10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the Fiscal Year Ended October 2, 2016

Commission file number 1-15983

______________________________

MERITOR, INC.

(Exact name of registrant as specified in its charter)

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

Registrant’s telephone number, including area code: (248) 435-1000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of each class	Name of each exchange on which registered
Common Stock, $1 Par Value	New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ X ]       No [  ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes [    ]       No [ X ]

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 Regulation 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

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 definitions of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	ý		Accelerated filer	¨
Non-accelerated filer	¨	(Do not check if a smaller reporting company)	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 ]

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant on April 1, 2016 (the last business day of the most recently completed second fiscal quarter) was approximately $731,839,701

86,767,764 shares of the registrant’s Common Stock, par value $1 per share, were outstanding on November 30, 2016.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information contained in the definitive Proxy Statement for the Annual Meeting of Shareholders of the registrant to be held on January 26, 2017 is incorporated by reference into Part III.

			Page
			No.
PART I.
	Item 1.	Business	1
	Item 1A.	Risk Factors	14
	Item 1B.	Unresolved Staff Comments	23
	Item 2.	Properties	23
	Item 3.	Legal Proceedings	24
	Item 4	Mine Safety Disclosures	25
	Item 4A.	Executive Officers of the Registrant	25
PART II.
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
	Item 6.	Selected Financial Data	30
	Item 7.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	32
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	63
	Item 8.	Financial Statements and Supplementary Data	65
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	148
	Item 9A.	Controls and Procedures	148
	Item 9B.	Other Information	152
PART III.
	Item 10.	Directors, Executive Officers and Corporate Governance	152
	Item 11.	Executive Compensation	152
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	152
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	153
	Item 14.	Principal Accountant Fees and Services	153
PART IV.
	Item 15.	Exhibits and Financial Statement Schedules	154
		Signatures	162

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PART I

Item 1.Business.

Overview

Meritor, Inc. ("we", "us" or "our"), 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. We serve commercial truck, trailer, military, bus and coach, construction, and other industrial OEMs and certain aftermarkets. Our principal products are axles, undercarriages, drivelines, brakes and braking systems.

Meritor was incorporated in Indiana in 2000 in connection with the merger of Meritor Automotive, Inc. and Arvin Industries, Inc. As used in this Annual Report on Form 10-K, the terms "company," "Meritor," "we," "us" and "our" include Meritor, its consolidated subsidiaries and its predecessors unless the context indicates otherwise.

Meritor serves a broad range of customers worldwide, including medium- and heavy-duty truck OEMs, specialty vehicle manufacturers, certain aftermarkets, and trailer producers. Our total sales from continuing operations in fiscal year 2016 were approximately $3.2 billion. Our ten largest customers accounted for approximately 73 percent of fiscal year 2016 sales from continuing operations. Sales from operations outside the United States (U.S.) accounted for approximately 49 percent of total sales from continuing operations in fiscal year 2016. Our continuing operations also participated in 5 unconsolidated joint ventures, which we accounted for under the equity method of accounting and that generated revenues of approximately $1.1 billion in fiscal year 2016.

Our fiscal year ends on the Sunday nearest to September 30. Fiscal year 2016 ended on October 2, 2016, fiscal year 2015 ended on September 27, 2015, and fiscal year 2014 ended on September 28, 2014. All year and quarter references relate to our fiscal year and fiscal quarters unless otherwise stated. For ease of presentation, September 30 is utilized consistently throughout this report to represent the fiscal year end.

Whenever an item in this Annual Report on Form 10-K refers to information under specific captions in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations or Item 8. Financial Statements and Supplementary Data, the information is incorporated in that item by reference.

References in this Annual Report on Form 10-K to our belief that we are a leading supplier or the world's leading supplier, and other similar statements as to our relative market position are based principally on calculations we have made. These calculations are based on information we have collected, including company and industry sales data obtained from internal and available external sources as well as our estimates. In addition to such quantitative data, our statements are based on other competitive factors such as our technological capabilities, our engineering, research and development efforts, and our innovative solutions as well as the quality of our products and services, in each case relative to that of our competitors in the markets we address.

Our Business

Our reporting segments are as follows:

• The Commercial Truck & Industrial segment supplies drivetrain systems and components, including axles, drivelines and braking and suspension systems, for medium- and heavy-duty trucks, off-highway, 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 and remanufactured parts to commercial vehicle aftermarket customers in North America and Europe. This segment also supplies a wide variety of undercarriage products and systems for trailer applications in North America.

See Note 24 of the Notes to Consolidated Financial Statements under Item 8. Financial Statements and Supplementary Data for financial information by segment for continuing operations for each of the last three fiscal years, including information on sales and assets by geographic area. The heading "Products" below includes information on certain product sales for each of the last three fiscal years.

Business Strategies

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We are currently a premier global supplier of a broad range of integrated systems, modules and components to OEMs and the aftermarket for the commercial vehicle, transportation and industrial sectors, and we believe we have market-leading positions in many of the markets we serve. We are working to enhance our leadership positions and capitalize on our existing customer, product and geographic strengths.    For additional market related discussion, see the Trends and Uncertainties section in Item 7.

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 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 include:

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

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

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

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

• Ability to successfully execute strategic initiatives;

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

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

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

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

• Competitively driven price reductions to our customers;

• Potential price increases from our suppliers;

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

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

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

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

Our specific business strategies are influenced by these industry factors and global trends and are focused on leveraging our resources to continue to develop and produce competitive product offerings. We believe the following strategies will allow us to

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maintain a balanced portfolio of commercial truck, industrial and aftermarket businesses covering key global markets. See Item 1A. Risk Factors below for information on certain risks that could have an impact on our business, financial condition or results of operations in the future.

Successful Achievement of M2016; Foundation for M2019

The success we had in executing our three-year M2016 strategic plan fundamentally transformed our business for long-term sustainability. The plan, intended to drive value for our shareholders, customers and employees, clearly defined specific financial measures of success, including improved EBITDA margin, reduced debt (including retirement liabilities) and new business wins driven by organic growth, all of which were substantially achieved by the end of fiscal year 2016.

That plan focused on four major priorities, many of which will carry over into our M2019 strategic plan:

• Drive operational excellence

• Focus on customer value

• Reduce product cost

• Invest in a high-performing team

Drive Operational Excellence

The Operational Excellence priority emphasized our focus on executing the Meritor Production System, a lean manufacturing initiative designed to improve systems, processes, behaviors and capabilities primarily associated with five core metrics:

• Safety - Total case rate is a measure of recordable workplace injuries normalized per 100 employees per year. We have initiated safety programs throughout our global operations to protect our employees. Our target for M2016 was to achieve a rate of less than 0.8. Our total case rate in fiscal 2016 was 0.76.

• Quality - Through a focus on products, suppliers, lean operations, systems, people and technology, we are driving toward improving our quality as measured in parts per million (PPM). Our M2016 target was to achieve customer parts per million of less than 75. In fiscal year 2016, we achieved 50 PPM. This improvement was driven by a focus on prevention through robust problem solving, training and development.

• Delivery - In fiscal year 2016, we achieved our OEM delivery performance goal of a 99 percent on-time delivery rate in our commercial truck business. Our intent is to maintain this high delivery rate for our customers.

• Cost - Throughout M2016, we targeted - and achieved - net improvements of 2.6 percent each year for labor and burden cost reduction. Major areas of attention included better equipment utilization, reduced changeover time, elimination of waste, improved shift and asset utilization, investing in equipment to improve cycle time and flexibility, and employee involvement. Our work in this area had a significant impact on our financial results during the three-year period.

• People - We encourage employees in our manufacturing facilities to submit at least three suggestions annually. In North America, we implemented approximately $1.5 million in improvements in fiscal year 2016 based on employee input. We also saw a significant improvement in employee engagement scores year over year from our salaried employees globally.

Throughout the company, teams are focused on improving workplace safety and quality, implementing cost savings ideas, increasing productivity and efficiency, and streamlining operations. In 2016, our trailer business earned the Platinum Supplier Award from Wabash National Corp. for excellence in supply chain performance.

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Focus on Customer Value

We established three main goals for improving customer value as part of our M2016 plan. Our first goal was to introduce new products and win new business to drive profitable growth. Second, we worked closely with our customers to achieve the Meritor Value Proposition through pricing for value. Third, we committed to exceed our customer's goals with respect to quality, delivery, innovation, and customer service. During the last three years, the evidence of our success in achieving these goals was demonstrated through our continued ability to renew existing customer relationships and establish new customer relationships.

In fiscal year 2016, we significantly increased our penetration with PACCAR for rear axles in North America, Australia and Brazil, and we now have standard position on front steer axles with PACCAR. We also renewed our long-term partnership with Navistar upon signing a new five-year agreement. Under the terms of the agreement, Meritor retained standard position for brakes and rear axles with Navistar, as well as standard position for front axles in severe service, medium-duty and bus applications. We now have long-term pricing and positioning agreements with the four largest commercial truck OEMs in North America and our partnerships with each of them have never been stronger.

For more than 100 years, our products have evolved to meet the changing needs of our customers in all major regions of the world. As technology has advanced, we have designed products that are more fuel efficient, lighter weight, safer, more durable and more reliable. The Meritor brand is well established globally and represents a wide portfolio of high-quality products for many different applications.

Building upon the strength of our core technologies, we intend to expand our presence globally and continue our growth in complementary product lines. Our strategy involves continuing to capitalize on our geographic diversity and product line capability through our many core competencies, global customer relationships and substantial aftermarket presence.

In the future, we believe there is significant revenue potential with an expanded product portfolio. Our current launch cycle is one of the most aggressive in our company’s history. We have worked with our customers to design axles, brakes, drivelines and suspensions that will enhance the value of their vehicles. There were several examples of this in fiscal 2016:

• We introduced a lighter weight, more efficient axle carrier platform called the 13X, which is designed for Class 6 and 7 applications. Production is scheduled to begin in 2017. The 13X axle meets our OEM customers' requests for an axle that is lighter, more efficient and tailored to meet the needs of medium-duty applications.

• We launched the MFS+, a lighter-weight, front-steer axle with the recognized performance of the company's MFS™ series while being easier to maintain. This axle, which has integrated components and an optimized design to reduce weight, represents the next step in the evolution of our front-steer axle offering.

• We announced the expanded availability of the MFS™ Series of front non-drive axles to include a deep-drop axle option that offers end-users greater flexibility in packaging their vehicles. The new option, which includes deep axle drops of 4.76 and 5 inches, is ideal for auto hauling and refuse applications where lower vehicle ride heights are needed.

• We launched Meritor’s DUALite Series of integrated systems for the bus and coach market in China which offers on-highway customers in the region fully-dressed axle options that are manufactured locally.

As industry trends continue to drive the need for equipment that complies with environmental and safety-related regulatory provisions, OEMs select suppliers based not only on the cost and quality of their products but also on their ability to meet stringent environmental and safety requirements and to service and support the customer after the sale. We use our technological and market expertise to develop and engineer products that address mobility, safety, regulatory and environmental concerns.

One way in which we have worked to address safety is that we have implemented a strategy of focusing on products and technologies that enhance overall vehicle braking performance. Our commitment to designing and manufacturing braking solutions for the commercial vehicle market has resulted in more commercial vehicles in North America having Meritor brakes than any other brake manufacturer. We believe Meritor’s EX+ air disc brakes are among the highest performing brakes in the marketplace. In Europe, a region where air disc brakes are much more widely adopted, we have sold more than 5 million ELSA air disc brakes - a testament to the quality, reliability and performance of this brake platform.

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We are recognized globally for our capabilities in designing, testing and manufacturing high quality drivetrain and braking products that optimize overall performance. Our manufacturing facility in Lindesberg, Sweden received the Swedish Assembly Award 2016 for advancing assembly technology. Specifically, we consolidated production for all families of bolted carriers into a single universal assembly line that utilizes smart sequencing and material flow enhancements, thus creating a flexible line that supports a wide variety of customer needs. The facility’s transformation led to best-in-class delivery and productivity and significantly improved quality enabling the plant to produce thousands of different axle configurations on a just-in-time basis for our customers.

We effectively manage complexity for low volumes and support our customers’ needs during periods of peak volumes. The quality, durability and on-time delivery of our products has earned us strong positions in the markets we support. As we seek to extend and expand our business with existing customers and establish relationships with new ones, our objective is to ensure we are getting a fair value for the recognized benefits of our products and services and the strong brand equity we hold in the marketplace.

We believe the quality of our core product lines, our ability to service our products through our aftermarket capabilities, and our sales and service support teams give us a competitive advantage. An important element of being a preferred supplier is the ability to deliver service through the entire life cycle of the product. Also, as our industry becomes more global, our manufacturing footprint around the world and our ability to supply customers with regionally-tailored product solutions are competencies of increasing importance.

Reduce Product Cost

We instituted a broad collaborative effort among our Purchasing, Engineering, Supply Chain, Quality and Operations departments to manage product costs with a target of achieving annual net material reductions (measured against controllable spend) of 2.5 percent annually, which was achieved each year during M2016. We are driving such material performance using three different approaches: commercial negotiations, best-cost-country sourcing, and technical innovation.

Increasing inventory turns is an important element of improving our working capital performance. We believe we can improve our inventory turnover rate from our current levels. By reducing inventory, we expect to generate more cash to reinvest in our business, repay debt and/or return value to shareholders. We are employing various approaches including localization of our supply base where possible; warehousing close to our facilities for imported supply; improved demand planning; increased accuracy in production forecasting; and minimizing or eliminating inventory held to support certain low-volume products.

Invest in a High-Performing Team

Investing in a high-performing team is fundamental to having an engaged and aligned workforce. As part of our M2016 objectives, we set targets to strengthen the level of engagement from our employees, build a more diverse culture and make additional tools available for career development.

Our goal for M2016 was to achieve a top quartile score on twelve key engagement factors as measured by a third-party survey administered to a majority of our salaried employees annually. To achieve this, the leadership team made a dedicated effort to improve employee satisfaction in all regions. Some of those initiatives included:

•Cross-functional assignments

•Mentoring programs

•Succession development program

•Business resource groups

•Training and skill assessment and development

As a result, we dramatically improved our employee engagement score moving to a top quartile score in eleven of the twelve engagement factors.

Transition to M2019 Growth-Focused Strategy

Our M2019 strategic plan reinforces the important elements of M2016 and goes further from a growth perspective. Looking at the strong foundation we have built over the past three years, we are committed to maintaining the operational improvements we have achieved, while simultaneously initiating actions focused on growth. The financial stability driven by M2016 allows for more investment in these strategies, which we anticipate will lead to a rate of return our investors expect over the next three fiscal years.

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The financial targets we set for this three year plan are the following:

•Grow revenue at 20 percent above market levels

•Increase adjusted diluted earnings per share from continuing operations by $1.25

•Reduce the ratio of net debt to Adjusted EBITDA to less than 1.5

(see Non-GAAP Financial Measures below)

To achieve these targets, we have now focused the organization on three main priorities:

•Exceeding customer expectations

•Transforming to a growth-oriented organization

•Continuing to invest in employees

Exceed Customer Expectations

Over the past three years, we have worked hard to become an innovation partner to our customers. From concept to launch, we work closely together to ensure we are designing reliable and high quality products that meet or exceed their expectations. In our M2019 plan, we have set a quality target of 25 PPM. We believe this will further differentiate us in the commercial vehicle industry.

We also want to continue the excellent delivery performance we have demonstrated at greater than 99 percent and we will continue our focus on driving down operating costs through material cost-reduction and labor and burden improvements. We are targeting achievement of 1.5 percent improvement per year.

Transform to a Growth Oriented Organization

We know that despite changes in global market conditions, we must generate top-line growth. We have designed the M2019 plan to enable us to achieve the growth we seek while operating in a cyclical industry that can be greatly impacted by economic and political factors by initiating actions focused on growth, including increasing rates of new product development, new market development, new business with existing strategic customers, and expansion into adjacent markets.

We have rapidly increased the pace of product introduction which is a key component to growing revenue. Prior to M2016, we launched approximately three programs annually. For M2019, we expect to introduce seven or more programs per year across our product portfolio and geographic regions. We are developing these jointly with our customers for their future product programs, and we have line of sight to revenue streams for each of these products.

We expect to continue to broaden our relationships with our global strategic customers, earn the business of new customers, increase aftermarket share in our core product areas, expand our components business by utilizing our time-proven core competencies of forging, machining and gearing, and enter near adjacent markets that we believe will be a good match with our core competencies. While we are planning for the majority of our growth to be organic, we anticipate allocating capital for targeted acquisitions that could be an accelerant in our growth trajectory.

Invest in Employees

We will also continue to drive the close alignment of our global Meritor team to the company's objectives, which was a key driver of the success we experienced in our M2016 strategic plan. We believe that our strength to compete in the global market is dependent upon the engagement of every Meritor employee and that a high-performing team is critical to the level of performance we want to achieve. We have a strong and experienced leadership group and a committed team, both of which are focused on sustaining the strong foundation we built in M2016 and delivering on our M2019 performance objectives. We will also continue to diversify our workforce because we recognize the value of different opinions and backgrounds in a company as global as Meritor.

We have established a variety of development and training programs to help our employees grow as we grow, and we will continue to measure the engagement of our employees to ensure we are building on the competencies that are important to our future.

Products

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Meritor designs, develops, manufactures, markets, distributes, sells, services and supports a broad range of products for use in the transportation and industrial sectors. In addition to sales of original equipment systems and components, we provide our original equipment, aftermarket and remanufactured products to vehicle OEMs, their dealers (who in turn sell to motor carriers and commercial vehicle users of all sizes), independent distributors, and other end-users in certain aftermarkets.

The following chart sets forth, for each of the fiscal years 2016, 2015 and 2014, information about product sales comprising more than 10% of consolidated revenue in any of those years. A narrative description of our principal products follows the chart.

Product Sales:

	Fiscal Year Ended September 30,
	2016		2015		2014
Axles, Undercarriage and Drivelines	73	%	74	%	78	%
Brakes and Braking Systems	25	%	25	%	21	%
Other	2	%	1	%	1	%
Total	100	%	100	%	100	%

Axles, Undercarriage & Drivelines

We believe we are one of the world's leading independent suppliers of axles for medium- and heavy-duty commercial vehicles, with the leading market position in axle manufacturing in North America, South America and Europe, and are one of the major axle manufacturers in the Asia-Pacific region. Our extensive truck axle product line includes a wide range of front steer axles and rear drive axles. Our front steer and rear drive axles can be equipped with our cam, wedge or air disc brakes, automatic slack adjusters, complete wheel-end equipment such as hubs, rotors and drums, and (through our MeritorWABCO joint venture) anti-lock braking systems (“ABS”) and vehicle stability control systems.

We supply heavy-duty axles in certain global regions for use in numerous off-highway vehicle applications, including construction, material handling, and mining. We also supply axles for use in military tactical wheeled vehicles, principally in North America. These products are designed to tolerate high tonnage and operate under extreme geographical and climate conditions. In addition, we have other off-highway vehicle products that are currently in development for certain other regions. We also supply axles for use in buses, coaches and recreational vehicles, fire trucks and other specialty vehicles in North America, Asia Pacific and Europe, and we believe we are a leading supplier of bus and coach axles in North America.

We are one of the major manufacturers of heavy-duty trailer axles in North America. Our trailer axles are available in more than 40 models in capacities from 20,000 to 30,000 pounds for virtually all heavy trailer applications and are available with our broad range of suspension modules, brake products, including drum brakes, disc brakes, anti-lock and trailer stability control systems, and ABS (through our MeritorWABCO joint venture).

We supply universal joints and driveline components, including our Permalube™ universal joint and RPL Permalube™ driveline, which are maintenance free, permanently lubricated designs used often in the high mileage on-highway market. We supply drivelines in a variety of global regions, for use in numerous on-highway vehicle applications, including construction, material handling and mining. We supply transfer cases and drivelines for use in military tactical wheeled vehicles, principally in North America. We also supply transfer cases for use in specialty vehicles in North America. Anti-lock brakes and stability control systems (which we supply through our MeritorWABCO joint venture) are also used in military vehicles and specialty vehicles. In addition, we supply trailer air suspension systems and products with an increasing market presence in North America. We also supply advanced suspension modules for use in light-, medium- and heavy-duty military tactical wheeled vehicles, principally in North America.

Brakes andBraking Systems

We believe we are one of the leading independent suppliers of air brakes to medium- and heavy-duty commercial vehicle manufacturers in North America and Europe. In Brazil, one of the largest truck and trailer markets in the world, we believe that Master Sistemas Automotivos Limitada, our 49%-owned joint venture with Randon S. A. Implementos e Participações, is a leading supplier of brakes and brake-related products.

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Through manufacturing facilities located in North America, Asia Pacific and Europe, we manufacture a broad range of foundation air brakes, as well as automatic slack adjusters for brake systems. Our foundation air brake products include cam drum brakes, which offer improved lining life and tractor/trailer interchangeability; wedge drum brakes, which are lightweight and provide automatic internal wear adjustment; air disc brakes, which provide enhanced stopping distance and improved fade resistance for demanding applications; and wheel-end components such as hubs, drums and rotors.

Our brakes and brake system components also are used in military tactical wheeled vehicles, principally in North America. We also supply brakes for use in buses, coaches and recreational vehicles, fire trucks and other specialty vehicles in North America and Europe, and we believe we are the leading supplier of bus and coach brakes in North America. We also supply brakes for commercial vehicles, buses and coaches in Asia Pacific.

U.S. Federal regulations require that new medium- and heavy-duty vehicles sold in the United States be equipped with ABS. We believe that Meritor WABCO Vehicle Control Systems, our 50%-owned joint venture with WABCO, is a leading supplier of ABS and a supplier of other electronic and pneumatic control systems (such as stability control and collision avoidance systems) for North American heavy-duty commercial vehicles. The joint venture also supplies hydraulic ABS to the North American medium-duty truck market and produces stability control and collision mitigation systems for tractors and trailers, which are designed to help maintain vehicle stability and aid in reducing tractor-trailer rollovers and other incidents.

Other Products

In addition to the products discussed above, we sell other complementary products, including third party and private label items, through our aftermarket distribution channels. These products are generally sold under master distribution or similar agreements with outside vendors and include brake shoes and friction materials; automatic slack adjusters; yokes and shafts; wheel-end hubs and drums; ABS and stability control systems; shock absorbers and air springs; air brakes, air systems, air dryers and compressors.

Customers; Sales and Marketing

Meritor has numerous customers worldwide and has developed long-standing business relationships with many of these customers. Our ten largest customers accounted for approximately 73 percent of our total sales in fiscal year 2016. Sales to our largest three customers, AB Volvo, Daimler AG and Navistar International Corporation represented approximately 23 percent, 18 percent and 9 percent, respectively, of our sales in fiscal year 2016. No other customer accounted for 10% or more of our total sales in fiscal year 2016.

Original Equipment Manufacturers (OEMs)

In North America, we design, engineer, market and sell products principally to OEMs, dealers and distributors. While our North American sales are typically direct to the OEMs, our ultimate commercial truck customers include trucking and transportation fleets. Fleet customers may specify our components and integrated systems for installation in the vehicles they purchase from OEMs. We employ what we refer to as a “push-pull” marketing strategy. We “push” for being the standard product at the OEM. At the same time, our district field managers then call on fleets and OEM dealers to “pull-through” our components on specific truck purchases. For all other markets, we specifically design, engineer, market and sell products principally to OEMs for their market-specific needs or product specifications.

For certain large OEM customers, our supply arrangements are generally negotiated on a long-term contract basis for a multi-year period that may require us to provide annual cost reductions through price reductions or other cost benefits for the OEMs. If we are unable to generate sufficient cost savings in the future to offset such price reductions, our gross margins will be adversely affected. Sales to other OEMs are typically made through open order releases or purchase orders at market-based prices that do not require the purchase of a minimum number of products. The customer typically has the right to cancel or delay these orders on reasonable notice. We typically compete to either retain business or try to win new business from OEMs when long-term contracts expire.

We have established leading positions in many of the markets we serve as a global supplier of a broad range of drivetrain systems, brakes and components. Based on available industry data and internal company estimates, our market-leading positions include independent truck drive axles (i.e., those manufactured by an independent, non-captive supplier) in North America, Europe, South America and India through a joint venture; truck drivelines in North America; truck air brakes in North America and South America (through a joint venture); and military wheeled vehicle drivetrains, suspensions and brakes in North America.

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Our global customer portfolio includes companies such as AB Volvo, Daimler AG, Navistar International Corporation, Oshkosh, MAN, Iveco, PACCAR, Ashok Leyland, Scania, XCMG, Wabash National and Ford.

Aftermarket

We market and sell truck, trailer, off-highway and other products principally to, and service such products principally for, OEMs, their parts marketing operations, their dealers and other independent distributors and service garages within the aftermarket industry. Our product sales are generated through long-term agreements with certain of our OEM customers and distribution agreements and sales to independent dealers and distributors. Sales to other OEMs are typically made through open order releases or purchase orders at market based prices which do not require the purchase of a minimum number of products. The customer typically has the right to cancel or delay these orders on reasonable notice.

Our product offerings allow us to service all stages of our customers’ vehicle ownership lifecycle. In North America, we stock and distribute hundreds of parts from top national brands to our customers or what we refer to as our “all makes” strategy. Our district field managers call on our OEM and independent customers to market our full product line capabilities on a regular basis to seek to ensure that we satisfy our customers’ needs. Our aftermarket business sells products under the following brand names: Meritor; Meritor Wabco; Euclid; Trucktechnic; Meritor Green; and Meritor AllFit.

Based on available industry data and internal company estimates, we believe our North America aftermarket business has the overall market leadership position for the portfolio of products that we offer.

Competition

We compete worldwide with a number of North American and international providers of components and systems, some of which are owned by or associated with some of our customers. The principal competitive factors are price, quality, service, product performance, design and engineering capabilities, new product innovation and timely delivery. Certain OEMs manufacture their own components that compete with the types of products we supply.

Our major competitors for axles are Dana Holding Corp. and, in certain markets, OEMs that manufacture axles for use in their own products. Emerging competitors for axles include Daimler Truck North America’s Detroit Axle and American Axle Corporation, ZF Friedrichshafen in Europe, and from China, Hande, Fuwa and Ankai. Our major competitors for brakes are WABCO, Bendix/Knorr Bremse and, in certain markets, OEMs that manufacture brakes for use in their own products. Our major competitors for industrial applications are MAN, AxleTech International, Oshkosh, AM General, Marmon-Herrington, Dana Holding Corp., Knorr, Kessler & Co., Carraro, NAF, Sisu and, in certain markets, OEMs that manufacture industrial products for use in their own vehicles. Our major competitors for trailer applications are Hendrickson, BPW and SAF-Holland.

See Item 1A. Risk Factors for information on certain risks associated with our competitive environment.

Raw Materials and Suppliers

Our purchases of raw materials and parts are concentrated over a limited number of suppliers. We are dependent upon our suppliers' ability to meet cost performance, quality specifications and delivery schedules. The inability of a supplier to meet these requirements, the loss of a significant supplier, or work stoppages, could have an adverse effect on our ability to meet our customers' delivery requirements.

The cost of our core products is susceptible to changes in overall steel commodity prices, including ingredients used for various grades of steel. We have generally structured our major steel supplier and customer contracts to absorb and pass on normal index-related market fluctuations in steel prices. While we have had steel pricing adjustment programs in place with most major OEMs, the price adjustment programs tend to lag behind the movement in steel costs and have generally not contemplated non-steel index related increases.

Significant future volatility in the commodity markets or a deterioration in product demand may require us to pursue customer increases through surcharges or other pricing arrangements. In addition, if suppliers are inadequate for our needs, or if prices remain at current levels or increase and we are unable to either pass these prices to our customer base or otherwise mitigate the costs, our operating results could be further adversely affected.

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We continuously work to address these competitive challenges by reducing costs and, as needed, restructuring operations. We manage supplier risk by conducting periodic assessments for all major suppliers and more frequent rigorous assessments of high-risk suppliers. On an ongoing basis, we monitor third party financial statements, conduct surveys through supplier questionnaires, and conduct site visits. We have developed a chronic supplier improvement process where we identify and develop actions to address ongoing financial, quality and delivery issues to further mitigate potential risk. We are proactive in managing our supplier relationships to avoid supply disruption. Our process employs dual sourcing and resourcing trigger points that cause us to take aggressive actions and then monitor the progress closely.

Acquisitions, Divestitures and Restructuring

As described above, our business strategies are focused on enhancing our market position by continuously evaluating the competitive differentiation of our product portfolio, focusing on our strengths and core competencies, and growing the businesses that offer the most attractive returns. Implementing these strategies involves various types of strategic initiatives.

As part of our M2019 strategy, we are evaluating acquisition opportunities that fit strategically with our core competencies and growth initiatives and continuously reviewing the prospects of our existing businesses to determine whether any of them should be modified, restructured, sold or otherwise discontinued. In the fourth quarter of fiscal year 2015, we completed the acquisition of the majority of the assets of Sypris Solutions, Inc.’s Morganton, North Carolina trailer axle beam and carrier manufacturing facility (see Note 6 of the Notes to Consolidated Financial Statements under Item 8. Financial Statements and Supplementary Data below). In the fourth quarter of fiscal year 2014, we completed the disposition of our Mascot all-makes remanufacturing business, which was part of the Aftermarket & Trailer segment (see Note 3 of the Notes to Consolidated Financial Statements under Item 8. Financial Statements and Supplementary Data below).

Restructuring Actions

Fourth Quarter 2016 Market Related Actions: In response to the decline in revenue in North America and South America, during the fourth quarter of fiscal year 2016, we approved various headcount reduction plans targeting different areas of the business. We expect to incur an aggregate of $10 million in restructuring costs associated with these plans, primarily related to a total reduction of approximately 100 salaried and hourly positions. During the fourth quarter of fiscal year 2016, we incurred a total of $5 million in restructuring costs in the Commercial Truck & Industrial segment, $1 million in Aftermarket & Trailer segments and $2 million in their corporate locations. Restructuring actions with these plans are expected to be substantially complete by the first half of fiscal year 2017. 

Aftermarket Actions: During the third quarter of fiscal year 2016, we approved various restructuring plans in the North American and European aftermarket businesses.  We expect to incur an aggregate of approximately $8 million in restructuring costs associated with these plans in the Aftermarket & Trailer segment primarily for severance. We recorded $5 million of restructuring costs during the third quarter of fiscal year 2016. Restructuring actions associated with these plans are expected to be completed by the end of fiscal year 2017.  

Other Fiscal 2016 Actions: During the first half of fiscal year 2016, we recorded restructuring costs of $3 million primarily associated with a labor reduction program in China in the Commercial Truck & Industrial segment and a labor reduction program in the Aftermarket and Trailer segment. Restructuring actions with these plans were substantially complete as of September 30, 2016.

M2016 Footprint Actions: As part of the our M2016 Strategy, during fiscal year 2013 we announced a North American footprint realignment action and a European shared services reorganization. Restructuring actions associated with these programs were substantially complete as of September 30, 2015. In total, we eliminated approximately 140 hourly and salaried positions and incurred approximately $7 million of associated restructuring costs, primarily in the Commercial Truck & Industrial segment in connection with the consolidation of certain gearing and machining operations in North America and the closure of a North America manufacturing facility.

South America Labor Reduction: During the fiscal years 2014 and 2015, we completed a South America headcount reduction plan intended to reduce labor costs in response to softening economic conditions in the region. In response to decreasing production volumes in South America, we eliminated approximately 420 hourly and 40 salaried positions and incurred $13 million of restructuring costs, primarily severance benefits, in the Commercial Truck & Industrial segment. This plan was substantially complete as of September 30, 2015.

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Closure of a Corporate Engineering Facility: During the second quarter of fiscal year 2015, we notified approximately 30 salaried and contract employees that their positions were being eliminated due to the planned closure of a corporate engineering facility. We recorded severance expenses of $2 million associated with this plan. Restructuring actions associated with this program were substantially complete as of September 30, 2015.

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

See Item 1A. Risk Factors for information on certain risks associated with strategic initiatives.

Joint Ventures

As the industries in which we operate have become more globalized, joint ventures and other cooperative arrangements have become an important element of our business strategies. These strategic alliances provide for sales, product design, development and manufacturing in certain product and geographic areas. As of September 30, 2016, our continuing operations participated in the following non-consolidated joint ventures:

	Key Products	Country
Meritor WABCO Vehicle Control Systems	Antilock braking and air systems and various safety systems	U.S.
Master Sistemas Automotivos Limitada	Braking systems	Brazil
Sistemas Automotrices de Mexico S.A. de C.V.	Axles, drivelines and brakes	Mexico
Ege Fren Sanayii ve Ticaret A.S.	Braking systems	Turkey
Automotive Axles Limited	Rear drive axle assemblies and braking systems	India

Aggregate sales of our non-consolidated joint ventures were $1,101 million, $1,288 million and $1,268 million in fiscal years 2016, 2015 and 2014, respectively.

In accordance with accounting principles generally accepted in the United States, our consolidated financial statements include the financial position and operating results of those joint ventures in which we have control. For additional information on our unconsolidated joint ventures and percentage ownership thereof see Note 13 of the Notes to Consolidated Financial Statements under Item 8. Financial Statements and Supplementary Data below.

Research and Development

We have significant research, development, engineering and product design capabilities. We spent $68 million in fiscal year 2016, $69 million in fiscal year 2015 and $71 million in fiscal year 2014 on company-sponsored research, development and engineering. We employ professional engineers and scientists globally and have additional engineering capabilities through contract arrangements in low-cost countries. We also have advanced technical centers in North America, South America, Europe and Asia Pacific (primarily in India and China).

Patents and Trademarks

We own or license many United States and foreign patents and patent applications in our engineering and manufacturing operations and other activities. While in the aggregate these patents and licenses are considered important to the operation of our businesses, management does not consider them of such importance that the loss or termination of any one of them would materially affect a business segment or Meritor as a whole.

Our registered trademarks for Meritor® and the Bull design are important to our business. Other significant trademarks owned by us include Euclid® and Trucktechnic® for aftermarket products.

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Substantially all of our U.S.-held intellectual property rights are subject to a first-priority perfected security interest securing our obligations to the lenders under our credit facility. See Note 16 of the Notes to Consolidated Financial Statements under Item 8. Financial Statements and Supplementary Data below.

Employees

At September 30, 2016, we had approximately 8,000 full-time employees (which includes consolidated joint ventures). At that date, no employees in the United States and Canada were covered by collective bargaining agreements. Most of our facilities outside of the United States and Canada are unionized. We believe our relationship with unionized employees is satisfactory.

Environmental Matters

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 our operations. We record 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, we record a liability for our allocable share of costs related to our involvement with the site, as well as an allocable share of costs related to insolvent parties or unidentified shares. At environmental sites in which we are the only potentially responsible party, we record a liability for the total estimated costs of remediation before consideration of recovery from insurers or other third parties.

