Retiree Medical		Pension			Retiree Medical
Interest cost	33			9		36			10
Assumed return on plan assets	(50		)	—		(56		)	—
Recognized actuarial loss	12			6		14			10
Total expense (income)	$	(5	)	$	15	$	(6	)	$	20

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Contingencies (Tables)

6 Months Ended

Mar. 31, 2016

Loss Contingencies [Line Items]

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, 2015	$	2	$	14		$	16
Payments and other	—		(3		)	(3		)
Accruals	—		3			3
Balance at March 31, 2016	$	2	$	14		$	16

Maremont Asbestos

Loss Contingencies [Line Items]

Asbestos related reserves and recoveries

Maremont’s asbestos-related reserves and corresponding asbestos-related recoveries are summarized as follows (in millions):

	March 31, 2016		September 30, 2015
Pending and future claims	$	71	$	71
Billed but unpaid claims	2		3
Asbestos-related liabilities	$	73	$	74
Asbestos-related insurance recoveries	$	37	$	41

Rockwell Asbestos

Loss Contingencies [Line Items]

Asbestos related reserves and recoveries

The Rockwell legacy asbestos-related reserves and corresponding asbestos-related recoveries are summarized as follows (in millions):

	March 31, 2016		September 30, 2015
Pending and future claims	$	55	$	55
Billed but unpaid claims	3		3
Asbestos-related liabilities	$	58	$	58
Asbestos-related insurance recoveries	$	14	$	14

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Shareowners' Equity (Tables)

6 Months Ended

Mar. 31, 2016

Equity [Abstract]

Schedule of accumulated other comprehensive loss

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at September 30, 2014	$	41		$	(789	)	$	(1	)	$	(749	)
Other comprehensive income before reclassification	(67		)	(1		)	(1		)	(69		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	1			24			—			25
Net current-period other comprehensive income	$	(66	)	$	23		$	(1	)	$	(44	)
Balance at March 31, 2015	$	(25	)	$	(766	)	$	(2	)	$	(793	)

The components of AOCL and the changes in AOCL by components, net of tax, for three months ended March 31, 2016 and 2015 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at December 31, 2015	$	(60	)	$	(696	)	$	(4	)	$	(760	)
Other comprehensive income (loss) before reclassification	10			—			(1		)	9
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			9			—			9
Net current-period other comprehensive income (loss)	$	10		$	9		$	(1	)	$	18
Balance at March 31, 2016	$	(50	)	$	(687	)	$	(5	)	$	(742	)

The components of AOCL and the changes in AOCL by components, net of tax, for six months ended March 31, 2016 and 2015 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at September 30, 2015	$	(54	)	$	(705	)	$	(7	)	(766		)
Other comprehensive income (loss) before reclassification	4			—			2			6
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			18			—			18
Net current-period other comprehensive income (loss)	$	4		$	18		$	2		$	24
Balance at March 31, 2016	$	(50	)	$	(687	)	$	(5	)	$	(742	)

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at December 31, 2014	$	8		$	(777	)	$	(2	)	$	(771	)
Other comprehensive income before reclassification	(33		)	(1		)	—			(34		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			12			—			12
Net current-period other comprehensive income	$	(33	)	$	11		$	—		$	(22	)
Balance at March 31, 2015	$	(25	)	$	(766	)	$	(2	)	$	(793	)

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
Actuarial losses	18		(a)
	18		Total before tax
	—		Tax (benefit) expense
Total reclassifications for the period	$	18	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).

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
Actuarial losses	$	12	(b)
	12		Total before tax
	—		Tax expense
	12		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).

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
Actuarial losses	$	24	(b)
	24		Total before tax
	—		Tax expense
	24		Net of tax
Foreign Currency Translation Related Adjustment
Other reclassification adjustment	$	1
	1		Total before tax
	—		Tax expense
	1		Net of tax
Total reclassifications for the period	$	25	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).

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
Actuarial losses	9		(a)
	9		Total before tax
	—		Tax (benefit) expense
Total reclassifications for the period	$	9	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).

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Business Segment Information (Tables)

6 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Summary of segment information

Segment information is summarized as follows (in millions):

	Commercial Truck & Industrial		Aftermarket & Trailer		Eliminations			Total
Three Months Ended March 31, 2016
External Sales	$	610	$	211	$	—		$	821
Intersegment Sales	21		7		(28		)	—
Total Sales	$	631	$	218	$	(28	)	$	821
Three Months Ended March 31, 2015
External Sales	$	660	$	204	$	—		$	864
Intersegment Sales	21		8		(29		)	—
Total Sales	$	681	$	212	$	(29	)	$	864

	Commercial Truck & Industrial		Aftermarket & Trailer		Eliminations			Total
Six Months Ended March 31, 2016
External Sales	$	1,223	$	407	$	—		$	1,630
Intersegment Sales	41		14		(55		)	—
Total Sales	$	1,264	$	421	$	(55	)	$	1,630
Six months ended March 31, 2015
External Sales	$	1,338	$	405	$	—		$	1,743
Intersegment Sales	46		15		(61		)	—
Total Sales	$	1,384	$	420	$	(61	)	$	1,743

Segment income attributable to parent

	Three Months Ended March 31,						Six Months Ended March 31,
	2016			2015			2016			2015
Segment EBITDA:
Commercial Truck & Industrial	$	56		$	57		$	108		$	113
Aftermarket & Trailer	28			30			48			55
Segment EBITDA	84			87			156			168
Unallocated legacy and corporate costs, net (1)	(3		)	—			1			(2		)
Interest expense, net	(21		)	(21		)	(43		)	(40		)
Provision for income taxes	(7		)	(6		)	(14		)	(13		)
Depreciation and amortization	(16		)	(17		)	(31		)	(32		)
Noncontrolling interests	—			—			(1		)	(1		)
Loss on sale of receivables	(2		)	(1		)	(4		)	(3		)
Restructuring costs	(2		)	(3		)	(3		)	(6		)
Income from continuing operations attributable to Meritor, Inc.	$	33		$	39		$	61		$	71

⁽¹⁾ Unallocated legacy and corporate costs, net represents items that are not directly related to the company's business segments. These costs 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.

Schedule of segment assets

Segment Assets:	March 31, 2016			September 30, 2015
Commercial Truck & Industrial	$	1,509		$	1,569
Aftermarket & Trailer	454			448
Total segment assets	1,963			2,017
Corporate (1)	340			434
Less: Accounts receivable sold under off-balance sheet factoring programs(2)	(210		)	(256		)
Total assets	$	2,093		$	2,195

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

⁽²⁾  At March 31, 2016 and September 30, 2015, segment assets include $210 million and $256 million, respectively, of accounts receivable sold under off-balance sheet accounts receivable factoring programs (see Note 8). These sold receivables are included in segment assets as the CODM reviews segment assets inclusive of these balances.

XML

Supplemental Guarantor Condensed Consolidating Financial Statements (Tables)

6 Months Ended

Mar. 31, 2016

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Schedule of condensed consolidating statement of operations

	Three Months Ended March 31, 2016
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	420		$	401		$	—		$	821
Subsidiaries	—			28			16			(44		)	—
Total sales	—			448			417			(44		)	821
Cost of sales	(12		)	(369		)	(363		)	44			(700		)
GROSS MARGIN	(12		)	79			54			—			121
Selling, general and administrative	(19		)	(21		)	(20		)	—			(60		)
Restructuring costs	—			(1		)	(1		)	—			(2		)
Other operating expense	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(34		)	57			33			—			56
Other income (expense), net	35			(9		)	(28		)	—			(2		)
Equity in earnings of affiliates	—			7			—			—			7
Interest income (expense), net	(28		)	7			—			—			(21		)
INCOME (LOSS) BEFORE INCOME TAXES	(27		)	62			5			—			40
Provision for income taxes	—			—			(7		)	—			(7		)
Equity income (loss) from continuing operations of subsidiaries	60			(6		)	—			(54		)	—
INCOME (LOSS) FROM CONTINUING OPERATIONS	33			56			(2		)	(54		)	33
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	(2		)	(1		)	3			(1		)
NET INCOME (LOSS)	32			54			(3		)	(51		)	32
Less: Net income attributable to noncontrolling interests	—			—			—			—			—
NET INCOME (LOSS) ATTRIBUTABLE TO MERITOR, INC.	$	32		$	54		$	(3	)	$	(51	)	$	32

	Three Months Ended March 31, 2015
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	418		$	446		$	—		$	864
Subsidiaries	—			31			17			(48		)	—
Total sales	—			449			463			(48		)	864
Cost of sales	(10		)	(380		)	(407		)	48			(749		)
GROSS MARGIN	(10		)	69			56			—			115
Selling, general and administrative	(16		)	(26		)	(15		)	—			(57		)
Restructuring costs	(1		)	—			(2		)	—			(3		)
OPERATING INCOME (LOSS)	(27		)	43			39			—			55
Other income (expense), net	37			(9		)	(26		)	—			2
Equity in earnings of affiliates	—			8			1			—			9
Interest income (expense), net	(29		)	6			2			—			(21		)
INCOME (LOSS) BEFORE INCOME TAXES	(19		)	48			16			—			45
Provision for income taxes	(1		)	—			(5		)	—			(6		)
Equity income from continuing operations of subsidiaries	59			8			—			(67		)	—
INCOME FROM CONTINUING OPERATIONS	39			56			11			(67		)	39
INCOME FROM DISCONTINUED OPERATIONS, net of tax	4			5			3			(8		)	4
NET INCOME	43			61			14			(75		)	43
Less: Net income attributable to noncontrolling interests	—			—			—			—			—
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	43		$	61		$	14		$	(75	)	$	43

	Six Months Ended March 31, 2016
	Parent				Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—			$	837		$	793		$	—		$	1,630
Subsidiaries	—				55			32			(87		)	—
Total sales	—				892			825			(87		)	1,630
Cost of sales	(26		)	—	(746		)	(720		)	87			(1,405		)
GROSS MARGIN	(26		)		146			105			—			225
Selling, general and administrative	(39		)		(42		)	(35		)	—			(116		)
Restructuring costs	—				(1		)	(2		)	—			(3		)
Other operating expense	(3		)		—			—			—			(3		)
OPERATING INCOME (LOSS)	(68		)		103			68			—			103
Other income (loss), net	34				(9		)	(26		)	—			(1		)
Equity in earnings of affiliates	—				16			1			—			17
Interest income (expense), net	(59		)		15			1			—			(43		)
INCOME (LOSS) BEFORE INCOME TAXES	(93		)		125			44			—			76
Provision for income taxes	—				—			(14		)	—			(14		)
Equity income from continuing operations of subsidiaries	154				21			—			(175		)	—
INCOME FROM CONTINUING OPERATIONS	61				146			30			(175		)	62
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(3		)		(5		)	(4		)	9			(3		)
Net income	58				141			26			(166		)	59
Less: Net income attributable to noncontrolling interests	—				—			(1		)	—			(1		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	58			$	141		$	25		$	(166	)	$	58

	Six months ended March 31, 2015
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	821		$	922		$	—		$	1,743
Subsidiaries	—			61			33			(94		)	—
Total sales	—			882			955			(94		)	1,743
Cost of sales	(24		)	(751		)	(832		)	94			(1,513		)
GROSS MARGIN	(24		)	131			123			—			230
Selling, general and administrative	(34		)	(54		)	(34		)	—			(122		)
Restructuring costs	(1		)	(3		)	(2		)	—			(6		)
Other operating income	—			—			1			—			1
OPERATING INCOME (LOSS)	(59		)	74			88			—			103
Equity in earnings of affiliates	—			15			3			—			18
Other income (loss), net	37			(9		)	(24		)	—			4
Interest income (expense), net	(58		)	13			5			—			(40		)
INCOME (LOSS) BEFORE INCOME TAXES	(80		)	93			72			—			85
Provision for income taxes	(1		)	—			(12		)	—			(13		)
Equity income from continuing operations of subsidiaries	152			53			—			(205		)	—
INCOME FROM CONTINUING OPERATIONS	71			146			60			(205		)	72
INCOME FROM DISCONTINUED OPERATIONS, net of tax	1			2			—			(2		)	1
NET INCOME	72			148			60			(207		)	73
Less: Net income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	72		$	148		$	59		$	(207	)	$	72

Schedule of condensed consolidating statement of comprehensive income (loss)

	Three Months Ended March 31, 2016
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income (loss)	$	32	$	54	$	(3	)	$	(51	)	$	32
Other comprehensive income (loss)	18		23		(10		)	(13		)	18
Total comprehensive income (loss)	50		77		(13		)	(64		)	50
Less: Comprehensive income attributable to noncontrolling interests	—		—		—			—			—
Comprehensive income (loss) attributable to Meritor, Inc.	$	50	$	77	$	(13	)	$	(64	)	$	50

	Three Months Ended March 31, 2015
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
Net income	$	43		$	61		$	14	$	(75	)	$	43
Other comprehensive income (loss)	(22		)	(65		)	27		38			(22		)
Total comprehensive income (loss)	21			(4		)	41		(37		)	21
Less: Comprehensive income attributable to noncontrolling interests	—			—			—		—			—
Comprehensive income (loss) attributable to Meritor, Inc.	$	21		$	(4	)	$	41	$	(37	)	$	21

	Six Months Ended March 31, 2016
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	58	$	141	$	26		$	(166	)	$	59
Other comprehensive income (loss)	24		12		(2		)	(10		)	24
Total comprehensive income	82		153		24			(176		)	83
Less: Comprehensive income attributable to noncontrolling interests	—		—		(1		)	—			(1		)
Comprehensive income attributable to Meritor, Inc.	$	82	$	153	$	23		$	(176	)	$	82

	Six months ended March 31, 2015
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
Net income	$	72		$	148		$	60	$	(207	)	$	73
Other comprehensive income (loss)	(44		)	(92		)	18		73			(45		)
Total comprehensive income	28			56			78		(134		)	28
Less: Comprehensive income attributable to noncontrolling interests	—			—			—		—			—
Comprehensive income attributable to Meritor, Inc.	$	28		$	56		$	78	$	(134	)	$	28

Schedule of condensed consolidating balance sheet

	March 31, 2016
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	24		$	5		$	65	$	—		$	94
Receivables trade and other, net	—			30			396		—			426
Inventories	—			165			197		—			362
Other current assets	4			22			27		—			53
TOTAL CURRENT ASSETS	28			222			685		—			935
NET PROPERTY	19			187			221		—			427
GOODWILL	—			219			180		—			399
OTHER ASSETS	55			133			144		—			332
INVESTMENTS IN SUBSIDIARIES	2,384			329			—		(2,713		)	—
TOTAL ASSETS	$	2,486		$	1,090		$	1,230	$	(2,713	)	$	2,093
CURRENT LIABILITIES:
Short-term debt	$	1		$	4		$	20	$	—		$	25
Accounts and notes payable	41			182			288		—			511
Other current liabilities	85			61			107		—			253
TOTAL CURRENT LIABILITIES	127			247			415		—			789
LONG-TERM DEBT	967			4			7		—			978
RETIREMENT BENEFITS	583			—			28		—			611
INTERCOMPANY PAYABLE (RECEIVABLE)	1,401			(1,986		)	585		—			—
OTHER LIABILITIES	34			238			44		—			316
EQUITY (DEFICIT) ATTRIBUTABLE TO        MERITOR, INC.	(626		)	2,587			126		(2,713		)	(626		)
NONCONTROLLING INTERESTS	—			—			25		—			25
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	2,486		$	1,090		$	1,230	$	(2,713	)	$	2,093

	September 30, 2015
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	73		$	6		$	114	$	—		$	193
Receivables trade and other, net	1			40			420		—			461
Inventories	—			159			179		—			338
Other current assets	4			20			26		—			50
TOTAL CURRENT ASSETS	78			225			739		—			1,042
NET PROPERTY	15			183			221		—			419
GOODWILL	—			219			183		—			402
OTHER ASSETS	61			129			142		—			332
INVESTMENTS IN SUBSIDIARIES	2,354			313			—		(2,667		)	—
TOTAL ASSETS	$	2,508		$	1,069		$	1,285	$	(2,667	)	$	2,195
CURRENT LIABILITIES:
Short-term debt	$	1		$	4		$	10	$	—		$	15
Accounts and notes payable	55			213			306		—			574
Other current liabilities	93			83			103		—			279
TOTAL CURRENT LIABILITIES	149			300			419		—			868
LONG-TERM DEBT	1,017			6			13		—			1,036
RETIREMENT BENEFITS	603			—			29		—			632
INTERCOMPANY PAYABLE (RECEIVABLE)	1,365			(1,886		)	521		—			—
OTHER LIABILITIES	45			217			43		—			305
EQUITY (DEFICIT) ATTRIBUTABLE TO        MERITOR, INC.	(671		)	2,432			235		(2,667		)	(671		)
NONCONTROLLING INTERESTS	—			—			25		—			25
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	2,508		$	1,069		$	1,285	$	(2,667	)	$	2,195

Schedule of condensed consolidating statement of cash flows

	Six Months Ended March 31, 2016
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	(20	)	$	18		$	41		$	—	$	39
INVESTING ACTIVITIES
Capital expenditures	(12		)	(22		)	(13		)	—		(47		)
Other investing activities	—			4			(1		)	—		3
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(12		)	(17		)	(11		)	—		(40		)
FINANCING ACTIVITIES
Repayment of notes	(55		)	—			—			—		(55		)
Repurchase of Common Stock	(43		)	—			—			—		(43		)
Intercompany advances	81			—			(81		)	—		—
Other financing activities	—			(2		)	—			—		(2		)
CASH USED FOR FINANCING ACTIVITIES	(17		)	(2		)	(81		)	—		(100		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			2			—		2
CHANGE IN CASH AND CASH EQUIVALENTS	(49		)	(1		)	(49		)	—		(99		)
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	73			6			114			—		193
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	24		$	5		$	65		$	—	$	94

	Six months ended March 31, 2015
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY        OPERATING ACTIVITIES	$	7		$	10		$	12		$	—	$	29
INVESTING ACTIVITIES
Capital expenditures	(1		)	(10		)	(12		)	—		(23		)
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(1		)	(9		)	(9		)	—		(19		)
FINANCING ACTIVITIES
Repayment of notes	(16		)	—			—			—		(16		)
Repurchase of common stock	(16		)	—			—			—		(16		)
Intercompany advances	54			—			(54		)	—		—
Other financing activities	—			(2		)	(4		)	—		(6		)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	22			(2		)	(58		)	—		(38		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			(12		)	—		(12		)
CHANGE IN CASH AND CASH EQUIVALENTS	28			(1		)	(67		)	—		(40		)
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	71			5			171			—		247
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	99		$	4		$	104		$	—	$	207