We have been designated as a potentially responsible party at nine Superfund sites, excluding sites as to which our records disclose no involvement or as to which our liability has been finally determined. In addition to Superfund sites, various other lawsuits, claims and proceedings have been asserted against us, alleging violations of federal, state and local environmental protection requirements or seeking remediation of alleged environmental impairments, principally at previously disposed-of properties. We have established reserves for these liabilities when they are considered to be probable and reasonably estimable. See Note 23 of the Notes to Consolidated Financial Statements under Item 8. Financial Statements and Supplementary Data below for information as to our estimates of the total reasonably possible costs we could incur and the amounts recorded as a liability as of September 30, 2016, and as to changes in environmental accruals during fiscal year 2016.

The process of estimating environmental liabilities is complex and dependent on physical and scientific data at the site, uncertainties as to remedies and technologies to be used, and the outcome of discussions with regulatory agencies. The actual amount of costs or damages for which we may be held responsible could materially exceed our current estimates because of uncertainties, including the financial condition of other potentially responsible parties, the success of the remediation and other factors that make it difficult to predict actual costs accurately. However, based on management's assessment, after consulting with Meritor's General Counsel and with outside advisors who specialize in environmental matters, and subject to the difficulties inherent in estimating these future costs, we believe that our 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 adverse effect on our 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 remedy could significantly change our estimates. Management cannot assess the possible effect of compliance with future requirements.

International Operations

We believe our international operations provide us with geographical diversity and help us to weather the cyclical nature of our business. Approximately 46 percent of our total assets as of September 30, 2016 and 49 percent of fiscal year 2016 sales from continuing operations were outside the U.S. See Note 24 of the Notes to Consolidated Financial Statements under Item 8. Financial Statements and Supplementary Data below for financial information by geographic area for the three fiscal years ended September 30, 2016.

Our international operations are subject to a number of risks inherent in operating abroad (see Item 1A. Risk Factors below). There can be no assurance that these risks will not have a material adverse impact on our ability to increase or maintain our foreign sales or on our financial condition or results of operations.

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Our operations are also exposed to global market risks, including foreign currency exchange rate risk related to our transactions denominated in currencies other than the U.S. dollar. We have a foreign currency cash flow hedging program in place to help reduce the company’s exposure to changes in exchange rates. We use foreign currency forward contracts to manage the company’s exposures arising from foreign currency exchange risk. Gains and losses on the underlying foreign currency exposures are partially offset with gains and losses on the foreign currency forward contracts. It is our policy not to enter into derivative financial instruments for speculative purposes and, therefore, we hold no derivative instruments for trading purposes. See Item 7A. Quantitative and Qualitative Disclosures About Market Risk and Note 17 of the Notes to Consolidated Financial Statements under Item 8. Financial Statements and Supplementary Data below.

Seasonality; Cyclicality

We may experience seasonal variations in the demand for our products, to the extent OEM vehicle production fluctuates. Historically, for most of our operations, demand has been somewhat lower in the quarters ended September 30 and December 31, when OEM plants may close for summer shutdowns and holiday periods or when there are fewer selling days during the quarter. Our aftermarket business and our operations in India and China generally experience seasonally higher demand in the quarters ending March 31 and June 30.

In addition, the industries in which we operate have been characterized historically by periodic fluctuations in overall demand for trucks, trailers and other specialty vehicles for which we supply products, resulting in corresponding fluctuations in demand for our products. Production and sales of the vehicles for which we supply products generally depend on economic conditions and a variety of other factors that are outside of our control, including freight tonnage, customer spending and preferences, vehicle age, labor relations and regulatory requirements. See Item 1A. Risk Factors below. Cycles in the major vehicle industry markets of North America and Europe are not necessarily concurrent or related. It is part of our strategy to continue to seek to expand our operations globally to help mitigate the effect of periodic fluctuations in demand of the vehicle industry in one or more particular countries.

See section Trends and Uncertainties in Item 7. Management's Discussion and Analysis for estimated commercial truck production volumes for selected original equipment ("OE") markets based on available sources and management's estimates.

Available Information

We make available free of charge through our web site (www.Meritor.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, and other filings we make with the Securities and Exchange Commission (“SEC”), as soon as reasonably practicable after they are filed. The information contained on the company’s website is not included in, or incorporated by reference into, this annual report on Form 10-K.

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Cautionary Statement

This Annual Report on Form 10-K contains statements relating to future results of the company (including certain projections and business trends) that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words or phrases such as “believe,” “expect,” “anticipate,” “estimate,” “should,” “are likely to be,” “will” and similar expressions. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to reliance on major OEM customers and possible negative outcomes from contract negotiations with our major customers, including failure to negotiate acceptable terms in contract renewal negotiations and our ability to obtain new customers; the outcome of actual and potential product liability, warranty and recall claims; our ability to successfully manage rapidly changing volumes in the commercial truck markets and work with our customers to manage demand expectations in view of rapid changes in production levels; global economic and market cycles and conditions; availability and sharply rising costs of raw materials, including steel, and our ability to manage or recover such costs; our ability to manage possible adverse effects on our European operations, or financing arrangements related thereto following the United Kingdom's decision to exit the European Union or, in the event one or more other countries exit the European monetary union; risks inherent in operating abroad (including foreign currency exchange rates, restrictive government actions regarding trade, implications of foreign regulations relating to pensions and potential disruption of production and supply due to terrorist attacks or acts of aggression); risks related to our joint ventures; rising costs of pension and other postemployment benefits; the ability to achieve the expected benefits of strategic initiatives and 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 and launch of new products; labor relations of our company, our suppliers and customers, including potential disruptions in supply of parts to our facilities or demand for our products due to work stoppages; the financial condition of our suppliers and customers, including potential bankruptcies; possible adverse effects of any future suspension of normal trade credit terms by our suppliers; potential 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, asbestos-related or other matters; possible changes in accounting rules; ineffective internal controls;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 this Annual Report on Form 10-K: 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.

Item 1A.Risk Factors

Our business, financial condition and results of operations can be impacted by a number of risks, including those described below and elsewhere in this Annual Report on Form 10-K, any one of which could cause our actual results to vary materially from recent results or from anticipated future results. Any of these individual risks could materially and adversely affect our business, financial condition and results of operations. This effect could be compounded if multiple risks were to occur.

We may not be able to execute our M2019 Strategy.

At the beginning of fiscal 2016, we announced our M2019 Strategy, a three-year plan to drive growth and increase shareholder value. In connection with the plan, we established certain financial goals relating to revenue growth, profit improvement and capital allocation. The M2019 Strategy is based on our current planning assumptions, and achievement of the plan is subject to a number of risks. Our assumptions include that we are able to successfully launch new products, secure new business wins, expand our current customer relationships, reduce debt, reduce costs and increase pricing, and that any increases in raw materials prices are substantially offset by customer recovery mechanisms. If our assumptions are incorrect, if management is not able to execute the plan or if our business suffers from any number of additional risks set forth herein, we may not be able to achieve the financial goals we have announced for M2019.

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We depend on large OEM customers, and loss of sales to these customers or failure to negotiate acceptable terms in contract renewal negotiations, or to obtain new customers, could have an adverse impact on our business.

We are dependent upon large OEM customers with substantial bargaining power with respect to price and other commercial terms. In addition, we have long-term contracts with certain of these customers that are subject to renegotiation and renewal from time to time. Loss of all or a substantial portion of sales to any of our large volume customers for whatever reason (including, but not limited to, loss of contracts or failure to negotiate acceptable terms in contract renewal negotiations, loss of market share by these customers, insolvency of such customers, reduced or delayed customer requirements, plant shutdowns, strikes or other work stoppages affecting production by such customers), continued reduction of prices to these customers, or a failure to obtain new customers, could have a significant adverse effect on our financial results. There can be no assurance that we will not lose all or a portion of sales to our large volume customers, or that we will be able to offset any reduction of prices to these customers with reductions in our costs or by obtaining new customers.

During fiscal year 2016, sales to our three largest customers, AB Volvo, Daimler AG and Navistar International Corporation represented approximately 23 percent, 18 percent and 9 percent, respectively. No other customer accounted for 10% or more of our total sales in fiscal year 2016.

The level of our sales to large OEM customers, including the realization of future sales from awarded business or obtaining new business or customers, is inherently subject to a number of risks and uncertainties, including the number of vehicles that these OEM customers actually produce and sell. Several of our significant customers have major union contracts that expire periodically and are subject to renegotiation. Any strikes or other actions that affect our customers' production during this process would also affect our sales. Further, to the extent that the financial condition, including bankruptcy or market share of any of our largest customers, deteriorates or their sales otherwise continue to decline, our financial position and results of operations could be adversely affected. In addition, our customers generally have the right to replace us with another supplier under certain circumstances. Accordingly, we may not in fact realize all of the future sales represented by our awarded business. Any failure to realize these sales could have a material adverse effect on our financial condition and results of operations.

Our ability to manage rapidly changing production and sales volume in the commercial vehicle market may adversely affect our results of operations.

Production and sales in the commercial vehicle market have been volatile in recent years. Our business may experience difficulty in adapting to rapidly changing production and sales volumes. In an upturn of the cycle, when demand increases for production, we may have difficulty in meeting such extreme or rapidly increasing demand. This difficulty may include not having sufficient manpower or working capital to meet the needs of our customers or relying on other suppliers who may not be able to respond quickly to a changed environment when demand increases rapidly. In contrast, in the downturn of the cycle, we may have difficulty sustaining profitability given fixed costs (as further discussed below).

A downturn in the global economy could materially adversely affect our results of operations, financial condition and cash flows.

Although the global economy has improved since the global economic recession that began in late 2008 and continued through 2009, the recession had a significant adverse impact on our business, customers and suppliers. Our cash and liquidity needs were impacted by the level, variability and timing of our customers' worldwide vehicle production and other factors outside of our control. If the global economy were to take another significant downturn, depending upon the length, duration and severity of another recession, our results of operations, financial condition and cash flow would be materially adversely affected again.

Our levels of fixed costs can make it difficult to adjust our cost base to the extent necessary, or to make such adjustments on a timely basis, and continued volume declines can result in non-cash impairment charges as the value of certain long-lived assets is reduced. As a result, our financial condition and results of operations have been and would be expected to continue to be adversely affected during periods of prolonged declining production and sales volumes in the commercial vehicle markets.

The negative impact on our financial condition and results of operations from continued volume declines could also have negative effects on our liquidity. If cash flows are not available from our operations, we may be required to rely on the banking and credit markets to meet our financial commitments and short-term liquidity needs; however, we cannot predict whether that funding will be available at all or on commercially reasonable terms. In addition, in the event of reduced sales, levels of receivables would decline, which would lead to a decline in funding available under our U.S. receivables facilities or under our European factoring arrangements.

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Our working capital requirements may negatively affect our liquidity and capital resources.

Our working capital requirements can vary significantly, depending in part on the level, variability and timing of our customers' worldwide vehicle production and the payment terms with our customers and suppliers. As production volumes increase, our working capital requirements to support the higher volumes generally increase. If our working capital needs exceed our other cash flows from operations, we would look to our cash balances and availability for borrowings under our borrowing arrangements to satisfy those needs, as well as potential sources of additional capital, which may not be available on satisfactory terms or in adequate amounts.

In addition, since many of our accounts receivable factoring programs support our working capital requirements in Europe, any dissolution of the European monetary union, if it were to occur, or any other termination of our European factoring agreements could have a material adverse effect on our liquidity if we were unable to renegotiate such agreements or find alternative sources of liquidity.

One of our consolidated joint ventures in China participates in bills of exchange programs to settle accounts receivable from its customers and obligations to its trade suppliers. These programs are common in China and generally require the participation of local banks. Any disruption in these programs, if it were to occur, could have an adverse effect on our liquidity if we were unable to find alternative sources of liquidity.

Our liquidity, including our access to capital markets and financing, could be constrained by limitations in the overall credit market, our credit ratings, our ability to comply with financial covenants in our debt instruments, and our suppliers suspending normal trade credit terms on our purchases, or by other factors beyond our control.

Our current senior secured revolving credit facility matures in February 2019. Upon expiration of this facility, we will require a new or renegotiated facility (which may be smaller and have less favorable terms than our current facility) or other financing arrangements. 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, and there is no guarantee that we will be able to access additional capital.

On November 30, 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 are 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.

Our liquidity could also be adversely impacted if our suppliers were to suspend normal trade credit terms and require more accelerated payment terms, including payment in advance or payment on delivery of purchases. If this were to occur, we would be dependent on other sources of financing to bridge the additional period between payment of our suppliers and receipt of payments from our customers.

We operate in an industry that is cyclical and that has periodically experienced significant year-to-year fluctuations in demand for vehicles; we also experience seasonal variations in demand for our products.

The industries in which we operate have been characterized historically by significant periodic fluctuations in overall demand for medium- and heavy-duty trucks and other vehicles for which we supply products, resulting in corresponding fluctuations in demand for our products. The length and timing of any cycle in the vehicle industry cannot be predicted with certainty.

Production and sales of the vehicles for which we supply products generally depend on economic conditions and a variety of other factors that are outside our control, including freight tonnage, customer spending and preferences, vehicle age, labor relations and regulatory requirements. In particular, demand for our Commercial Truck & Industrial segment products can be affected by a pre-buy before the effective date of new regulatory requirements, such as changes in emissions standards. Historically, implementation of new, more stringent, emissions standards, has increased heavy-duty truck demand prior to the effective date of the new regulations, and correspondingly decreased this demand after the new standards are implemented. In addition, any expected increase in the heavy-duty truck demand prior to the effective date of new emissions standards may be offset by instability in the financial markets and resulting economic contraction in the U.S. and worldwide markets.

Sales from the aftermarket portion of our Aftermarket & Trailers segment depend on overall levels of truck ton miles and gross domestic product (GDP), among other things, and may be influenced by times of slower economic growth or economic contraction based on the average age of commercial truck fleets.

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We may also experience seasonal variations in the demand for our products to the extent that vehicle production fluctuates. Historically, for most of our business, demand has been somewhat lower in the quarters ended September 30 and December 31, when OEM plants may close during model changeovers and vacation and holiday periods or when there are fewer selling days during the quarter. In addition, our aftermarket business and our operations in India and China generally experience seasonally higher demand in the quarters ending March 31 and June 30.

Disruptions in the financial markets could impact the availability and cost of credit which could negatively affect our business.

Disruptions in the financial markets, including the bankruptcy, insolvency or restructuring of certain financial institutions, and the lack of liquidity generally could impact the availability and cost of incremental credit for many companies and may adversely affect the availability of credit already arranged. Such disruptions could adversely affect the U.S. and world economy, further negatively impacting consumer spending patterns in the transportation and industrial sectors. In addition, as our customers and suppliers respond to rapidly changing consumer preferences, they may require access to additional capital. If that capital is not available or its cost is prohibitively high, their business would be negatively impacted which could result in further restructuring or even reorganization under bankruptcy laws. Any such negative impact, in turn, could negatively affect our business either through loss of sales to any of our customers so affected or through inability to meet our commitments (or inability to meet them without excess expense) because of loss of supplies from any of our suppliers so affected. There are no assurances that government responses to these disruptions would restore consumer confidence or improve the liquidity of the financial markets.

In addition, disruptions in the capital and credit markets, as were experienced in the recent past, could adversely affect our ability to draw on our senior secured revolving credit facility. Our access to funds under that credit facility is dependent on the ability of the banks that are parties to the facility to meet their funding commitments. Those banks may not be able to meet their funding commitments to us if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests from Meritor and other borrowers within a short period of time. Longer-term disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation, reduced alternatives, or failures of significant financial institutions could adversely affect our access to liquidity needed for our business. Any disruption could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged.

Continued fluctuation in the prices of raw materials and transportation costs has adversely affected our business and, together with other factors, will continue to pose challenges to our financial results.

Prices of raw materials, primarily steel, for our manufacturing needs and costs of transportation have fluctuated sharply in past years, including rapid increases which had a negative impact on our operating income for certain periods. These steel price increases, along with increasing transportation costs, created pressure on profit margins, and if they recur in the future, they could unfavorably impact our financial results going forward. While we have had steel pricing adjustment programs in place with most major OEMs, the price adjustment programs have tended to lag the increase in steel costs and have generally not contemplated all non-index-related increases in steel costs. Raw material price fluctuation, together with the volatility of the commodity markets will continue to pose risks to our financial results. If we are unable to pass price increases on to our customer base or otherwise mitigate the costs, our operating income could be adversely affected.

Escalating price pressures from customers may adversely affect our business.

Pricing pressure by OEMs is a characteristic, to a certain extent, of the commercial vehicle industry. Virtually all OEMs have aggressive price reduction initiatives and objectives each year with their suppliers, and such actions are expected to continue in the future. Accordingly, we must be able to reduce our operating costs in order to maintain our current margins. Price reductions have impacted our margins and may do so in the future. There can be no assurance that we will be able to avoid future customer price reductions or offset future customer price reductions through improved operating efficiencies, new manufacturing processes, sourcing alternatives or other cost reduction initiatives.

We operate in a highly competitive industry.

Each of Meritor's businesses operates in a highly competitive environment. We compete worldwide with a number of North American and international providers of components and systems, some of which are owned by or associated with some of our customers. Certain OEMs manufacture products for their own use that compete with the types of products we supply, and any future increase in this activity could displace Meritor's sales.

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Exchange rate fluctuations could adversely affect our financial condition and results of operations.

As a result of our substantial international operations, we are exposed to foreign currency risks that arise from our normal business operations, including risks in connection with our transactions that are denominated in foreign currencies. While we employ financial instruments to hedge certain of our foreign currency exchange risks relating to these transactions, our efforts to manage these risks may not be successful. In addition, we translate sales and other 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. For fiscal years 2014, 2015 and 2016, our reported financial results were adversely affected by appreciation of the U.S. dollar against foreign currencies.

A disruption in supply of raw materials or parts could impact our production and increase our costs.

Some of our significant suppliers have experienced weak financial condition in recent years . In addition, some of our significant suppliers are located in developing countries. We are dependent upon the ability of our suppliers to meet performance and quality specifications and delivery schedules. The inability of a supplier to meet these requirements, the loss of a significant supplier, or any labor issues or work stoppages at a significant supplier could disrupt the supply of raw materials and parts to our facilities and could have an adverse effect on us.

Work stoppages or similar difficulties could significantly disrupt our operations.

A work stoppage at one or more of our manufacturing facilities could have a material adverse effect on our business. In addition, if a significant customer were to experience a work stoppage, that customer could halt or limit purchases of our products, which could result in shutting down the related manufacturing facilities. Also, a significant disruption in the supply of a key component due to a work stoppage at one of our suppliers could result in shutting down manufacturing facilities, which could have a material adverse effect on our business.

Our international operations are subject to a number of risks.

We have a significant number of facilities and operations outside the United States, including investments and joint ventures in developing countries. During fiscal year 2016, approximately 49 percent of our sales from continuing operations were generated outside of the United States. Our strategy to grow in emerging markets may put us at risk due to the risks inherent in operating in such markets. Our international operations are subject to a number of risks inherent in operating abroad, including, but not limited to:

• risks with respect to currency exchange rate fluctuations (as more fully discussed above);

• risks to our liquidity if the European monetary union were to dissolve and we were unable to renegotiate European factoring agreements;

• risks arising from the United Kingdom's decision to exit the European Union, or in the event one or more other countries exit the European monetary union;

• local economic and political conditions;

• disruptions of capital and trading markets;

• possible terrorist attacks or acts of aggression that could affect vehicle production or the availability of raw materials or supplies;

• restrictive governmental actions (such as restrictions on transfer of funds and trade protection measures, including export duties, quotas and customs duties and tariffs);

• changes in legal or regulatory requirements;

• import or export licensing requirements;

• limitations on the repatriation of funds;

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• difficulty in obtaining distribution and support;

• nationalization;

• the laws and policies of the United States affecting trade, foreign investment and loans;

• the ability to attract and retain qualified personnel;

• tax laws; and

• labor disruptions.

There can be no assurance that these risks will not have a material adverse impact on our ability to increase or maintain our foreign sales or on our financial condition or results of operations.

Certain of our operations are conducted through joint ventures which have unique risks.

We conduct certain of our operations through joint ventures, many of which act as our suppliers, pursuant to the terms of the agreements that we entered into with our partners. We may share management responsibilities and information with one or more partners that may not share our goals and objectives. Additionally, one or more partners may fail to satisfy contractual obligations, conflicts may arise between us and any of our partners, the ownership of one of our partners may change or our ability to control decision making or compliance with applicable rules and regulations may be limited. Additionally, our ability to sell our interest in a joint venture may be subject to contractual and other limitations. Accordingly, any of the foregoing could adversely affect our results of operations, financial condition and cash flow.

A violation of the financial covenants in our senior secured revolving credit facility could result in a default thereunder and could lead to an acceleration of our obligations under this facility and, potentially, other indebtedness.

Our ability to borrow under our existing financing arrangements depends on our compliance with covenants in the related agreements and on our performance against covenants in our bank credit facility that require compliance with certain financial ratios as of the end of each fiscal quarter. To the extent that we are unable to maintain compliance with these requirements or to perform against the financial ratio covenants due to one or more of the various risk factors discussed herein or otherwise, our ability to borrow, and our liquidity, would be adversely impacted.

Availability under the senior secured revolving credit facility is subject to a collateral test, performed quarterly, pursuant to which borrowings on the senior secured revolving credit facility cannot exceed 1.0x the collateral test value. Availability under the senior secured revolving credit facility is also subject to certain financial covenants based on (i) the ratio of our priority debt (consisting principally of amounts outstanding under the senior secured 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 not more than 2.25 to 1.00 as of the last day of each fiscal quarter through maturity.

 If an amendment or waiver is needed (in the event we do not meet one of these covenants) and not obtained, we would be in violation of that covenant, and the lenders would have the right to accelerate the obligations upon the vote of the lenders holding more than 50% of outstanding loans thereunder. A default under the senior secured revolving credit facility could also constitute a default under our outstanding convertible notes as well as our U.S. receivables facility and could result in the acceleration of these obligations. In addition, a default under our senior secured revolving credit facility could result in a cross-default or the acceleration of our payment obligations under other financing agreements. If our obligations under our senior secured revolving credit facility and other financing arrangements are accelerated as described above, our assets and cash flow may be insufficient to fully repay these obligations, and the lenders under our senior secured revolving credit facility could institute foreclosure proceedings against our assets.

Our strategic initiatives may be unsuccessful, may take longer than anticipated, or may result in unanticipated costs.

The success and timing of any future divestitures and acquisitions will depend on a variety of factors, many of which are not within our control. If we engage in acquisitions, we may finance these transactions by issuing additional debt or equity securities. The additional debt from any such acquisitions, if consummated, could increase our debt to capitalization ratio. In addition, the ultimate benefit of any acquisition would depend on our ability to successfully integrate the acquired entity or assets into our

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existing business and to achieve any projected synergies. There is no assurance that the total costs and total cash costs associated with any current and future restructuring will not exceed our estimates, or that we will be able to achieve the intended benefits of these restructurings.

We are exposed to environmental, health and safety and product liabilities.

Our business is subject to liabilities with respect to environmental and health and safety matters. In addition, we are required to comply with federal, state, local and foreign laws and regulations governing the protection of the environment and health and safety, and we could be held liable for damages arising out of human exposure to hazardous substances or other environmental or natural resource damages. Environmental health and safety laws and regulations are complex, change frequently and tend to be increasingly stringent. As a result, our future costs to comply with such laws may increase significantly. There is also an inherent risk of exposure to warranty and product liability claims, as well as product recalls, in the commercial vehicle industry if our products fail to perform to specifications or are alleged to cause property damage, injury or death.

With respect to environmental liabilities, we have been designated as a potentially responsible party at nine Superfund sites (excluding sites as to which our records disclose no involvement or as to which our liability has been finally determined). In addition to the Superfund sites, various other lawsuits, claims and proceedings have been asserted against us alleging violations of federal, state and local and foreign environmental protection requirements or seeking remediation of alleged environmental impairments. We have established reserves for these liabilities when we determine that the company has a probable obligation and we can reasonably estimate it, but the process of estimating environmental liabilities is complex and dependent on evolving physical and scientific data at the site, uncertainties as to remedies and technologies to be used, and the outcome of discussions with regulatory agencies. The actual amount of costs or damages for which we may be held responsible could materially exceed our current estimates because of these and other uncertainties which make it difficult to predict actual costs accurately. In future periods, new laws and regulations, changes in remediation plans, advances in technology and additional information about the ultimate clean-up remedy could significantly change our estimates and have a material impact on our financial position and results of operations. Management cannot assess the possible effect of compliance with future requirements.

We are exposed to asbestos litigation liability.

One of our subsidiaries, Maremont Corporation, manufactured friction products containing asbestos from 1953 through 1977, when it sold its friction product business. We 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. We, along with many other companies, have also been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos used in certain components of products of Rockwell International Corporation ("Rockwell"). Liability for these claims was transferred to us at the time of the spin-off of Rockwell's automotive business to Meritor in 1997.

The uncertainties of asbestos claim and other litigation including the outcome of litigation with insurance companies regarding the scope of asbestos coverage, and the long-term solvency of our insurance carriers, make it difficult to predict accurately the ultimate resolution of asbestos claims. The possibility of adverse rulings or new legislation affecting asbestos claim litigation or the settlement process increases that uncertainty. Although we have established reserves to address asbestos liability and corresponding receivables for recoveries from our insurance carriers, if our assumptions with respect to 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 asbestos-related claims, and the effect on us, could differ materially from our current estimates and, therefore, could have a material impact on our financial position and results of operations.

We are exposed to the rising cost of pension and other postemployment benefits.

The commercial vehicle industry, like other industries, continues to be impacted by the cost of pension and other postemployment benefits. In estimating our expected obligations under our pension and postemployment benefit plans, we make certain assumptions as to economic and demographic factors, such as discount rates, investment returns and health care cost trends. If actual experience of these factors is worse than our assumptions, our obligations could grow which could in turn increase the amount of mandatory contributions to these plans in the coming years. Our pension plans and other postemployment benefits are underfunded by $160 million and $447 million, respectively, as of September 30, 2016.

Impairment in the carrying value of long-lived assets and goodwill could negatively affect our operating results and financial condition.

We have a significant amount of long-lived assets and goodwill on our consolidated balance sheet. Under generally accepted accounting principles, long-lived assets, excluding goodwill, are required to be reviewed for impairment whenever adverse events

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or changes in circumstances indicate a possible impairment. If business conditions or other factors cause our operating results and cash flows to decline, we may be required to record non-cash impairment charges. Goodwill must be evaluated for impairment at least annually. If the carrying value of our reporting units exceeds their current fair value, the goodwill is considered impaired and is reduced to fair value via a non-cash charge to earnings. Events and conditions that could result in impairment in the value of our long-lived assets and goodwill include changes impacting the industries in which we operate, particularly the impact of any downturn in the global economy, as well as competition and advances in technology, adverse changes in the regulatory environment, or other factors leading to reduction in expected long-term sales or operating results. If the value of long-lived assets or goodwill is impaired, our earnings and financial condition could be adversely affected.

The value of our deferred tax assets could become impaired, which could materially and adversely affect our results of operations and financial condition.

In accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 740 “Income Taxes,” each quarter we determine the probability of the realization of deferred tax assets, using significant judgments and estimates with respect to, among other things, historical operating results, expectations of future earnings and tax planning strategies. If we determine in the future that there is not sufficient positive evidence to support the valuation of these assets, due to the risk factors described herein or other factors, we may be required to adjust the valuation allowance to reduce our deferred tax assets. Such a reduction could result in material non-cash expenses in the period in which the valuation allowance is adjusted and could have a material adverse effect on our results of operations and financial condition. In addition, future changes in laws or regulations could have a material impact on the company's overall tax position.

Our overall effective tax rate is equal to our total tax expense as a percentage of our total earnings before tax. However, tax expenses and benefits are determined separately for each tax paying component (an individual entity) or group of entities that is consolidated for tax purposes in each jurisdiction. Losses in certain jurisdictions which have valuation allowances against their deferred tax assets provide no current financial statement tax benefit unless required under the intra-period allocation requirements of ASC Topic 740. As a result, changes in the mix of projected earnings between jurisdictions, among other factors, could have a significant impact on our overall effective tax rate.

Our unrecognized tax benefits recorded in accordance with FASB ASC Topic 740 could significantly change.

FASB ASC Topic 740, “Income Taxes,” defines the confidence level that a tax position must meet in order to be recognized in the financial statements. This topic requires that the tax effects of a position be recognized only if it is "more-likely-than-not" to be sustained based solely on its technical merits as of the reporting date. The more-likely-than-not threshold represents a positive assertion by management that a company is entitled to the economic benefits of a tax position. If a tax position is not considered more-likely-than-not to be sustained based solely on its technical merits, no benefits of the position are to be recognized. Moreover, the more-likely-than-not threshold must continue to be met in each reporting period to support continued recognition of a benefit. In the event that the more-likely-than-not threshold is not met, we would be required to change the relevant tax position which could have an adverse effect on our results of operations and financial condition.

Restriction on use of tax attributes from tax law “ownership change”.

Section 382 of the U.S. Internal Revenue Code of 1986, as amended, limits the ability of a corporation that undergoes an “ownership change” to use its tax attributes, such as net operating losses and tax credits. In general, an “ownership change” occurs if shareholders owning five percent or more (applying certain look-through rules) of an issuer's outstanding common stock, collectively, increase their ownership percentage by more than fifty percentage points within any three year period over such shareholders' lowest percentage ownership during this period. If we were to issue new shares of stock, such new shares could contribute to such an “ownership change” under U.S. tax law. Moreover, not every event that could contribute to such an “ownership change” is within our control. If an “ownership change” under Section 382 were to occur, our ability to utilize tax attributes in the future may be limited.

Assertions against us or our customers relating to intellectual property rights could materially impact our business.

Our industry is characterized by companies that hold large numbers of patents and other intellectual property rights and that vigorously pursue, protect and enforce intellectual property rights. From time to time, third parties may assert against us and our customers and distributors their patent and other intellectual property rights to technologies that are important to our business.

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Claims that our products or technology infringe third-party intellectual property rights, regardless of their merit or resolution, are frequently costly to defend or settle and divert the efforts and attention of our management and technical personnel. In addition, many of our supply agreements require us to indemnify our customers and distributors from third-party infringement claims, which have in the past and may in the future require that we defend those claims and might require that we pay damages in the case of adverse rulings. Claims of this sort also could harm our relationships with our customers and might deter future customers from doing business with us. We do not know whether we will prevail in these proceedings given the complex technical issues and inherent uncertainties in intellectual property litigation. If any pending or future proceedings result in an adverse outcome, we could be required to:

• cease the manufacture, use or sale of the infringing products or technology;

• pay substantial damages for infringement;

• expend significant resources to develop non-infringing products or technology;

• license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all;

• enter into cross-licenses with our competitors, which could weaken our overall intellectual property portfolio;

• lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property against others;

• pay substantial damages to our customers or end users to discontinue use or replace infringing technology with non-infringing technology; or

• relinquish rights associated with one or more of our patent claims, if our claims are held invalid or otherwise unenforceable.

Any of the foregoing results could have a material adverse effect on our business, financial condition and results of operations.

We utilize a significant amount of intellectual property in our business. If we are unable to protect our intellectual property, our business could be adversely affected.

Our success depends in part upon our ability to protect our intellectual property. To accomplish this, we rely on a combination of intellectual property rights, including patents, trademarks and trade secrets, as well as customary contractual protections with our customers, distributors, employees and consultants, and security measures to protect our trade secrets. We cannot guarantee that:

• any of our present or future patents will not lapse or be invalidated, circumvented, challenged, abandoned or, in the case of third-party patents licensed or sub-licensed to us, be licensed to others;

• any of our pending or future patent applications will be issued or have the coverage originally sought;

• our intellectual property rights will be enforced in jurisdictions where competition may be intense or where legal protection may be weak; or

• any of the trademarks, trade secrets or other intellectual property rights that we presently employ in our business will not lapse or be invalidated, circumvented, challenged, abandoned or licensed to others.

In addition, we may not receive competitive advantages from the rights granted under our patents and other intellectual property rights. Our competitors may develop technologies that are similar or superior to our proprietary technologies, duplicate our proprietary technologies, or design around the patents we own or license. Our existing and future patents may be circumvented, blocked, licensed to others, or challenged as to inventorship, ownership, scope, validity or enforceability. Effective intellectual property protection may be unavailable or more limited in one or more relevant jurisdictions relative to those protections available in the United States, or may not be applied for in one or more relevant jurisdictions. If we pursue litigation to assert our intellectual property rights, an adverse decision in any of these legal actions could limit our ability to assert our intellectual property rights, limit the value of our technology or otherwise negatively impact our business, financial condition and results of operations.

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We are a party to a number of patent and intellectual property license agreements. Some of these license agreements require us to make one-time or periodic payments. We may need to obtain additional licenses or renew existing license agreements in the future. We are unable to predict whether these license agreements can be obtained or renewed on acceptable terms.

A breach or failure of our information technology infrastructure could adversely impact our business and operations.

We recognize the increasing volume of cyber-attacks and employ commercially practical efforts to provide reasonable assurance such attacks are appropriately mitigated. Each year, we evaluate the threat profile of our industry to stay abreast of trends and to provide reasonable assurance our existing countermeasures will address any new threats identified. Despite our implementation of security measures, our IT systems and those of our service providers are vulnerable to circumstances beyond our reasonable control including acts of malfeasance, acts of terror, acts of government, natural disasters, civil unrest, and denial of service attacks any of which may lead to the theft of our intellectual property and trade secrets, or business disruption. To the extent that any disruption or security breach results in a loss or damage to our data or an inappropriate disclosure of confidential information, it could cause significant damage to our reputation, affect our relationships with our customers, suppliers and employees, and lead to claims against the company and ultimately harm our business. Additionally, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.

Ineffective internal controls could impact our business and financial results.

Our internal control over financial reporting may not prevent or detect misstatements because of inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in our implementation, our business and financial results could be harmed and we could fail to meet our financial reporting obligations. For example, in connection with management’s evaluation of the effectiveness of our internal control over financial reporting as of September 30, 2016, management determined that we did not maintain effective controls over the design and operating effectiveness of our controls over the assessment of uncertain tax positions and our deferred tax asset valuation allowance. Management determined that these ineffective controls over income tax accounting constituted material weaknesses. See Item 9A, Controls and Procedures, for a discussion of our internal control over financial reporting, including a discussion of the material weaknesses. If the new controls being implemented to address the material weaknesses and to strengthen the overall internal control over accounting for income taxes are not designed or do not operate effectively, if we are unsuccessful in implementing or following these new processes or are otherwise unable to remediate these material weaknesses, this may result in untimely or inaccurate reporting of our financial condition or results of operations.

Item 1B.Unresolved Staff Comments.

None.

Item 2.Properties.

At September 30, 2016, our operating segments, including all consolidated joint ventures, had the following facilities in the United States, Europe, South America, Canada, Mexico and the Asia-Pacific region. For purposes of these numbers, multiple facilities in one geographic location are counted as one facility.

	Manufacturing and Distribution Facilities	Engineering Facilities, Sales Offices, Warehouses and Service Centers
Commercial Truck & Industrial	18	15
Aftermarket & Trailer	6	8
Other	—	5
Total	24	28

These facilities had an aggregate floor space of approximately 9.1 million square feet, substantially all of which is in use. We owned approximately 64 percent and leased approximately 36 percent of this floor space. Substantially all of our owned domestic plants and equipment are subject to liens securing our obligations under our revolving credit facility with a group of banks (see Note 16 of the Notes to Consolidated Financial Statements under Item 8. Financial Statements and Supplementary Data). In the

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opinion of management, our properties have been well maintained, are in sound operating condition and contain all equipment and facilities necessary to operate at present levels.

A summary of floor space (in square feet) of these facilities at September 30, 2016, (including new space under construction) is as follows:

	Owned Facilities			Leased Facilities
Location	Commercial Truck & Industrial	Aftermarket & Trailer	Other	Commercial Truck & Industrial	Aftermarket & Trailer	Other	Total
United States	2,029,291	769,037	417,800	401,539	526,226	—	4,143,893
Canada	—	—	—	—	65,272	—	65,272
Europe	1,870,150	68,326	—	528,076	67,087	13,308	2,546,947
Asia-Pacific	173,155	—	—	998,641	87,335	—	1,259,131
Latin America	494,913	—	—	571,743	—	—	1,066,656
Total	4,567,509	837,363	417,800	2,499,999	745,920	13,308	9,081,899

Item 3.Legal Proceedings.

• See Note 20 of the Notes to Consolidated Financial Statements under Item 8. Financial Statements and Supplementary Data for information with respect to three class action lawsuits filed against the company as a result of modifications made to our retiree medical benefits.

• See Note 23 of the Notes to Consolidated Financial Statements under Item 8. Financial Statements and Supplementary Data for information with respect to asbestos-related and product liability litigation.

• See Item 1. Business, “Environmental Matters” and Note 23 of the Notes to Consolidated Financial Statements under Item 8. Financial Statements and Supplementary Data for information relating to environmental proceedings.

• On July 10, 2014, Sistemas Automotrices de Mexico, S.A. de C.V. (“Sisamex”), a Mexican joint venture between our subsidiary Meritor Heavy Vehicle Systems, LLC (“Meritor HVS”) and Quimmco, S.A. de C.V. ("Quimmco"), filed a lawsuit against Meritor HVS in the Northern District of Illinois, seeking, among other relief, a declaration of Sisamex’s exclusive right to manufacture certain products and the components thereof for sale in Mexico. On July 13, 2014, Meritor HVS filed a lawsuit against Sisamex and Quimmco in the Northern District of Illinois, seeking, among other relief, a declaration that Sisamex may not manufacture without Meritor HVS's consent the components at issue in Sisamex's lawsuit and that Sisamex must instead purchase those components from Meritor HVS. On July 23, 2014, the parties to the two actions filed a joint motion seeking an order that the two actions are related and that both actions be heard before the same judge. The motion was granted. Shortly after the cases were filed, both parties filed cross motions to dismiss the other party’s complaint. The Court heard oral arguments on the motions on November 24, 2014 and on January 28, 2015 denied both parties' motions. Discovery was completed in February 2016.  Sisamex then filed a motion for summary judgment on July 15, 2016, and the court heard the motion on October 14, 2016. We expect that the court will rule upon the motion within 90 days of the hearing date. If the motion for summary judgment is not granted by the Court, trial is currently expected to take place sometime during 2017.

• In March 2016, we were served with a complaint filed against our 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 we violated federal and state antitrust and other laws in connection with a former business of ours 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 2016, we were served with a virtually identical suit also naming the company as a defendant on behalf of a purported class of automobile dealers. In September 2016, we filed a motion to dismiss. We intend to defend ourselves vigorously against these claims. We believe at this time that liabilities associated with this case, while possible, are not probable, and therefore we have not recorded any accrual for them as of September 30, 2016. Further, any possible range of loss cannot be reasonably estimated at this time.

• In April 2016, we were served with several complaints filed against our company and other defendants in the United States District Court for the Northern District of Mississippi. The complaints were amended in July 2016. These complaints allege damages, including diminution of property value, concealment/fraud and emotional distress resulting from alleged environmental pollution in and around a neighborhood in Grenada, Mississippi. Rockwell owned and operated a facility near the neighborhood from 1965 to 1985. We filed answers to the complaints in July 2016 and intend to defend ourselves

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vigorously against these claims. We believe at this time that liabilities associated with this case, while possible, are not probable, and therefore we have not recorded any accrual for them as of September 30, 2016. Further, any possible range of loss cannot be reasonably estimated at this time.

• Various other lawsuits, claims and proceedings have been or may be instituted or asserted against Meritor or our subsidiaries relating to the conduct of our business, including those pertaining to product liability, tax, warranty or recall claims, intellectual property, safety and health, contract and employment matters. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to Meritor, management believes, after consulting with Meritor's General Counsel, that the disposition of matters that are pending will not have a material effect on our business, financial condition or results of operations.

Item 4.Mine Safety Disclosures.

Not applicable.

Item 4A.Executive Officers of the Registrant.

The name, age, positions and offices held with Meritor and principal occupations and employment during the past five years of each of our executive officers as of December 1, 2016, are as follows:

Jeffrey A. Craig, 56 - Chief Executive Officer and President since April 2015 and President and Chief Operating Officer from June 2014 until April 2015. Mr. Craig has served as a director of Meritor since April 2015. Senior Vice President and President, Commercial Truck and Industrial from February 2013 until May 2014. Senior Vice President and Chief Financial Officer from May 2008 until January 2013. Acting Controller from May 2008 to January 2009. Senior Vice President and Controller from May 2007 until May 2008. Vice President and Controller from May 2006 until April 2007. Prior to joining Meritor, he was President and Chief Executive Officer of GMAC Commercial Finance (commercial lending service) from 2001 to May 2006 and President and Chief Executive Officer of GMAC’s Business Credit division from 1999 to 2001. He joined GMAC as general auditor in 1997 from Deloitte & Touche, where he served as an audit partner.

Kevin Nowlan, 44 - Senior Vice President and Chief Financial Officer since May 2013. Vice President and Chief Financial Officer from February 2013 until April 2013. Vice President and Controller from December 2010 until February 2013and Vice President and Treasurer from July 2009 until his appointment as Vice President and Controller. From July 2008 until July 2009, served as Vice President and Assistant Treasurer of Meritor and from March 2007 until July 2008 served as Vice President of Shared Services. Prior to joining Meritor, Mr. Nowlan worked in various roles at GMAC and General Motors Corporation from 1995 through March 2007.

April Miller Boise, 48 - Senior Vice President, General Counsel and Corporate Secretary since August 2016. Prior to joining Meritor, Ms. Boise was Senior Vice President, General Counsel, Head of Global Mergers and Acquisitions and Corporate Secretary at Avintiv, Inc. (formerly known as The Polymer Group). From 2011 until 2015, she was Vice President, General Counsel, Corporate Secretary and Chief Privacy Officer at Veyance Technologies, Inc. (formerly known as Goodyear Engineered Products). From 1999 to 2010, Ms. Boise was an attorney with Thompson Hine LLP, where she held positions of increasing responsibility, including Managing Partner, Cleveland Office, Executive Committee Member and Hiring Partner 2009-2010; Chair, Private Equity Group, 2007-2010; Co-Founder and Chair, Women’s Initiative, 2006-2009; and Partner, Corporate Transactions and Securities, 2002-2010.

Timothy Heffron, 52 - Vice President, Human Resources and Chief Information Officer since August 2013. Vice President, Chief Information Officer and Shared Services from July 2011 until August 2013. Vice President of Shared Services from June 2008 until July 2011. Prior to joining Meritor, Mr. Heffron was Executive Vice President and Chief Information Officer of GMAC Commercial Finance from January 2002 until June 2008, Director of Reengineering for GMAC from December 1999 until December 2001, Director of Global Information TechnologyAudit for General Motors Corporation from June 1999 until November 1999. Assistant General Auditor for GMAC from March 1998 until May 1999. Prior to that, Mr. Heffron spent nine years in public accounting, most recently as an audit senior manager with Ernst & Young.

Chris Villavarayan, 46 - President, Americas since February 2014. Vice President of Global Manufacturing and Supply Chain Management from June 2012 until February 2014. Managing Director of Meritor India and CEO of MHVSIL and Automotive Axles Ltd. (joint venture between Meritor and Kalyani Group of India) from December 2009 until June 2012. General Manager of European Operations and Worldwide Manufacturing Planning and Strategy from June 2007 until December 2009. Director of Manufacturing Performance Plus from November 2006 until June 2007. Regional Manager of Continuous Improvement from

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July 2005 until November 2006. Industrialization Project Manager from September 2001 until July 2005. Site Manager of Meritor St. Thomas, Ontario facility from June 2000 until September 2001.

Joseph Plomin, 54-President, International since January 2014. Vice President of International from July 2013 until January 2014. Vice President of Global Brakes from May 2012 until July 2013. Vice President of Truck North America and South America from July 2011 until May 2012. Vice President of Commercial Vehicle Systems Truck from September 2007 until July 2011. Prior to joining Meritor, Mr. Plomin held a variety of executive positions at Delco Remy International, including Senior Vice President of Sales/Marketing/Product Line Management from October 2006 until September 2007; President of Electrical Aftermarket from February 2006 until October 2006; General Manager/Senior Vice President of Heavy Duty/Industrial Division from June 2001 until February 2006; and Senior Vice President of Sales and Marketing, Electrical Division from September 1998 until December 2000.

Robert Speed, 45-President, Aftermarket & Trailer and Chief Procurement Officer since April 2015. Vice President and Chief Procurement Officer from February 2014 until April 2015. Vice President of Procurement from March 2013 until February 2014. Vice President of Purchasing from January 2012 until March 2013. Managing Director of Meritor’s Australia operations from July 2010 until January 2012. Senior Director of Finance, Truck Americas, from February 2009 until July 2010. Senior Director of Finance, Truck Group, from July 2008 until February 2009. Director of Finance for Truck and Procurement from January 2008 until July 2008. Director of Financial Planning and Analysis from March 2006 until January 2008. Prior to joining Meritor, Mr. Speed was Manager of Capital Markets at NOP Automotive Worldwide from February 2005 until March 2006. Director of Finance & Administration at NOP Automotive Worldwide from September 2000 until June 2003. Manager of Finance at NOP Automotive Worldwide from February 2000 until August 2000. M&A Arbitrage Trader at Peter Securities, LLC from July 1998 until February 2000. Senior Equity Trader at First of America Bank from May 1997 until July 1998.

There are no family relationships, as defined in Item 401 of Regulation S-K, between any of the above executive officers and any director, executive officer or person nominated to become a director or executive officer. No officer of Meritor was selected pursuant to any arrangement or understanding between him or her and any person other than Meritor. All executive officers are elected annually.

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PART II

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Meritor's common stock, par value $1 per share (“Common Stock”), is listed on the New York Stock Exchange (“NYSE”) and trades under the symbol "MTOR." On November 30, 2016, there were 15,041 shareholders of record of Meritor's Common Stock.

The high and low sale prices per share of Meritor Common Stock for each quarter of fiscal years 2016 and 2015 were as follows:

	Fiscal Year 2016				Fiscal Year 2015
Quarter Ended	High		Low		High		Low
December 31	$	11.85	$	7.57	$	14.99	$	9.73
March 31	8.30		6.11		15.46		12.04
June 30	8.95		6.44		14.42		12.25
September 30	11.29		6.92		14.22		10.98

There were no dividends declared and paid in fiscal year 2016 or in fiscal year 2015. Our payment of cash dividends and the amount of the dividend are subject to review and change at the discretion of our Board of Directors.

Our revolving credit facility permits us to declare and pay up to $40 million of dividends in any fiscal year provided that no default or unmatured default, as defined in the agreement, has occurred and is continuing at the date of declaration or payment. 

Additionally, our indentures permit us to pay dividends under the following primary conditions:

• if a default on the notes, as defined in the indentures, has not occurred and is not continuing or shall not occur as a consequence of the payment;

• if the interest coverage ratio, as defined in the indentures, is greater than 2.00 to 1.00 after giving effect to the dividend;

• if the cumulative amount of the dividends paid does not exceed certain cumulative cash and earnings measurements;

• if the dividends are less than $60 million per fiscal year (with a carryover to the next fiscal year of up to $60 million if unused in the current fiscal year); and

• if after giving effect to the dividend, the total leverage ratio, as defined in the indenture, would not exceed 4.00 to 1.00.

See Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters for information on securities authorized for issuance under equity compensation plans.

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 September 30, 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)
July 1- 31, 2016	58,275	$	6.87	58,275	$	—
August 1- 31, 2016	—		—	—		—
September 1 30, 2016	—		—	—		—
Total	58,275			58,275

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(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 had no stated expiration. During fiscal year 2016, we repurchased 8.7 million shares of common stock for $81 million (including commission costs) and all of our $55 million outstanding principal amount 4.625 percent convertible notes at 100 percent face value of the notes. In the aggregate under this authorization, we repurchased 12.8 million shares of our common stock for $136 million (including commission costs), $19 million principal amount of our 4.0 percent convertible notes due 2027, and all of our $55 million outstanding principal amount 4.625 percent convertible notes at 100 percent of the face value of the notes (see Note 18 of the Notes to Consolidated Financial Statements). The repurchase program under the $210 million authorization was complete as of September 30, 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. However, the company does not believe such purchases or transactions are issuer repurchases for the purposes of this Item 5 of this Report on Form 10-K. 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 fiscal year 2016.

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Shareholder Return Performance Presentation

The line graph below compares the cumulative total shareholder return of the S&P 500, Meritor, Inc. and the peer group of companies for the period from September 30, 2011 to September 30, 2016, assuming a fixed investment of $100 at the respective closing prices on the last day of each fiscal year and reinvestment of cash dividends.

	9/11	9/12	9/13	9/14	9/15	9/16
Meritor, Inc.	100.00	60.06	111.33	153.68	150.57	157.65
S&P 500	100.00	130.20	155.39	186.05	184.91	213.44
Peer Group(1)	100.00	117.27	176.68	178.67	159.10	187.07

⁽¹⁾  The peer group consists of representative commercial vehicle suppliers of approximately comparable products to Meritor. The peer group consists of Accuride Corporation, Commercial Vehicle Group, Inc., Cummins Inc., Dana Holding Corporation, Haldex AB, Modine Manufacturing Company, SAF-Holland SA, Stoneridge, Inc., and Wabco Holdings Inc.

The information included under the heading “Shareholder Return Performance Presentation” is not to be treated as “soliciting material” or as “filed” with the SEC, and is not incorporated by reference into any filing by the company under the Securities Act of 1933 or the Securities Exchange Act of 1934 that is made on, before or after the date of filing of this Annual Report on Form 10-K.

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Item 6.Selected Financial Data.

The following sets forth selected consolidated financial data. The data should be read in conjunction with the information included under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8. Financial Statements and Supplementary Data below. Fiscal years 2013 and 2012 have been recast to reflect our Mascot business as discontinued operations.

	Year Ended September 30,
	2016			2015			2014			2013			2012
	(in millions, except per share amounts)
SUMMARY OF OPERATIONS
Sales
Commercial Truck & Industrial	$	2,445		$	2,739		$	2,980		$	2,920		$	3,613
Aftermarket & Trailer	860			884			920			871			906
Intersegment Sales	(106		)	(118		)	(134		)	(119		)	(135		)
Total Sales	$	3,199		$	3,505		$	3,766		$	3,672		$	4,384
Operating Income	$	204		$	128		$	217		$	7		$	173
Income Before Income Taxes	155			67			315			51			137
Net Income Attributable to Noncontrolling Interests	(2		)	(1		)	(5		)	(2		)	(11		)
Net Income (Loss) Attributable to Meritor, Inc.:
Income (Loss) from Continuing Operations	$	577		$	65		$	279		$	(15	)	$	69
Loss from Discontinued Operations	(4		)	(1		)	(30		)	(7		)	(17		)
Net Income (Loss)	$	573		$	64		$	249		$	(22	)	$	52
BASIC EARNINGS (LOSS) PER SHARE
Continuing Operations	$	6.40		$	0.67		$	2.86		$	(0.15	)	$	0.72
Discontinued Operations	(0.04		)	(0.01		)	(0.31		)	(0.07		)	(0.18		)
Basic Earnings (Loss) per Share	$	6.36		$	0.66		$	2.55		$	(0.22	)	$	0.54
DILUTED EARNINGS (LOSS) PER SHARE
Continuing Operations	$	6.27		$	0.65		$	2.81		$	(0.15	)	$	0.71
Discontinued Operations	(0.04		)	(0.01		)	(0.30		)	(0.07		)	(0.17		)
Diluted Earnings (Loss) per Share	$	6.23		$	0.64		$	2.51		$	(0.22	)	$	0.54
FINANCIAL POSITION AT SEPTEMBER 30
Total Assets (1)	$	2,494		$	2,195		$	2,485		$	2,552		$	2,489
Short-term Debt	14			15			7			13			18
Long-term Debt (1)	982			1,036			948			1,107			1,030

⁽¹⁾  Fiscal years 2014, 2013 and 2012 have been recast to reflect the early adoption of ASU 2015-03, Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.

30

Income (loss) from continuing operations attributable to Meritor, Inc. in the selected financial data information presented above includes the following items specific to the period of occurrence (in millions):

	Year Ended September 30,
	2016			2015			2014			2013			2012
Pretax items:
Restructuring costs	$	(16	)	$	(16	)	$	(10	)	$	(23	)	$	(39	)
Goodwill and asset impairment charges	—			(17		)	—			—			—
Impact of pension settlement losses and curtailment gain	—			(59		)	15			(109		)	—
Antitrust settlement with Eaton (including recovery of past legal fees)	—			—			209			—			—
Gain on sale of equity investment	—			—			—			125			—
Specific warranty contingency, net of supplier recovery	—			—			8			(7		)	—
Loss on debt extinguishment	—			(25		)	(31		)	(19		)	—
Gain on sale of property	—			—			—			—			16
Asbestos-related liability remeasurement	(4		)	(1		)	(20		)	(7		)	(18		)
Asbestos-related insurance settlements, net	30			—			—			—			—
Supplier litigation settlement	6			—			—			—			—
Non-operating gains, net	—			5			—			3			7
After tax items:
Tax valuation allowance reversal, net and other (1)	454			16			—			—			—

⁽¹⁾  The fiscal year ended September 30, 2016 includes non-cash income tax benefit (expense) of $438 million related to the partial reversal of the U.S. valuation allowance, ($9) million related to the establishment of a valuation allowance in Brazil and $25 million related to other correlated tax relief. The fiscal year ended September 30, 2015 includes non-cash income tax benefit of $16 million related to the reversal of valuation allowances in Germany, Italy, Mexico and Sweden.

Loss from discontinued operations attributable to Meritor, Inc. in the selected financial data information presented above includes the following items specific to the period of occurrence (in millions):

	Year Ended September 30,
	2016			2015		2014			2013			2012
Pretax items:
Gain (loss) on divestitures of businesses, net	$	—		$	—	$	(23	)	$	—		$	(1	)
Restructuring costs	—			—		—			(3		)	(1		)
Litigation settlement	(3		)	—		—			—			—
Charge for contingency and indemnity obligation	—			—		—			—			(10		)

31

Item 7.Management’s Discussion and Analysis of Financial Conditions and Results of Operations.

Overview

Headquartered in Troy, Michigan, we are a premier global supplier of a broad range of integrated systems, modules and components to OEMs and the aftermarket for the commercial vehicle, transportation and industrial sectors. We serve 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.

Our sales for fiscal year 2016 were $3,199 million, a decrease compared to $3,505 million in the prior year. The decrease 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 and Europe, partially offset by new business wins and increasing market volumes in India.

Net income attributable to Meritor for fiscal year 2016 and 2015 was $573 million and $64 million, respectively. The increase in net income attributable to Meritor was primarily driven by (i) a reversal of a portion of our valuation allowance in the U.S. resulting in a non-cash income tax benefit of $438 million in the current year; (ii) a $25 million income tax benefit related to other correlated tax relief; (iii) a $55 million pension settlement loss, net of tax in the prior year and (iv) a $24 million loss on debt extinguishment recognized in the prior year.

Adjusted EBITDA (see Non-GAAP Financial Measures below) for fiscal year 2016 was $327 million compared to $334 million in fiscal year 2015. Our Adjusted EBITDA margin (see Non-GAAP Financial Measures below) in fiscal year 2016 was 10.2 percent compared to 9.5 percent in the same period a year ago. Despite lower revenue, Adjusted EBITDA margin increased as a result of (i) strong material, labor and burden performance, which continued to lower product costs year over year; (ii) lower year-over-year steel indices, which also reduced material costs; and (iii) insurance settlements and favorable insurance recoveries related to legacy asbestos liabilities (see Note 23 of the Notes to the Condensed Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data). These more than offset the impact of lower Class 8 production volumes in North America and unfavorable foreign currency impacts on our EBITDA margin.

Net income from continuing operations attributable to the company for fiscal years 2016 and 2015 was $577 million and $65 million, respectively. Adjusted income from continuing operations attributable to the company for fiscal years 2016 and 2015 was $151 million and $159 million, respectively. See Non-GAAP Financial Measures below.

Cash flows provided by operating activities were $204 million in fiscal year 2016 compared to cash flows provided by operating activities of $97 million in the prior fiscal year. The increase is due in part to $52 million received related to insurance settlements for recoveries for defense and indemnity costs associated with asbestos liabilities in fiscal year 2016 (see Note 23 of the Notes to the Condensed Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data), as well as $94 million used in fiscal year 2015 to fund a voluntary buyout of our German and Canadian pension plan obligations.

Valuation Allowance (VA)

In prior years, we established valuation allowances against our U.S. net deferred tax assets and the net deferred tax assets of our 100-percent-owned subsidiaries, including those in France, U.K. and certain other countries.

During the fourth quarter of fiscal year 2016, as a result of sustained profitability in the U.S., evidenced by a recent strong earnings history, future forecasted earnings, and additional positive evidence, we determined it was more likely than not that we will be able to realize a portion of our deferred tax assets. Accordingly, we reversed a portion of the valuation allowance in the U.S. resulting in a non-cash income tax benefit of $438 million.

During the fourth quarter of fiscal year 2016, due to a three-year cumulative loss and future economic uncertainty, we concluded that a valuation allowance was required in Brazil. This resulted in a non-cash charge to income tax expense of $9 million.

We continue to maintain valuation allowances in France, U.K. and certain other jurisdictions, as we believe the negative evidence that we will be able to recover these net deferred tax assets continues to outweigh the positive evidence. If, in the future, we generate taxable income on a sustained basis in jurisdictions where we have recorded valuation allowances, our conclusion regarding the need for valuation allowances in these jurisdictions could change.

Repurchase Authorizations

32

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. During fiscal year 2016, we repurchased 8.7 million shares of common stock for $81 million (including commission costs) and all of our $55 million outstanding principal amount 4.625 percent convertible notes at 100 percent face value of the notes. In the aggregate under this authorization, we repurchased 12.8 million shares of our common stock for $136 million (including commission costs), $19 million principal amount of our 4.0 percent convertible notes due 2027, and all of our $55 million outstanding principal amount 4.625 percent convertible notes at 100 percent of the face value of the notes (see Note 18 of the Notes to Consolidated Financial Statements). The repurchase program under the $210 million authorization was complete as of September 30, 2016.

On July 21, 2016, our Board of Directors authorized the repurchase of up to $100 million of our common stock and up to $150 million aggregate principal amount of any of our debt securities (including convertible debt securities), in each case from time to time through open market purchases, privately negotiated transactions or otherwise, until September 30, 2019, subject to compliance with legal and regulatory requirements and our debt covenants. The amounts remaining available for repurchases under these authorizations were $100 million of our common stock and $150 million of our public debt securities, in each case as of November 30, 2016.

Trends and Uncertainties

Industry Production Volumes

 The following table reflects estimated on-highway commercial truck production volumes for selected original equipment (OE) markets based on available sources and management's estimates.

	Year Ended September 30,
	2016	2015	2014	2013	2012
Estimated Commercial Truck production (in thousands):
North America, Heavy-Duty Trucks	253	328	281	243	295
North America, Medium-Duty Trucks	240	235	220	198	181
North America, Trailers	293	303	254	235	229
Western Europe, Heavy- and Medium-Duty Trucks	440	402	395	414	394
South America, Heavy- and Medium-Duty Trucks	61	89	156	187	174
India, Heavy- and Medium-Duty Trucks	326	287	216	208	315

North America:

During fiscal year 2016, production volumes in North America decreased compared to the levels experienced in fiscal year 2015, which we believe is primarily due to excess Class 8 inventory. We believe we are in the midst of an inventory correction that will persist through at least the first half of fiscal 2017. As a result, we expect fiscal year 2017 production volumes in North America to decline further from the levels experienced in fiscal year 2016 with the first quarter having the lowest level of Class 8 production for the year.

Western Europe:

During fiscal year 2016, production volumes in Western Europe increased slightly compared to the levels experienced in fiscal year 2015. We expect fiscal year 2017 production volumes to remain relatively consistent with the levels experienced in fiscal year 2016.

South America:

During fiscal year 2016, production volumes in South America significantly decreased on a year-over-year basis as a result of the difficult economic climate in Brazil. For the first half of fiscal year 2017, we expect South America production volumes to remain relatively consistent with the depressed levels experienced in fiscal year 2016 but to increase slightly in the second half of fiscal year 2017.

China:

33

During fiscal year 2016, production volumes in China remained relatively consistent with levels experienced in fiscal year 2015. We expect fiscal year 2017 production volumes in China to remain relatively consistent with the levels experienced in fiscal year 2016.

India:

During fiscal year 2016, production volumes in India increased due to an improving economic climate compared to the levels experienced in fiscal year 2015. We expect fiscal year 2017 production volumes in India to increase slightly from the levels experienced in fiscal year 2016.

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 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 include:

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

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

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

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

• Ability to successfully execute strategic initiatives;

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

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

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

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

• Competitively driven price reductions to our customers;

• Potential price increases from our suppliers;

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

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

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

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

34

NON-GAAP FINANCIAL MEASURES

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

     Adjusted income (loss) from continuing operations attributable to the company and Adjusted diluted earnings (loss) per share from continuing operations are defined as reported income (loss) from continuing operations and reported diluted earnings (loss) per share from continuing operations before restructuring expenses, asset impairment charges, non-cash tax expense related to the use of deferred tax assets in jurisdictions with net operating loss carry forwards, and other special items as determined by management. Non cash tax expense was added as an adjustment in fiscal year 2016. 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. Net debt including retirement liabilities is defined as total debt plus pension assets, pension liability, retiree medical liability and other retirement benefits less cash and cash equivalents. Net Debt is defined as total debt less cash and cash equivalents.

     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. Net debt, including retirement liabilities, is a specific financial measure which was part of our three-year plan, M2016, to reduce debt and other balance sheet liabilities. Net Debt over Adjusted EBITDA is a specific financial measure in our M2019 plan.

     Adjusted income (loss) from continuing operations attributable to the company, 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. 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. Net debt should not be considered a substitute for total debt as reported on the balance sheet. Set forth below are reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.

35

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).

	Year Ended September 30,
	2016			2015 (2)			2014 (2)
Adjusted income from continuing operations attributable to the company	$	151		$	159		$	105
Antitrust settlement with Eaton (1)	—			—			210
Restructuring costs	(16		)	(16		)	(10		)
Reduction of specific warranty contingency, net of supplier recovery	—			—			8
Pension settlement losses	—			(59		)	—
Loss on debt extinguishment	—			(24		)	(31		)
Goodwill and asset impairment charges	—			(17		)	—
Non-cash tax expense (3)	(13		)	(4		)	(4		)
Tax valuation allowance reversal, net and other (4)	454			16			—
Income tax benefits	1			10			1
Income from continuing operations attributable to the company	$	577		$	65		$	279
Adjusted diluted earnings per share from continuing operations	$	1.64		$	1.59		$	1.06
Impact of adjustments on diluted earnings per share	4.63			(0.94		)	1.75
Diluted earnings per share from continuing operations	$	6.27		$	0.65		$	2.81

⁽¹⁾ Adjustment associated with our share of the antitrust settlement with Eaton less legal expenses incurred in fiscal year 2014.

⁽²⁾ The fiscal years ended September 30, 2015 and 2014 have been recast to reflect non-cash tax expense.

⁽³⁾ Represents tax expense related to the use of deferred tax assets in jurisdictions with net operating loss carry forwards.

⁽⁴⁾ Includes non-cash income tax benefit (expense) of $438 million related to the partial reversal of the U.S. valuation allowance ($9) million related to the establishment of a valuation allowance in Brazil and $25 million related to other correlated tax relief.

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

	Year Ended September 30,
	2016			2015			2014
Cash provided by operating activities	$	204		$	97		$	215
Capital expenditures	(93		)	(79		)	(77		)
Free cash flow	$	111		$	18		$	138

Adjusted EBITDA is reconciled to net income attributable to Meritor, Inc. below (in millions).

36

	Year Ended September 30,
	2016			2015			2014
Net income attributable to Meritor, Inc.	$	573		$	64		$	249
Loss from discontinued operations, net of tax, attributable to Meritor, Inc.	4			1			30
Income from continuing operations, net of tax, attributable to Meritor, Inc.	$	577		$	65		$	279
Interest expense, net	84			105			130
Provision (benefit) for income taxes	(424		)	1			31
Depreciation and amortization	67			65			67
Restructuring costs	16			16			10
Loss on sale of receivables	5			5			8
Pension settlement losses	—			59			—
Antitrust settlement with Eaton, net of tax (1)	—			—			(208		)
Reduction of specific warranty contingency, net of supplier recovery	—			—			(8		)
Goodwill and asset impairment charges	—			17			—
Noncontrolling interests	2			1			5
Adjusted EBITDA	$	327		$	334		$	314
Adjusted EBITDA Margin (2)	10.2		%	9.5		%	8.3		%

⁽¹⁾Adjustment associated with our share of the antitrust settlement with Eaton less legal expenses incurred in fiscal year 2014.

⁽²⁾Adjusted EBITDA Margin equals Adjusted EBITDA divided by consolidated sales from continuing operations.

Net debt, including retirement liabilities, is reconciled to total debt (in millions).

	September 30,
	2016			2015
Short-term debt	$	14		$	15
Long-term debt	982			1,036
Total debt	996			1,051
Pension assets - non-current	(123		)	(110		)
Pension liability - current	6			5
Pension liability - non-current	277			214
Pension liability	160			109
Retiree medical liability - current	33			33
Retiree medical liability - non-current	414			405
Retire medical liability	447			438
Other retirement benefits - current	1			1
Other retirement benefits - non-current	12			13
Subtotal	1,616			1,612
Less: Cash and cash equivalents	(160		)	(193		)
Net debt, including retirement liabilities	$	1,456		$	1,419

37

Non-Consolidated Joint Ventures

At September 30, 2016, our continuing operations included investments in joint ventures that are not majority owned or controlled and are accounted for under the equity method of accounting. Our investments in non-consolidated joint ventures totaled $100 million at September 30, 2016 and $96 million at September 30, 2015.

These strategic alliances provide for sales, product design, development and/or manufacturing in certain product and geographic areas. Aggregate sales of our non-consolidated joint ventures were $1,101 million, $1,288 million and $1,268 million in fiscal years 2016, 2015 and 2014, respectively. 

Our equity in the earnings of affiliates was $36 million, $39 million and $38 million in fiscal years 2016, 2015 and 2014, respectively. The decrease in fiscal year 2016 compared to fiscal year 2015 was primarily due to lower earnings from our North American joint ventures. We received cash dividends from our affiliates of $37 million, $32 million and $36 million in fiscal years 2016, 2015 and 2014, respectively.

In June 2014, ZF Meritor LLC (“ZF Meritor”), a joint venture between ZF Friedrichshafen AG and our subsidiary, Meritor Transmission, entered into a settlement agreement with Eaton Corporation relating to an antitrust lawsuit filed by ZF Meritor in 2006. Pursuant to the terms of the settlement agreement, Eaton agreed to pay $500 million to ZF Meritor. In July 2014, ZF Meritor received proceeds of $400 million net of attorney's contingency fees. In July 2014, we received proceeds of $210 million representing our share based on our ownership interest in ZF Meritor and including a recovery of current and prior years' attorney expenses paid by Meritor. ZF Meritor and Meritor Transmission agreed to dismiss all pending antitrust litigation with Eaton. ZF Meritor does not have any operating activities.

Our pre-tax share of the settlement was $210 million ($209 million after-tax), of which $190 million was recognized as equity in earnings of ZF Meritor and $20 million for the recovery of legal expenses from ZF Meritor was recognized as a reduction of selling, general and administrative expenses in the consolidated statement of operations. The proceeds from the settlement were used primarily to voluntarily pre-fund the next three years of mandatory pension contributions to our U.S. and U.K. pension plans.

For more information about our non-consolidated joint ventures, see Note 13 of the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

Results of Operations

38

Fiscal Year 2016 Compared to Fiscal Year 2015

Sales

The following table reflects total company and business segment sales for fiscal years 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.

										Dollar Change Due To
	2016		2015		Dollar Change			% Change		Currency			Volume/ Other
Sales:
Commercial Truck & Industrial
North America	$	1,358	$	1,560	$	(202	)	(13	)%	$	—		$	(202	)
Europe	559		574		(15		)	(3	)%	(20		)	5
South America	130		198		(68		)	(34	)%	(28		)	(40		)
China	84		90		(6		)	(7	)%	(4		)	(2		)
India	152		140		12			9	%	(9		)	21
Other	86		87		(1		)	(1	)%	(4		)	3
Total External Sales	$	2,369	$	2,649	$	(280	)	(11	)%	$	(65	)	$	(215	)
Intersegment Sales	76		90		(14		)	(16	)%	(7		)	(7		)
Total Sales	$	2,445	$	2,739	$	(294	)	(11	)%	$	(72	)	$	(222	)
Aftermarket & Trailer
North America	$	716	$	734	$	(18	)	(2	)%	$	(9	)	$	(9	)
Europe	114		122		(8		)	(7	)%	(4		)	(4		)
Total External Sales	$	830	$	856	$	(26	)	(3	)%	$	(13	)	$	(13	)
Intersegment Sales	30		28		2			7	%	(5		)	7
Total Sales	$	860	$	884	$	(24	)	(3	)%	$	(18	)	$	(6	)
Total External Sales	$	3,199	$	3,505	$	(306	)	(9	)%	$	(78	)	$	(228	)

Commercial Truck& Industrial sales were $2,445 million in fiscal year 2016, down 11 percent from 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 primarily driven by the strong U.S. dollar relative to the Brazilian real and the euro. The decrease was partially offset by new business wins and increasing market volumes in India.