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Earnings per Share - Reconciliation of common shares (Details) - shares shares in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Earnings Per Share [Abstract]
Basic average common shares outstanding (in shares)	91.3	97.9	91.9	97.9
Impact of restricted shares, restricted share units and performance share units (in shares)	1.2	1.9	1.6	2.0
Impact of stock options (in shares)	0.0	0.1	0.0	0.1
Impact of convertible notes (in shares)	0.0	3.0	0.0	2.0
Diluted average common shares outstanding (in shares)	92.5	102.9	93.5	102.0

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Earnings per Share - Additional information (Details) - USD ($) $ / shares in Units, $ in Millions				1 Months Ended		3 Months Ended		6 Months Ended
	Dec. 01, 2015	Dec. 01, 2014	Dec. 02, 2013	Nov. 30, 2015	Nov. 30, 2014	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015	Sep. 30, 2015	Nov. 30, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Impact of convertible notes (in shares)						0	3,000,000	0	2,000,000
Impact of restricted shares, restricted share units and performance share units (in shares)						1,200,000	1,900,000	1,600,000	2,000,000
Share-based compensation expense						$ 3	$ 3	$ 6	$ 5
Executive Officer
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number or shares issuable per performance share unit (in shares)				1	1
Executive Officer | Performance Shares
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number or shares issuable per performance share unit (in shares)											1
Exercise price (in usd per share)	$ 10.51	$ 13.74	$ 7.97
Executive Officer | Restricted Share Units (RSUs)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Exercise price (in usd per share)	$ 10.51	$ 13.74
Shares granted (in shares)				500,000	400,000
Vesting period	3 years	3 years
Stock Options, Out-of-the-Money
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive shares excluded from computation of earnings per share (in shares)						700,000		300,000
7.875% Convertible Notes Due 2026 | Convertible Notes Payable
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Interest rate						7.875%		7.875%		7.875%
Performance period of October 1, 2013 to September 30, 2016 | Executive Officer | Performance Shares
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance period								3 years
Shares authorized for grant (in shares)						1,800,000		1,800,000
Impact of convertible notes (in shares)						1,100,000	1,000,000	1,000,000	800,000
Performance period of October 1, 2013 to September 30, 2016 | Executive Officer | Performance Shares | Minimum
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance-based vesting percentage								0.00%
Performance period of October 1, 2013 to September 30, 2016 | Executive Officer | Performance Shares | Maximum
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance-based vesting percentage								200.00%
Performance period of October 1, 2013 to September 30, 2016 | Executive Officer | Performance Shares | Performance Objective One
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Award vesting rights percentage								50.00%
Performance period of October 1, 2013 to September 30, 2016 | Executive Officer | Performance Shares | Performance Objective Two
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Award vesting rights percentage								25.00%
Performance period of October 1, 2013 to September 30, 2016 | Executive Officer | Performance Shares | Performance Objective Three
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Award vesting rights percentage								25.00%
Performance period of October 1, 2014 to September 30, 2017 | Executive Officer | Performance Shares
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance period								3 years
Shares authorized for grant (in shares)					600,000
Performance period of October 1, 2014 to September 30, 2017 | Executive Officer | Performance Shares | Minimum
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance-based vesting percentage								0.00%
Performance period of October 1, 2014 to September 30, 2017 | Executive Officer | Performance Shares | Maximum
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance-based vesting percentage								200.00%
Performance period of October 1, 2014 to September 30, 2017 | Executive Officer | Performance Shares | Performance Objective One
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Award vesting rights percentage								75.00%
Performance period of October 1, 2014 to September 30, 2017 | Executive Officer | Performance Shares | Performance Objective Two
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Award vesting rights percentage								25.00%
Performance period of October 1, 2015 to September 30, 2018 | Executive Officer | Performance Shares
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance period				3 years
Shares authorized for grant (in shares)				700,000
Performance period of October 1, 2015 to September 30, 2018 | Executive Officer | Performance Shares | Minimum
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance-based vesting percentage								0.00%
Performance period of October 1, 2015 to September 30, 2018 | Executive Officer | Performance Shares | Maximum
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance-based vesting percentage								200.00%
Performance period of October 1, 2015 to September 30, 2018 | Executive Officer | Performance Shares | Performance Objective One
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Award vesting rights percentage								50.00%
Performance period of October 1, 2015 to September 30, 2018 | Executive Officer | Performance Shares | Performance Objective Two
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Award vesting rights percentage								50.00%

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Discontinued Operations (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015	Sep. 30, 2015
Discontinued Operations and Disposal Groups [Abstract]
Sales	$ 0	$ 0	$ 0	$ 1
Income (loss) before income taxes	(1)	3	(4)	0
Benefit from income taxes	0	1	1	1
Income (loss) from discontinued operations attributable to Meritor, Inc.	(1)	$ 4	(3)	$ 1
Discontinued operations, assets	1		1		$ 4
Discontinued operations, liabilities	$ 6		$ 6		$ 10

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Goodwill (Details) $ in Millions	6 Months Ended
	Mar. 31, 2016 USD ($) segment
Goodwill [Line Items]
Number of operating segments | segment	2
Number of reportable segments | segment	2
Goodwill [Roll Forward]
Beginning balance	$ 402
Foreign currency translation	(3)
Ending balance	399
Commercial Truck & Industrial
Goodwill [Roll Forward]
Beginning balance	239
Foreign currency translation	(3)
Ending balance	236
Aftermarket & Trailer
Goodwill [Roll Forward]
Beginning balance	163
Foreign currency translation	0
Ending balance	$ 163

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Restructuring Costs - Additional Details (Details) $ in Millions	3 Months Ended			6 Months Ended
	Mar. 31, 2016 USD ($)	Mar. 31, 2015 USD ($) position employee	Dec. 31, 2014 USD ($) position	Mar. 31, 2016 USD ($)	Mar. 31, 2015 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)
Restructuring Cost and Reserve [Line Items]
Restructuring reserve	$ 9	$ 12		$ 9	$ 12	$ 10	$ 11
Restructuring costs	2	3		3	6
Plant Shutdown & Other
Restructuring Cost and Reserve [Line Items]
Restructuring reserve	$ 1	$ 0		1	0	$ 0	$ 0
Restructuring costs				1	0
Closure of Corporate Engineering Facility
Restructuring Cost and Reserve [Line Items]
Restructuring costs					$ 1
Closure of Corporate Engineering Facility | Hourly And Salaried Positions
Restructuring Cost and Reserve [Line Items]
Number of positions eliminated | employee		30
Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs				$ 3
Commercial Truck & Industrial | M2016 Strategy
Restructuring Cost and Reserve [Line Items]
Restructuring costs			$ 3
Commercial Truck & Industrial | M2016 Strategy | Hourly Positions
Restructuring Cost and Reserve [Line Items]
Number of positions eliminated | position			50
Commercial Truck & Industrial | M2016 Strategy | Salaried Position
Restructuring Cost and Reserve [Line Items]
Number of positions eliminated | position			20
Commercial Truck & Industrial | European Labor Reduction
Restructuring Cost and Reserve [Line Items]
Restructuring costs		$ 2
Commercial Truck & Industrial | European Labor Reduction | Hourly Positions
Restructuring Cost and Reserve [Line Items]
Number of positions eliminated | position		20
Commercial Truck & Industrial | European Labor Reduction | Salaried Position
Restructuring Cost and Reserve [Line Items]
Number of positions eliminated | position		20

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Restructuring Costs - Changes in restructuring reserves (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015	Sep. 30, 2015
Restructuring Reserve [Roll Forward]
Beginning balance			$ 10	$ 11
Charges to continuing operations	$ 2	$ 3	3	6
Cash payments – continuing operations			(4)	(3)
Other				(2)
Ending balance	9	12	9	12
Less: non-current restructuring reserves	(3)	(2)	(3)	(2)	$ (3)
Restructuring reserves – current	6	10	6	10	$ 7
Employee Termination Benefits
Restructuring Reserve [Roll Forward]
Beginning balance			10	11
Charges to continuing operations			2	6
Cash payments – continuing operations			(4)	(3)
Other				(2)
Ending balance	8	12	8	12
Less: non-current restructuring reserves	(3)	(2)	(3)	(2)
Restructuring reserves – current	5	10	5	10
Plant Shutdown & Other
Restructuring Reserve [Roll Forward]
Beginning balance			0	0
Charges to continuing operations			1	0
Cash payments – continuing operations			0	0
Other				0
Ending balance	1	0	1	0
Less: non-current restructuring reserves	0	0	0	0
Restructuring reserves – current	$ 1	$ 0	$ 1	$ 0

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Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Income Tax Disclosure [Abstract]
Net pre-tax income (loss) tax benefit not recorded	$ 17	$ 24	$ 28	$ 36