Aftermarket & Trailer sales were $860 million in fiscal year 2016, down 3 percent from fiscal year 2015. Sales decreased due to the unfavorable impact of the softer North America and Europe aftermarket business and foreign exchange translation driven by the strong U.S. dollar compared to the same period in the prior fiscal year.

Cost of Sales and Gross Profit

Cost of sales primarily represents material, labor and overhead production costs associated with our products and production facilities. Cost of sales for fiscal year 2016 was $2,763 million compared to $3,043 million in the prior year, representing a 9.0 percent decrease. Total cost of sales was approximately 86.4 percent of sales for fiscal year 2016 compared to approximately 86.8 percent for the prior fiscal year.

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

	Cost of Sales
Fiscal year ended September 30, 2015	$	3,043
Volumes, mix and other, net	(203		)
Foreign exchange	(77		)
Fiscal year ended September 30, 2016	$	2,763

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	$	(238	)
Lower labor and overhead costs	(54		)
Other, net	12
Total change in costs of sales	$	(280	)

Materialcosts represent the majority of our cost of sales and include raw materials, composed primarily of steel and purchased components. Material costs decreased by $238 million compared to the same period in the prior fiscal year primarily due to lower volumes, movement in foreign currency rates, favorable material economics and material performance programs.

Labor and overhead costs decreased by $54 million compared to the prior fiscal year primarily due to lower volumes, the movement in foreign currency exchange rates, and savings associated with labor and burden cost reduction programs.

Other, net increased by $12 million compared to the prior fiscal year. The increase was primarily driven by foreign currency transaction losses related to the strengthening U.S. dollar, net of hedge impacts.

Gross margin for fiscal year 2016 was$436 million compared to $462 million in fiscal year 2015. Gross margin, as a percentage of sales, was 13.6 percent and 13.2 percent for fiscal years 2016 and 2015, respectively.

Other Income Statement Items

Selling, general and administrative expenses ("SG&A") for fiscal years 2016 and 2015 are summarized as follows (dollars in millions):

	2016					2015					Increase (Decrease)
	Amount			% of sales		Amount			% of sales		Amount			% of sales
SG&A
Loss on sale of receivables	$	(5	)	(0.2	)%	$	(5	)	(0.1	)%	$	—		(0.1) pts
Short- and long-term variable compensation	(30		)	(0.9	)%	(27		)	(0.8	)%	(3		)	(0.1) pts
Asbestos-related liability remeasurement	(4		)	(0.1	)%	2			—	%	(6		)	(0.1) pts
Asbestos-related insurance settlements, net	30			0.9	%	—			—	%	30			0.9 pts
Supplier litigation settlement	6			0.2	%	—			—	%	6			0.2 pts
All other SG&A	(210		)	(6.6	)%	(213		)	(6.0	)%	3			(0.6) pts
Total SG&A	$	(213	)	(6.7	)%	$	(243	)	(6.9	)%	$	30		0.2 pts

2016 Insurance and Litigation Settlements, net

In fiscal year 2016, we recognized $27 million related to cash settlements with insurance companies for recoveries of defense and indemnity costs associated with asbestos liabilities. In addition, in the fourth quarter of fiscal year 2016, we recognized $12 million to reflect expected reimbursement of future defense and indemnity payments under a coverage-in-place arrangement with

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an insurer associated with Rockwell asbestos liabilities. Separately, although we continue to pursue litigation and believe we have insurance coverage, the collection of $9 million of Rockwell asbestos-related insurance receivables associated with policies in dispute has become doubtful; therefore, in the fourth quarter of fiscal year 2016, we recorded a $9 million reserve. In fiscal year 2016, we also recognized approximately $6 million related to a supplier litigation settlement. (refer to Note 23 in the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data).

All other SG&A, which represents normal selling, general and administrative expense, remained relatively flat but increased as a percentage of sales due to lower sales.

Goodwill Impairment costs of $15 million were recognized during the fourth quarter of fiscal year 2015 for our Defense reporting unit, which is included in the Commercial Truck and Industrial segment.

Restructuring costs were $16 million in fiscal year 2016, compared to $16 million in fiscal year 2015. In fiscal year 2016, $6 million of restructuring costs were recognized by our Commercial Truck & Industrial segment, $8 million by our Aftermarket and Trailer segment and $2 million by our corporate locations, primarily related to employee severance. In fiscal year 2015, our Commercial Truck & Industrial segment and corporate locations recognized $14 million and $2 million, respectively, of restructuring costs primarily related to employee severance costs.

Operating income for fiscal year 2016 was $204 million, compared to $128 million in fiscal year 2015. Key items affecting income are discussed above.

Equity in earnings of affiliates was $36 million in fiscal year 2016, compared to $39 million in the prior year. The decrease was primarily attributable to lower production in our affiliates' respective markets.

Interest expense, net was $84 million and $105 million in fiscal years 2016 and 2015, respectively. The decrease was primarily attributable to the recognized loss on debt extinguishment of $25 million in fiscal year 2015, primarily related to the repurchase of our 7.875 percent convertible notes due 2026, partially offset by the increase of interest expense related to fixed-rate debt in fiscal year 2016.

Benefit for income taxes was $424 million in fiscal year 2016 compared to provision for income taxes of $1 million in fiscal year 2015. The decrease in tax expense was primarily attributable to a $438 million tax benefit from the partial reversal of the U.S. valuation allowance and a $25 million tax benefit related to a correlated tax relief. This decrease was partially offset by a $9 million non-cash charge to income tax expense in Brazil related to the establishment of a valuation allowance and the recording of tax expense in jurisdictions in which we previously recognized a valuation allowance.

Income from continuing operations (before noncontrolling interests) for fiscal year 2016 was $579 million compared to $66 million in fiscal year 2015. The reasons for the increase are discussed above.

Loss from discontinued operations, net of tax for fiscal year 2016 was $4 million, compared to a loss of $1 million in the prior year. The increase in loss from discontinued operations, net of tax, was primarily attributable to a litigation settlement in the current year.

Net income attributable to noncontrolling interests was $2 million in fiscal year 2016 compared to $1 million in fiscal year 2015. Noncontrolling interests represent our minority partners’ share of income or loss associated with our less than 100-percent-owned consolidated subsidiaries.

Net Income attributable to Meritor, Inc. was $573 million for fiscal year 2016 compared to net income of $64 million for fiscal year 2015.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.

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The following table reflects Segment EBITDA and Segment EBITDA margins for fiscal years 2016 and 2015 (dollars in millions).

	Segment EBITDA							Segment EBITDA Margins
	2016		2015		Change			2016		2015		Change
Commercial Truck & Industrial	$	208	$	216	$	(8	)	8.5	%	7.9	%	0.6 pts
Aftermarket & Trailer	115		123		(8		)	13.4	%	13.9	%	(0.5) pts
Segment EBITDA	$	323	$	339	$	(16	)	10.1	%	9.7	%	0.4 pts

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

	Commercial Truck & Industrial			Aftermarket & Trailer			TOTAL
Segment EBITDA–Year ended September 30, 2015	$	216		$	123		$	339
Lower earnings from unconsolidated affiliates	(3		)	—			(3		)
Impact of foreign currency transactions, net of hedge impacts	(18		)	(11		)	(29		)
Impact of foreign currency translation	(7		)	(1		)	(8		)
Short and long-term variable compensation	(4		)	(2		)	(6		)
Asbestos related insurance settlements, net of asbestos related expense	10			3			13
Supplier litigation settlement	—			6			6
Volume, mix, pricing and other	14			(3		)	11
Segment EBITDA – Year ended September 30, 2016	$	208		$	115		$	323

Commercial Truck& Industrial Segment EBITDA was$208 million in fiscal year 2016, compared to $216 million in the prior fiscal year. Segment EBITDA margin increased to 8.5 percent in fiscal year 2016 compared to 7.9 percent in the prior fiscal year. The increase in Segment EBITDA margin was primarily driven by strong material, labor and burden performance, which continued to lower costs year-over-year and insurance settlements for recoveries for defense and indemnity costs associated with asbestos liabilities (refer to Note 23 in the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data). In addition, material costs have been favorably impacted by lower year-over-year steel prices. The overall increase in Segment EBITDA margin was partially offset by foreign currency impacts, which included a $5 million non-recurring foreign currency option contract hedge gain in 2015, unfavorable product mix and the impact of lower sales in fiscal year 2016.

Aftermarket & Trailer Segment EBITDA was $115 million in fiscal year 2016, compared to $123 million in the prior fiscal year. Segment EBITDA margin decreased to 13.4 percent in the current fiscal year compared to 13.9 percent in fiscal year 2015. The decreases in Segment EBITDA and Segment EBITDA margin were primarily driven by lower revenue, foreign currency impacts, and unfavorable product mix, which were partially offset by a supplier litigation settlement (see Note 23 of the Notes to the Condensed Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data).

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Fiscal Year 2015 Compared to Fiscal Year 2014

Sales

The following table reflects total company and business segment sales for fiscal years 2015 and 2014 (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.

										Dollar Change Due To
	2015		2014		Dollar Change			% Change		Currency			Volume/ Other
Sales:
Commercial Truck & Industrial
North America	$	1,560	$	1,447	$	113		8	%	$	—		$	113
Europe	574		644		(70		)	(11	)%	(120		)	50
South America	198		408		(210		)	(51	)%	(53		)	(157		)
China	90		146		(56		)	(38	)%	(2		)	(54		)
India	140		114		26			23	%	(5		)	31
Other	87		117		(30		)	(26	)%	(13		)	(17		)
Total External Sales	$	2,649	$	2,876	$	(227	)	(8	)%	$	(193	)	$	(34	)
Intersegment Sales	90		104		(14		)	(13	)%	(24		)	10
Total Sales	$	2,739	$	2,980	$	(241	)	(8	)%	$	(217	)	$	(24	)
Aftermarket & Trailer
North America	$	734	$	739	$	(5	)	(1	)%	$	(12	)	$	7
Europe	122		151		(29		)	(19	)%	(21		)	(8		)
Total External Sales	$	856	$	890	$	(34	)	(4	)%	$	(33	)	$	(1	)
Intersegment Sales	28		30		(2		)	(7	)%	(21		)	19
Total Sales	$	884	$	920	$	(36	)	(4	)%	$	(54	)	$	18
Total External Sales	$	3,505	$	3,766	$	(261	)	(7	)%	$	(226	)	$	(35	)

Commercial Truck& Industrial sales were $2,739 million in fiscal year 2015, down 8 percent from fiscal year 2014. The decrease in sales was the result of the strengthening of the US dollar against most currencies, primarily the euro and Brazilian real, which unfavorably impacted sales by $193 million in fiscal year 2015 compared to the prior fiscal year. In addition, unfavorable macro-economic conditions in South America and China resulted in lower production in these regions, and we experienced lower revenue from our Defense business compared to the prior period. These production decreases were partially offset by higher sales in North America, as the Class 8 truck market reached its strongest production levels since 2006.

Aftermarket & Trailer sales were $884 million in fiscal year 2015, down 4 percent from fiscal year 2014. The decrease was primarily due to the unfavorable impact of the strengthening US dollar on our aftermarket business in Europe.

Cost of Sales and Gross Profit

Cost of sales primarily represents material, labor and overhead production costs associated with the company’s products and production facilities. Cost of sales for fiscal year 2015 was $3,043 million compared to $3,279 million in the prior year, representing a 7.2 percent decrease. Total cost of sales was approximately 86.8 percent of sales for fiscal year 2015 compared to approximately 87.1 percent for the prior fiscal year.

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The following table summarizes significant factors contributing to the changes in costs of sales during fiscal year 2015 compared to the prior fiscal year (in millions):

	Cost of Sales
Fiscal year ended September 30, 2014	$	3,279
Volumes, mix and other, net	(50		)
Foreign exchange	(186		)
Fiscal year ended September 30, 2015	$	3,043

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	$	(160	)
Lower labor and overhead costs	(89		)
Other, net	13
Total change in costs of sales	$	(236	)

Materialcosts represent the majority of our cost of sales and include raw materials, composed primarily of steel and purchased components. Material costs decreased by $160 million compared to the prior fiscal year primarily due to the movement in foreign currency rates, lower volume, and material cost savings.

Labor and overhead costs decreased by $89 million compared to the prior fiscal year primarily due to the movement in foreign currency rates, lower revenue, and savings associated with labor and burden cost reduction programs.

Other, net increased by $13 million compared to the prior fiscal year. The increase was primarily due to a $15 million

immediate recognition of negative prior service costs related to the curtailment of our retiree medical liability in the prior fiscal year partially offset by a decrease in foreign currency transaction losses.

Gross margin for fiscal year 2015 was$462 million compared to $487 million in fiscal year 2014. Gross margin, as a percentage of sales, was 13.2 percent and 12.9 percent for fiscal years 2015 and 2014, respectively.

Other Income Statement Items

SG&A for fiscal years 2015 and 2014 are summarized as follows (dollars in millions):

	2015					2014					Increase (Decrease)
	Amount			% of sales		Amount			% of sales
SG&A
Loss on sale of receivables	$	5		0.1	%	$	8		0.2	%	$	(3	)	(0.1) pts
Short- and long-term variable compensation	27			0.8	%	35			0.9	%	(8		)	(0.1) pts
Legal fee recovery from the Eaton settlement	—			—	%	(20		)	(0.5	)%	20			0.5 pts
Asbestos-related liability remeasurement	(2		)	—	%	20			0.5	%	(22		)	(0.5) pts
Long-term liability reduction	—			—	%	(5		)	(0.1	)%	5			0.1 pts
All other SG&A	213			6.0	%	220			5.8	%	(7		)	0.2 pts
Total SG&A	$	243		6.9	%	$	258		6.8	%	$	(15	)	0.1 pts

In the fourth quarter of fiscal year 2014, we incurred a $20 million charge associated with the re-measurement of our asbestos liabilities, net of expected insurance recoveries. The increase in our fiscal year 2014 net liability was primarily due to increased claim filings and higher projected defense costs.

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 In the third quarter of fiscal year 2014, as a result of the settlement with Eaton, ZF Meritor was obligated to reimburse the company $20 million for the recovery of current and prior period legal expenses. We recognized the recovery in SG&A as the historical incurrence of these costs was included in SG&A in the consolidated statements of operations in prior periods.  

In the first quarter of fiscal year 2014, we executed a change to our long-term disability benefit plan reducing the duration for which we provide medical and dental benefits to individuals on long-term disability to be more consistent with market practices. This resulted in a $5 million reduction in the liability associated with these benefits.

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

Pension settlement losses of $59 million were recognized during the fiscal year 2015. During the fourth quarter of fiscal year 2015, we recognized a $16 million loss associated with the settlement of our remaining Canadian pension plans through lump-sum payments and an annuity purchase and $43 million associated with the settlement of our remaining German pension plans through an annuity purchase. The loss was non-cash and related primarily to the acceleration of previously unrecognized actuarial losses already reflected in equity.

Goodwill Impairment costs of $15 million were recognized during the fourth quarter of fiscal year 2015 for the company's Defense reporting unit, which was included in the Commercial Truck and Industrial segment.

Restructuring costs were $16 million in fiscal year 2015, compared to $10 million in fiscal year 2014. In fiscal year 2015, our Commercial Truck & Industrial segment and corporate locations recognized $14 million and $2 million, respectively, of restructuring costs primarily related to employee severance costs. In fiscal year 2014, our Commercial Truck & Industrial segment and our Aftermarket & Trailer segment recognized $8 million and $1 million, respectively, of restructuring costs primarily related to employee severance costs. In addition, we recognized $1 million of restructuring costs at our corporate locations in fiscal year 2014.

Operating income for fiscal year 2015 was $128 million, compared to $217 million in fiscal year 2014. Key items affecting income are discussed above.

Equity in earnings of ZF Meritor was $190 million in fiscal year 2014 related to our share of the earnings related to the antitrust settlement with Eaton in the third quarter of fiscal year 2014.

Equity in earnings of affiliates was $39 million in fiscal year 2015, compared to $38 million in the prior year.

Interest expense, net was $105 million and $130 million in fiscal years 2015 and 2014, respectively. The decrease was primarily attributable to the capital markets transactions we executed in fiscal year 2015 that lowered our cost of debt as well as lower losses on debt extinguishments. 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. In addition, in fiscal year 2015, we repurchased $19 million principal amount of our 4.0 percent convertible notes due 2027. In fiscal year 2015, we recognized a $24 million loss on debt extinguishment, which was included in Interest expense, net, primarily related to the repurchase of our 7.875 percent convertible notes due 2026.

During fiscal year 2014, we exercised a call option to redeem $250 million principal amount of our 10.625 percent notes due 2018 at a premium equal to 5 percent of their principal amount and repaid the balance of our $45 million term loan, both of which were funded by available cash and the issuance of $225 million principal amount of our 6.25 percent notes due 2024. In the fourth quarter of fiscal year 2014, we repurchased the remaining $84 million principal amount of our 8.125 percent notes due 2015 as well as $38 million principal amount of our 4.0 percent convertible notes due 2027. We recognized a $31 million loss on debt extinguishment, which was included in Interest expense, net, related to these transactions.

Provision for income taxes was $1 million in fiscal year 2015 compared to $31 million in fiscal year 2014. The decrease in provision for income taxes was primarily attributable to tax benefits for the reversal of valuation allowances in Germany, Italy, Mexico and Sweden of $16 million. Provision for income taxes in fiscal year 2015 also decreased due to lower earnings in tax-paying jurisdictions.

Income from continuing operations (before noncontrolling interests) for fiscal year 2015 was $66 million compared to $284 million in fiscal year 2014. The reasons for the decrease are previously discussed.

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Loss from discontinued operations, net of tax for fiscal year 2015 was $1 million, compared to a loss of $30 million in the prior year. Significant items included in results from discontinued operations in fiscal year 2015 and 2014 include the following (in millions):

	Year Ended September 30,
	2015			2014
Operating loss, net (primarily Mascot)	$	—		$	(8	)
Loss on Mascot disposal (1)	—			(23		)
Environmental remediation charges	—			(4		)
Other, net	(2		)	(2		)
Loss before income taxes	(2		)	(37		)
Benefit for income taxes	1			7
Loss from discontinued operations attributable to Meritor, Inc.	$	(1	)	$	(30	)

⁽¹⁾ Includes loss on sale, severance and other disposal costs.

Net income attributable to noncontrolling interests was $1 million in fiscal year 2015 compared to $5 million in fiscal year 2014. Noncontrolling interests represent our minority partners’ share of income or loss associated with our less than 100-percent-owned consolidated subsidiaries.

Net Income attributable to Meritor, Inc. was $64 million for fiscal year 2015 compared to net income of $249 million for fiscal year 2014.Various factors affecting the decrease in net income were previously discussed.

Segment EBITDA and EBITDA Margins

The following table reflects Segment EBITDA and Segment EBITDA margins for fiscal years 2015 and 2014 (dollars in millions).

	Segment EBITDA							Segment EBITDA Margins
	2015		2014		Change			2015		2014		Change
Commercial Truck & Industrial	$	216	$	218	$	(2	)	7.9	%	7.3	%	0.6 pts
Aftermarket & Trailer	123		106		17			13.9	%	11.5	%	2.4 pts
Segment EBITDA	$	339	$	324	$	15		9.7	%	8.6	%	1.1 pts

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

	Commercial Truck & Industrial			Aftermarket & Trailer			TOTAL
Segment EBITDA–Year ended September 30, 2014	$	218		$	106		$	324
Higher earnings from unconsolidated affiliates	1			—			1
Impact of foreign currency exchange rates	(35		)	(6		)	(41		)
Short and long-term variable compensation	7			2			9
Volume, mix, pricing and other	25			21			46
Segment EBITDA – Year ended September 30, 2015	$	216		$	123		$	339

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Commercial Truck& Industrial Segment EBITDA was$216 million in fiscal year 2015, compared to $218 million in the prior fiscal year. Segment EBITDA margin increased to 7.9 percent in fiscal year 2015 compared to 7.3 percent in the prior fiscal year. Segment EBITDA margin increased as a result of successful execution of our M2016 initiatives, including cost performance and pricing actions. However, Segment EBITDA declined as this performance was more than offset by the impact of lower revenue and foreign currency translation.

Aftermarket & Trailer Segment EBITDA was $123 million in fiscal year 2015, up $17 million compared to the prior fiscal year. Segment EBITDA margin increased to 13.9 percent in fiscal year 2015 compared to 11.5 percent in fiscal year 2014. The increases in Segment EBITDA and Segment EBITDA margin were driven by continued cost performance and pricing actions.

Cash Flows (in millions)

	Fiscal Year Ended September 30,
	2016			2015			2014
OPERATING CASH FLOWS
Income from continuing operations	$	579		$	66		$	284
Depreciation and amortization	67			65			67
Loss on debt extinguishment	—			25			31
Deferred income tax benefit	(415		)	(24		)	(2		)
Pension and retiree medical expense	20			82			25
Gain on sale of property	(2		)	(3		)	—
Goodwill and asset impairment charges	—			17			—
Equity in earnings of ZF Meritor	—			—			(190		)
Equity in earnings of other affiliates	(36		)	(39		)	(38		)
Restructuring costs	16			16			10
Dividends received from ZF Meritor	—			—			190
Dividends received from other equity method investments	37			32			36
Pension and retiree medical contributions	(42		)	(141		)	(177		)
Restructuring payments	(11		)	(16		)	(10		)
Decrease (increase) in working capital	28			(12		)	20
Changes in off-balance sheet accounts receivable securitization and factoring	(31		)	39			(46		)
Other, net	(1		)	—			27
Cash flows provided by continuing operations	209			107			227
Cash flows used for discontinued operations	(5		)	(10		)	(12		)
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES	$	204		$	97		$	215

Cash provided by operating activities for fiscal year 2016 was $204 million compared to $97 million in fiscal year 2015 and $215 million in fiscal year 2014. The increase in cash flows provided by continuing operations in fiscal year 2016, compared to fiscal 2015, is due in part to $52 million received in fiscal year 2016 related to insurance settlements for recoveries for defense and indemnity costs associated with asbestos liabilities (refer to Note 23 in the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data), as well as $94 million used in fiscal year 2015 to fund a voluntary buyout of our German and Canadian pension plan obligations. The decrease in cash flows provided by continuing operations in fiscal year 2015, compared to fiscal year 2014, is primarily due to the $209 million in proceeds received from the settlement of the Eaton antitrust litigation in fiscal year 2014, partially offset by an increase in cash provided by our accounts receivable factoring program and lower contributions to our pension plans.

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	Fiscal Year Ended September 30,
	2016			2015			2014
INVESTING CASH FLOWS
Capital expenditures	$	(93	)	$	(79	)	$	(77	)
Proceeds from sale of property	4			4			—
Cash paid for acquisition of Morganton	—			(16		)	—
Other investing activities	(1		)	—			—
Net investing cash flows provided by discontinued operations	4			4			7
CASH USED FOR INVESTING ACTIVITIES	$	(86	)	$	(87	)	$	(70	)

Cash used for investing activities was $86 million in fiscal year 2016, compared to cash used for investing activities of $87 million in fiscal year 2015 and $70 million in fiscal year 2014. The increase in cash used for investing activities year over year is due largely to an increase in capital expenditures as we invest in new product development to support our revenue growth and operational performance initiatives. Capital expenditures were $93 million in fiscal year 2016 compared to $79 million in fiscal year 2015 and $77 million in fiscal year 2014.

Cash paid for acquisition of Morganton represents the purchase of the majority of the assets of Sypris Solutions, Inc.'s ("Sypris") Morganton, North Carolina manufacturing facility for $16 million in fiscal year 2015.

Net investing cash flows provided by discontinued operations in fiscal year 2016 and 2015 includes $3 million for the final and fourth installments, respectively, on the note receivable that was issued at the time of the sale of our Body Systems business.

Net investing cash flows provided by discontinued operations in fiscal year 2014 includes $4 million of proceeds from the sale of our Mascot business. In addition, we received $3 million for the third installment on the note receivable that was issued at the time of sale of our Body Systems business.

	Fiscal Year September 30,
	2016			2015			2014
FINANCING CASH FLOWS
Repayment of notes and term loan	$	(55	)	$	(199	)	$	(439	)
Proceeds from debt issuance	—			225			225
Debt issuance costs	—			(4		)	(10		)
Other financing activities	(16		)	(9		)	12
Net change in debt	(71		)	13			(212		)
Repurchase of common stock	(81		)	(55		)	—
CASH USED FOR FINANCING ACTIVITIES	$	(152	)	$	(42	)	$	(212	)

Cash used for financing activities was $152 million in fiscal year 2016 compared to cash used for financing activities of $42 million in fiscal year 2015 and $212 million in fiscal year 2014. In fiscal year 2016, cash used for financing activities is primarily related to the repurchase of all of the $55 million of outstanding principal amount 4.625 percent convertible notes at 100 percent of the face value of the notes and the repurchase 8.7 million shares of our common stock for $81 million (including commission costs). In fiscal year 2015, cash was provided by the issuance of $225 million principal amount of our 6.25 percent notes due 2024 in fiscal year 2015. A portion of net proceeds from this offering was used to repurchase our 7.875 percent convertible notes due 2026. Additionally, in fiscal year 2015, we spent $20 million on the repurchase of $19 million principal amount of our 4.0 percent convertible notes due 2027 (see Note 16 in the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data). We also spent $55 million on the repurchase of 4.2 million shares of our common stock in fiscal year 2015 (see Note 18 in the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data).

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During fiscal year 2014, we issued $225 million of 6.25 percent notes due 2024. Net proceeds from the issuance of these notes were used along with available cash to repurchase $250 million principal amount of our 10.625 percent notes due 2018 at a premium of $13 million. We also repurchased $38 million principal amount of our 4.0 percent convertible notes due 2027 and $84 million principal amount of our 8.125 percent notes due 2015. The outstanding term loan balance of $45 million was paid in fiscal year 2014.

Contractual Obligations

As of September 30, 2016, we are contractually obligated to make payments as follows (in millions):

	Total		2017		2018		2019		2020		2021		Thereafter(2)
Total debt (1)	$	1,034	$	14	$	4	$	2	$	1	$	277	$	736
Operating leases	97		16		15		15		14		11		26
Interest payments on long-term debt	456		63		63		63		63		58		146
Total	$	1,587	$	93	$	82	$	80	$	78	$	346	$	908

(1) Total debt excludes unamortized discount on convertible notes of $14 million, unamortized issuance costs of $15 million, and original issuance discount of $9 million.

(2) Includes our 4.0 percent and 7.875 percent convertible notes which contain a put and call feature that allows for earlier redemption beginning in 2019 and 2020, respectively (refer to Note 16 in the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data Convertible Securities below).

We also sponsor defined benefit pension plans that cover certain of our U.S. employees and certain non-U.S. employees. Our funding practice provides that annual contributions to the pension trusts will be at least equal to the minimum amounts required by ERISA in the U.S. and the actuarial recommendations or statutory requirements in other countries. Management expects funding for our retirement pension plans of approximately $6 millionin fiscal year 2017.

We also sponsor retirement medical plans that cover certain of our U.S. and non-U.S. employees and retirees, including certain employees of divested businesses, and provide for medical payments to eligible employees and dependents upon retirement. Management expects gross retiree medical plan benefit payments of approximately $40 million, $40 million, $40 million, $40 million and $40 million in fiscal years 2017, 2018, 2019, 2020 and 2021, respectively, before consideration of any Part D reimbursement from the U.S. government.

Contractual obligations identified in the table above do not include liabilities associated with uncertain tax positions of $16 million due to the high degree of uncertainty regarding the future cash outflows associated with these amounts. For additional discussion of uncertain tax positions, refer to Note 22 in the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

Liquidity

Our outstanding debt, net of discounts and unamortized debt issuance costs where applicable, is summarized below (in millions). For a detailed discussion of terms and conditions related to this debt, see Note 16 in the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

	September 30,
	2016			2015
Fixed-rate debt securities	$	713		$	712
Fixed-rate convertible notes	271			324
Unamortized discount on convertible notes	(14		)	(20		)
Other borrowings	26			35
Total debt	$	996		$	1,051

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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 2017 capital expenditures 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. 

     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.

Sources of liquidity as of September 30, 2016, in addition to cash on hand, are as follows (in millions):

	Total Facility Size		Utilized as of 9/30/16		Readily Available as of 9/30/16		Current Expiration
On-balance sheet arrangements:
Revolving credit facility(1)	$	506	$	—	$	506	February 2019(1)
Committed U.S. accounts receivable securitization(2)	100		—		71		December 2018
Total on-balance sheet arrangements	606		—		577
Off-balance sheet arrangements:(2)
Swedish Factoring Facility	$	174	$	135	$	—	December 2016
U.S. Factoring Facility (3)	90		44		—		February 2019
U.K. Factoring Facility	28		6		—		February 2018
Italy Factoring Facility	34		24		—		June 2017
Other uncommitted factoring facilities	22		10		—		Various
Letter of credit facility	25		23		2		March 2019
Total off-balance sheet arrangements	373		242		2
Total available sources	$	979	$	242	$	579

(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 $498 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 September 30, 2016, we had $160 million in cash and cash equivalents.

At September 30, 2016, we had approximately $23 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 as we expect to meet our liquidity needs in the U.S. through ongoing cash flows from operations in the U.S., external borrowings or both.

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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 agreement, which may limit our borrowings under the 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 September 30, 2016, we were in compliance with all covenants under our credit agreement.

Equity and Equity-Linked Repurchase Authorizations - 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. Under this program, we repurchased 12.8 million shares of our common stock for $136 million (including commission costs), $19 million principal amount of our 4.0 percent convertible notes due 2027, and all $55 million outstanding principal amount of our 4.625 percent convertible notes due 2026 (see Note 18 of the Notes to Consolidated Financial Statements). The repurchase program under the $210 million authorization was complete as of September 30, 2016.

On July 21, 2016, our Board of Directors authorized the repurchase of up to $100 million of our common stock from time to time through open market purchases, privately negotiated transactions or otherwise, until September 30, 2019, subject to compliance with legal and regulatory requirements and our debt covenants. The amount remaining available for repurchases under this authorization was $100 million as of November 30, 2016.

Debt Repurchase Authorizations - In addition to the repurchase authorizations described above, in January 2015, the Offering Committee of our Board of Directors approved a repurchase authorization for up to $150 million aggregate principal amount of any of our public debt securities (including convertible debt securities). No repurchases were made under this authorization prior to it being replaced by the authorization described below on July 21, 2016.

On July 21, 2016, our Board of Directors authorized the repurchase of up to $150 million aggregate principal amount of any of our debt securities (including convertible debt securities) from time to time through open market purchases, privately negotiated transactions or otherwise, until September 30, 2019, subject to compliance with legal and regulatory requirements and our debt covenants. No repurchases had been made under this authorization as of November 30, 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 year 2014, 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.

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The 2024 Notes constitute senior unsecured obligations of Meritor and rank equally in right of payment with its 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 100 percent of principal amount of the 2024 Notes to be redeemed, plus the applicable make-whole premium (as defined in the indenture under which the 2024 Notes were issued) 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. 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, we 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.

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 Debt Securities - On March 1, 2016, substantially all $55 million outstanding principal amount 4.625 percent convertible notes were repurchased at 100 percent of the face value of the notes. On April 15, 2016, the remaining 4.625 percent convertible notes were redeemed at 100 percent of the face value. As of September 30, 2016, none of the 4.625 percent convertible notes remain outstanding. The repurchases were made under our equity and equity-linked repurchase authorizations (see Note 18 of the Notes to Consolidated Financial Statements). The repurchase program under these authorizations was complete as of September 30, 2016.

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 reflected the market price of these notes at the time, which included 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. The net loss on debt extinguishment was included in Interest expense, net in the consolidated statement of operations. 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 June 2, 2016, we entered into a third amendment of our senior secured revolving credit facility. The amendment increased the 2019 revolving loan commitment to $466 million, permits us to execute certain internal restructuring plans, including the release of certain guarantors when required by such plans, and reset covenant basket amounts. Pricing and maturity dates remained unchanged. Subsequent to the amendment, certain lenders converted their $32 million of 2017 revolving

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loan commitments to 2019 revolving loan commitments and are now subject to the terms of 2019 lenders. Pursuant to the revolving credit agreement, we now have a $506 million revolving credit facility, $8 million of which matures in April 2017 for banks not electing to extend their commitments under the revolving credit facility, and $498 million of which matures 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 September 30, 2016, we were in compliance with all covenants under the revolving credit facility with a ratio of approximately 0.19x 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 September 30, 2016, the revolving credit facility was collateralized by approximately $693 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 our 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 September 30, 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 27 of the Notes to the Consolidated Financial Statements).

No borrowings were outstanding under the revolving credit facility at September 30, 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 September 30, 2016 and September 30, 2015, there were no letters of credit outstanding under the revolving credit facility.

U.S. Securitization Program – We have a $100 million U.S. accounts receivables securitization facility. On December 4, 2015, we entered into an amendment which extended 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 September 30, 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 September 30, 2016, we were in compliance with all covenants under our credit agreement (see Note 16 in the Notes to the Consolidated Financial Statements). 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 our various U.S. locations. Under this arrangement, we can request financing from Wells Fargo Equipment Finance ("Wells Fargo", which acquired this business from GE Capital Commercial, Inc.) 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 Wells Fargo 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. As of September 30, 2016 and 2015, we had $7 million and $10 million, respectively, outstanding under this capital lease arrangement. In addition, we had another $9 million and $7 million, respectively, outstanding through other capital lease arrangements at September 30, 2016 and 2015.

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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 were $9 million and $18 million outstanding under these arrangements at September 30, 2016 and 2015, respectively.

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 September 30, 2016 and 2015, we had $10 million and $13 million, respectively, outstanding under this program at more than one bank.

Credit Ratings –At September 30, 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 are 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 total amounts utilized at September 30, 2016 of $220 million, of which $179 was attributable to committed factoring facilities involving the sale of AB Volvo accounts receivables. The remaining amount of $41 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 December 2016. 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).

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. At September 30, 2016 and 2015, we had $23 million and $24 million, respectively, of letters of credit outstanding under this facility. In addition, we had another $5 million and $6 million of letters of credit outstanding through other letter of credit facilities as of September 30, 2016 and 2015.

Contingencies

Contingencies related to environmental, asbestos and other matters are discussed in Note 23 in the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

Critical Accounting Policies

Critical accounting policies are those that are most important to the portrayal of the company’s financial condition and results of operations. These policies require management’s most difficult, subjective or complex judgments in the preparation of the financial statements and accompanying notes. Management makes estimates and assumptions about the effect of matters that are inherently uncertain, relating to the reporting of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. Our most critical accounting policies are discussed below.

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Pensions — 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. Our pension obligations are determined annually and were measured as of September 30, 2016 and 2015.

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 that raised the life expectancies. We reviewed the new SOA mortality and mortality improvement tables and utilized our actuary to conduct a study based on our plan participants. We have determined that the best representation of our plans' mortality is 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. As a result of this change in actuarial assumption, our U.S. pension obligations increased by $24 million, and our U.S. OPEB obligations decreased by $18 million, in fiscal year 2015. We consider improvement scales released annually by the SOA. These did not have an impact in fiscal year 2016.

The U.S. plans include a qualified and non-qualified pension plan. In fiscal year 2016, the only significant non-U.S. plan is located in the U.K. The following are the significant assumptions used in the measurement of the projected benefit obligation ("PBO") and net periodic pension expense:

	2016				2015
	U.S.			U.K. (3)	U.S.			Non-U.S. (3)
Assumptions as of September 30:
Discount rate (1)	3.50%	—	3.55%	2.50%	4.25%	—	4.35%	1.00%	—	3.80%
Assumed return on plan assets (beginning of the year)(1)(2)	7.75%			6.00%	8.00%			2.25%	—	7.25%

⁽¹⁾  The discount rate for the company’s U.K. pension plan was 2.50 percent and 3.80 percent for fiscal years 2016 and 2015, respectively. The assumed return on plan assets for this plan was 6.00 percent and 7.25 percent for fiscal years 2016 and 2015, respectively.

⁽²⁾  The assumed return on plan assets for fiscal year 2017 is 7.75 percent for the U.S. plan and 6.00 percent for the U.K. plan.

⁽³⁾  In fiscal year 2015, our German and Canadian pension plans were settled. In 2016, assumptions presented are for the U.K pension plan, which is the only significant non-U.S. plan remaining.

The discount rate is used to calculate the present value of the PBO at the balance sheet date and net periodic pension expense for the subsequent fiscal year. The rate used reflects a rate of return on high-quality fixed income investments that match the duration of expected benefit payments. Generally we use a portfolio of long-term corporate AA/Aa bonds that match the duration of the expected benefit payments, except for our U.K. pension plan which uses an annualized yield curve, to establish the discount rate for this assumption.

The assumed return on plan assets is used to determine net periodic pension expense. The rate of return assumptions are based on projected long-term market returns for the various asset classes in which the plans are invested, weighted by the target asset allocations. An incremental amount for diversification, rebalancing and active management, where appropriate, is included in the rate of return assumption. The return assumptions are reviewed annually.

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These assumptions reflect our historical experience and our best judgments regarding future expectations. The effects of the indicated increase and decrease in selected assumptions, assuming no changes in benefit levels and no amortization of gains or losses for the plans in 2016, are shown below (in millions):

	Effect on All Plans – September 30, 2016
	Percentage Point Change	Increase (Decrease) in PBO			Increase (Decrease) in Pension Expense
Assumption:
Discount rate	-0.5 pts	$	126		$	—
	+0.5 pts	(114		)	—
Assumed return on plan assets	-1.0 pts	N/A (1)			14
	+1.0 pts	N/A (1)			(14		)

⁽¹⁾ Not Applicable

Accounting guidance applicable to pensions does not require immediate recognition of the effects of a deviation between actual and assumed experience and the revision of an estimate. This approach allows the favorable and unfavorable effects that fall within an acceptable range to be netted and disclosed as an unrecognized gain or loss in the footnotes. Based on the September 30, 2016 and 2015 measurement dates, we had an unrecognized loss of $791 million and $744 million, respectively. A portion of this loss is amortized into earnings each fiscal year. Unrecognized losses for the U.S. and U.K. plans are being amortized into net periodic pension expense over the average life expectancy of the inactive participants of approximately 21 years and 27 years, respectively.

In recognition of the long-term nature of the liabilities of the pension plans, we have targeted an asset allocation strategy designed to promote asset growth while maintaining an acceptable level of risk over the long term. Asset-liability studies are performed periodically to validate the continued appropriateness of these asset allocation targets. The asset allocation ranges for the U.S. plan are 30–50 percent equity investments, 30–50 percent fixed income investments and 10–30 percent alternative investments. Alternative investments include private equities, real estate, hedge funds and partnership interests. The target asset allocation ranges for the non-U.S. plans are 15–35 percent equity investments, 30–60 percent fixed income investments, 0–10 percent real estate and 10–30 percent alternative investments. The asset class mix and the percentage of securities in any asset class or market may vary as the risk/return characteristics of either individual market or asset classes vary over time.

The investment strategies for the pension plans are designed to achieve an appropriate diversification of investments as well as safety and security of the principal invested. Assets invested are allocated to certain global sub-asset categories within prescribed ranges in order to promote international diversification across security type, issuer type, investment style, industry group, and economic sector. Assets of the plans are both actively and passively managed. Policy limits are placed on the percentage of plan assets that can be invested in a security of any single issuer and minimum credit quality standards are established for debt securities. Meritor securities did not comprise any of the value of our worldwide pension assets as of September 30, 2016.

Based on current assumptions, the fiscal year 2017 net pension income is estimated to be $13 million.

Retiree Medical — We have retirement medical plans that cover certain of our U.S. and non-U.S. employees and provide for medical payments to eligible employees and dependents upon retirement. Our retiree medical obligations were measured as of September 30, 2016 and September 30, 2015.

The following are the significant assumptions used in the measurement of the accumulated postretirement benefit obligation (APBO):

	2016		2015
Assumptions as of September 30:
Discount rate	3.45	%	4.20	%
Health care cost trend rate	7.10	%	7.00	%
Ultimate health care trend rate	4.75	%	5.00	%
Year ultimate rate is reached	2024		2022

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The discount rate is the rate used to calculate the present value of the APBO. The rate is determined based on high-quality fixed income investments that match the duration of expected benefit payments. We used the corporate AA/Aa bond rate for this assumption.

The health care cost trend rate represents the company’s expected annual rates of change in the cost of health care benefits. Our projection for fiscal year 2017 is 7.10 percent. For measurement purposes, the annual increase in health care costs was assumed to decrease gradually to 4.75 percent by fiscal year 2024 and remain at that level thereafter.

A one-percentage point change in the assumed health care cost trend rate for all years to, and including, the ultimate rate would have the following effects (in millions):

	2016			2015
Effect on total of service and interest cost
1% Increase	$	1		$	2
1% Decrease	(1		)	(1		)
Effect on APBO
1% Increase	40			39
1% Decrease	(35		)	(34		)

Based on current assumptions, fiscal year 2017 retiree medical expense is estimated to be approximately $27 million.

Product Warranties — Our business segments record estimated product warranty costs at the time of shipment of products to customers. Liabilities for product recall campaigns are recorded at the time the company’s obligation is known 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.

Significant factors and information used by management when estimating product warranty liabilities include:

• Past claims experience;

• Sales history;

• Product manufacturing and industry developments; and

• Recoveries from third parties, where applicable.

Asbestos — Maremont Corporation (“Maremont”) — 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 September 30, 2016 and 2015, respectively. Although Maremont has been named in these cases, very few cases allege actual injury and, 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 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 advised Maremont that it would be possible to determine an estimate of a reasonable forecast 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 occur in the future.

As of September 30, 2016, 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 $70 million to $83 million . After consultation with Bates White, Maremont recognized a liability for pending and future claims over the next ten years of $70 million and $71 million as of September 30, 2016 and 2015, respectively. 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. Maremont recognized $2 million of expense and $2 million of income in fiscal years 2016 and 2015, respectively, associated with its annual valuation of asbestos-related liabilities. Maremont has recognized incremental insurance

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receivables associated with recoveries expected for asbestos-related liabilities as the estimate of asbestos-related liabilities for pending and future claims changes.

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 2026;

• 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 declines 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 plaintiff’s law firms in jurisdictions without an established history with Maremont cannot be reasonably estimated.

Maremont has historically had insurance that reimburses a substantial portion of the costs incurred defending against asbestos-related claims. The insurance receivable related to asbestos-related liabilities was $32 million and $41 million as of September 30, 2016 and 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.

Maremont maintained insurance coverage with other insurance carriers that management believed also provided coverage for 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. During the first quarter of fiscal year 2016, the dispute related to these insurance policies was settled. As part of this settlement, on December 12, 2015, Maremont received $17 million in cash, 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. During the fourth quarter of fiscal year 2016, Maremont recognized an additional $9 million of the cash settlement proceeds as a reduction in asbestos expense. As of September 30, 2016, $3 million remained recorded as a liability to the insurance carrier. The settlement also provides additional recovery for Maremont if certain future defense and indemnity 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 firm, jurisdiction and disease; 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.

Asbestos — Rockwell International — 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 September 30, 2016 and 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.

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We 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. As of September 30, 2016, 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 $60 million to $75 million. After consultation with Bates White, management recognized a liability for pending and future claims over the next ten years of $60 million as of September 30, 2016 compared to $55 million as of 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. The increase in the estimated liability is primarily due to higher settlement values, compared to the prior year. AM recognized a $2 million and $4 million charge in the fourth quarter of fiscal years 2016 and 2015, respectively, associated with its annual valuation of asbestos-related liabilities.

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 2026;

• 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 declines 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: Rockwell has insurance coverage that management believes covers indemnity and defense costs, over and above self-insurance retentions, for a significant portion of these claims. In 2004, we initiated litigation against certain of these carriers to enforce the insurance policies. During the fourth quarter of fiscal year 2016, we executed settlement agreements with two of these carriers, thereby resolving the litigation against those particular carriers. Pursuant to the terms of one of those settlement agreements, we received $32 million in cash from an insurer, of which $10 million was recognized as a reduction in asbestos expense, and $22 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 ultimately incurred. Pursuant to the terms of a second settlement agreement, we recorded a $12 million receivable to reflect expected reimbursement of future defense and indemnity payments under a coverage-in-place arrangement with that insurer. In addition to the coverage provided from the settlements executed during the fourth quarter of fiscal year 2016, the company continues to maintain a receivable of $6 million related to a previously executed coverage-in-place arrangement with other insurers. The insurance receivables for Rockwell’s asbestos-related liabilities totaled $27 million and $14 million as of September 30, 2016 and 2015, respectively. Included in these amounts are insurance receivables of $9 million at both September 30, 2016 and 2015, which are associated with policies in dispute. Although we continue to pursue litigation and believe we have insurance coverage, the collection of the $9 million has become doubtful; therefore, in the fourth quarter of fiscal year 2016, we recorded a $9 million reserve.

Also, during the third quarter of fiscal year 2016, we reached a settlement, relating to certain proofs of claim filed by us under certain insurance policies, with an insolvent insurer for $6 million (the "allowed claim"). On June 17, 2016, we entered into an assignment of claim (“Assignment”) with a third party to assign the allowed claim we had against the insolvent insurer. The Assignment was approved by the liquidator, which resulted in us receiving $3 million and was recognized as a reduction of selling, general and administrative expenses in the consolidated statement of operations in the third quarter of fiscal year 2016.

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

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Goodwill — Goodwill is reviewed for impairment annually 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, we may be required to record impairment charges for goodwill at that time.

We have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads us to determine that it is more-likely-than-not that the fair value of our reporting units is less than its carrying amount. If after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then a subsequent two-step impairment test is unnecessary. If we conclude otherwise, then we are required to test goodwill for impairment under a subsequent two-step process. We may elect to forgo this assessment and proceed directly to the two-step process.

Step one consists of a comparison of the fair value of a reporting unit with its carrying amount. An impairment loss may be recognized if the review indicates that the carrying value of a reporting unit exceeds its fair value. Estimates of fair value are primarily determined by using discounted cash flows and market multiples on earnings. If the carrying amount of a reporting unit exceeds its fair value, step two requires the fair value of the reporting unit to be allocated to the underlying assets and liabilities of that reporting unit, resulting in an implied fair value of goodwill. If the carrying amount of the goodwill of the reporting unit exceeds the implied fair value, an impairment charge is recorded equal to the excess.

The impairment review is highly judgmental and involves the use of significant estimates and assumptions. These estimates and assumptions have a significant impact on the amount of any impairment charge recorded. Discounted cash flow methods are dependent upon assumptions of future sales trends, market conditions and cash flows of each reporting unit over several years. Actual cash flows in the future may differ significantly from those previously forecasted.

Sales for our primary military program were at their peak during fiscal year 2012 and began to decline in fiscal year 2013. The program wound down to insignificant levels in 2015 and is expected to remain insignificant until completion of the program.

In the fourth quarter of fiscal year 2015, the U.S. Army awarded a new contract for the production of the Joint Light Tactical Vehicle to Oshkosh. We expect production for this program to ramp up over the next several years. Although we expect to supply wheel-ends on this program, our revenue is expected to be significantly less than if the program was awarded differently and we were supplying our ProTec Independent Suspension.

Based on sales expectations for currently awarded programs, the fair value of our Defense business at September 30, 2015 did not exceed its carrying value enough to support the goodwill associated with it. As a result, we recorded an impairment of $15 million, pre-tax, of goodwill in the fourth quarter of fiscal year 2015. The fair value of the other reporting units substantially exceeded their carrying values.

For fiscal year 2016, the fair value of all of our reporting units exceeded their carrying values.

Impairment of Long-Lived Assets - Long-lived assets, excluding goodwill, to be held and used are reviewed for impairment whenever adverse events or changes in circumstances indicate a possible impairment. An impairment loss is recognized when the long-lived assets’ carrying value exceeds the fair value. If business conditions or other factors cause the operating results and cash flows to decline, we may be required to record impairment charges at that time. Long-lived assets held for sale are recorded at the lower of their carrying amount or fair value less cost to sell. Significant judgments and estimates used by management when evaluating long-lived assets for impairment include:

• An assessment as to whether an adverse event or circumstance has triggered the need for an impairment review;

• Undiscounted future cash flows generated by the asset; and

• Probability and estimated future cash flows associated with alternative courses of action that are being considered to recover the carrying amount of a long-lived asset.

In the fourth quarter of fiscal year 2015, the U.S. Army awarded a new contract for the production of the Joint Light Tactical Vehicle to Oshkosh, for which we will supply wheel-ends. However, we made certain capital investments and commitments to supply our ProTec Independent Suspension had the JLTV program been awarded differently. As a result, we recorded an impairment of $2 million of long-lived assets in the fourth quarter of fiscal year 2015.

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Income Taxes —Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. If it is more-likely-than-not that the deferred tax asset will be realized, no valuation allowance is recorded. Management's judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and the valuation allowance recorded against the net deferred tax assets. The valuation allowance would need to be adjusted in the event future taxable income is materially different than amounts estimated. Significant judgments, estimates and factors considered by management in its determination of the probability of the realization of deferred tax assets include:

• Historical operating results;

• Expectations of future earnings;

• Tax planning strategies; and

• The extended period of time over which retirement medical and pension liabilities will be paid.

In prior years, we established valuation allowances against our U.S. net deferred tax assets and the net deferred tax assets of our 100-percent-owned subsidiaries, including those in France, Germany, Italy, Sweden, U.K. and certain other countries. In evaluating our ability to recover these net deferred tax assets, we utilize a consistent approach which considers our 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/or tax planning strategies. In addition, we review changes in near-term market conditions and other factors that impact future operating results.

During the fourth quarter of fiscal year 2016, as a result of sustained profitability in the U.S. evidenced by a strong earnings history, future forecasted earnings, and additional positive evidence, we determined it was more likely than not that we would be able to realize our deferred tax assets. Accordingly, we reversed a portion of the valuation allowance in the U.S. resulting in a non-cash income tax benefit of $438 million. In fiscal year 2015, we reversed valuation allowances in Germany, Italy, Mexico and Sweden, resulting in non-cash income tax benefits of $16 million.

During the fourth quarter of fiscal year 2016, due to a three-year cumulative loss and future economic uncertainty, we concluded that a valuation allowance was required in Brazil. This resulted in a non-cash charge to income tax expense of $9 million. We continue to maintain the valuation allowances in France, U.K., and certain other jurisdictions, as we believe the negative evidence that we will be able to recover these net deferred tax assets continues to outweigh the positive evidence. If, in the future, we generate taxable income on a sustained basis, the conclusion regarding the need for valuation allowances in these jurisdictions could change.

The expiration periods for deferred tax assets related to net operating losses and tax credit carryforwards as of September 30, 2016 are included below (in millions). Also included are the associated valuation allowances on these deferred tax assets (in millions).

	Fiscal Year Expiration Periods
	2017-2021		2022-2031		2032-2036		Indefinite		Total
Net Operating Losses and Tax Credit Carryforwards	$	25	$	160	$	10	$	260	$	455
Valuation Allowances on these Deferred Tax Assets	$	24	$	56	$	8	$	253	$	341

New Accounting Pronouncements

New Accounting Pronouncements are discussed in Note 2 in the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

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International Operations

Approximately 46 percent of our total assets as of September 30, 2016 and 49 percent of fiscal year 2016 sales from continuing operations were outside the United States. Management believes that international operations have significantly benefited the financial performance of the company. However, our international operations are subject to a number of risks inherent in operating abroad, as discussed in Item 1A. Risk Factors. There can be no assurance that these risks will not have a material adverse impact on our ability to increase or maintain our foreign sales or on our financial condition or results of operations.

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Item 7A. 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. For fiscal years 2016, 2015 and 2014, our reported financial results were adversely affected by the appreciation of the U.S. dollar against foreign currencies relative to the prior year.

We use foreign currency forward contracts to minimize the earnings exposures arising from foreign currency exchange risk on foreign currency purchases and sales. Gains and losses on the underlying foreign currency exposures are partially offset with gains and losses on the foreign currency forward contracts. Under this cash flow hedging program, we designate the foreign currency contracts (the contracts) as cash flow hedges of underlying foreign currency forecasted 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 shareholders’ 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. 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. In the fourth quarter of fiscal year 2016, we entered into a new series of foreign currency option contracts with effective dates from the start of the first quarter of fiscal year 2017 through the end of fiscal year 2018. 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 exposureof Brazilian real earnings to U.S. dollars. In the second quarter of fiscal 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. Changes in fair value associated with these contracts were recorded in other income, net, in the consolidated statements of operations. As of September 30, 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 did not qualify for hedge accounting but were expected to mitigate foreign currency translation exposureof Swedish krona and euro earnings to U.S. dollars. Changes in fair value associated with these contracts were 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 in our debt balances and interest expense associated with changes in interest rates. To manage this risk, we enter into interest rate swaps from time to time to economically convert portions of our fixed-rate debt into floating rate exposure, ensuring that the sensitivity of the economic value of debt falls within our corporate risk tolerances. It is our policy not to enter into derivative instruments for speculative purposes, and therefore, we hold no derivative instruments for trading purposes.

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

Market Risk	Assuming a 10% Increase in Rates			Assuming a 10% Decrease in Rates			Increase / (Decrease) In
Foreign Currency Sensitivity:
Forward contracts in USD (1)	2.9			(2.9		)	Fair Value
Forward contracts in Euro (1)	(7.4		)	7.4			Fair Value
Foreign currency denominated debt (2)	1.7			(1.7		)	Fair Value
Foreign currency option contracts in USD	(0.7		)	3.2			Fair Value
Foreign currency option contracts in Euro	(0.9		)	3.7			Fair Value
Interest Rate Sensitivity:	Assuming a 50 BPS Increase in Rates			Assuming a 50 BPS Decrease in Rates			Increase / (Decrease) In
Debt - fixed rate (3)	$	(30.1	)	$	31.3		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 September 30, 2016, the fair value of outstanding foreign currency denominated debt was $17 million. A 10% decrease in quoted currency exchange rates would result in a decrease of $1.7 million in foreign currency denominated debt. At September 30, 2016, a 10% increase in quoted currency exchange rates would result in an increase of $1.7 million in foreign currency denominated debt.

(3) At September 30, 2016, the fair value of outstanding debt was $1,051 million. A 50 basis points decrease in quoted interest rates would result in an increase of $31.3 million in the fair value of fixed rate debt. A 50 basis points increase in quoted interest rates would result in a decrease of $30.1 million in the fair value of fixed rate debt.

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Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareowners of Meritor, Inc.

Troy, Michigan

We have audited the accompanying consolidated balance sheets of Meritor, Inc. and subsidiaries (the "Company") as of October 2, 2016 and September 27, 2015, and the related consolidated statements of operations, comprehensive income, equity (deficit), and cash flows for each of the three years in the period ended October 2, 2016.These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Meritor, Inc. and subsidiaries as of October 2, 2016 and September 27, 2015, and the results of their operations and their cash flows for each of the three years in the period ended October 2, 2016, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of October 2, 2016, based on the criteria established in Internal Control - Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated December 1, 2016, expressed an adverse opinion on the Company's internal control over financial reporting.

/s/	DELOITTE & TOUCHE LLP
	DELOITTE & TOUCHE LLP

Detroit, Michigan

December 1, 2016

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MERITOR, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(In millions, except per share amounts)

	Year Ended September 30,
	2016			2015			2014
Sales	$	3,199		$	3,505		$	3,766
Cost of sales	(2,763		)	(3,043		)	(3,279		)
GROSS MARGIN	436			462			487
Selling, general and administrative	(213		)	(243		)	(258		)
Pension settlement losses	—			(59		)	—
Restructuring costs	(16		)	(16		)	(10		)
Goodwill impairment	—			(15		)	—
Other operating expense, net	(3		)	(1		)	(2		)
OPERATING INCOME	204			128			217
Other income (expense), net	(1		)	5			—
Equity in earnings of ZF Meritor	—			—			190
Equity in earnings of other affiliates	36			39			38
Interest expense, net	(84		)	(105		)	(130		)
INCOME BEFORE INCOME TAXES	155			67			315
Benefit (provision) for income taxes	424			(1		)	(31		)
INCOME FROM CONTINUING OPERATIONS	579			66			284
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(4		)	(1		)	(30		)
NET INCOME	575			65			254
Less: Net income attributable to noncontrolling interests	(2		)	(1		)	(5		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	573		$	64		$	249
NET INCOME ATTRIBUTABLE TO MERITOR, INC.
Net income from continuing operations	$	577		$	65		$	279
Loss from discontinued operations	(4		)	(1		)	(30		)
Net income	$	573		$	64		$	249
BASIC EARNINGS (LOSS) PER SHARE
Continuing operations	$	6.40		$	0.67		$	2.86
Discontinued operations	(0.04		)	(0.01		)	(0.31		)
Basic earnings per share	$	6.36		$	0.66		$	2.55
DILUTED EARNINGS (LOSS) PER SHARE
Continuing operations	$	6.27		$	0.65		$	2.81
Discontinued operations	(0.04		)	(0.01		)	(0.30		)
Diluted earnings per share	$	6.23		$	0.64		$	2.51
Basic average common shares outstanding	90.1			96.9			97.5
Diluted average common shares outstanding	92.0			100.1			99.2

See Notes to Consolidated Financial Statements.

66

MERITOR, INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in millions)

	Year Ended September 30,
	2016			2015			2014
Net income	$	575		$	65		$	254
Other comprehensive income:
Foreign currency translation adjustments	(12		)	(97		)	(20		)
Pension and other postretirement benefit related adjustments (net of tax of $33, $5 and $2 at September 30, 2016, 2015 and 2014, respectively)	(35		)	84			3
Unrealized gain (loss) on investment and foreign exchange contracts	4			(6		)	2
Total comprehensive income	532			46			239
Less: Comprehensive (income) loss attributable to noncontrolling interest	(2		)	1			(5		)
Comprehensive income attributable to Meritor, Inc.	$	530		$	47		$	234

See Notes to Consolidated Financial Statements.

67

MERITOR, INC.

CONSOLIDATED BALANCE SHEET

(In millions)

	September 30,
	2016			2015
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	160		$	193
Receivables, trade and other, net	396			461
Inventories	316			338
Other current assets	33			50
TOTAL CURRENT ASSETS	905			1,042
NET PROPERTY	439			419
GOODWILL	390			402
OTHER ASSETS	760			332
TOTAL ASSETS	$	2,494		$	2,195
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Short-term debt	$	14		$	15
Accounts and notes payable	475			574
Other current liabilities	268			279
TOTAL CURRENT LIABILITIES	757			868
LONG-TERM DEBT	982			1,036
RETIREMENT BENEFITS	703			632
OTHER LIABILITIES	238			305
TOTAL LIABILITIES	2,680			2,841
COMMITMENTS AND CONTINGENCIES (NOTE 23)
EQUITY (DEFICIT):
Common stock (September 30, 2016 and 2015, 99.6 and 98.8 shares issued and 86.8 and 94.6 shares outstanding, respectively)	99			99
Additional paid-in capital	876			865
Accumulated deficit	(241		)	(814		)
Treasury stock, at cost (September 30, 2016 and 2015, 12.8 and 4.2 shares, respectively)	(136		)	(55		)
Accumulated other comprehensive loss	(809		)	(766		)
Total deficit attributable to Meritor, Inc.	(211		)	(671		)
Noncontrolling interests	25			25
TOTAL DEFICIT	(186		)	(646		)
TOTAL LIABILITIES AND DEFICIT	$	2,494		$	2,195

See Notes to Consolidated Financial Statements.

68

MERITOR, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(In millions)

	Year Ended September 30,
	2016			2015			2014
OPERATING ACTIVITIES
CASH PROVIDED BY OPERATING ACTIVITIES (see Note 26)	$	204		$	97		$	215
INVESTING ACTIVITIES
Capital expenditures	(93		)	(79		)	(77		)
Proceeds from sale of property	4			4			—
Cash paid for acquisition of Morganton	—			(16		)	—
Other investing activities	(1		)	—			—
Net investing cash flows used for continuing operations	(90		)	(91		)	(77		)
Net investing cash flows provided by discontinued operations	4			4			7
CASH USED FOR INVESTING ACTIVITIES	(86		)	(87		)	(70		)
FINANCING ACTIVITIES
Proceeds from debt issuances	—			225			225
Repayment of notes and term loan	(55		)	(199		)	(439		)
Debt issuance costs	—			(4		)	(10		)
Other financing activities	(16		)	(9		)	12
Net change in debt	(71		)	13			(212		)
Repurchase of common stock	(81		)	(55		)	—
CASH USED FOR FINANCING ACTIVITIES	(152		)	(42		)	(212		)
EFFECT OF CHANGES IN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1			(22		)	(4		)
CHANGE IN CASH AND CASH EQUIVALENTS	(33		)	(54		)	(71		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	193			247			318
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	160		$	193		$	247

See Notes to Consolidated Financial Statements.

69

MERITOR, INC. CONSOLIDATED STATEMENT OF EQUITY (DEFICIT) (In millions)
	Common Stock		Additional Paid-in Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Loss			Total Deficit Attributable to Meritor, Inc.			Non- controlling Interests			Total
Beginning balance at September 30, 2015	$	99	$	865		$	(814	)	$	(55	)	$	(766	)	$	(671	)	$	25		$	(646	)
Comprehensive income (loss)	—		—			573			—			(43		)	530			2			532
Equity based compensation expense	—		9			—			—			—			9			—			9
Repurchase of common stock	—		—			—			(81		)	—			(81		)	—			(81		)
Non-controlling interest dividends	—		—			—			—			—			—			(2		)	(2		)
Other	—		2			—			—			—			2			—			2
Ending balance at September 30, 2016	$	99	$	876		$	(241	)	$	(136	)	$	(809	)	$	(211	)	$	25		$	(186	)
Beginning balance at September 30, 2014	$	97	$	918		$	(878	)	$	—		$	(749	)	$	(612	)	$	27		$	(585	)
Comprehensive income (loss)	—		—			64			—			(17		)	47			(1		)	46
Vesting of restricted stock	2		(2		)	—			—			—			—			—			—
Repurchase of convertible notes	—		(62		)	—			—			—			(62		)	—			(62		)
Equity based compensation expense	—		10			—			—			—			10			—			10
Repurchase of common stock	—		—			—			(55		)	—			(55		)	—			(55		)
Non-controlling interest dividends	—		—			—			—			—			—			(1		)	(1		)
Other	—		1			—			—			—			1			—			1
Ending balance at September 30, 2015	$	99	$	865		$	(814	)	$	(55	)	$	(766	)	$	(671	)	$	25		$	(646	)
Beginning balance at September 30, 2013	$	97	$	914		$	(1,127	)	$	—		$	(734	)	$	(850	)	$	28		$	(822	)
Comprehensive income (loss)	—		—			249			—			(15		)	234			5			239
Repurchase of convertible notes	—		(4		)	—			—			—			(4		)	—			(4		)
Equity based compensation expense	—		8			—			—			—			8			—			8
Non-controlling interest dividends	—		—			—			—			—			—			(6		)	(6		)
Ending balance at September 30, 2014	$	97	$	918		$	(878	)	$	—		$	(749	)	$	(612	)	$	27		$	(585	)

See Notes to Consolidated Financial Statements.

70

MERITOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 consolidated financial statements are those of the company and its consolidated subsidiaries.

Certain businesses are reported in discontinued operations in the consolidated statement of operations, consolidated statement of cash flows and related notes for all periods presented. In fiscal year 2014, the company exited its Mascot business, a remanufacturer and distributor of all makes differentials, transmissions and steering gears. The results of operations and cash flows of the company’s former Mascot business are presented in discontinued operations in the consolidated statement of operations and consolidated statement of cash flows. Additional information regarding discontinued operations is discussed in Note 3.

The company’s fiscal year ends on the Sunday nearest September 30. The 2016, 2015 and 2014 fiscal years ended on October 2, 2016, September 27, 2015 and September 28, 2014, 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 is used consistently throughout this report to represent the fiscal year end.

2.SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) requires the use of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses and related disclosures. Actual results could differ from these estimates. Significant estimates and assumptions were used to review goodwill and other long-lived assets for impairment (see Notes 4 and 11), costs associated with the company’s restructuring actions (see Note 5), product warranty liabilities (see Note 14), long-term incentive compensation plan obligations (see Note 19), retiree medical and pension obligations (see Notes 20 and 21), income taxes (see Note 22), and contingencies including asbestos (see Note 23).

Concentration of Credit Risk

In the normal course of business, the company provides credit to customers. The company limits its credit risk by performing ongoing credit evaluations of its customers and maintaining reserves for potential credit losses and through accounts receivable factoring programs. The company’s accounts receivables are generally due from medium- and heavy-duty truck OEMs, specialty vehicle manufacturers, aftermarket customers, and trailer producers. The company’s ten largest customers accounted for 73 percent , 75 percent and 76 percent of sales in fiscal years 2016, 2015 and 2014, respectively. Sales to the company's top three customers were 50 percent, 55 percent and 57 percent of total sales in fiscal 2016, 2015 and 2014, respectively. At September 30, 2016 and 2015, 22 percent and 21 percent of the company's trade accounts receivables were from the company's three largest customers, respectively.

Consolidation and Joint Ventures

The consolidated financial statements include the accounts of the company and those subsidiaries in which the company has control. All intercompany balances and transactions are eliminated in consolidation. The results of operations of controlled subsidiaries are included in the consolidated financial statements and are offset by a related noncontrolling interest recorded for the noncontrolling partners’ ownership. Investments in affiliates that are not controlled or majority-owned are reported using the equity method of accounting (see Note 13).

71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Foreign Currency

Local currencies are generally considered the functional currencies for operations outside the U.S. For operations reporting in local currencies, assets and liabilities are translated at year-end exchange rates with cumulative currency translation adjustments included as a component of Accumulated Other Comprehensive Loss in the consolidated balance sheet. Income and expense items are translated at average rates of exchange during the year.

Impairment of Long-Lived Assets

Long-lived assets, excluding goodwill, to be held and used are reviewed for impairment whenever adverse events or changes in circumstances indicate a possible impairment. An impairment loss is recognized when a long-lived asset’s carrying value exceeds the fair value.

Long-lived assets held for sale are recorded at the lower of their carrying amount or estimated fair value less cost to sell.

Discontinued Operations

A business component that either has been disposed of or is classified as held for sale is reported as discontinued operations if the cash flows of the component have been or will be eliminated from the ongoing operations of the company, and the company will no longer have any significant continuing involvement in the business component. The results of discontinued operations are aggregated and presented separately in the consolidated statement of operations and consolidated statement of cash flows (see Note 3).

Revenue Recognition

Revenues are recognized upon shipment of product and transfer of ownership to the customer. Provisions for customer sales allowances and incentives are recorded as a reduction of sales at the time of product shipment.

Allowance for Doubtful Accounts

An allowance for uncollectible trade receivables is recorded when accounts are deemed uncollectible based on consideration of write-off history, aging analysis, and any specific, known troubled accounts.

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 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):

	YearEnded September 30,
	2016	2015	2014
Basic average common shares outstanding	90.1	96.9	97.5
Impact of stock options	—	0.1	0.1
Impact of restricted shares, restricted share units and performance share units	1.9	2.0	1.6
Impact of convertible notes	—	1.1	—
Diluted average common shares outstanding	92.0	100.1	99.2

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

72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

$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 shares.

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 units which includes incremental performance share units that were issued subsequent to the December 1, 2013 grant date. There were 1.3 million, 0.9 million and 0.1 million shares related to these performance share units included in the diluted earnings per share calculation for the years ended September 30, 2016, 2015 and 2014, respectively, as certain payout thresholds were achieved in fiscal years 2016, 2015 and 2014 relative to the Adjusted EBITDA, net debt reduction and incremental booked revenue targets.

For the years ended September 30, 2016, 2015 and 2014, the dilutive impact of previously issued restricted shares, restricted share units, and performance share units was 1.9 million, 2.0 million and 1.6 million, respectively. For the years ended September 30, 2016, 2015 and 2014, compensation cost related to restricted shares, restricted share units, performance share units and stock options was $9 million,$10 million and $8 million, respectively.

At September 30, 2014, options to purchase 0.3 million shares of common stock were excluded in the computation of diluted earnings per share because their exercise price exceeded the average market price for the twelve-month period and thus their inclusion would be anti-dilutive.

73

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

For the fiscal year ended 2015, 1.1 million shares were included in the computation of diluted earnings per share because the average stock price exceeded the conversion price for the 7.875 percent convertible notes due 2026. For the years ended September 30, 2016 and September 30, 2014, 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 these periods was less than the conversion price for the 7.875 percent convertible notes due 2026.