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Accounts Receivable Factoring and Securitization (Details) € in Millions		3 Months Ended		6 Months Ended
	Feb. 19, 2016 EUR (€)	Mar. 31, 2016 USD ($)	Mar. 31, 2015 USD ($)	Mar. 31, 2016 USD ($)	Mar. 31, 2015 USD ($)	Mar. 31, 2016 EUR (€)	Mar. 31, 2016 USD ($)	Mar. 29, 2016 EUR (€)	Feb. 19, 2016 USD ($)	Dec. 31, 2015 EUR (€)	Sep. 30, 2015 EUR (€)	Sep. 30, 2015 USD ($)
Costs associated with off balance sheet factoring arrangements		$ 2,000,000	$ 1,000,000	$ 4,000,000	$ 3,000,000
Swedish Factoring Facility
Maximum limit for sale of eligible trade receivables						€ 155	$ 176,000,000	€ 155		€ 150
Utilization of accounts receivable factoring facility under arrangement						107	121,000,000				€ 108	$ 121,000,000
Liquidity commitment on facilities				364 days
U.S Factoring Facility
Maximum limit for sale of eligible trade receivables	€ 80								$ 91,000,000
Amount of increase in commitment to purchase trade receivables | €	€ 15
Utilization of accounts receivable factoring facility under arrangement						42	48,000,000				74	83,000,000
United Kingdom Factoring Facility
Maximum limit for sale of eligible trade receivables						25	28,000,000
Utilization of accounts receivable factoring facility under arrangement						6	7,000,000				8	8,000,000
Italy Factoring Facility
Maximum limit for sale of eligible trade receivables						30	34,000,000
Utilization of accounts receivable factoring facility under arrangement						€ 17	19,000,000				€ 22	24,000,000
Other Factoring Facility
Utilization of accounts receivable factoring facility under arrangement							14,000,000					18,000,000
U.S. Securitization Financing Facility
Maximum limit for securitization financing arrangement							100,000,000
Debt-to-EBITDA ratio				2.25
Outstanding balance under accounts receivable securitization program							$ 0					$ 0

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Operating Cash Flow (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
OPERATING ACTIVITIES
Net income	$ 32	$ 43	$ 59	$ 73
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax	(1)	4	(3)	1
INCOME FROM CONTINUING OPERATIONS	33	39	62	72
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization			31	32
Restructuring costs	2	3	3	6
Loss on debt extinguishment			0	1
Gain on sale of property			(2)	0
Equity in earnings of affiliates	$ (7)	$ (9)	(17)	(18)
Pension and retiree medical expense			10	14
Other adjustments to income from continuing operations			4	5
Dividends received from equity method investments			19	10
Pension and retiree medical contributions			(22)	(24)
Restructuring payments			(4)	(3)
Changes in off-balance sheet accounts receivable factoring			(51)	40
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, foreign currency adjustments and discontinued operations			7	(99)
Operating cash flows provided by continuing operations			40	36
Operating cash flows used for discontinued operations			(1)	(7)
CASH PROVIDED BY OPERATING ACTIVITIES			$ 39	$ 29

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Inventories (Details) - USD ($) $ in Millions	Mar. 31, 2016	Sep. 30, 2015
Inventory Disclosure [Abstract]
Finished goods	$ 146	$ 133
Work in process	31	28
Raw materials, parts and supplies	185	177
Total	$ 362	$ 338

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Other Current Assets (Details) - USD ($) $ in Millions	Mar. 31, 2016	Sep. 30, 2015
Other Current Assets Disclosure [Abstract]
Current deferred income tax assets	$ 20	$ 20
Asbestos-related recoveries (see Note 20)	14	13
Prepaid and other	19	17
Other current assets	$ 53	$ 50

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Net Property (Details) - USD ($) $ in Millions	Mar. 31, 2016	Sep. 30, 2015
Property, Plant and Equipment [Line Items]
Property at cost	$ 1,287	$ 1,287
Less: accumulated depreciation	(860)	(868)
Net property	427	419
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	221	214
Machinery and equipment
Property, Plant and Equipment [Line Items]
Property at cost	852	864
Company-owned tooling
Property, Plant and Equipment [Line Items]
Property at cost	116	116
Construction in progress
Property, Plant and Equipment [Line Items]
Property at cost	$ 67	$ 62

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Other Assets - Summary of other assets (Details) - USD ($) $ in Millions	Mar. 31, 2016	Sep. 30, 2015
Other Assets, Noncurrent [Abstract]
Investments in non-consolidated joint ventures	$ 98	$ 96
Asbestos-related recoveries (see Note 20)	37	42
Unamortized revolver debt issuance costs	8	10
Capitalized software costs, net	27	28
Non-current deferred income tax assets, net	28	28
Assets for uncertain tax positions	3	3
Prepaid pension costs	114	110
Other	17	15
Other assets	$ 332	$ 332

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Other Assets - Additional information (Details) - USD ($) $ in Millions	Mar. 31, 2016	Sep. 30, 2015
Equity Method Joint Venture
Schedule of Equity Method Investments [Line Items]
Investments in joint venture	$ 45	$ 42

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Unconsolidated Significant Subsidiary (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Equity Method Investment, Summarized Financial Information, Income Statement [Abstract]
Sales	$ 83	$ 88	$ 168	$ 170
Gross margin	21	19	43	37
Income from continuing operations	13	13	29	24
Net income	$ 13	$ 13	$ 29	$ 24

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Other Current Liabilities - Summary of other current liabilities (Details) - USD ($) $ in Millions	Mar. 31, 2016	Sep. 30, 2015	Mar. 31, 2015
Other Current Liabilities Disclosure [Abstract]
Compensation and benefits	$ 98	$ 122
Income taxes	13	9
Taxes other than income taxes	23	23
Accrued interest	14	14
Product warranties (see Note 16)	19	22	$ 23
Environmental reserves (see Note 20)	8	9
Restructuring (see Note 6)	6	7	$ 10
Asbestos-related liabilities (see Note 20)	17	17
Indemnity obligations (see Note 20)	2	2
Other	53	54
Other current liabilities	$ 253	$ 279

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Other Current Liabilities - Summary of product warranties (Details) - USD ($) $ in Millions	6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Sep. 30, 2015
Movement in Standard Product Warranty Accrual [Roll Forward]
Total product warranties – beginning of period	$ 48	$ 51
Accruals for product warranties	7	7
Payments	(9)	(9)
Change in estimates and other	1	0
Total product warranties – end of period	47	49
Less: Non-current product warranties	(28)	(26)	$ (26)
Product warranties – current	$ 19	$ 23	$ 22

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Other Liabilities (Details) - USD ($) $ in Millions	Mar. 31, 2016	Sep. 30, 2015	Mar. 31, 2015
Other Liabilities Disclosure [Abstract]
Asbestos-related liabilities (see Note 20)	$ 121	$ 109
Restructuring (see Note 6)	3	3	$ 2
Non-current deferred income tax liabilities	99	99
Liabilities for uncertain tax positions	15	15
Product warranties (see Note 15)	28	26	$ 26
Environmental (see Note 20)	8	8
Indemnity obligations (see Note 20)	12	13
Other	30	32
Other liabilities	$ 316	$ 305

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Long-Term Debt - Schedule of long-term debt (Details) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015
Debt Instrument [Line Items]
Capital lease obligation	$ 17		$ 17
Subtotal	1,003		1,051
Less: current maturities	(25)		(15)
Long-term debt	978		1,036
Unamortized issuance cost	8		10
Convertible Notes Payable
Debt Instrument [Line Items]
Unamortized discount on convertible notes	(17)		(20)
4.625% convertible notes due 2026 | Convertible Notes Payable
Debt Instrument [Line Items]
Debt	$ 0		55
Interest rate	4.625%	4.625%
4.0% convertible notes due 2027 | Convertible Notes Payable
Debt Instrument [Line Items]
Debt	$ 142		$ 142
Interest rate	4.00%		4.00%
Unamortized issuance cost	$ 1		$ 1
7.875% Convertible Notes Due 2026 | Convertible Notes Payable
Debt Instrument [Line Items]
Debt	$ 128		$ 127
Interest rate	7.875%		7.875%
Unamortized issuance cost	$ 2		$ 3
Original issuance discount	10		10
6.75% notes due 2021
Debt Instrument [Line Items]
Debt	$ 270		$ 270
Interest rate	6.75%		6.75%
Unamortized issuance cost	$ 5		$ 5
6.25% notes due 2024
Debt Instrument [Line Items]
Debt	$ 442		$ 442
Interest rate	6.25%		6.25%
Unamortized issuance cost	$ 8		$ 8
Export financing arrangements and other
Debt Instrument [Line Items]
Debt	$ 21		$ 18

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Long-Term Debt - Revolving Credit Facility (Details) - Revolving Credit Facility	6 Months Ended
	Mar. 31, 2016 USD ($)	Sep. 30, 2015 USD ($)	May. 22, 2015 USD ($)	Feb. 13, 2015 USD ($)
Line of Credit Facility [Line Items]
Maximum borrowing capacity			$ 499,000,000	$ 499,000,000
Borrowings outstanding	$ 0	$ 0
Letters of credit outstanding	$ 0	$ 0
Revolving Credit Facility - Amended - Matures In April 2017
Line of Credit Facility [Line Items]
Maximum borrowing capacity			40,000,000	89,000,000
Revolving Credit Facility - Amended - Matures In February 2019
Line of Credit Facility [Line Items]
Maximum borrowing capacity			$ 459,000,000	$ 410,000,000
Amended Revolving Credit Facility
Line of Credit Facility [Line Items]
Collateral test, maximum ratio	1.0
Value of company assets collateralized	$ 647,000,000
Maximum limit on issuance, letters of credit	$ 100,000,000
Triggering Event One
Line of Credit Facility [Line Items]
Debt-to-EBITDA ratio	2.25
LIBOR
Line of Credit Facility [Line Items]
Basis spread on variable rate	3.25%
Unused capacity, commitment fee percentage	0.50%
Prime Rate | Overnight Revolving Credit Loans
Line of Credit Facility [Line Items]
Basis spread on variable rate	2.25%