Other

Other significant accounting policies are included in the related notes, specifically, goodwill (Note 4), inventories (Note 9), property and depreciation (Note 11), capitalized software (Note 12), product warranties (Note 14), financial instruments (Note 17), equity based compensation (Note 19), retirement medical plans (Note 20), retirement pension plans (Note 21), income taxes (Note 22) and environmental and asbestos-related liabilities (Note 23).

Accounting standards to be implemented

In October 2016, the FASB issued Accounting Standards Update (ASU) 2016-17, Consolidation (Topic 810): Interests held through Related Parties that are under Common Control, which alters how a decision maker needs to consider indirect interests in a variable interest entity (VIE) held through an entity under common control. Under the ASU, if a decision maker is required to evaluate whether it is the primary beneficiary of a VIE, it will need to consider only its proportionate indirect interest in the VIE held through a common control party. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements and does not expect a material impact upon adoption.

In October 2016, the FASB issued ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. The ASU was issued to remove the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. The amendments in this update are effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted however the guidance can only be adopted in the first interim period of a fiscal year. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force). The ASU was issued to reduce differences in practice with respect to how specific transactions are classified in the statement of cash flows. The update provides guidance on the following eight types of transactions: debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investments, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. The amendments in this update are effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

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

In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The ASU clarifies the assessment of the likelihood that revenue will be collected from a contract, the guidance for presenting sales taxes and similar taxes, and the timing for measuring customer payments that are not in cash. The ASU also establishes a practical expedient for contract modifications at the transition. 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

74

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

in ASU 2016-12 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 May 2016, the FASB issued ASU 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting (SEC Update). The ASU was issued to remove from the Codification certain SEC staff guidance that the SEC staff stated would be rescinded: Revenue and Expense Recognition for Freight Services in Process; Accounting for Shipping and Handling Fees and Costs; and Accounting for Consideration Given by a Vendor to a Customer (including a Reseller of the Vendor’s Products). 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 2016-11 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 April, 2016, the FASB issued 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, including accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The standard is required to be adopted by public business entities in fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. 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 years beginning after December 15, 2016, including interim periods within those fiscal years. 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 years beginning after December 15, 2016, including interim periods within those fiscal years. 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

75

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

application of hedge accounting. The standard is required to be adopted by public business entities in fiscal years beginning after December 15, 2016, including interim years 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 years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2019 and is currently assessing the potential impact of this 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 years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

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 years beginning after December 15, 2016, including interim periods within those fiscal years. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

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 annual period ending after December 15, 2016 and for annual periods and interim periods thereafter. 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 does not expect a material impact on its consolidated financial statements from adoption of this guidance.

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 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 non-current amounts in a classified balance sheet. Deferred taxes are 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 implemented this guidance on a prospective

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basis in the fourth quarter of fiscal year 2016. Prior periods were not retrospectively adjusted. The impact as of September 30, 2016 was a reclassification between current and non-current deferred tax assets of $17 million.

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 years beginning after December 15, 2015, including interim periods within those fiscal years. Early adoption is permitted. The company adopted this standard in the first quarter of 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.

3.DISCONTINUED OPERATIONS

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

	Year Ended September 30,
	2016			2015			2014
Sales	$	—		$	1		$	29
Operating losses, net	$	—		$	—		$	(8	)
Net loss on sales of businesses	—			—			(23		)
Environmental remediation charges (see Note 23)	—			—			(4		)
Litigation settlement	(3		)	—			—
Other, net	(4		)	(2		)	(2		)
Loss before income taxes	(7		)	(2		)	(37		)
Benefit for income taxes	3			1			7
Loss from discontinued operations attributable to Meritor, Inc.	$	(4	)	$	(1	)	$	(30	)

Loss from discontinued operations attributable to the company for the twelve months ended September 30, 2016 was primarily attributable to a litigation settlement.

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

Prior Period Divestitures

Mascot

On August 15, 2014, the company completed its strategic review of certain remanufacturing product lines within the aftermarket business in North America, and the Board of Directors concluded the company should exit the Mascot business. Mascot is a remanufacturer and distributor of all makes differentials, transmissions and steering gears primarily for OEMs. In the fourth quarter of fiscal year 2014, the company disposed of its Mascot business which was part of the company's Aftermarket & Trailer segment. The company sold certain long-lived and current assets of the business to a third party and recognized a loss of $23 million during

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the fourth quarter of fiscal year 2014 in connection with the disposal. These charges included loss on sale, severance and other disposal costs. Total sales from this business were $1 million in fiscal year 2015 and $29 million in fiscal year 2014.

The results of operations and cash flows of the company's Mascot business are presented in discontinued operations in the consolidated statements of operations and consolidated statement of cash flows.

Body Systems

On January 3, 2011, the company completed the sale of its Body Systems business to Inteva Products Holding Coöperatieve U.A., an assignee of 81 Acquisition LLC and an affiliate of Inteva Products, LLC pursuant to the sale agreement signed in August 2010. The purchase price included a five-year, 8-percent promissory note for $15 million, payable in five annual installments beginning in January 2012 and is included in receivables, trade and other, net in the consolidated balance sheet. The notes receivable balance as of September 30, 2016 and September 30, 2015 was $0 million and $3 million, respectively.

MSSC

In October, 2009, the company closed on the sale of its 57 percent interest in MSSC, a joint venture that manufactured and supplied automotive coil springs, torsion bars and stabilizer bars in North America, to the joint venture partner, a subsidiary of Mitsubishi Steel Mfg. Co., LTD (MSM). In connection with the sale of its interest in MSSC, the company provided certain indemnifications 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. The company’s estimated exposure under these indemnities at September 30, 2016 and September 30, 2015 was $1 million and $2 million, respectively, and is included in other liabilities in the consolidated balance sheet. Adjustments to amounts previously reported in discontinued operations that are related to the disposal of the company’s MSSC business are reflected in discontinued operations for all periods presented.

European Trailer

In the second quarter of fiscal year 2011, the company announced the planned closure of its European Trailer business which was part of the company’s Aftermarket & Trailer segment. All manufacturing operations and use of productive assets ceased prior to September 30, 2011. In the fourth quarter of fiscal year 2014, the company recognized a $5 million charge, included in other, net, related to a specific product warranty matter.

4. 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.

Annual Impairment Analysis

ASC Topic 350 allows entities to perform an initial qualitative evaluation to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The results of this qualitative assessment determine whether it is necessary to perform step one of the required two-step impairment test. As allowed by the revised guidance, the company has elected to bypass the qualitative assessment for fiscal year 2016 and proceed directly to the two-step impairment test.

Excluding the qualitative evaluation discussed above, the goodwill impairment review is a two-step process. Step one consists of a comparison of the fair value of a reporting unit with its carrying amount. An impairment loss may be recognized if the review indicates that the carrying value of a reporting unit exceeds its fair value. Estimates of fair value are primarily determined by using discounted cash flows and market multiples on earnings. If the carrying amount of a reporting unit exceeds its fair value, step two requires the fair value of the reporting unit to be allocated to the underlying assets and liabilities of that reporting unit, resulting

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in an implied fair value of goodwill. If the carrying amount of the goodwill of the reporting unit exceeds the implied fair value, an impairment charge is recorded equal to the excess.

The impairment review is highly judgmental and involves the use of significant estimates and assumptions. These estimates and assumptions have a significant impact on the amount of any impairment charge recorded. Discounted cash flow methods are dependent upon assumptions of future sales trends, market conditions and cash flows of each reporting unit over several years. Actual cash flows in the future may differ significantly from those previously forecasted.

Sales of the company’s primary military program wound down to insignificant levels in 2015. Additionally, the U.S. Army awarded a new contract for the production of the Joint Light Tactical Vehicle to Oshkosh for which the company is expected to supply wheel-ends. Revenue is expected to be significantly less than if the program had been awarded differently and the company was supplying its ProTec independent suspension. The company continues to work toward securing participation in additional military programs; however, based on sales expectations for currently awarded programs, the company's fair value of the Defense business did not exceed its carrying value. Since the fair value of the business did not exceed the implied fair value of its net assets without goodwill enough to support the full amount of goodwill, the company's Defense reporting unit, which is included in the Commercial Truck and Industrial segment, recorded a goodwill impairment of $15 million in the fourth quarter of 2015, which is the total accumulated impairment loss. The fair value of the other reporting units exceeded their carrying values. For fiscal year 2016, the fair value of all of the company’s reporting units exceeded their carrying values.

A summary of the changes in the carrying value of goodwill is presented below (in millions):

	Commercial Truck & Industrial			Aftermarket & Trailer			Total
Balance at September 30, 2014	$	261		$	170		$	431
Impairment	(15		)	—			(15		)
Foreign currency translation	(7		)	(7		)	(14		)
Balance at September 30, 2015	239			163			402
Impairment	—			—			—
Foreign currency translation	(9		)	(3		)	(12		)
Balance at September 30, 2016	$	230		$	160		$	390

5. RESTRUCTURING COSTS

At September 30, 2016 and 2015, $16 million and $10 million, respectively, of restructuring reserves primarily related to unpaid employee termination benefits remained in the consolidated balance sheet. Asset impairment charges relate to manufacturing facilities that have been sold and machinery and equipment that became idle and obsolete as a result of these actions.

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The following table summarizes changes in restructuring reserves (in millions):

	Employee Termination Benefits			Asset Impairment			Plant Shutdown & Other		Total
Balance at September 30, 2013	$	12		$	—		$	—	$	12
Activity during the period:
Charges to continuing operations	10			—			—		10
Cash payments – continuing operations	(10		)	—			—		(10		)
Other	(1		)	—			—		(1		)
Balance at September 30, 2014	11			—			—		11
Activity during the period:
Charges to continuing operations	15			1			—		16
Asset write-offs	—			(1		)	—		(1		)
Cash payments – continuing operations	(16		)	—			—		(16		)
Balance at September 30, 2015	10			—			—		10
Activity during the period:
Charges to continuing operations	15			—			1		16
Cash payments – continuing operations	(11		)	—			—		(11		)
Other	1			—			—		1
Total restructuring reserves, end of year	15			—			1		16
Less: non-current restructuring reserves	(2		)	—			—		(2		)
Restructuring reserves – current, at September 30, 2016	$	13		$	—		$	1	$	14

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Restructuring costs attributable to the company’s business segments during fiscal years 2016, 2015 and 2014 are as follows (in millions):

	Commercial Truck & Industrial		Aftermarket & Trailer		Corporate		Total
Fiscal year 2016:
Market related actions	$	5	$	1	$	2	$	8
Aftermarket actions	—		5		—		5
Other	1		2		—		3
Total restructuring costs	$	6	$	8	$	2	$	16
Fiscal year 2015:
South America labor reduction II	$	6	$	—	$	—	$	6
M2016 footprint actions	5		—		—		5
Closure of engineering facility	—		—		2		2
European labor reductions	2		—		—		2
Other	1		—		—		1
Total restructuring costs	$	14	$	—	$	2	$	16
Fiscal year 2014:
South America labor reduction I	$	7	$	—	$	—	$	7
Other	1		1		1		3
Total restructuring costs	$	8	$	1	$	1	$	10

Fourth Quarter 2016 Market Related Actions: In response to the decline in revenue in North America and South America, during the fourth quarter of fiscal year 2016, the company approved various headcount reduction plans targeting different areas of the business. The company expects to incur an aggregate of $10 million in restructuring costs associated with these plans, primarily related to a total reduction of approximately 100 salaried and hourly positions. During the fourth quarter of fiscal year 2016, the company incurred a total of $5 million in restructuring costs in the Commercial Truck & Industrial segment, $1 million in Aftermarket & Trailer segments and $2 million in their corporate locations. Restructuring actions with these plans are expected to be substantially complete by the first half of fiscal year 2017. 

Aftermarket Actions: During the third quarter of fiscal year 2016, the company approved various restructuring plans in the North American and European aftermarket businesses. The company expects to incur an aggregate of approximately $8 million in restructuring costs associated with these plans in the Aftermarket & Trailer segment primarily for severance. The company recorded $5 million of restructuring costs during the third quarter of fiscal year 2016. Restructuring actions associated with these plans are expected to be completed by the end of fiscal year 2017.  

Other Fiscal 2016 Actions: During the first half of fiscal year 2016, the company recorded restructuring costs of $3 million primarily associated with a labor reduction program in China in the Commercial Truck & Industrial segment and a labor reduction program in the Aftermarket and Trailer segment. Restructuring actions with these plans were substantially complete as of September 30, 2016.

M2016 Footprint Actions: As part of the company's M2016 Strategy, during fiscal year 2013 the company announced a North American footprint realignment action and a European shared services reorganization. Restructuring actions associated with these programs were substantially complete as of September 30, 2015. In total, the company eliminated approximately 140 hourly and salaried positions and incurred approximately $7 million of associated restructuring costs, primarily in the Commercial Truck & Industrial segment in connection with the consolidation of certain gearing and machining operations in North America and the closure of a North America manufacturing facility.

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South America Labor Reduction: During fiscal years 2014 and 2015, the company completed a South America headcount reduction plan intended to reduce labor costs in response to softening economic conditions in the region. In response to decreasing production volumes in South America, the company eliminated approximately 420 hourly and 40 salaried positions and incurred $13 million of restructuring costs, primarily severance benefits, in the Commercial Truck & Industrial segment. This plan was substantially complete as of September 30, 2015.

Closure of a Corporate Engineering Facility: 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 $2 million associated with this plan. Restructuring actions associated with this program were substantially complete as of September 30, 2015.

European Labor Reductions: 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 fiscal year 2015. Restructuring actions associated with this program were substantially complete as of June 30, 2015.

6. ACQUISITIONS

On July 9, 2015, the company purchased from Sypris Solutions, Inc. (“Sypris”), a supplier of axle shafts and trailer beams for Meritor and Sistemas Automotrices De Mexico S.A. de C.V., a joint venture that is 50%-owned by Meritor, the majority of the assets of Sypris’s Morganton, North Carolina manufacturing facility for $16 million cash consideration. The fair value of the net assets acquired was $16 million, which consisted mainly of property, plant and equipment. Of the equipment acquired, $2 million was classified as held for sale at the acquisition date and was recorded in net property as of September 30, 2015.  The revenue and earnings of the combined entity as though the business combination had occurred as of the beginning of the comparable prior annual reporting period was insignificant to the consolidated financial statements as the majority of sales were eliminated upon consolidation. 

7. ACCOUNTS RECEIVABLE FACTORING AND SECURITIZATION

Off-balance sheet arrangements

Swedish Factoring Facility: The company has an arrangement to sell trade receivables from AB Volvo through one of its European subsidiaries. On October 14, 2016, Meritor extended this Swedish factoring facility with Nordea Bank until December 9, 2016. All other terms of the agreement remain unchanged. Under this arrangement, the company can sell up to, at any point in time, €155 million ($174 million) of eligible trade receivables. 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 consolidated balance sheet. The company had utilized €121 million ($135 million) and €108 million ($121 million) of this accounts receivable factoring facility as of September 30, 2016 and 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 was set to expire February 28, 2016. Under this arrangement, which terminates on February 19, 2019, the company can sell up to, at any point in time, €80 million ($90 million) of eligible trade receivables from AB Volvo and its U.S. subsidiaries through one of the company's U.S. subsidiaries. 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 €39 million ($44 million) and €74 million ($83 million) of this accounts receivable factoring facility as of September 30, 2016 and 2015, respectively. As of September 30, 2015, the company had utilized more than the committed eligible trade receivable amount of €65 million ($73 million) then in effect based on approval from the bank.

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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 consolidated balance sheet. The company had utilized €6 million ($6 million) and €8 million ($8 million) of this accounts receivable factoring facility as of September 30, 2016 and 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 consolidated balance sheet. The company had utilized €22 million ($24 million) and €22 million ($24 million) of this accounts receivable factoring facility as of September 30, 2016 and 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 $10 million and $18 million at September 30, 2016 and 2015, respectively.

Total costs associated with all of the off-balance sheet arrangements described above were $5 million, $6 million and $8 million in fiscal years 2016, 2015 and 2014, respectively, and are included in selling, general and administrative expenses in the condensed consolidated statement 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 U.S. securitization facility at 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 consolidated balance sheet. At September 30, 2016 and 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 in amounts exceeding the amounts shown as outstanding at fiscal year ends.

8. GAIN ON SALE OF PROPERTY AND OTHER OPERATING EXPENSE, NET

The company recognized a gain on sale of property of $3 million during fiscal year 2015. This gain is associated with the sale of excess land at the company's facility at Cwmbran, Wales.

Other operating expense, net for fiscal years 2016 and 2014 primarily relates to environmental remediation costs incurred by the company (see Note 23).

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9. 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):

	September 30,
	2016		2015
Finished goods	$	125	$	133
Work in process	26		28
Raw materials, parts and supplies	165		177
Total	$	316	$	338

10. OTHER CURRENT ASSETS

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

	September 30,
	2016		2015
Current deferred income tax assets (see Note 22)	$	—	$	20
Asbestos-related recoveries (see Note 23)	10		13
Prepaid and other	23		17
Other current assets	$	33	$	50

11. NET PROPERTY

Property is stated at cost. Depreciation of property is based on estimated useful lives, generally using the straight-line method. Estimated useful lives for buildings and improvements range from 10 to 50 years and estimated useful lives for machinery and equipment range from 3 to 20 years. Significant improvements are capitalized, and disposed or replaced property is written off. Maintenance and repairs are charged to expense in the period they are incurred. Company-owned tooling is classified as property and depreciated over the shorter of its expected life or the life of the production contract, generally not to exceed three years.

In accordance with the FASB guidance on property, plant and equipment, the company reviews the carrying value of long-lived assets, excluding goodwill, to be held and used, for impairment whenever events or changes in circumstances indicate a possible impairment. An impairment loss is recognized when a long-lived asset’s carrying value is not recoverable and exceeds estimated fair value.

In the fourth quarter of fiscal year 2015, the U.S. Army awarded a new contract for the production of the Joint Light Tactical Vehicle (JLTV) to Oshkosh, for which the company is expected to supply wheel-ends. However, the company made certain capital investments and commitments to supply its ProTec Independent Suspension had the JLTV program been awarded differently. As a result, the company recorded an impairment of $2 million of long-lived assets in the fourth quarter of fiscal year 2015.

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Net property is summarized as follows (in millions):

	September 30,
	2016			2015
Property at cost:
Land and land improvements	$	30		$	31
Buildings	231			214
Machinery and equipment	839			864
Company-owned tooling	113			116
Construction in progress	56			62
Total	1,269			1,287
Less: accumulated depreciation	(830		)	(868		)
Net property	$	439		$	419

12. OTHER ASSETS

Other assets are summarized as follows (in millions):

	September 30,
	2016		2015
Investments in non-consolidated joint ventures (see Note 13)	$	100	$	96
Asbestos-related recoveries (see Note 23)	49		42
Unamortized revolver debt issuance costs (see Note 16)	7		10
Capitalized software costs, net (1)	29		28
Non-current deferred income tax assets (see Note 22)	413		28
Assets for uncertain tax positions (see Note 22)	35		3
Prepaid pension costs (see Note 21)	123		110
Other	4		15
Other assets	$	760	$	332

(1) 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.

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13. INVESTMENTS IN NON-CONSOLIDATED JOINT VENTURES

The company’s non-consolidated joint ventures and related direct ownership interest are as follows:

	September 30,
	2016		2015		2014
Meritor WABCO Vehicle Control Systems (Commercial Truck & Industrial)	50	%	50	%	50	%
Master Sistemas Automotivos Ltda. (Commercial Truck & Industrial)	49	%	49	%	49	%
Sistemas Automotrices de Mexico S.A. de C.V. (Commercial Truck & Industrial)	50	%	50	%	50	%
Ege Fren Sanayii ve Ticaret A.S. (Commercial Truck & Industrial)	49	%	49	%	49	%
Automotive Axles Limited (Commercial Truck & Industrial)	36	%	36	%	36	%
ZF Meritor LLC (Commercial Truck & Industrial)	—	%	—	%	50	%

In June 2014, ZF Meritor LLC, a joint venture between ZF Friedrichshafen AG and the company's subsidiary, Meritor Transmission LLC, entered into a settlement agreement with Eaton Corporation relating to an antitrust lawsuit filed by ZF Meritor in 2006. Pursuant to the terms of the settlement agreement, Eaton agreed to pay $500 million to ZF Meritor. In July 2014, ZF Meritor received proceeds of $400 million, net of attorney's contingency fees. In July 2014, the company received proceeds of $210 million representing its share based on the company's ownership interest in ZF Meritor and including a recovery of current and prior years' attorney expenses paid by Meritor. ZF Meritor and Meritor Transmission agreed to dismiss all pending antitrust litigation with Eaton. ZF Meritor did not have any operating activities and was dissolved in fiscal year 2015.

The company's pre-tax share of the settlement was $210 million ($209 million after-tax), of which $190 million was recognized as equity in earnings of ZF Meritor, and $20 million for the recovery of legal expenses from ZF Meritor was recognized as a reduction of selling, general and administrative expenses ("SG&A") in the consolidated statement of operations. The company recognized the recovery in SG&A as the historical incurrence of these costs was included in SG&A in the consolidated statement of operations in prior periods.

The company’s investments in non-consolidated joint ventures are as follows (in millions): 

	September 30,
	2016		2015
Commercial Truck & Industrial	$	100	$	96
Aftermarket & Trailer	—		—
Total investments in non-consolidated joint ventures	$	100	$	96

The company’s equity in earnings of non-consolidated joint ventures is as follows (in millions): 

	Year Ended September 30,
	2016		2015		2014
Commercial Truck & Industrial	$	36	$	39	$	38
Aftermarket & Trailer	—		—		—
Total equity in earnings of affiliates	$	36	$	39	$	38

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The summarized financial information presented below represents the combined accounts of the company’s non-consolidated joint ventures related to its continuing operations (in millions):

	September 30,
	2016		2015
Current assets	$	337	$	393
Non-current assets	151		140
Total assets	$	488	$	533
Current liabilities	$	192	$	239
Non-current liabilities	103		111
Total liabilities	$	295	$	350

	Year Ended September 30,
	2016		2015		2014
Sales	$	1,101	$	1,288	$	1,268
Gross profit	165		187		167
Net income	73		83		458

Dividends received from the company’s non-consolidated joint ventures were $37 million in fiscal year 2016, $32 million in fiscal year 2015 and $36 million in fiscal year 2014.

The company had sales to its non-consolidated joint ventures of approximately $9 million, $5 million and $3 million in fiscal years 2016, 2015 and 2014, respectively. These sales exclude sales of $124 million, $135 million and $141 million in fiscal years 2016, 2015 and 2014, respectively, to a joint venture in the company’s Commercial Truck & Industrial segment, which are eliminated as the company purchases these components back after value add provided by the joint venture. The company had purchases from its non-consolidated joint ventures of approximately $753 million, $855 million and $760 million in fiscal years 2016, 2015 and 2014, respectively. Additionally, the company leases space and provides certain administrative and technical services to various non-consolidated joint ventures. The company collected $12 million, $9 million and $5 million for such leases and services during fiscal years 2016, 2015 and 2014, respectively.

Amounts due from the company’s non-consolidated joint ventures were $22 million and $35 million at September 30, 2016 and 2015, respectively, and are included in Receivables, trade and other, net in the consolidated balance sheet. Amounts due to the company’s non-consolidated joint ventures were $84 million and $107 million at September 30, 2016 and 2015, respectively, and are included in Accounts payable in the consolidated balance sheet.

The fair value of the company’s investment in its Automotive Axles Limited joint venture was approximately $59 million and $57 million at September 30, 2016 and 2015, respectively, based on quoted market prices as this joint venture is listed and publicly traded on the Bombay Stock Exchange in India.

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 September 30, 2016 and 2015, the company’s investment in the joint venture was $45 million and $42 million, respectively, representing the company’s maximum exposure to loss. This amount is included in investments in non-consolidated joint ventures (see Note 12). 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

14. OTHER CURRENT LIABILITIES

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

	September 30,
	2016		2015
Compensation and benefits	$	115	$	122
Income taxes	8		9
Taxes other than income taxes	21		23
Accrued interest	14		14
Product warranties	18		22
Restructuring (see Note 5)	14		7
Asbestos-related liabilities (see Note 23)	18		17
Indemnity obligations (see Note 23)	2		2
Other	58		63
Other current liabilities	$	268	$	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 relationship 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):

	September 30,
	2016			2015			2014
Total product warranties – beginning of year	$	48		$	51		$	57
Accruals for product warranties	10			15			22
Payments	(14		)	(18		)	(22		)
Change in estimates and other	—			—			(6		)
Total product warranties – end of year	44			48			51
Less: non-current product warranties (see Note 15)	(26		)	(26		)	(24		)
Product warranties – current	$	18		$	22		$	27

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

15. OTHER LIABILITIES

Other liabilities are summarized as follows (in millions):

	September 30,
	2016		2015
Asbestos-related liabilities (see Note 23)	$	136	$	109
Restructuring (see Note 5)	2		3
Non-current deferred income tax liabilities (see Note 22)	12		99
Liabilities for uncertain tax positions (see Note 22)	16		15
Product warranties (see Note 14)	26		26
Environmental (see Note 23)	6		8
Indemnity obligations (see Note 23)	11		13
Other	29		32
Other liabilities	$	238	$	305

16. LONG-TERM DEBT

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

	September 30,
	2016			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)	129			127
6.75 percent notes due 2021(3)(6)	271			270
6.25 percent notes due 2024(3)(7)	442			442
Capital lease obligation	16			17
Export financing arrangements and other	10			18
Unamortized discount on convertible notes (8)	(14		)	(20		)
Subtotal	996			1,051
Less: current maturities	(14		)	(15		)
Long-term debt	$	982		$	1,036

⁽¹⁾ The 4.625 percent convertible notes contained a put and call feature, which allowed for earlier redemption beginning in 2016. As of June 30, 2016 all of these notes were redeemed.

⁽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 millionunamortized issuance costs as of September 30, 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 September 30, 2016 and September 30, 2015, respectively, and$9 millionand$10 million original issuance discount as of September 30, 2016 and September 30, 2015.

⁽⁶⁾ The 6.75 percent notes due 2021 are presented net of $4 million and $5 million unamortized issuance costs as of September 30, 2016 and September 30, 2015.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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

⁽⁸⁾ The carrying amount of the equity component related to convertible debt.

Revolving Credit Facility

On June 2, 2016, the company entered into a third amendment of its senior secured revolving credit facility. The amendment increased the 2019 revolving loan commitment to $466 million, permits the company to execute certain internal restructuring plans, including the release of certain guarantors when required by such plans, and reset covenant basket amounts. Pricing and maturity dates remained unchanged. Subsequent to the amendment, certain lenders converted their $32 million 2017 revolving loan commitments to 2019 revolving loan commitments and are now subject to the terms of 2019 lenders. Pursuant to the revolving credit agreement, the company now has a $506 million revolving credit facility, $8 million of which matures in April 2017 for banks not electing to extend their commitments under the revolving credit facility, and $498 million of which matures 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 September 30, 2016, the revolving credit facility was collateralized by approximately $693 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 September 30, 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 27).

No borrowings were outstanding under the revolving credit facility at September 30, 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 September 30, 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.

Issuance of Debt Securities - 2024 Notes

On February 13, 2014, the company 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 offering and sale were made pursuant to the company's February 2012 shelf registration statement. The Initial 2024 Notes were issued under the company's indenture dated as of April 1, 1998, as supplemented. The Initial 2024 Notes were issued at 100 percent of their principal amount. The proceeds from the sale of the Initial 2024 Notes were $225 million and, together with cash on hand, were primarily used to repurchase $250 million principal amount of the company’s previously outstanding 10.625 percent notes due 2018.

On June 11, 2015, the company completed a public offering of an additional $225 million aggregate principal amount of 6.25 percent notes due 2024 (the "Additional 2024 Notes"), in an underwritten public offering pursuant to the company's December 2014 shelf registration statement. 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 the company's 7.875 percent convertible notes due 2026 (the "7.875 convertible notes"). The company used the remaining net proceeds to purchase

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

an annuity to satisfy its obligations under the Canadian and German pension plans for its employees and for general corporate purposes. The Additional 2024 Notes constitute a further issuance of, and are fungible with, the $225 million aggregate principal amount of Initial 2024 Notes that the company 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 bear interest at a fixed rate of 6.25 percent per annum. The company pays interest on the 2024 Notes semi-annually, in arrears, on February 15 and August 15 of each year. The 2024 Notes constitute senior unsecured obligations of the company and rank equally in right of payment with existing and future senior unsecured indebtedness and effectively junior to existing and future secured indebtedness. The 2024 Notes are guaranteed on a senior unsecured basis by each of the company's subsidiaries from time to time guaranteeing its senior secured credit facility. The guarantees rank equally with existing and future senior unsecured indebtedness of the guarantors and will be effectively subordinated to all of the existing and future secured indebtedness of the guarantors, to the extent of the value of the assets securing such indebtedness.

Prior to February 15, 2019, the company may redeem, at its option, from time to time, the 2024 Notes, in whole or in part, at a redemption price equal to 100 percent of the principal amount of the 2024 Notes to be redeemed, plus an applicable make-whole premium (as defined in the indenture under which the 2024 Notes were issued) and any accrued and unpaid interest. On or after February 15, 2019, the company may redeem, at its option, from time to time, the 2024 Notes, in whole or in part, at the redemption prices (expressed as percentages of the principal amount of the 2024 Notes to be redeemed) set forth below, plus accrued and unpaid interest, if any, if redeemed during the 12-month period beginning on February 15 of the years indicated below:

Year	Redemption Price
2019	103.125%
2020	102.083%
2021	101.042%
2022 and thereafter	100.000%

Prior to February 15, 2017, the company may redeem, at its option, from time to time, up to approximately $79 million aggregate principal amount of the 2024 Notes with the net cash proceeds of one or more public sales of the company's 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 remain outstanding after each such redemption and notice of any such redemption is mailed within 90 days of any such sale of common stock.

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

Issuance of Debt Securities - 2021 Notes

On May 31, 2013, the company completed an 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 offering and sale were made pursuant to the company's shelf registration statement that was effective at the time of the offering. The 2021 Notes were issued under the company's indenture dated as of April 1, 1998, as supplemented. The 2021 Notes were issued at 100 percent of their principal amount. The proceeds from the sale of the 2021 Notes were $275 million and were primarily used to complete a cash tender offer for $167 million of the 8.125 percent notes due 2015.

The 2021 Notes bear interest at a fixed rate of 6.75 percent per annum. The company pays interest on the 2021 Notes semi-annually, in arrears, on June 15 and December 15 of each year. The 2021 Notes constitute senior unsecured obligations of the company and rank equally in right of payment with existing and future senior unsecured indebtedness and effectively junior to existing and future secured indebtedness to the extent of the security therefor. The 2021 Notes are guaranteed on a senior unsecured basis by each of the company's subsidiaries from time to time guaranteeing its senior secured credit facility. The guarantees rank equally with existing and future senior unsecured indebtedness of the guarantors and will be effectively subordinated to all of the existing and future secured indebtedness of the guarantors, to the extent of the value of the assets securing such indebtedness.

Prior to June 15, 2016, the company may redeem, at its option, from time to time, the 2021 Notes, in whole or in part, at a redemption price equal to the 100 percent of the principal amount of the 2021 Notes to be redeemed plus an applicable make-whole premium (as defined in the indenture under which the 2021 Notes were issued) and any accrued and unpaid interest. On or

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

after June 15, 2016, the company may redeem, at its option, from time to time, the 2021 Notes, in whole or in part, at the redemption prices (expressed as percentages of the principal amount of the 2021 Notes to be redeemed) set forth below, plus accrued and unpaid interest, if any, if redeemed during the 12-month period beginning on June 15 of the years indicated below:

Year	Redemption Price
2016	105.063%
2017	103.375%
2018	101.688%
2019 and thereafter	100.000%

Prior to June 15, 2016, the company also may redeem, at its option, from time to time, up to 35 percent of the aggregate principal amount of the 2021 Notes with the net cash proceeds of one or more public sales of the company's common stock at a redemption price equal to 106.75 percent of the principal amount, plus accrued and unpaid interest, if any, so long as at least 65 percent the aggregate principal amount of 2021 Notes originally issued remains outstanding after each such redemption and notice of any such redemption is mailed within 90 days of any such sale of common stock.

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 2021 Notes, each holder of 2021 Notes may require the company to repurchase some or all of such holder's 2021 Notes at a purchase price equal to 101 percent of the principal amount of the 2021 Notes to be repurchased, plus accrued and unpaid interest, if any.

Repurchase of Debt Securities

In fiscal year 2014, the company repurchased $38 million principal amount of its 4.0 percent convertible notes due 2027. The notes were repurchased at a premium equal to 7 percent of their principal amount. The repurchase of $38 million principal amount of 4.0 percent convertible notes was accounted for as an extinguishment of debt, and accordingly, the company recognized a net loss on debt extinguishment of $5 million, the majority of which is premium. The net loss on debt extinguishment is included in Interest expense, net in the consolidated statement of operations.

On September 20, 2014, the company completed the redemption of its outstanding 8.125 percent notes due 2015. The notes were redeemed at a premium equal to 7 percent of their principal amount. The repurchase of $84 million principal amount of 8.125 percent notes was accounted for as an extinguishment of debt, and accordingly, the company recognized a net loss on debt extinguishment of $5 million consisting of $6 million of premium net of $1 million acceleration of the remaining unamortized gain on a related interest rate swap termination. The net loss on debt extinguishment is included in Interest expense, net in the consolidated statement of operations.

On March 15, 2014, the company completed the redemption of its 10.625 percent notes due 2018. The notes were redeemed at a premium equal to approximately 5 percent of their principal amount. The repurchase of $250 million principal amount of 10.625 percent notes was accounted for as an extinguishment of debt, and accordingly, the company recognized a net loss on debt extinguishment of $19 million, which consisted of $6 million of unamortized discount and deferred issuance costs and $13 million of premium. The net loss on debt extinguishment is included in Interest expense, net in the consolidated statement of operations.

In fiscal year 2015, the company repurchased $110 million principal amount at maturity of the company's 7.875 percent convertible notes, of which $85 million were repurchased at a premium equal to approximately 64 percent of their principal amount in the third quarter of 2015, and $25 million were purchased at a premium equal to approximately 58 percent of their principal amount in the fourth quarter of 2015. The 7.875 percent convertible notes contain a conversion to equity feature which can be settled in cash upon conversion. Accordingly, the liability and equity components are required to be separately accounted for upon recognition. Subsequently, upon derecognition of the convertible notes, the total cash consideration paid by the company is required to be allocated between the extinguishment of the liability component and the reacquisition of the equity component. Of the fiscal year 2015 total cash consideration of $179 million paid, $121 million and $58 million were allocated between the liability and equity components, respectively. The repurchase of $110 million principal amount at maturity of the company's 7.875 percent convertible notes was accounted for as an extinguishment of debt, and accordingly, the company recognized a net loss on debt extinguishment of $24 million, which consisted of $14 million of unamortized discount and deferred issuance costs and $10 million of premium. The net loss on debt extinguishment was included in Interest expense, net in the consolidated statement of operations. The repurchase was made under the company's 2026 convertible notes repurchase authorization.

In fiscal year 2015, the company repurchased $19 million principal amount of the company's 4.0 percent convertible notes. In the second quarter of fiscal year 2015, $15 million of the notes were repurchased at a premium equal to approximately 6 percent of their principal amount. In the third quarter of fiscal year 2015, $4 million of the notes were repurchased at a premium equal to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

approximately 5 percent of their principal amount. The repurchase of $19 million of 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 was premium. The net loss on debt extinguishment was included in Interest expense, net in the consolidated statement of operations.

On March 1, 2016, substantially all $55 million outstanding principal amount of the company's 4.625 percent convertible notes were repurchased at 100 percent of the face value of the notes. On April 15, 2016, the remaining 4.625 percent convertible notes were redeemed at 100 percent of the face value. As of September 30, 2016 none of the 4.625 percent convertible notes were outstanding. The repurchases were made under the company's equity and equity linked repurchase authorizations (see Note 18). The repurchase program under these authorizations was complete as of September 30, 2016.

2013 Convertible Senior Unsecured Notes

In December 2012, the company issued $250 million principal amount of 7.875 percent convertible notes due 2026 (the "2013 convertible notes"). The 2013 convertible notes were sold by the company to qualified institutional buyers in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended. The 2013 convertible notes have an initial principal amount of $900 per note and will accrete to $1,000 per note on December 1, 2020 at an effective interest rate of 10.9 percent. Net proceeds received by the company, after issuance costs and discounts, were approximately $220 million.

The company pays 7.875 percent cash interest on the principal amount of the 2013 convertible notes semi-annually in arrears on June 1 and December 1 of each year to holders of record at the close of business on the preceding May 15 and November 15, respectively, and at maturity to the holders that present the 2013 convertible notes for payment. Interest accrues on the principal amount thereof from and including the date the 2013 convertible notes were issued or from, and including, the last date in respect of which interest has been paid or provided for, as the case may be, to, but excluding, the next interest payment date.

The 2013 convertible notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of the company's subsidiaries. The 2013 convertible notes are senior unsecured obligations and rank equally in right of payment with all of the company's existing and future senior unsecured indebtedness and are junior to any of the company's existing and future secured indebtedness.

The 2013 convertible notes will be convertible into cash up to the principal amount at maturity of the 2013 convertible note surrendered for conversion and, if applicable, shares of the company's common stock (subject to a conversion share cap as described below), based on an initial conversion rate, subject to adjustment, equivalent to 83.3333 shares per $1,000 principal amount at maturity of 2013 convertible notes (which represents an initial conversion price of $12.00 per share), only under the following circumstances:

• prior to June 1, 2025, during any calendar quarter after the calendar quarter ending December 31, 2012, if the closing sale price of the company's common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 120 percent of the applicable conversion price in effect on the last trading day of the immediately preceding calendar quarter;

• prior to June 1, 2025, during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount at maturity of 2013 convertible notes was equal to or less than 97 percent of the conversion value of the 2013 convertible notes on each trading day during such five consecutive trading day period;

• prior to June 1, 2025, if the company has called the 2013 convertible notes for redemption;

• prior to June 1, 2025, upon the occurrence of specified corporate transactions; or

• at any time on or after June 1, 2025.

On or after December 1, 2020, the company may redeem the 2013 convertible notes at its option, in whole or in part, at a redemption price in cash equal to 100 percent of the principal amount at maturity of the 2013 convertible notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Further, holders may require the company to purchase all or a portion of their 2013 convertible notes at a purchase price in cash equal to 100 percent of the principal amount at maturity of the 2013 convertible notes to be purchased, plus accrued and unpaid interest, on December 1, 2020 or upon certain fundamental changes. The maximum number of shares of common stock into which the 2013 convertible notes are convertible is approximately 11 million shares.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The company used the net proceeds of approximately $220 million from the offering of the 2013 convertible notes (after discounts and issuance costs) and additional cash to acquire a portion of its outstanding 4.625 percent convertible senior notes due 2026 (the "4.625 percent convertible notes") in transactions that settled concurrently with the closing of the 2013 convertible note offering. Approximately $245 million of $300 million principal amount of the 4.625 percent convertible notes were repurchased for an aggregate purchase price of approximately $236 million (including accrued interest).

Accounting guidance requires that cash-settled convertible debt, such as the 2013 convertible notes, be separated into debt and equity components at issuance and a value be assigned to each. The value assigned to the debt component is the estimated fair value, as of the issuance date, of a similar bond without the conversion feature. The difference between the bond cash proceeds and this estimated fair value, representing the value assigned to the equity component, is recorded as a debt discount. The company measures the debt component at fair value by utilizing a discounted cash flow model. This model utilizes observable inputs such as contractual repayment terms, benchmark forward yield curves, yield curves and quoted market prices of its own nonconvertible debt. The yield curves are acquired from an independent source that is widely used in the financial industry and reviewed internally by personnel with appropriate expertise in valuation methodologies.

2027 Convertible Notes

In February 2007, the company issued $200 million principal amount of 4.00 percent convertible notes due 2027 (the "2027 convertible notes"). The 2027 convertible notes bear cash interest at a rate of 4.00 percent per annum from the date of issuance through February 15, 2019, payable semi-annually in arrears on February 15 and August 15 of each year. After February 15, 2019, the principal amount of the notes will be subject to accretion at a rate that provides holders with an aggregate annual yield to maturity of 4.00 percent.

The 2027 convertible notes are convertible into shares of the company’s common stock at an initial conversion rate, subject to adjustment, equivalent to 37.4111 shares of common stock per $1,000 initial principal amount of notes, which represents an initial conversion price of approximately $26.73 per share. If converted, the accreted principal amount will be settled in cash and the remainder of the company’s conversion obligation, if any, in excess of such accreted principal amount will be settled in cash, shares of common stock, or a combination thereof, at the company’s election. Holders may convert their 2027 convertible notes at any time on or after February 15, 2025. The maximum number of shares of common stock into which the 2027 convertible notes are convertible is approximately 5 million shares.

Prior to February 15, 2025, holders may convert their notes only under the following circumstances:

• during any calendar quarter, if the closing price of the company’s common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 120 percent of the applicable conversion price;

• during the five business day period after any five consecutive trading day period in which the average trading price per $1,000 initial principal amount of notes is equal to or less than 97 percent of the average conversion value of the notes during such five consecutive trading day period;

• upon the occurrence of specified corporate transactions; or

• if the notes are called by the company for redemption.

On or after February 15, 2019, the company may redeem the 2027 convertible notes, in whole or in part, for cash at a redemption price equal to 100 percent of the accreted principal amount plus any accrued and unpaid interest. On each of February 15, 2019 and 2022, or upon certain fundamental changes, holders may require the company to purchase all or a portion of their 2027 convertible notes at a purchase price in cash equal to 100 percent of the accreted principal amount plus any accrued and unpaid interest.

The 2027 convertible notes are fully and unconditionally guaranteed by certain subsidiaries of the company that currently guarantee the company’s obligations under its senior secured credit facility and other publicly held notes (see Revolving Credit Facility above).

Accounting guidance requires that cash-settled convertible debt, such as the 2027 convertible notes, be separated into debt and equity components at issuance and a value be assigned to each. The value assigned to the debt component is the estimated fair value, as of the issuance date, of a similar bond without the conversion feature. The difference between the bond cash proceeds and this estimated fair value, representing the value assigned to the equity component, is recorded as a debt discount. The company measures the debt component at fair value by utilizing a discounted cash flow model. This model utilizes observable inputs such as contractual repayment terms, benchmark forward yield curves, yield curves and quoted market prices of its own nonconvertible debt. The yield curves are acquired from an independent source that is widely used in the financial industry and reviewed internally by personnel with appropriate expertise in valuation methodologies.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table summarizes the principal amounts and related unamortized discount on all convertible notes (in millions):

	September 30, 2016			September 30, 2015
Principal amount of convertible notes	$	283		$	338
Unamortized discount on convertible notes	(23		)	(30		)
Net carrying value	$	260		$	308

The following table summarizes other information related to the convertible notes:

	Convertible Notes
		2027		2013
Total amortization period for debt discount (in years):		12		8
Remaining amortization period for debt discount (in years):		3		4
Effective interest rates on convertible notes:		7.7	%	10.9	%

The following table summarizes interest costs recognized on convertible notes (in millions):

	Year Ended September 30,
	2016		2015		2014
Contractual interest coupon	$	18	$	26	$	30
Amortization of debt discount	8		8		9
Repurchase of convertible notes	—		24		5
Total	$	26	$	58	$	44

Debt Maturities

As of September 30, 2016, the company is contractually obligated to make payments as follows (in millions):

	Total		2017		2018		2019		2020		2021		Thereafter(2)
Total debt (1)	$	1,034	$	14	$	4	$	2	$	1	$	277	$	736

(1) Total debt excludes unamortized discount on convertible notes of $14 million, unamortized issuance costs of $15 million, and original issuance discount of $9 million.

(2) Includes the company's 4.0 percent and 7.875 percent convertible notes, which contain a put and call feature that allows for earlier redemption beginning in 2019 and 2020, respectively.

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 Wells Fargo Equipment Finance ("Wells Fargo"), which acquired the equipment financing business from GE Capital Commercial, Inc., 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 Wells Fargo 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 $7 million and $10 million outstanding under this capital lease arrangement as of September 30, 2016 and 2015, respectively. In addition, the company had another $9 million and $7 million outstanding through other capital lease arrangements at September 30, 2016 and 2015, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

As of September 30, 2016, the future minimum lease payments for noncancelable capital leases with initial terms in excess of one year were as follows:

	Total			2017			2018			2019			2020			2021		Thereafter
Capital lease obligation	$	20		$	6		$	4		$	3		$	2		$	2	$	3
Less amounts representing interest	(4		)	(1		)	(1		)	(1		)	(1		)	—		—
Principal on capital lease	$	16		$	5		$	3		$	2		$	1		$	2	$	3

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. At September 30, 2016 and 2015, $23 million and $24 million of letters of credit were outstanding under this facility. In addition, the company had another $5 million and $6 million of letters of credit outstanding through other letter of credit facilities at September 30, 2016 and 2015, respectively.

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 were $9 million and $18 million outstanding under these arrangements at September 30, 2016 and 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 unpaid amount exceeds $35 million per bank. As of September 30, 2016 and 2015, the company had $10 million and $13 million, respectively, outstanding under this program at more than one bank.

Operating Leases

The company has various operating leasing arrangements. Future minimum lease payments under these operating leases are $16 million in 2017, $15 million in 2018, $15 million in 2019, $14 million in 2020, $11 million in 2021 and $26 million thereafter.

17. FINANCIAL INSTRUMENTS

The company’s financial instruments include cash and cash equivalents, short-term debt, long-term debt, and foreign exchange forward and options contracts. The company uses derivatives for hedging and non-trading purposes in order to manage its foreign exchange rate exposures.

Foreign Exchange Contracts

As a result of the company’s substantial international operations, it is exposed to foreign currency risks that arise from normal business operations, including in connection with transactions that are denominated in foreign currencies. In addition, the company translates sales and financial results denominated in foreign currencies into U.S. dollars for purposes of its consolidated financial statements. As a result, appreciation of the U.S. dollar against these foreign currencies generally will have a negative impact on 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. For fiscal years 2016, 2015 and 2014, the company's reported financial results were adversely affected by appreciation of the U.S. dollar against foreign currencies relative to the prior years.

The company has a foreign currency cash flow hedging program to reduce the company’s exposure to changes in exchange rates on foreign currency purchases and sales. The company uses foreign currency forward contracts to manage the company’s

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

exposures arising from foreign currency exchange risk. Gains and losses on the underlying foreign currency exposures are partially offset with gains and losses on the foreign currency forward contracts. Under this foreign currency cash flow hedging program, the company has designated the foreign exchange 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 consolidated balance sheet and is recognized in operating income when the underlying forecasted transaction impacts earnings. The terms of the foreign exchange contracts generally require the company to place cash on deposit as collateral if the fair value of these contracts represents a liability for the company. The fair values of the foreign exchange derivative instruments and any related collateral cash deposits are presented on a net basis as the derivative contracts are subject to master netting arrangements.

At September 30, 2016, 2015 and 2014, the notional amount of the company's foreign exchange contracts outstanding under its foreign currency cash flow hedging program were $190 million, $137 million, and $47 million respectively. The company classifies the cash flows associated with the contracts in cash flows from operating activities in the consolidated statement of cash flows. This is consistent with the classification of the cash flows associated with the underlying hedged item.

From time to time the company hedges against foreign currency exposure related to translations to U.S. dollars of financial results denominated in foreign currencies. Changes in fair value associated with these contracts are recorded in other income, net, in the consolidated statement of operations. The company also uses option contracts to mitigate foreign currency exposure on expected future Indian Rupee-denominated purchases. Changes in fair value associated with these contracts are recorded in cost of sales in the consolidated statement of operations.

The following table summarizes the impact of the company’s derivatives instruments on comprehensive income for fiscal years ended September 30 (in millions): 

	Location of Gain (Loss)	2016			2015		2014
Derivatives designated as hedging instruments:
Amount of gain (loss) recognized in AOCL (effective portion)	AOCL	$	(3	)	$	3	$	3
Amount of gain (loss) reclassified from AOCL into income (effective portion)	Cost of Sales	(4		)	6		1
Derivatives not designated as hedging instruments: Amount of gain recognized in income	Cost of Sales	(1		)	2		—
Derivatives not designated as hedging instruments: Amount of gain recognized in income	Other Income (expense)	(1		)	2		—

Fair Value

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

	September 30, 2016				September 30, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	160	$	160	$	193	$	193
Short-term debt	14		14		15		15
Long-term debt	982		1,051		1,036		1,123
Foreign exchange forward contracts (other assets)	1		1		1		1
Foreign exchange forward contracts (other liabilities)	2		2		3		3
Short-term foreign currency option contracts (other assets)	—		—		1		1
Long-term foreign currency option contracts (other assets)	2		2		1		1

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

	September 30, 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	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 September 30, 2016 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash equivalents	$	160	$	—	$	—
Short-term debt	—		—		14
Long-term debt	—		1,040		11
Foreign exchange forward contracts (asset)	—		1		—
Foreign exchange forward contracts (liability)	—		2		—
Short-term foreign currency option contracts (asset)	—		—		—
Long-term foreign currency option contracts (asset)	—		—		2

Fair value of financial instruments by the valuation hierarchy at September 30, 2015 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash equivalents	$	193	$	—	$	—
Short-term debt	—		—		15
Long-term debt	—		1,102		21
Foreign exchange forward contracts (asset)	—		1		—
Foreign exchange forward contracts (liability)	—		3		—
Short-term foreign currency option contracts (asset)	—		—		1
Long-term foreign currency option contracts (asset)	—		—		1

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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 consolidated balance sheet for the twelve months ended September 30, 2016 and September 30, 2015, respectively. No transfers of assets between any of the Levels occurred during these periods.

Twelve months ended September 30, 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, net	(2		)	—			(2		)
Included in cost of sales	—			(1		)	(1		)
Total realized gains (losses):
Included in other income, net	—			—			—
Included in cost of sales	—			—			—
Purchases, issuances, sales and settlements:
Purchases	1			—			1
Settlements	—			2			2
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	—			—			—
Fair Value as of September 30, 2016	$	—		$	2		$	2

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

Twelve months ended September 30, 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 unrealized gains (losses):
Included in other income, net	(1		)	—			(1		)
Included in cost of sales	(1		)	—			(1		)
Total realized gains (losses):
Included in other income, net	2			—			2
Included in cost of sales	3			—			3
Purchases, issuances, sales and settlements:
Purchases	6			—			6
Settlements	(10		)	(1		)	(11		)
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	—			1			1
Fair Value as of September 30, 2015	$	1		$	1		$	2

⁽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 September 30, 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Foreign exchange forward contracts — The company uses foreign exchange forward purchase and sale contracts with terms of 16 months 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 cash flow hedges, the effective portion of changes in the fair value of the contracts is recorded in Accumulated Other Comprehensive Loss in the statement of shareholders’ equity and is recognized in operating income when the underlying forecasted transaction impacts earnings.

Foreign currency option contracts — The company uses option contracts to mitigate foreign currency exposure on expected future Indian Rupee-denominated purchases. In the second quarter of fiscal year 2015, the company entered into a new series of foreign currency option contracts with effective dates from the start of third quarter of fiscal year 2015 through the end of fiscal year 2017. In the fourth quarter of fiscal year 2016, the company entered into a new series of foreign currency option contracts with effective dates from the start of the first quarter of fiscal year 2017 through the end of fiscal year 2018. At September 30, 2016, the notional amount of the company's Indian Rupee foreign exchange contracts outstanding was $174 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. 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.

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 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. As of the end of fiscal year 2016, there are no Brazilian real foreign currency option contracts outstanding. 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 other income, net, in the consolidated statement of operations.

Also in 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 Swedish krona and euro earnings, to U.S. dollars. These foreign currency option contracts did not qualify for a hedge accounting election. As of the end of fiscal year 2016, there were no Swedish krona and euro foreign currency option contracts outstanding. 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.

18. SHAREHOLDERS’ EQUITY

Common Stock

The company is authorized to issue 500 million shares of common stock, with a par value of $1 per share, and 30 million shares of Preferred Stock, without par value, of which 2 million shares are designated as Series A Junior Participating Preferred Stock (Junior Preferred Stock). No shares of Preferred Stock or Junior Preferred Stock have been issued.

In the first quarter of fiscal year 2015, the company filed a shelf registration statement with the Securities and Exchange Commission, registering an unlimited amount of debt and/or equity securities that may be offered in one or more offerings on terms to be determined at the time of sale. 

The company has reserved approximately 10 million shares of common stock in connection with its 2010 Long-Term Incentive Plan, as amended ("LTIP") for grants of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, performance shares, restricted share units and stock awards to key employees and directors. At September 30, 2016, there were 2.9 million shares available for future grants the LTIP.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Repurchase Authorizations

On July 21, 2016, the Board of Directors authorized the repurchase of up to $100 million of the company’s common stock and up to $150 million aggregate principal amount of any of the company’s debt securities (including convertible debt securities), in each case from time to time through open market purchases, privately negotiated transactions or otherwise, until September 30, 2019, subject to compliance with legal and regulatory requirements and our debt covenants. This repurchase authorization superseded and replaced the January 2015 repurchase authorization described below. No repurchases were made under these authorizations during fiscal 2016.

In June 2014, the company's Board of Directors authorized the repurchase of up to $210 million of the company's 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. During fiscal year 2016, the company repurchased 8.7 million shares of common stock for $81 million (including commission costs) and all $55 million outstanding principal amount 4.625% convertible notes at 100 percent of the face value of the notes. In the aggregate, the company repurchased 12.8 million shares of common stock for $136 million (including commission costs), $19 million principal amount of its 4.0 percent convertible notes, and all of the $55 million outstanding principal amount 4.625% convertible notes at 100 percent of the face value of the notes. (see Note 18). The repurchase program under the $210 million authorization was complete as of September 30, 2016.

In January 2015, the Offering Committee of the company's Board of Directors authorized the repurchase of up to $150 million aggregate principal amount of any of the company's debt securities (including convertible debt securities). No repurchases were made under this authorization prior to its replacement with the authorization described above on July 21, 2016.

In May 2015, the Offering Committee of the company's Board of Directors authorized the repurchase of up to $175 million aggregate principal amount at maturity of the company’s 7.875 percent convertible notes, subject to compliance with legal and regulatory requirements and its debt covenants. This repurchase authorization expired on September 30, 2015. During fiscal year 2015, the company repurchased $110 million principal amount at maturity of the company's 7.875 percent convertible notes for $179 million (see Note 16) pursuant to this repurchase authorization.

Accumulated Other Comprehensive Loss (AOCL)

The components of AOCL as reported in the Consolidated Balance Sheet and Statement of Equity (Deficit), and the changes in AOCL by components, net of tax, 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	(12		)	(70		)	4			(78		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			35			—			35
Net current-period other comprehensive income (loss)	$	(12	)	$	(35	)	$	4		$	(43	)
Balance at September 30, 2016	$	(66	)	$	(740	)	$	(3	)	$	(809	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Amortization of prior service costs	$	(1	)	(a)
Amortization of actuarial losses	36			(a)
	35			Total before tax
	—			Tax (benefit) expense
	$	35		Net of tax
Total reclassifications for the period	$	35		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 and 21 for additional details), which is recorded in cost of sales and selling, general and administrative expenses

	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 (loss) before reclassification	(96		)	(18		)	(6		)	(120		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	1			102			—			103
Net current-period other comprehensive income (loss)	$	(95	)	$	84		$	(6	)	$	(17	)
Balance at September 30, 2015	$	(54	)	$	(705	)	$	(7	)	$	(766	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Amortization of prior service costs	$	(1	)	(a)
Amortization of actuarial losses	47			(a)
Recognized prior service costs due to settlement	56			(a)
	102			Total before tax
	—			Tax (benefit) expense
	$	102		Net of tax
Employee Benefit Related Adjustment
Other reclassification adjustment	$	1		(b)
	1			Total before tax
	—			Tax (benefit) expense
	$	1		Net of tax
Total reclassifications for the period	$	103		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 and 21 for additional details).
(b)  These accumulated other comprehensive income components are included in the computation of loss from discontinued operations (see Note 3).

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at September 30, 2013	$	61		$	(792	)	$	(3	)	$	(734	)
Other comprehensive income (loss) before reclassification	(20		)	(21		)	2			(39		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			24			—			24
Net current-period other comprehensive income (loss)	$	(20	)	$	3		$	2		$	(15	)
Balance at September 30, 2014	$	41		$	(789	)	$	(1	)	$	(749	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Amortization of prior service costs	$	(7	)	(a)
Amortization of actuarial losses	46			(a)
Recognized prior service costs due to curtailment	(15		)	(a)
	24			Total before tax
	—			Tax (benefit) expense
	$	24		Net of tax
Total reclassifications for the period	$	24		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 and 21 for additional details).

19. EQUITY BASED COMPENSATION

Stock Options

Under the company’s incentive plans, stock options are typically granted at prices equal to the fair value on the grant date and have a maximum term of 10 years. Stock options generally vest over a three-year period from the grant date. No stock options were granted or exercised during fiscal years 2016, 2015 and 2014.

The following is a rollforward of stock options for fiscal year 2016 (shares in thousands, exercise price and remaining contractual term represent weighted averages and aggregate intrinsic values in millions):

	Shares		Exercise Price		Remaining Contractual Life (years)	Aggregate Intrinsic Value
Outstanding — beginning of year	650		$	10.32
Cancelled or expired	(417	)	11.50
Outstanding — end of year	233		$	8.22	1.9	—
Exercisable — end of year	233		$	8.22	1.9	—

Stock-based compensation is measured at the grant date based on the fair value of the award and is generally recognized as expense ratably on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award. No compensation cost is ultimately recognized for awards for which employees do not render the requisite service and are forfeited.

Compensation expense is recognized for the non-vested portion of previously issued stock options. No compensation expense associated with the expensing of stock options was recognized in fiscal years 2016 and 2015. During fiscal year 2014, the company recognized $1.2 million in compensation expense associated with the expensing of stock options. No options were exercised in fiscal years 2016, 2015 and 2014.

Restricted Stock and Restricted Share Units

The company has granted shares of restricted stock and restricted share units to certain employees and non-employee members of the Board of Directors in accordance with the existing plans. The company measures the grant price fair value of these stock-based awards at the market price of the company’s common stock as of the date of the grant. Employee awards typically vest at the end of three years and are subject to continued employment by the employee. Compensation cost associated with stock-based awards is recognized ratably over the vesting period. Cash dividends on the restricted stock, if any, are reinvested in additional shares of common stock during the vesting period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following is a rollforward of the company’s non-vested restricted stock and restricted share units as of September 30, 2016, and the activity during fiscal year 2016 is summarized as follows (shares in thousands):

Non-vested Shares	Number of Shares		Weighted-Average Grant-Date Fair Value
Non-vested - beginning of year	1,447		$	8.23
Granted	713		9.72
Vested	(744	)	4.44
Forfeited	(184	)	12.14
Non-vested - end of year	1,232		11.00

In fiscal years 2016, 2015 and 2014, the company granted 0.7 million, 0.5 million, and 0.2 million shares of restricted stock and restricted share units, respectively. The grant date weighted average fair value of these restricted share units was $9.72, $13.91, and $9.23 for shares of restricted stock and restricted share units granted in fiscal years 2016, 2015 and 2014, respectively. The number of non-vested restricted shares and restricted share units as of September 30, 2016 was 1.2 million. The per share weighted average fair value of these non-vested shares was $11.00.

As of September 30, 2016, there was $8 million of total unrecognized compensation costs related to non-vested restricted shares and restricted share units. These costs are expected to be recognized over a weighted average period of 1.49 years. Total compensation expense recognized for restricted stock and restricted share units was $5 million in fiscal year 2016, $4 million in fiscal year 2015 and fiscal year 2014.

Performance Share Units

The company has granted performance share units to all executives eligible to participate in the LTIP. The company measures the grant price fair value of these units-based awards at the market price of the company’s common stock as of the date of the grant. Compensation cost associated with these stock-based awards is recognized ratably over the vesting period.

In November 2015, the Board of Directors approved a grant of performance share units to all executives eligible to participate in the LTIP. 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 LTIP. 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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 shares.

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 units which includes incremental performance share units that were issued subsequent to the December 1, 2013 grant date.

The following is a rollforward of the company’s non-vested performance share units as of September 30, 2016, and the activity during fiscal year 2016 is summarized as follows (shares in thousands):

Non-vested Shares	Number of Shares		Weighted-Average Grant-Date Fair Value
Non-vested - beginning of year	2,310		$	10.01
Granted	810		10.31
Vested	—		—
Forfeited	(460	)	11.31
Non-vested - end of year	2,660		9.88

There were 0.8 million performance share units granted during fiscal 2016 and 2.7 million of non-vested performance shares as of September 30, 2016. The per share weighted average fair value of the performance share units was $9.88 as of September 30, 2016.

For the years ended September 30, 2016, 2015 and 2014, compensation cost recognized related to the performance share units was $6 million , $8 million and $4 million, respectively. As of September 30, 2016, there were $15.9 million of total unrecognized compensation costs related to non-vested performance share unit equity compensation arrangements. These costs are expected to be recognized over a weighted average period of 3.74 years.

20. RETIREMENT MEDICAL PLANS

The company has retirement medical plans that cover certain of its U.S. and non-U.S. employees, including certain employees of divested businesses, and provide for medical payments to eligible employees and dependents upon retirement. These plans are unfunded.

The company approved amendments to certain retiree medical plans in fiscal years 2002 and 2004. Certain of these plan amendments were challenged in lawsuits that were filed in the United States District Court for the Eastern District of Michigan ("District Court") alleging the changes breached the terms of various collective bargaining agreements entered into with the United Auto Workers (the "UAW lawsuit") at facilities that have either been closed or sold and alleging a companion claim under the Employee Retirement Income Security Act of 1974 ("ERISA").

On December 22, 2005, the District Court issued a preliminary injunction enjoining the company from implementing the changes to retiree health benefits and ordered the company to reinstate and resume paying the full cost of health benefits for the UAW retirees at the levels existing prior to the changes made in 2002 and 2004. On September 13, 2006, the District Court granted a motion by the UAW for summary judgment and granted the UAW’s request to make the terms of the preliminary injunction

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permanent (the "injunction"). The company accounted for the injunction as a rescission of the 2002 and 2004 plan amendments and began recording the impact of the injunction in March 2006. In addition, the injunction ordered the defendants to reimburse the plaintiffs for out-of-pocket expenses incurred since the date of the earlier benefit modifications. The company has recorded a $2 million reserve at September 30, 2016 and 2015, as the best estimate of its liability for these retroactive benefits. The company appealed the District Court’s order to the U.S. Court of Appeals for the Sixth Circuit. The Sixth Circuit ruled to affirm the District Court’s ruling and the company moved for an en banc rehearing.  The motion for an en banc rehearing was held in abeyance while the parties attempted to settle the case.  In July, 2016 the company moved for re-hearing based on a Supreme Court decision on the subject matter and subsequent Sixth Circuit ruling in a separate case on the same subject matter.  The company believes it has meritorious defenses and continues to pursue a reversal of the Sixth Circuit’s previous decision.  The ultimate outcome of the UAW lawsuit may result in future plan amendments. The impact of any future plan amendments cannot be reasonably estimated at this time.

The mortality assumptions for participants in the company’s U.S. plans incorporates future mortality improvements from tables published by the Society of Actuaries ("SOA"). In October 2014, the SOA issued new mortality and mortality improvement tables that raised the life expectancies. The company reviewed the new SOA mortality and mortality improvement tables and utilized an actuary to conduct a study based on the company’s plan participants. The company determined that the best representation of the plans' mortality is to utilize the new SOA mortality and mortality improvement tables as the reference table for credibility-weighted mortality rates, blended with company-specific mortality based on the study conducted by the actuary. The company incorporated the updated tables into the 2015 year-end measurement of the plans’ benefit obligations. As a result of this change in actuarial assumption, the company’s U.S. OPEB obligations decreased by $18 million in the fourth quarter of fiscal year 2015. The company considers improvement scales released annually by the SOA. These did not have an impact in fiscal year 2016.

On September 26, 2014, Meritor amended its retiree medical and retiree life insurance plan in the United States to cease retiree medical coverage for salaried and non-union hourly employees under the age of 65 and eliminate retiree life insurance coverage with face amounts ranging from $3,750 to $15,000. The amendment triggered a curtailment in the fourth quarter of fiscal year 2014 which immediately reduced the retiree medical liability by $16 million (i.e., a curtailment gain) and reduced retiree medical expense by $15 million. The reduction in expense was primarily attributable to the required immediate recognition of negative prior service costs which were previously being amortized into net periodic expense over the active participants remaining average service life. The $16 million reduction to the retiree medical liability established a new negative prior service cost base, which, subsequent to the curtailment, is being amortized over an average expected lifetime of inactive participants of approximately 10 years.

The company’s retiree medical obligations were measured as of September 30, 2016, 2015, and 2014. The following are the assumptions used in the measurement of the APBO and retiree medical expense:

	2016		2015		2014
Discount rate	3.45	%	4.20	%	4.20	%
Health care cost trend rate	7.10	%	7.00	%	7.40	%
Ultimate health care trend rate	4.75	%	5.00	%	5.00	%
Year ultimate rate is reached	2024		2022		2022

The assumptions noted above are used to calculate the APBO for each fiscal year end and retiree medical expense for the subsequent fiscal year.

The discount rate is used to calculate the present value of the APBO. This rate is determined based on high-quality fixed income investments that match the duration of expected retiree medical benefits. The company has used the corporate AA/Aa bond rate for this assumption. The health care cost trend rate represents the company’s expected annual rates of change in the cost of health care benefits. The company’s projection for fiscal year 2017 health care cost trend rate is 7.10 percent.

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The APBO as of the September 30, 2016 and 2015 measurement dates are summarized as follows (in millions):

	2016		2015
Retirees	$	444	$	433
Employees eligible to retire	1		3
Total	$	445	$	436

The following reconciles the change in APBO and the amounts included in the consolidated balance sheet for years ended September 30, 2016 and 2015, respectively (in millions):

	2016			2015
APBO — beginning of year	$	436		$	477
Service cost	—			—
Interest cost	18			19
Participant contributions	—			2
Actuarial loss (gain)	27			(19		)
Foreign currency rate changes	—			(3		)
Benefit payments (2)	(36		)	(40		)
APBO — end of year	445			436
Other (1)	2			2
Retiree medical liability	$	447		$	438

⁽¹⁾  The company recorded a $2 million reserve for retiree medical liabilities at September 30, 2016 and 2015 as its best estimate for retroactive benefits related to the previously mentioned injunction

⁽²⁾  Net of subsidies and rebates available under Employer Group Waiver Plan (EGWP).

Actuarial losses/(gains) relate to changes in the discount rate and other actuarial assumptions. In accordance with FASB ASC Topic 715, “Compensation – Retirement Benefits”, a portion of the actuarial losses is not subject to amortization. The actuarial losses that are subject to amortization are generally amortized over the average lifetime of inactive participants of approximately 10 years.

The Medicare Prescription Drug Improvement and Modernization Act of 2003 provides for a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit at least actuarially equivalent to the benefit established by the law. The company provides retiree medical benefits under certain plans that exceed the value of the benefits that are provided by the Medicare Part D plan. Therefore, management concluded that these plans are at least actuarially equivalent to the Medicare Part D plan and the company is eligible for the federal subsidy. In September 2011, in connection with the Health Care and Education Reconciliation Act of 2010, the company converted its current prescription drug program for certain retirees to a group-based, company-sponsored Medicare Part D program, or Employer Group Waiver Plan (EGWP). In September 2012, the company converted certain additional groups of retirees to EGWP and as a result, reduced its APBO by an additional amount of approximately $25 million. In 2013, the company began using use the Part D subsidies delivered through EGWP to reduce its net retiree medical costs. As a result of this change in assumption, the company reduced its APBO by approximately $35 million. These reductions to APBO are being amortized over an average expected lifetime of inactive participants of approximately 10 years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The retiree medical liability is included in the consolidated balance sheet as follows (in millions):

	September 30,
	2016		2015
Current — included in compensation and benefits	$	33	$	33
Long-term — included in retirement benefits	414		405
Retiree medical liability	$	447	$	438

The following table summarizes the amounts included in Accumulated Other Comprehensive Loss net of tax related to retiree medical liabilities as of September 30, 2016 and 2015 and changes recognized in Other Comprehensive Income (Loss) net of tax for the years ended September 30, 2016 and 2015.

	Net Actuarial Loss			Prior Service Cost (Benefit)			Total
Balance at September 30, 2015	$	101		$	(12	)	$	89
Net actuarial loss for the year	27			—			27
Amortization for the year	(13		)	1			(12		)
Deferred tax impact	(8		)	—			(8		)
Balance at September 30, 2016	$	107		$	(11	)	$	96
Balance at September 30, 2014	$	142		$	(13	)	$	129
Net actuarial gain for the year	(19		)	—			(19		)
Amortization for the year	(22		)	1			(21		)
Balance at September 30, 2015	$	101		$	(12	)	$	89

The net actuarial loss and prior service benefit that are estimated to be amortized from accumulated other comprehensive loss into net periodic retiree medical expense in fiscal year 2017 are $15 million and $(3) million, respectively.