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Long-Term Debt - Repurchases of Debt Securities (Details) - USD ($) $ in Millions		3 Months Ended
	Mar. 01, 2016	Mar. 31, 2015	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015
Debt Instrument [Line Items]
Debt repurchase program, remaining amount			$ 39
Convertible Notes Payable | 7.875% Convertible Notes Due 2026
Debt Instrument [Line Items]
Interest rate			7.875%		7.875%
Convertible Notes Payable | 4.0% convertible notes due 2027
Debt Instrument [Line Items]
Interest rate			4.00%		4.00%
Principal amount of convertible notes repurchased			$ 15
Repurchase price percentage		6.00%
Convertible Notes Payable | 4.625% convertible notes due 2026
Debt Instrument [Line Items]
Interest rate			4.625%	4.625%
Principal amount of convertible notes repurchased	$ 55
Repurchase price percentage	100.00%

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Long-Term Debt - Capital Leases (Details) - USD ($)		6 Months Ended
	Mar. 20, 2012	Mar. 31, 2016	Sep. 30, 2015
Debt Instrument [Line Items]
Outstanding capital lease obligations		$ 17,000,000	$ 17,000,000
Financing Arrangements For Capital Leases
Debt Instrument [Line Items]
Maximum amount of progress payments for equipment under construction	$ 10,000,000
Financing Arrangements For Capital Leases | Five-Year Swap Rate
Debt Instrument [Line Items]
Basis spread on variable rate		5.64%
Capital Lease Arrangements
Debt Instrument [Line Items]
Capital lease, term	60 months
Outstanding capital lease obligations		$ 8,000,000	10,000,000
Capital Lease Arrangements | 30-Day LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate		4.75%
Other Capital Lease Arrangements
Debt Instrument [Line Items]
Outstanding capital lease obligations		$ 9,000,000	$ 7,000,000

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Long-Term Debt - Letter of Credit Facilities (Details) - USD ($)	Mar. 31, 2016	Dec. 20, 2015	Sep. 30, 2015	Feb. 21, 2014
Standby Letters of Credit
Line of Credit Facility [Line Items]
Maximum limit on issuance, letters of credit		$ 25,000,000		$ 30,000,000
Letters of credit outstanding	$ 22,000,000		$ 24,000,000
Other Letters of Credit Arrangements
Line of Credit Facility [Line Items]
Letters of credit outstanding	$ 6,000,000		$ 6,000,000

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Long-Term Debt - Export financing arrangements (Details) - BRAZIL - Note payable - Export Financing Arrangement - USD ($) $ in Millions	Mar. 31, 2016	Sep. 30, 2015
Debt Instrument [Line Items]
Interest rate	5.50%
Long-term debt outstanding	$ 19	$ 18

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Long-Term Debt - Other (Details) - CHINA - Notes Payable to Banks - Other Export Financing Arrangements - USD ($) $ in Millions	Mar. 31, 2016	Sep. 30, 2015
Debt Instrument [Line Items]
Debt default, amount	$ 35
Long-term debt outstanding	$ 8	$ 13

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Financial Instruments - Fair value of financial instruments (Details) - USD ($) $ in Millions	Mar. 31, 2016	Sep. 30, 2015
Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 94	$ 193
Short-term debt	25	15
Long-term debt	978	1,036
Carrying Value | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign exchange forward contracts (asset)	0	1
Foreign exchange forward contracts (liability)	2	3
Carrying Value | Foreign currency option contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Short-term foreign currency option contracts (asset)	0	1
Long-term foreign currency option contracts (asset)	0	1
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	94	193
Short-term debt	24	15
Long-term debt	958	1,123
Fair Value | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign exchange forward contracts (asset)	0	1
Foreign exchange forward contracts (liability)	2	3
Fair Value | Foreign currency option contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Short-term foreign currency option contracts (asset)	0	1
Long-term foreign currency option contracts (asset)	$ 0	$ 1

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Financial Instruments - Offsetting of derivative assets and liabilities (Details) - USD ($) $ in Millions	Mar. 31, 2016	Sep. 30, 2015
Derivative Asset
Gross Amounts Recognized	$ 0	$ 1
Gross Amounts Offset	0	0
Net Amounts Reported	0	1
Derivative Liabilities
Gross Amounts Recognized	2	3
Gross Amounts Offset	0	0
Net Amounts Reported	$ 2	$ 3

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Financial Instruments - Fair value of financial instruments by valuation hierarchy (Details) - USD ($) $ in Millions	Mar. 31, 2016	Mar. 31, 2015
Level 1
Cash and cash equivalents	$ 94	$ 207
Short-term debt	0	0
Long-term debt	0	0
Foreign currency option contracts (asset)		0
Foreign exchange forward contracts (liability)	0
Level 1 | Short-term | Foreign currency option contracts
Foreign currency option contracts (asset)		0
Level 1 | Long-term | Foreign currency option contracts
Foreign currency option contracts (asset)		0
Level 2
Cash and cash equivalents	0	0
Short-term debt	0	0
Long-term debt	946	1,093
Foreign currency option contracts (asset)		5
Foreign exchange forward contracts (liability)	2
Level 2 | Short-term | Foreign currency option contracts
Foreign currency option contracts (asset)		0
Level 2 | Long-term | Foreign currency option contracts
Foreign currency option contracts (asset)		0
Level 3
Cash and cash equivalents	0	0
Short-term debt	24	5
Long-term debt	12	38
Foreign currency option contracts (asset)		0
Foreign exchange forward contracts (liability)	$ 0
Level 3 | Short-term | Foreign currency option contracts
Foreign currency option contracts (asset)		2
Level 3 | Long-term | Foreign currency option contracts
Foreign currency option contracts (asset)		$ 2

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Financial Instruments - Reconciliation of changes in fair value (Details) - Foreign currency option contracts - USD ($) $ in Millions	3 Months Ended			6 Months Ended
	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)	$ 2			$ 2
Level 3
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Fair Value, beginning of period	2	$ 2	$ 5	2	$ 3
Purchases, issuances, sales and settlements:
Purchases			4	1	5
Settlements			(10)		(11)
Transfer in and / or out of Level 3	0		0	0	0
Reclass between short-term and long-term			0		1
Fair Value, end of period	0	2	4	0	4
Level 3 | Short-term
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Fair Value, beginning of period	2	1	4	1	2
Purchases, issuances, sales and settlements:
Purchases			4	1	5
Settlements			(9)		(10)
Transfer in and / or out of Level 3	0		0	0	0
Reclass between short-term and long-term			(2)		(1)
Fair Value, end of period	0	2	2	0	2
Level 3 | Long-term
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Fair Value, beginning of period	0	1	1	1	1
Purchases, issuances, sales and settlements:
Purchases			0	0	0
Settlements			(1)		(1)
Transfer in and / or out of Level 3	0		0	0	0
Reclass between short-term and long-term			2		2
Fair Value, end of period	0	0	2	0	2
Level 3 | Included in other income
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)	(2)	$ 1	(1)	(2)
Total realized gains (losses)			3		3
Level 3 | Included in other income | Short-term
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)	(2)		(1)	(2)
Total realized gains (losses)			3		3
Level 3 | Included in other income | Long-term
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)	$ 0		0	0
Total realized gains (losses)			0		0
Level 3 | Included in cost of sales
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)				(1)
Total realized gains (losses)			3		3
Level 3 | Included in cost of sales | Short-term
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)				0
Total realized gains (losses)			3		3
Level 3 | Included in cost of sales | Long-term
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)				$ (1)
Total realized gains (losses)			$ 0		$ 0

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Financial Instruments - Additional information (Details) - USD ($)	3 Months Ended			6 Months Ended
	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015	Sep. 30, 2015	Dec. 31, 2014
Foreign currency option contracts
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Total unrealized gains (losses)	$ 2,000,000			$ 2,000,000
Brazil, Brazil Real | Foreign currency option contracts
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Foreign currency contract, notional amount							$ 48,000,000
Sweden, Krona | Foreign currency option contracts
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Foreign currency contract, notional amount	19,000,000			19,000,000		$ 30,000,000
Euro | Foreign currency option contracts
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Foreign currency contract, notional amount	21,000,000			$ 21,000,000		$ 27,000,000
Maximum | 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				1 year
Included in other income | Level 3 | Foreign currency option contracts
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Total unrealized gains (losses)	$ (2,000,000)	$ 1,000,000	$ (1,000,000)	$ (2,000,000)
Foreign currency contract, net realized gain			$ 3,000,000		$ 3,000,000

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Retirement Benefit Liabilities - Summary of retirement benefits (Details) - USD ($) $ in Millions	Mar. 31, 2016	Sep. 30, 2015
Compensation and Retirement Disclosure [Abstract]
Retiree medical liability	$ 429	$ 438
Pension liability	208	219
Other	13	14
Subtotal	650	671
Less: current portion (included in compensation and benefits, Note 15)	(39)	(39)
Retirement benefits	$ 611	$ 632

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Retirement Benefit Liabilities - Components of net periodic pension and retiree medical expense (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Pension
Interest cost	$ 27	$ 18	$ 33	$ 36
Assumed return on plan assets	(25)	(28)	(50)	(56)
Recognized actuarial loss	6	7	12	14
Total expense (income)	8	(3)	(5)	(6)
Retiree Medical
Interest cost	5	5	9	10
Assumed return on plan assets	0	0	0	0
Recognized actuarial loss	3	5	6	10
Total expense (income)	$ 8	$ 10	$ 15	$ 20

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Contingencies - Additional details (Details) $ in Millions		6 Months Ended
	Dec. 12, 2015 USD ($)	Mar. 31, 2016 USD ($) site claim	Sep. 30, 2015 USD ($) claim	Sep. 30, 2009 USD ($)
Loss Contingencies [Line Items]
Environmental accrual balance		$ 16	$ 16
Discounted amount environmental accrual for ongoing operations maintenance and monitoring		8
Undiscounted amount environmental accrual for ongoing operations maintenance and monitoring		8
Maremont Asbestos
Loss Contingencies [Line Items]
Environmental accrual balance		$ 73	$ 74
Number of pending claims | claim		5,800	5,600
Obligation period for asbestos personal injury claims		10 years
Estimated insurance recoveries		$ 37	$ 41
Pending and future claims		71	71
Rockwell Asbestos
Loss Contingencies [Line Items]
Environmental accrual balance		$ 58	$ 58
Number of pending claims | claim		3,200	3,000
Obligation period for asbestos personal injury claims		10 years
Estimated insurance recoveries		$ 14	$ 14
Pending and future claims		$ 55	55
Superfund Sites
Loss Contingencies [Line Items]
Number of Superfund environmental sites | site		9
Environmental costs reasonably possible		$ 17
Environmental accrual balance		2	2
Non-Superfund Sites
Loss Contingencies [Line Items]
Environmental costs reasonably possible		28
Environmental accrual balance		14	14
Insurance Receivables | Rockwell Asbestos
Loss Contingencies [Line Items]
Estimated insurance recoveries		9	9
Indemnity Obligations
Loss Contingencies [Line Items]
Guarantee obligations recorded		$ 13	13	$ 28
MSSC
Loss Contingencies [Line Items]
Indemnity obligations liability			1
Low Range
Loss Contingencies [Line Items]
Site contingency, accrual, discount rate		0.50%
Low Range | Maremont Asbestos
Loss Contingencies [Line Items]
Range of possible loss		$ 71
Low Range | Rockwell Asbestos
Loss Contingencies [Line Items]
Range of possible loss			55
High Range
Loss Contingencies [Line Items]
Site contingency, accrual, discount rate		2.50%
High Range | Maremont Asbestos
Loss Contingencies [Line Items]
Range of possible loss		$ 100
High Range | Rockwell Asbestos
Loss Contingencies [Line Items]
Range of possible loss			74
Future tax years | Value Added Tax
Loss Contingencies [Line Items]
Increased liability		$ 10	$ 10
Insurance Settlement | Maremont Asbestos
Loss Contingencies [Line Items]
Cash settlement	$ 17
Litigation settlement, expense	5
Increased liability	$ 12

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Contingencies - Summary of environmental reserves (Details) $ in Millions	6 Months Ended
	Mar. 31, 2016 USD ($)
Accrual for Environmental Loss Contingencies [Roll Forward]
Beginning balance	$ 16
Payments and other	(3)
Accruals	3
Ending balance	16
Superfund Sites
Accrual for Environmental Loss Contingencies [Roll Forward]
Beginning balance	2
Payments and other	0
Accruals	0
Ending balance	2
Non-Superfund Sites
Accrual for Environmental Loss Contingencies [Roll Forward]
Beginning balance	14
Payments and other	(3)
Accruals	3
Ending balance	$ 14

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Contingencies - Asbestos related reserves and recoveries (Details) - USD ($) $ in Millions	Mar. 31, 2016	Sep. 30, 2015
Loss Contingencies [Line Items]
Asbestos-related liabilities	$ 16	$ 16
Maremont Asbestos
Loss Contingencies [Line Items]
Pending and future claims	71	71
Billed but unpaid claims	2	3
Asbestos-related liabilities	73	74
Asbestos-related insurance recoveries	37	41
Rockwell Asbestos
Loss Contingencies [Line Items]
Pending and future claims	55	55
Billed but unpaid claims	3	3
Asbestos-related liabilities	58	58
Asbestos-related insurance recoveries	$ 14	$ 14

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Shareowners' Equity - Equity and equity-linked repurchase authorizations (Details) - USD ($) shares in Millions	6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 01, 2016	Dec. 31, 2015	Sep. 30, 2015	Jan. 31, 2015	Sep. 30, 2014	Jun. 30, 2014
Class of Stock [Line Items]
Repurchase of common stock	$ 43,000,000	$ 16,000,000
Treasury stock (in shares)	8.1			4.2
Treasury stock, repurchase amount	$ 98,000,000				$ 55,000,000
Debt repurchase program, remaining amount	39,000,000
Equity and Equity-Linked Securities (Including Convertible Debt Securities)
Class of Stock [Line Items]
Authorized repurchase of securities, with debt reduction target						$ 150,000,000
Authorized repurchase of securities, amount remaining	$ 150,000,000				$ 150,000,000
Equity and Equity-Linked Securities (Including Convertible Debt Securities) | M2016 Strategy
Class of Stock [Line Items]
Authorized repurchase of securities, with debt reduction target							$ 210,000,000	$ 210,000,000
Authorized repurchase of securities, without debt reduction target							$ 40,000,000
Shares of common stock repurchased	3.9
Repurchase of common stock	$ 43,000,000
Treasury stock (in shares)	8.1
Treasury stock, repurchase amount	$ 98,000,000
Convertible notes, repurchase amount	$ 19,000,000
Convertible Notes Payable | 4.0% convertible notes due 2027
Class of Stock [Line Items]
Interest rate	4.00%				4.00%
Principal amount of convertible notes repurchased	$ 15,000,000
Convertible Notes Payable | 4.625% convertible notes due 2026
Class of Stock [Line Items]
Interest rate	4.625%			4.625%
Principal amount of convertible notes repurchased			$ 55,000,000
Convertible Notes Payable | 7.875% Convertible Notes Due 2026
Class of Stock [Line Items]
Interest rate	7.875%				7.875%

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Shareowners' Equity - Schedule of accumulated other comprehensive loss (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	$ (760)	$ (771)	$ (766)	$ (749)
Other comprehensive income (loss) before reclassification	9	(34)	6	(69)
Amounts reclassified from accumulated other comprehensive loss - net of tax	9	12	18	25
Net current-period other comprehensive income (loss)	18	(22)	24	(44)
Ending balance	(742)	(793)	(742)	(793)
Foreign Currency Translation
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(60)	8	(54)	41
Other comprehensive income (loss) before reclassification	10	(33)	4	(67)
Amounts reclassified from accumulated other comprehensive loss - net of tax	0	0	0	1
Net current-period other comprehensive income (loss)	10	(33)	4	(66)
Ending balance	(50)	(25)	(50)	(25)
Employee Benefit Related Adjustments
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(696)	(777)	(705)	(789)
Other comprehensive income (loss) before reclassification	0	(1)	0	(1)
Amounts reclassified from accumulated other comprehensive loss - net of tax	9	12	18	24
Net current-period other comprehensive income (loss)	9	11	18	23
Ending balance	(687)	(766)	(687)	(766)
Unrealized Loss, net of tax
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(4)	(2)	(7)	(1)
Other comprehensive income (loss) before reclassification	(1)	0	2	(1)
Amounts reclassified from accumulated other comprehensive loss - net of tax	0	0	0	0
Net current-period other comprehensive income (loss)	(1)	0	2	(1)
Ending balance	$ (5)	$ (2)	$ (5)	$ (2)

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Shareowners' Equity - Reclassifications from AOCI (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total reclassifications for the period	$ 9	$ 12	$ 18	$ 25
Foreign Currency Translation
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total reclassifications for the period	0	0	0	1
Amount Reclassified from Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total reclassifications for the period	9		18	(25)
Amount Reclassified from Accumulated Other Comprehensive Income | Actuarial losses
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total before tax	9	12	18	24
Amount Reclassified from Accumulated Other Comprehensive Income | Employee Benefit Related Adjustment
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total before tax	9	12	18	24
Tax expense	$ 0	0	$ 0	0
Total reclassifications for the period		$ 12		24
Amount Reclassified from Accumulated Other Comprehensive Income | Foreign Currency Translation Related Adjustment
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total before tax				1
Amount Reclassified from Accumulated Other Comprehensive Income | Foreign Currency Translation
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total before tax				1
Tax expense				0
Total reclassifications for the period				$ 1

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Business Segment Information - Summary of Segment Information (Details) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2016 USD ($)	Mar. 31, 2015 USD ($)	Mar. 31, 2016 USD ($) segment	Mar. 31, 2015 USD ($)
Number of reportable segments | segment			2
Total Sales	$ 821	$ 864	$ 1,630	$ 1,743
Commercial Truck & Industrial
Total Sales	610	660	1,223	1,338
Aftermarket & Trailer
Total Sales	211	204	407	405
Operating Segments | Commercial Truck & Industrial
Total Sales	631	681	1,264	1,384
Operating Segments | Aftermarket & Trailer
Total Sales	218	212	421	420
Eliminations
Total Sales	(28)	(29)	(55)	(61)
Eliminations | Commercial Truck & Industrial
Total Sales	21	21	41	46
Eliminations | Aftermarket & Trailer
Total Sales	$ 7	$ 8	$ 14	$ 15

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Business Segment Information - Segment Income Attributable to Parent (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Segment Reporting Information [Line Items]
Interest expense, net	$ (21)	$ (21)	$ (43)	$ (40)
Provision for income taxes	(7)	(6)	(14)	(13)
Depreciation and amortization			(31)	(32)
Noncontrolling interests	0	0	(1)	(1)
Restructuring costs	(2)	(3)	(3)	(6)
Net income from continuing operations	33	39	61	71
Commercial Truck & Industrial
Segment Reporting Information [Line Items]
Restructuring costs			(3)
Operating Segments
Segment Reporting Information [Line Items]
Segment EBITDA	84	87	156	168
Operating Segments | Commercial Truck & Industrial
Segment Reporting Information [Line Items]
Segment EBITDA	56	57	108	113
Operating Segments | Aftermarket & Trailer
Segment Reporting Information [Line Items]
Segment EBITDA	28	30	48	55
Segment Reconciling Items
Segment Reporting Information [Line Items]
Unallocated legacy and corporate costs, net	(3)	0	1	(2)
Interest expense, net	(21)	(21)	(43)	(40)
Provision for income taxes	(7)	(6)	(14)	(13)
Depreciation and amortization	(16)	(17)	(31)	(32)
Noncontrolling interests	0	0	(1)	(1)
Loss on sale of receivables	(2)	(1)	(4)	(3)
Restructuring costs	$ (2)	$ (3)	$ (3)	$ (6)

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Business Segment Information - Schedule of Segment Assets (Details) - USD ($) $ in Millions	Mar. 31, 2016	Sep. 30, 2015
Segment Reporting Information [Line Items]
TOTAL ASSETS	$ 2,093	$ 2,195
Operating Segments
Segment Reporting Information [Line Items]
TOTAL ASSETS	1,963	2,017
Operating Segments | Commercial Truck & Industrial
Segment Reporting Information [Line Items]
TOTAL ASSETS	1,509	1,569
Operating Segments | Aftermarket & Trailer
Segment Reporting Information [Line Items]
TOTAL ASSETS	454	448
Corporate
Segment Reporting Information [Line Items]
TOTAL ASSETS	340	434
Segment Reconciling Items
Segment Reporting Information [Line Items]
Less: Accounts receivable sold under off-balance sheet factoring programs	$ (210)	$ (256)

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Supplemental Guarantor Condensed Consolidating Financial Statements - Additional Information (Details) - USD ($) $ in Millions	6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Sep. 30, 2015
Condensed Financial Statements, Captions [Line Items]
Parent's total ownership, percentage	100.00%
Threshold for reporting consolidating financial statements	25.00%
Parent's portion of non-transferable net assets	$ 37
Parent
Condensed Financial Statements, Captions [Line Items]
Pension and retiree benefits, parent obligation	611		$ 631
Proceeds from investment in subsidiary	17	$ 37
Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Debt and capital lease obligations, subsidiary portion	$ 35		$ 33

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Supplemental Guarantor Condensed Consolidating Financial Statements - Condensed Consolidating Statement of Operations (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Sales
Sales	$ 821	$ 864	$ 1,630	$ 1,743
Cost of sales	(700)	(749)	(1,405)	(1,513)
GROSS MARGIN	121	115	225	230
Selling, general and administrative	(60)	(57)	(116)	(122)
Restructuring costs	(2)	(3)	(3)	(6)
Other operating expense	(3)	0	(3)	1
OPERATING INCOME (LOSS)	56	55	103	103
Other income (expense), net	(2)	2	(1)	4
Equity in earnings of affiliates	7	9	17	18
Interest income (expense), net	(21)	(21)	(43)	(40)
INCOME (LOSS) BEFORE INCOME TAXES	40	45	76	85
Provision for income taxes	(7)	(6)	(14)	(13)
Equity income (loss) from continuing operations of subsidiaries	0	0	0	0
INCOME (LOSS) FROM CONTINUING OPERATIONS	33	39	62	72
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax	(1)	4	(3)	1
Net income	32	43	59	73
Less: Net income attributable to noncontrolling interests	0	0	(1)	(1)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	32	43	58	72
External
Sales
Sales	821	864	1,630	1,743
Subsidiaries
Sales
Sales	0	0	0	0
Elims
Sales
Sales	(44)	(48)	(87)	(94)
Cost of sales	44	48	87	94
GROSS MARGIN	0	0	0	0
Selling, general and administrative	0	0	0	0
Restructuring costs	0	0	0	0
Other operating expense	0		0	0
OPERATING INCOME (LOSS)	0	0	0	0
Other income (expense), net	0	0	0	0
Equity in earnings of affiliates	0	0	0	0
Interest income (expense), net	0	0	0	0
INCOME (LOSS) BEFORE INCOME TAXES	0	0	0	0
Provision for income taxes	0	0	0	0
Equity income (loss) from continuing operations of subsidiaries	(54)	(67)	(175)	(205)
INCOME (LOSS) FROM CONTINUING OPERATIONS	(54)	(67)	(175)	(205)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax	3	(8)	9	(2)
Net income	(51)	(75)	(166)	(207)
Less: Net income attributable to noncontrolling interests	0	0	0	0
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	(51)	(75)	(166)	(207)
Parent
Sales
Sales	0	0	0	0
Cost of sales	(12)	(10)	(26)	(24)
GROSS MARGIN	(12)	(10)	(26)	(24)
Selling, general and administrative	(19)	(16)	(39)	(34)
Restructuring costs	0	(1)	0	(1)
Other operating expense	(3)		(3)	0
OPERATING INCOME (LOSS)	(34)	(27)	(68)	(59)
Other income (expense), net	35	37	34	37
Equity in earnings of affiliates	0	0	0	0
Interest income (expense), net	(28)	(29)	(59)	(58)
INCOME (LOSS) BEFORE INCOME TAXES	(27)	(19)	(93)	(80)
Provision for income taxes	0	(1)	0	(1)
Equity income (loss) from continuing operations of subsidiaries	60	59	154	152
INCOME (LOSS) FROM CONTINUING OPERATIONS	33	39	61	71
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax	(1)	4	(3)	1
Net income	32	43	58	72
Less: Net income attributable to noncontrolling interests	0	0	0	0
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	32	43	58	72
Parent | External
Sales
Sales	0	0	0	0
Parent | Subsidiaries
Sales
Sales	0	0	0	0
Guarantors
Sales
Sales	448	449	892	882
Cost of sales	(369)	(380)	(746)	(751)
GROSS MARGIN	79	69	146	131
Selling, general and administrative	(21)	(26)	(42)	(54)
Restructuring costs	(1)	0	(1)	(3)
Other operating expense	0		0	0
OPERATING INCOME (LOSS)	57	43	103	74
Other income (expense), net	(9)	(9)	(9)	(9)
Equity in earnings of affiliates	7	8	16	15
Interest income (expense), net	7	6	15	13
INCOME (LOSS) BEFORE INCOME TAXES	62	48	125	93
Provision for income taxes	0	0	0	0
Equity income (loss) from continuing operations of subsidiaries	(6)	8	21	53
INCOME (LOSS) FROM CONTINUING OPERATIONS	56	56	146	146
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax	(2)	5	(5)	2
Net income	54	61	141	148
Less: Net income attributable to noncontrolling interests	0	0	0	0
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	54	61	141	148
Guarantors | External
Sales
Sales	420	418	837	821
Guarantors | Subsidiaries
Sales
Sales	28	31	55	61
Non- Guarantors
Sales
Sales	417	463	825	955
Cost of sales	(363)	(407)	(720)	(832)
GROSS MARGIN	54	56	105	123
Selling, general and administrative	(20)	(15)	(35)	(34)
Restructuring costs	(1)	(2)	(2)	(2)
Other operating expense	0		0	1
OPERATING INCOME (LOSS)	33	39	68	88
Other income (expense), net	(28)	(26)	(26)	(24)
Equity in earnings of affiliates	0	1	1	3
Interest income (expense), net	0	2	1	5
INCOME (LOSS) BEFORE INCOME TAXES	5	16	44	72
Provision for income taxes	(7)	(5)	(14)	(12)
Equity income (loss) from continuing operations of subsidiaries	0	0	0	0
INCOME (LOSS) FROM CONTINUING OPERATIONS	(2)	11	30	60
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax	(1)	3	(4)	0
Net income	(3)	14	26	60
Less: Net income attributable to noncontrolling interests	0	0	(1)	(1)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	(3)	14	25	59
Non- Guarantors | External
Sales
Sales	401	446	793	922
Non- Guarantors | Subsidiaries
Sales
Sales	$ 16	$ 17	$ 32	$ 33

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Supplemental Guarantor Condensed Consolidating Financial Statements - Condensed Consolidating Statement of Comprehensive Income (Loss) (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Condensed Statement of Income Captions [Line Items]
Net income	$ 32	$ 43	$ 59	$ 73
Other comprehensive income (loss)	18	(22)	24	(45)
Total comprehensive income (loss)	50	21	83	28
Less: Comprehensive income attributable to noncontrolling interests	0	0	(1)	0
Comprehensive income (loss) attributable to Meritor, Inc.	50	21	82	28
Elims
Condensed Statement of Income Captions [Line Items]
Net income	(51)	(75)	(166)	(207)
Other comprehensive income (loss)	(13)	38	(10)	73
Total comprehensive income (loss)	(64)	(37)	(176)	(134)
Less: Comprehensive income attributable to noncontrolling interests	0	0	0	0
Comprehensive income (loss) attributable to Meritor, Inc.	(64)	(37)	(176)	(134)
Parent
Condensed Statement of Income Captions [Line Items]
Net income	32	43	58	72
Other comprehensive income (loss)	18	(22)	24	(44)
Total comprehensive income (loss)	50	21	82	28
Less: Comprehensive income attributable to noncontrolling interests	0	0	0	0
Comprehensive income (loss) attributable to Meritor, Inc.	50	21	82	28
Guarantors
Condensed Statement of Income Captions [Line Items]
Net income	54	61	141	148
Other comprehensive income (loss)	23	(65)	12	(92)
Total comprehensive income (loss)	77	(4)	153	56
Less: Comprehensive income attributable to noncontrolling interests	0	0	0	0
Comprehensive income (loss) attributable to Meritor, Inc.	77	(4)	153	56
Non- Guarantors
Condensed Statement of Income Captions [Line Items]
Net income	(3)	14	26	60
Other comprehensive income (loss)	(10)	27	(2)	18
Total comprehensive income (loss)	(13)	41	24	78
Less: Comprehensive income attributable to noncontrolling interests	0	0	(1)	0
Comprehensive income (loss) attributable to Meritor, Inc.	$ (13)	$ 41	$ 23	$ 78

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Supplemental Guarantor Condensed Consolidating Financial Statements - Condensed Consolidating Balance Sheet (Details) - USD ($) $ in Millions	Mar. 31, 2016	Sep. 30, 2015	Mar. 31, 2015	Sep. 30, 2014
CURRENT ASSETS:
Cash and cash equivalents	$ 94	$ 193	$ 207	$ 247
Receivables trade and other, net	426	461
Inventories	362	338
Other current assets	53	50
TOTAL CURRENT ASSETS	935	1,042
NET PROPERTY	427	419
GOODWILL	399	402
OTHER ASSETS	332	332
INVESTMENTS IN SUBSIDIARIES	0	0
TOTAL ASSETS	2,093	2,195
CURRENT LIABILITIES:
Short-term debt	25	15
Accounts and notes payable	511	574
Other current liabilities	253	279
TOTAL CURRENT LIABILITIES	789	868
LONG-TERM DEBT	978	1,036
RETIREMENT BENEFITS	611	632
INTERCOMPANY PAYABLE (RECEIVABLE)	0	0
OTHER LIABILITIES	316	305
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.	(626)	(671)
NONCONTROLLING INTERESTS	25	25
TOTAL LIABILITIES AND DEFICIT	2,093	2,195
Elims
CURRENT ASSETS:
Cash and cash equivalents	0	0	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	(2,713)	(2,667)
TOTAL ASSETS	(2,713)	(2,667)
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 (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.	(2,713)	(2,667)
NONCONTROLLING INTERESTS	0	0
TOTAL LIABILITIES AND DEFICIT	(2,713)	(2,667)
Parent
CURRENT ASSETS:
Cash and cash equivalents	24	73	99	71
Receivables trade and other, net	0	1
Inventories	0	0
Other current assets	4	4
TOTAL CURRENT ASSETS	28	78
NET PROPERTY	19	15
GOODWILL	0	0
OTHER ASSETS	55	61
INVESTMENTS IN SUBSIDIARIES	2,384	2,354
TOTAL ASSETS	2,486	2,508
CURRENT LIABILITIES:
Short-term debt	1	1
Accounts and notes payable	41	55
Other current liabilities	85	93
TOTAL CURRENT LIABILITIES	127	149
LONG-TERM DEBT	967	1,017
RETIREMENT BENEFITS	583	603
INTERCOMPANY PAYABLE (RECEIVABLE)	1,401	1,365
OTHER LIABILITIES	34	45
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.	(626)	(671)
NONCONTROLLING INTERESTS	0	0
TOTAL LIABILITIES AND DEFICIT	2,486	2,508
Guarantors
CURRENT ASSETS:
Cash and cash equivalents	5	6	4	5
Receivables trade and other, net	30	40
Inventories	165	159
Other current assets	22	20
TOTAL CURRENT ASSETS	222	225
NET PROPERTY	187	183
GOODWILL	219	219
OTHER ASSETS	133	129
INVESTMENTS IN SUBSIDIARIES	329	313
TOTAL ASSETS	1,090	1,069
CURRENT LIABILITIES:
Short-term debt	4	4
Accounts and notes payable	182	213
Other current liabilities	61	83
TOTAL CURRENT LIABILITIES	247	300
LONG-TERM DEBT	4	6
RETIREMENT BENEFITS	0	0
INTERCOMPANY PAYABLE (RECEIVABLE)	(1,986)	(1,886)
OTHER LIABILITIES	238	217
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.	2,587	2,432
NONCONTROLLING INTERESTS	0	0
TOTAL LIABILITIES AND DEFICIT	1,090	1,069
Non- Guarantors
CURRENT ASSETS:
Cash and cash equivalents	65	114	$ 104	$ 171
Receivables trade and other, net	396	420
Inventories	197	179
Other current assets	27	26
TOTAL CURRENT ASSETS	685	739
NET PROPERTY	221	221
GOODWILL	180	183
OTHER ASSETS	144	142
INVESTMENTS IN SUBSIDIARIES	0	0
TOTAL ASSETS	1,230	1,285
CURRENT LIABILITIES:
Short-term debt	20	10
Accounts and notes payable	288	306
Other current liabilities	107	103
TOTAL CURRENT LIABILITIES	415	419
LONG-TERM DEBT	7	13
RETIREMENT BENEFITS	28	29
INTERCOMPANY PAYABLE (RECEIVABLE)	585	521
OTHER LIABILITIES	44	43
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.	126	235
NONCONTROLLING INTERESTS	25	25
TOTAL LIABILITIES AND DEFICIT	$ 1,230	$ 1,285

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Supplemental Guarantor Condensed Consolidating Financial Statements - Condensed Consolidating Statement of Cash Flows (Details) - USD ($) $ in Millions	6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$ 39	$ 29
INVESTING ACTIVITIES
Capital expenditures	(47)	(23)
Other investing activities	3	0
Net investing cash flows provided by discontinued operations	4	4
CASH USED FOR INVESTING ACTIVITIES	(40)	(19)
FINANCING ACTIVITIES
Repayment of notes	(55)	(16)
Repurchase of Common Stock	(43)	(16)
Intercompany advances	0	0
Other financing activities	(2)	(6)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(100)	(38)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	2	(12)
CHANGE IN CASH AND CASH EQUIVALENTS	(99)	(40)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	193	247
CASH AND CASH EQUIVALENTS AT END OF PERIOD	94	207
Elims
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	0	0
INVESTING ACTIVITIES
Capital expenditures	0	0
Other investing activities	0
Net investing cash flows provided by discontinued operations	0	0
CASH USED FOR INVESTING ACTIVITIES	0	0
FINANCING ACTIVITIES
Repayment of notes	0	0
Repurchase of Common Stock	0	0
Intercompany advances	0	0
Other financing activities	0	0
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	0	0
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	0	0
CHANGE IN CASH AND CASH EQUIVALENTS	0	0
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	0	0
CASH AND CASH EQUIVALENTS AT END OF PERIOD	0	0
Parent
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	(20)	7
INVESTING ACTIVITIES
Capital expenditures	(12)	(1)
Other investing activities	0
Net investing cash flows provided by discontinued operations	0	0
CASH USED FOR INVESTING ACTIVITIES	(12)	(1)
FINANCING ACTIVITIES
Repayment of notes	(55)	(16)
Repurchase of Common Stock	(43)	(16)
Intercompany advances	81	54
Other financing activities	0	0
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(17)	22
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	0	0
CHANGE IN CASH AND CASH EQUIVALENTS	(49)	28
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	73	71
CASH AND CASH EQUIVALENTS AT END OF PERIOD	24	99
Guarantors
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	18	10
INVESTING ACTIVITIES
Capital expenditures	(22)	(10)
Other investing activities	4
Net investing cash flows provided by discontinued operations	1	1
CASH USED FOR INVESTING ACTIVITIES	(17)	(9)
FINANCING ACTIVITIES
Repayment of notes	0	0
Repurchase of Common Stock	0	0
Intercompany advances	0	0
Other financing activities	(2)	(2)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(2)	(2)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	0	0
CHANGE IN CASH AND CASH EQUIVALENTS	(1)	(1)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	6	5
CASH AND CASH EQUIVALENTS AT END OF PERIOD	5	4
Non- Guarantors
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	41	12
INVESTING ACTIVITIES
Capital expenditures	(13)	(12)
Other investing activities	(1)
Net investing cash flows provided by discontinued operations	3	3
CASH USED FOR INVESTING ACTIVITIES	(11)	(9)
FINANCING ACTIVITIES
Repayment of notes	0	0
Repurchase of Common Stock	0	0
Intercompany advances	(81)	(54)
Other financing activities	0	(4)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(81)	(58)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	2	(12)
CHANGE IN CASH AND CASH EQUIVALENTS	(49)	(67)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	114	171
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$ 65	$ 104