The components of retiree medical expense for years ended September 30 are as follows (in millions):

	2016			2015			2014
Service cost	$	—		$	—		$	—
Interest cost	18			19			23
Amortization of:
Prior service benefit	(1		)	(1		)	(7		)
Actuarial losses	13			22			23
Recognized prior service costs due to curtailment	—			—			(15		)
Retiree medical expense	$	30		$	40		$	24

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

A one-percentage point change in the assumed health care cost trend rate for all years to, and including, the ultimate rate would have the following effects (in millions):

	2016			2015
Effect on total service and interest cost
1% Increase	$	1		$	2
1% Decrease	(1		)	(1		)
Effect on APBO
1% Increase	40			39
1% Decrease	(35		)	(34		)

The company expects future benefit payments as follows (in millions):

	Gross Benefit Payments		Gross Receipts (1)
Fiscal 2017	$	40	$	7
Fiscal 2018	40		7
Fiscal 2019	40		7
Fiscal 2020	40		7
Fiscal 2021	40		7
Fiscal 2022 – 2026	184		34

⁽¹⁾  Consists of subsidies and rebates available under EGWP.

21. RETIREMENT PENSION PLANS

The company sponsors defined benefit pension plans that cover certain of its U.S. and non-U.S. employees. Pension benefits for salaried employees are based on years of credited service and compensation. Pension benefits for hourly employees are based on years of service and specified benefit amounts. The company’s funding policy provides that annual contributions to the pension trusts will be at least equal to the minimum amounts required by ERISA in the U.S. and the actuarial recommendations or statutory requirements in other countries.

The mortality assumptions for participants in the company’s U.S. plans incorporates future mortality improvements from tables published by the SOA. In October 2014, the SOA issued new mortality and mortality improvement tables that raised the life expectancies. The company reviewed the new SOA mortality and mortality improvement tables and utilized an actuary to conduct a study based on the company’s plan participants. The company determined that the best representation of the plans' mortality is to utilize the new SOA mortality and mortality improvement tables as the reference table for credibility-weighted mortality rates, blended with company specific mortality based on the study conducted by the actuary. The company incorporated the updated tables into the 2015 year-end measurement of the plans’ benefit obligations. As a result of this change in actuarial assumption, the company’s U.S. pension obligations increased by $24 million in the fourth quarter of fiscal year 2015. The company considers improvement scales released annually by the SOA. These did not have an impact in fiscal year 2016.

On August 1, 2010, Meritor amended its defined benefit pension plan in the United Kingdom to cease the accrual of future benefits for all of its active plan participants. Subsequent to the freeze date, the company began making contributions to its defined contribution savings plan on behalf of the affected employees. The amount of the savings plan contribution is based on a percentage of the employees’ pay. These changes did not affect then-current retirees. The company began recording the impact of the plan freeze in the fourth quarter of fiscal year 2010. Subsequent to the plan freeze, accumulated actuarial losses are being amortized into net periodic pension expense over the average life expectancy of inactive plan participants of approximately 27 years rather than over their remaining average service life.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In April 2007, the company announced a freeze of its defined benefit pension plan for salaried and non-represented employees in the United States, effective January 1, 2008. The change affected approximately 3,800 employees including certain employees who continued to accrue benefits for an additional transition period, ending June 30, 2011. After these freeze dates, the company started making additional contributions to its defined contribution savings plan on behalf of the affected employees. The amount of the savings plan contribution is based on a percentage of the employees’ pay, with the contribution percentage increasing as a function of employees’ age. These changes do not affect plan participants who had retired prior to the freeze dates or represented employees. Accumulated actuarial losses are being amortized into net periodic pension expense over the average life expectancy of inactive plan participants of approximately 21 years.

During fiscal year 2015, the company settled the remaining liabilities associated with its Canadian pension plans through lump-sum payments made from plan assets to plan participants and by purchasing annuity contracts from an insurance company. The company recognized a primarily non-cash pre-tax settlement loss of $16 million associated with the annuity purchases and lump-sum payments. The company settled a net pension obligation of $16 million using $20 million of pension plan assets, such that the assets and liabilities were derecognized from the balance sheet during the quarter ended September 30, 2015.

Additionally, in fiscal year 2015, the company settled the remaining liabilities associated with its German pension plans by purchasing annuity contracts from an insurance company. The company recognized a primarily non-cash pre-tax settlement loss of $43 million associated with the annuity purchases. The company settled a net pension obligation of $91 million, which was derecognized from the balance sheet during the quarter ended September 30, 2015.

In June 2013, the company amended its U.S. Retirement Plan to allow all terminated vested participants with an accrued benefit of $5,000 or less to receive a full lump-sum distribution of their benefit. The lump-sum amounts were rolled into individual retirement accounts for those participants that had an accrued benefit of $1,000 to $5,000 who did not make an affirmative election to receive their benefits. For those participants with an accrued benefit of less than $1,000, the benefits were automatically distributed to the participant.

Effective October 2014, the company amended the U.S. Retirement Plan to include an additional distribution option in the form of a Lump Sum Benefit from the Plan. The majority of Plan members are eligible for this distribution option following termination or when making their retirement payment election. The Lump Sum Benefit equals the present value of a member's vested accrued benefit paid in one lump sum payment.

The company’s pension obligations are generally measured as of September 30, 2016, 2015 and 2014, while the pension obligations associated with the fourth quarter fiscal year 2015 settled Canadian and German pension plans were measured as of August 31, 2015. The U.S. plans include qualified and non-qualified pension plans. The company’s only significant non-U.S. plan is located in the United Kingdom.

The following are the significant assumptions used in the measurement of the projected benefit obligation (PBO) and net periodic pension expense:

	U.S. Plans
	2016			2015			2014
Discount Rate	3.50%	—	3.55%	4.25%	—	4.35%	4.20%	—	4.30%
Assumed return on plan assets (beginning of the year)	7.75%			8.00%			8.00%

	Non-U.S. Plans (2)
	2016	2015			2014
Discount Rate (1)	2.50%	1.00%	—	3.80%	1.90%	—	4.10%
Assumed return on plan assets (beginning of the year) (1)	6.00%	2.25%	—	7.25%	2.25%	—	7.25%
Rate of compensation increase (3)	N/A	2.00%			2.00%	—	3.00%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

⁽¹⁾  The discount rate for the company’s U.K. pension plan was 2.50 percent, 3.80 percent and 4.10 percent for 2016, 2015 and 2014, respectively. The assumed return on plan assets for this plan was 6.00 percent for 2016 and 7.25 percent for 2015 and 2014.

⁽²⁾  In fiscal year 2015, our German and Canadian pension plans were settled. In 2016, assumptions presented are for the U.K pension plan, which is the only significant non-U.S. plan remaining.

⁽³⁾  Rate of compensation expense for 2016 is not applicable as the U.K. pension plan is frozen.

The discount rate is used to calculate the present value of the PBO at the balance sheet date and net periodic pension expense for the subsequent fiscal year. The rate used reflects a rate of return on high-quality fixed income investments that match the duration of expected benefit payments. Generally, the company uses a portfolio of long-term corporate AA/Aa bonds that match the duration of the expected benefit payments, except for the company's U.K. pension plan which uses an annualized yield curve, to establish the discount rate for this assumption.

The assumed return on plan assets is used to determine net periodic pension expense. The rate of return assumptions are based on projected long-term market returns for the various asset classes in which the plans are invested, weighted by the target asset allocations. An incremental amount for active plan asset management and diversification, where appropriate, is included in the rate of return assumption. The return assumption is reviewed annually.

The rate of compensation increase represents the long-term assumption for expected increases to salaries for pay-related plans. The accompanying disclosures include pension obligations associated with businesses classified as discontinued operations.

The following table reconciles the change in the PBO, the change in plan assets and amounts included in the consolidated balance sheet for the years ended September 30, 2016 and 2015, respectively (in millions):

	2016									2015
	U.S.			Non- U.S.			Total			U.S.			Non- U.S.			Total
PBO — beginning of year	$	1,042		$	614		$	1,656		$	1,059		$	735		$	1,794
Service cost	—			1			1			1			1			2
Interest cost	45			20			65			44			26			70
Actuarial loss	105			115			220			10			48			58
Settlements	—			—			—			—			(111		)	(111		)
Benefit payments	(80		)	(35		)	(115		)	(72		)	(29		)	(101		)
Foreign currency rate changes	—			(99		)	(99		)	—			(56		)	(56		)
PBO — end of year	$	1,112		$	616		$	1,728		$	1,042		$	614		$	1,656
Change in plan assets
Fair value of assets — beginning of year	$	830		$	717		$	1,547		$	832		$	743		$	1,575
Actual return on plan assets	79			169			248			65			67			132
Employer contributions	5			1			6			5			7			12
Settlements	—			—			—			—			(20		)	(20		)
Benefit payments	(80		)	(35		)	(115		)	(72		)	(29		)	(101		)
Foreign currency rate changes	—			(118		)	(118		)	—			(51		)	(51		)
Fair value of assets — end of year	$	834		$	734		$	1,568		$	830		$	717		$	1,547
Funded status	$	(278	)	$	118		$	(160	)	$	(212	)	$	103		$	(109	)

Amounts included in the consolidated balance sheet at September 30 are comprised of the following (in millions):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

	2016									2015
	U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total
Non-current assets	$	—		$	123		$	123		$	—		$	110		$	110
Current liabilities	(6		)	—			(6		)	(5		)	—			(5		)
Retirement benefits-non-current	(272		)	(5		)	(277		)	(207		)	(7		)	(214		)
Net amount recognized	$	(278	)	$	118		$	(160	)	$	(212	)	$	103		$	(109	)

The following tables summarize the amounts included in Accumulated Other Comprehensive Loss net of tax related to pension liabilities as of September 30, 2016 and 2015 and changes recognized in Other Comprehensive Income (Loss) net of tax for the year ended September 30, 2016.

	Net Actuarial Loss
	U.S.			Non-U.S.			Total
Balance at September 30, 2015	$	410		$	206		$	616
Net actuarial loss for the year	87			(11		)	76
Amortization for the year	(18		)	(5		)	(23		)
Deferred tax impact	(25		)	—			(25		)
Balance at September 30, 2016	$	454		$	190		$	644
Balance at September 30, 2014	$	419		$	241		$	660
Net actuarial loss for the year	8			24			32
Amortization for the year	(17		)	(8		)	(25		)
Deferred tax impact	—			5			5
Settlements	—			(56		)	(56		)
Balance at September 30, 2015	$	410		$	206		$	616

The company estimates that $30 million of net actuarial losses will be amortized from accumulated other comprehensive loss into net periodic pension expense during fiscal year 2017. The non-current portion of the pension liability is included in Retirement Benefits in the consolidated balance sheet as follows (in millions):

	September 30,
	2016		2015
Pension liability	$	277	$	214
Retiree medical liability — long term (see Note 20)	414		405
Other	12		13
Total retirement benefits	$	703	$	632

In accordance with FASB guidance, the PBO, accumulated benefit obligation (ABO) and fair value of plan assets are required to be disclosed for all plans where the ABO is in excess of plan assets. The difference between the PBO and ABO is that the PBO includes projected compensation increases.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Additional information is as follows (in millions):

	2016						2015
	ABO Exceeds Assets		Assets Exceed ABO		Total		ABO Exceeds Assets		Assets Exceed ABO		Total
PBO	$	1,116	$	612	$	1,728	$	1,057	$	599	$	1,656
ABO	1,116		612		1,728		1,057		598		1,655
Plan Assets	834		734		1,568		838		709		1,547

The components of net periodic pension expense are as follows (in millions):

	2016			2015			2014
Service cost	$	1		$	2		$	2
Interest cost	65			70			80
Assumed rate of return on plan assets	(99		)	(111		)	(104		)
Amortization of —
Actuarial losses	23			26			23
Settlement loss	—			59			—
Net periodic pension expense	$	(10	)	$	46		$	1

Disclosures on investment policies and strategies, categories of plan assets, fair value measurements of plan assets, and significant concentrations of risk are included below.

Investment Policy and Strategy

The company’s primary investment objective for its pension plan assets is to generate a total investment return sufficient to meet present and future benefit payments while minimizing the company’s cash contributions over the life of the plans. In order to accomplish this objective, the company maintains target allocations to identify and manage exposures. The target asset allocation ranges for the U.S. plan are 30–50 percent equity investments, 30–50 percent fixed income investments and 10–30 percent alternative investments. Alternative investments include private equities, real estate, hedge funds, diversified growth funds, and partnership interests. The target asset allocation ranges for the non-U.S. plans are 15–35 percent equity investments, 30–60 percent fixed income investments, 0–10 percent real estate and 10–30 percent alternative investments.

Investment strategies and policies for the company’s pension plan assets reflect a balance of risk-reducing and return-seeking considerations. The objective of minimizing the volatility of assets relative to liabilities is addressed primarily through asset diversification. Assets are broadly diversified across several asset classes to achieve risk-adjusted returns that accomplish this objective.

The majority of pension plan assets are externally managed through active managers. Managers are only permitted to invest within established asset classes and follow the strategies for which they have been appointed. The company uses investment guidelines and reviews asset returns and investment decisions made by the managers to ensure that they are in accordance with the company’s strategies.

Concentration of Risk

The company seeks to mitigate risks relative to performance of the plan assets. Assets are invested in various classes with different risk and return characteristics in order to ensure that they are sufficient to pay benefits. The company’s investment strategies incorporate a return-seeking approach through equity and alternative investments, while seeking to minimize the volatility of the plans’ assets relative to its liabilities through investments in fixed income securities. The significant areas of risk related to these strategies include equity, interest rate, and operating risk.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

A portion of plan assets is allocated to equity and alternative investments that are expected, over time, to earn higher returns. Within this return-seeking portfolio, asset diversification is utilized to reduce uncompensated risk.

Plan assets are also allocated to fixed income investments, which seek to minimize interest rate risk volatility relative to pension liabilities. The fixed income portfolio partially matches the long-dated nature of the pension liabilities reducing interest rate risk. Interest rate decreases generally increase the value of fixed income assets, partially offsetting the related increase in the liabilities, while interest rate increases generally result in a decline in the value of fixed income assets while reducing the present value of the liabilities.

Operating risks consist of the risks of inadequate diversification and weak controls. The company has established policies and procedures in order to mitigate this risk by monitoring investment manager performance, reviewing periodic compliance information, and ensuring that the plans’ managers invest in accordance with the company’s investment strategies.

Fair Value of Investments

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 assets (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 assets that the Plan has the ability to access.

• Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets 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 asset.

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.

Following are descriptions, valuation methodologies and other information related to plan assets.

Cash and cash equivalents: The fair value of cash and cash equivalents is valued at cost.

Equity Securities: The overall equity category includes common and preferred stocks issued by U.S. and international companies as well as equity funds that invest in these instruments. All investments generally allow near-term (within 90 days of the measurement date)  liquidity and are held in issues that are actively traded to facilitate transactions at minimum cost. The aggregate equity portfolio is diversified to avoid exposure to any investment strategy, single economic sector, industry group, or individual security. 

The fair value of equity securities is determined by either direct or indirect quoted market prices. When the value of assets held in separate accounts is not published, the value is based on the underlying holdings, which are primarily direct quoted market prices on regulated financial exchanges.

Most of the equity investments allow daily redemptions, with some providing monthly liquidity or requiring a 30-day notice. 

Fixed Income Securities: The overall fixed income category includes U.S. dollar-denominated and international marketable bonds and convertible debt securities as well as fixed income funds that invest in these instruments. All assets generally allow near-term liquidity and are held in issues which are actively traded to facilitate transactions at minimum cost. The aggregate fixed income portfolio is diversified to avoid exposure to any investment strategy, maturity, issuer or credit quality.

The fair value of fixed income securities is determined by either direct or indirect quoted market prices. When the value of assets held in separate accounts is not published, the value is based on the underlying holdings, which are primarily direct quoted market prices on regulated financial exchanges.

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U.S. fixed income securities typically offer daily liquidity, with only one investment allowing quarterly redemptions. International and emerging fixed income investment vehicles generally provide daily liquidity.

Commingled Funds: The fair value of commingled funds is accounted for by a custodian. The custodian obtains valuations from underlying fund managers based on market quotes for the most liquid assets and alternative methods for assets that do not have sufficient trading activity to derive prices. The company and custodian review the methods used by the underlying managers to value the assets.

Real Estate: Real estate provides an indirect investment into a diversified and multi-sector portfolio of property assets. The fair value of real estate investments is valued by the fund managers. The fund managers value the real estate investments via independent third-party appraisals on a periodic basis. Assumptions used to revalue the properties are updated every quarter. For the component of the real estate portfolio under development, the investments are carried at cost, which approximates fair value, until they are completed and valued by a third-party appraiser.

Due to the long-term nature of real estate investments, liquidity is provided on a quarterly basis.

Futures Contracts:  The plan enters into futures contracts in the normal course of its investing activities to manage market risk and to achieve overall investment portfolio objectives.  The credit risk associated with these contracts is minimal as they are traded on organized exchanges and settled daily.  The fair value of futures contracts is determined by direct quoted market prices.  Cash margin for these futures contracts is included in Cash and Cash Equivalents in the leveling table.

Alternatives/Partnerships/Private Equity: This category includes investments in private equity and hedge funds.  Such investments may be made directly or through pooled funds, including fund of funds structures. The fair market value of the company’s interest in partnerships and private equity is valued by the fund managers. The valuation is based on the net present value of observable inputs (dividends, cash flows, earnings, etc.), which are discounted at applicable discount rates. The company and custodian review the methods used by the underlying managers to value the assets. 

Most of these investments offer quarterly redemption opportunities. Some partnerships and private equity investments, due to the nature of their investment strategy and underlying holdings, offer less frequent liquidity. When available, liquidity events are closely evaluated.

The valuation methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

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The fair value of plan assets at September 30, 2016 by asset category is as follows (in millions):

U.S. Plans	2016
Asset Category	Level 1		Level 2		Level 3		Total
Equity investments
U.S. – Large cap	$	71	$	—	$	—	$	71
U.S. – Small cap	22		—		—		22
Private equity	—		—		11		11
International equity	41		—		—		41
Equity investments measured at net asset value (1)	—		—		—		152
Total equity investments	$	134	$	—	$	11	$	297
Fixed income investments
U.S. fixed income	$	10	$	265	$	—	$	275
Emerging fixed income	—		20		—		20
Partnerships fixed income	—		—		1		1
Fixed income investments measured at net asset value (1)	—		—		—		45
Total fixed income	$	10	$	285	$	1	$	341
Alternatives – Partnerships	—		—		77		77
Alternatives – Partnerships measured at net asset value (1)	—		—		—		84
Cash and cash equivalents	—		35		—		35
Total assets at fair value	$	144	$	320	$	89	$	834
Non-U.S. Plans	2016
Asset Category	Level 1		Level 2		Level 3		Total
Equity investments
International equity	$	61	$	—	$	—	$	61
Equity investments measured at net asset value (1)	—		—		—		82
Total equity investments	$	61	$	—	$	—	$	143
Fixed income investments
Other fixed income investments	$	—	$	222	$	—	$	222
Fixed income investments measured at net asset value (1)	—		—		—		198
Total fixed income	$	—	$	222	$	—	$	420
Commingled funds	—		6		—		6
Alternative investments measured at net asset value (1)	—		—		—		114
Real estate measured at net asset value (1)	—		—		—		37
Cash and cash equivalents	—		14		—		14
Total assets at fair value	$	61	$	242	$	—	$	734

⁽¹⁾  In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

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The fair value of plan assets at September 30, 2015 by asset category is as follows (in millions):

U.S. Plans	2015
Asset Category	Level 1		Level 2		Level 3		Total
Equity investments
U.S. – Large cap	$	88	$	—	$	—	$	88
U.S. – Small cap	21		—		—		21
Private equity	—		—		15		15
International equity	53		—		—		53
Equity investments measured at net asset value (1)	—		—		—		160
Total equity investments	$	162	$	—	$	15	$	337
Fixed income investments
U.S. fixed income	$	8	$	263	$	—	$	271
Emerging fixed income	—		20		—		20
Partnerships fixed income	—		—		1		1
Fixed income investments measured at net asset value (1)	—		—		—		45
Total fixed income	$	8	$	283	$	1	$	337
Alternatives – Partnerships	—		—		84		84
Alternatives – Partnerships measured at net asset value (1)	—		—		—		65
Cash and cash equivalents	—		7		—		7
Total assets at fair value	$	170	$	290	$	100	$	830
Non-U.S. Plans	2015
Asset Category	Level 1		Level 2		Level 3		Total
Equity investments
International equity	$	55	$	—	$	—	$	55
Equity investments measured at net asset value (1)	—		—		—		106
Total equity investments	$	55	$	—	$	—	$	161
Fixed income investments
Other fixed income investments	$	—	$	186	$	—	$	186
Fixed income investments measured at net asset value (1)	—		—		—		158
Total fixed income	$	—	$	186	$	—	$	344
Commingled funds	—		8		—		8
Alternative investments measured at net asset value (1)	—		—		—		133
Real estate measured at net asset value (1)	—		—		—		43
Cash and cash equivalents	—		28		—		28
Total assets at fair value	$	55	$	222	$	—	$	717

⁽¹⁾  In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

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Unfunded Commitment

As of September 30, 2016, the U.S. plan had $20 million of unfunded investment commitments related to plan assets. The majority of this amount is attributed to partnership investments that the plan will invest in gradually over the course of several years. Non-U.S. plans currently do not have any unfunded commitments.

The following table summarizes the changes in Level 3 pension plan assets measured at fair value on a recurring basis for the year ended September 30, 2016 (in millions):   

U.S. Plans	2016
	Fair Value at October 1, 2015		Return on Plan Assets: Attributable to Assets Held at September 30, 2016			Purchases		Settlements			Net Transfers Into (Out of) Level 3		Fair Value at September 30, 2016
Asset Category
Private equity	$	15	$	(4	)	$	—	$	—		$	—	$	11
Partnerships –
Fixed income	1		—			—		—			—		1
Alternatives –
Partnerships	84		(5		)	—		(2		)	—		77
Total Level 3 fair value	$	100	$	(9	)	$	—	$	(2	)	$	—	$	89

The following table summarizes the changes in Level 3 pension plan assets measured at fair value on a recurring basis for the year ended September 30, 2015 (in millions):

U.S. Plans	2015
	Fair Value at October 1, 2014		Return on Plan Assets: Attributable to Assets Held at September 30, 2015		Purchases		Settlements			Net Transfers Into (Out of) Level 3		Fair Value at September 30, 2015
Asset Category
Private equity	$	15	$	—	$	—	$	—		$	—	$	15
Partnerships –
Fixed income	1		—		—		—			—		1
Alternatives –
Partnerships	58		19		8		(1		)	—		84
Total Level 3 fair value	$	74	$	19	$	8	$	(1	)	$	—	$	100

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Information about the expected cash flows for the U.S. and non-U.S. pension plans is as follows (in millions): 

	U.S.		Non U.S.		Total
Expected employer contributions:
Fiscal 2017	$	5	$	1	$	6
Expected benefit payments:
Fiscal 2017	78		20		98
Fiscal 2018	76		20		96
Fiscal 2019	74		21		95
Fiscal 2020	73		22		95
Fiscal 2021	71		22		93
Fiscal 2022-2026	336		121		457

The company also sponsors certain defined contribution savings plans for eligible employees. Expense related to these plans, including company matching contributions, was $16 million, $15 million and $14 million for fiscal years 2016, 2015 and 2014, respectively.

22. INCOME TAXES

The income tax provisions were calculated based upon the following components of income before income taxes (in millions):

	2016		2015		2014
U.S. income	$	71	$	24	$	204
Foreign income	84		43		111
Total	$	155	$	67	$	315

The components of the benefit (provision) for income taxes are summarized as follows (in millions):    

	2016			2015			2014
Current tax benefit (expense):
U.S.	$	(1	)	$	(4	)	$	(1	)
Foreign	11			(20		)	(32		)
State and local	(1		)	(1		)	—
Total current tax benefit (expense)	9			(25		)	(33		)
Deferred tax benefit (expense):
U.S.	394			3			(1		)
Foreign	(22		)	21			3
State and local	43			—			—
Total deferred tax benefit	415			24			2
Income tax benefit (expense)	$	424		$	(1	)	$	(31	)

The deferred tax expense or benefit represents tax effects of current year deductions or items of income that will be recognized in future periods for tax purposes. In fiscal year 2016, the U.S. and state and local deferred tax benefit was primarily attributable to the valuation allowance reversal in the U.S. In fiscal year 2015, the foreign deferred tax benefit was primarily attributable to valuation allowance reversals in Germany, Italy, Mexico and Sweden in addition to the tax benefit received from the Canadian and German pension settlement charges.

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Net current and non-current deferred income tax assets (liabilities) included in the consolidated balance sheet consist of the tax effects of temporary differences related to the following (in millions): 

	September 30,
	2016			2015 (1)
Accrued compensation and benefits	$	21		$	27
Accrued product warranties	13			19
Inventory costs	8			20
Receivables	15			16
Accrued retiree healthcare benefits	169			175
Retirement pension plans	119			95
Property	7			9
Loss and credit carryforwards	455			487
Other	67			77
Sub-total	874			925
Less: Valuation allowances	(379		)	(834		)
Deferred income taxes - asset	$	495		$	91
Taxes on undistributed income	$	(7	)	$	(51	)
Intangible assets	(82		)	(85		)
Debt basis difference	(5		)	(8		)
Deferred income taxes - liability	$	(94	)	$	(144	)
Net deferred income tax assets (liabilities)	$	401		$	(53	)

(1) Immaterial Restatement- Subsequent to the issuance of Meritor’s consolidated financial statements as of and for the year ended September 30, 2015, it was determined that (i) Loss and credit carryforwards; (ii) Valuation allowances; and (iii) Taxes on undistributed income as of and for the year ended September 30, 2015 were overstated by approximately $121 million, overstated by approximately $127 million, and understated by approximately $6 million, respectively. As a result, September 30, 2015 Loss and credit carryforwards, Valuation allowances and Taxes on undistributed income have been corrected in the above reconciliation to appropriately reflect these balances. The errors had no impact on the consolidated balance sheet as of September 30, 2015 or the related consolidated statement of operations, comprehensive income, equity (deficit), or cash flows for the year ended September 30, 2015.

Net current and non-current deferred income tax assets (liabilities) are included in the consolidated balance sheet as follows (in millions): 

	September 30,
	2016			2015
Other current assets (see Note 10)	$	—		$	20
Other current liabilities	—			(2		)
Net current deferred income taxes — asset	—			18
Other assets (see Note 12)	413			28
Other liabilities (see Note 15)	(12		)	(99		)
Net non-current deferred income taxes — asset (liability)	$	401		$	(71	)

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%-owned subsidiaries in France, Germany, Italy, Sweden, the U.K. 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

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planning strategies. In addition, the company reviews changes in near-term market conditions and other factors that impact future operating results.

During the fourth quarter of fiscal year 2016, as a result of sustained profitability in the U.S. evidenced by a strong earnings history, future forecasted earnings, and additional positive evidence, the company determined it was more likely than not it would be able to realize deferred tax assets in the U.S. Accordingly, the company reversed a portion of the valuation allowance in the U.S., resulting in a non-cash income tax benefit of $438 million. In fiscal year 2015, the company reversed valuation allowances in Germany, Italy, Mexico, and Sweden, resulting in a non-cash income tax benefit of $16 million.

During the fourth quarter of fiscal year 2016, due to a three-year cumulative loss and future economic uncertainty, the company concluded that a valuation allowance was required in Brazil. This resulted in a non-cash charge to income tax expense of $9 million. As of September 30, 2016, the company continues to maintain the valuation allowances in France, the U.K. and certain other jurisdictions, as the company believes the negative evidence that it will be able to recover these net deferred tax assets continues to outweigh the positive evidence. If, in the future, the company generates taxable income on a sustained basis, its conclusion regarding the need for valuation allowances in these jurisdictions could change.

The expiration periods for deferred tax assets related to net operating losses and tax credit carryforwards as of September 30, 2016 are included below (in millions). Also included are the associated valuation allowances on these deferred tax assets (in millions).

	Fiscal Year Expiration Periods
	2017-2021		2022-2031		2032-2036		Indefinite		Total
Net Operating Losses and Tax Credit Carryforwards	$	25	$	160	$	10	$	260	$	455
Valuation Allowances on these Deferred Tax Assets	$	24	$	56	$	8	$	253	$	341

Realization of deferred tax assets representing net operating loss carryforwards for which a valuation allowance has not been provided is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Although realization is not assured, management believes it is more likely than not that all of such deferred tax assets will be realized. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if the company is unable to generate sufficient future taxable income during the carryforward period.

For fiscal years 2016 and 2015, no provision has been made for U.S., state or additional foreign income taxes related to approximately $687 million and $686 million of undistributed earnings of foreign subsidiaries that have been or are intended to be permanently reinvested. Quantification of the deferred tax liability, if any, associated with permanently reinvested earnings is not practicable.

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The company’s provision for income taxes was different from the provision for income taxes calculated at the U.S. statutory rate for the reasons set forth below (in millions): 

	2016			2015 (1)			2014 (1)
Expense for income taxes at statutory tax rate of 35%	$	(54	)	$	(23	)	$	(110	)
State and local income taxes	(7		)	(1		)	—
Foreign income taxed at rates other than 35%	5			7			13
Joint venture equity income	3			3			5
Tax effect of nonfunctional currency transaction	(30		)	—			(4		)
Correlated tax relief	51			—			—
U.S. tax impact on distributions from subsidiaries and joint ventures	14			(11		)	(26		)
Nondeductible expenses	(12		)	(9		)	(10		)
Tax credits	61			—			—
Valuation allowances	418			49			113
Tax rate change	(14		)	—			—
Other	(11		)	(16		)	(12		)
Income tax benefit (expense)	$	424		$	(1	)	$	(31	)

(1) Immaterial Restatement- Subsequent to the issuance of Meritor’s consolidated financial statements as of and for the year ended September 30, 2015, it was determined that (i) U.S. tax impact on distributions from subsidiaries and joint ventures; (ii) Valuation allowances; and (iii) Other as of and for the year ended September 30, 2015 were overstated by approximately $7 million, understated by approximately $2 million, and understated by approximately $9 million, respectively. As a result, September 30, 2015 U.S. tax impact on distributions from subsidiaries and joint ventures, Valuation allowances and Other have been corrected in the above reconciliation to appropriately reflect these balances. Also, it was determined that (i) Tax effect of nonfunctional currency transaction; (ii) U.S. tax impact on distributions from subsidiaries and joint ventures; (iii) Valuation allowances; and (iv) Other as of and for the year ended September 30, 2014 were understated by approximately $4 million, understated by approximately $8 million, understated by approximately $24 million, and understated by approximately $12 million, respectively. As a result, September 30, 2014 Tax effect of nonfunctional currency transaction, U.S. tax impact on distributions from subsidiaries and joint ventures, Valuation allowances and Other have been corrected in the above reconciliation to appropriately reflect these balances. The errors had no impact on the consolidated balance sheets as of September 30, 2015 and September 30, 2014 or the related consolidated statement of operations, comprehensive income, equity (deficit), or cash flows for the years ended September 30, 2015 and September 30, 2014.

In fiscal year 2016, the company determined it is now more favorable to take a foreign tax credit instead of foreign tax deduction, and as a result, a $61 million income tax benefit was recorded. Additionally, the company established a $51 millioncorrelated relief asset against a related uncertain tax position.

In fiscal year 2014, the company recorded $210 million of earnings related to the antitrust lawsuit settlement with Eaton Corporation. The earnings did not impact U.S. federal income tax expense, since they were offset by a corresponding valuation allowance in the U.S.

The total amount of gross unrecognized tax benefits the company recorded in accordance with FASB ASC Topic 740 as of September 30, 2016 was $243 million, of which $215 million represents the amount that, if recognized, would favorably affect the effective income tax rate in future periods.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

A reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period is as follows (in millions): 

	2016			2015 (1)			2014 (1)
Balance at beginning of the period	$	207		$	209		$	190
Additions to tax positions recorded during the current year	39			15			28
Reductions to tax position recorded in prior years	—			(2		)	(2		)
Reductions to tax positions due to lapse of statutory limits	(3		)	(11		)	(7		)
Translation, other	—			(4		)	—
Balance at end of the period	$	243		$	207		$	209

(1) Immaterial Restatement- Subsequent to the issuance of Meritor’s consolidated financial statements as of and for the year ended September 30, 2015, it was determined that unrecognized tax benefits as of and for the years ended September 30, 2015 and September 30, 2014 were understated by approximately $131 million and $121 million, respectively. As a result, September 30, 2015 and September 30, 2014 total unrecognized tax benefits have been corrected in the above reconciliation to appropriately reflect these balances. The errors had no impact on the consolidated balance sheet as of September 30, 2015 or the related consolidated statement of operations, comprehensive income, equity (deficit), or cash flows for the years ended September 30, 2015 and September 30, 2014.

The company’s continuing practice is to recognize interest and penalties on uncertain tax positions in the provision for income taxes in the consolidated statement of operations. At September 30, 2016 and September 30, 2015, the company recorded a $4 million asset and a $3 million liability, respectively of interest on uncertain tax positions in the consolidated balance sheet. In addition, penalties of $2 million were recorded at each of September 30, 2016 and September 30, 2015. The income tax benefit related to interest was $8 million for the year ended September 30, 2016. The income tax benefit amount related to interest and penalties was immaterial for the years ended September 30, 2015 and 2014. The income tax benefit related to penalties was immaterial for years ended September 30, 2016, 2015 and 2014.

The company files tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout the world. The company’s Canadian federal income tax returns for fiscal years 2010 through 2014 are currently under audit. The company’s Brazil subsidiary is currently under audit for calendar years 2011, 2014 and 2015. The company's German subsidiary is currently under audit for fiscal years 2008 through 2013. The company's Singapore subsidiary is currently under audit for fiscal year 2013. The company's Indian subsidiary is currently under audit for fiscal years 2013 through 2015. In addition, the company is under audit in the U.S. for federal, fiscal years 2010 and 2011, along with various state tax jurisdictions for various years. It is reasonably possible that audit settlements, the conclusion of current examinations or the expiration of the statute of limitations in several jurisdictions could change the company’s unrecognized tax benefits during the next twelve months. It is not possible to reasonably estimate the expected change to the total amount of unrecognized tax benefit in the next twelve months.

In addition to the audits listed above, the company has open tax years primarily from 2001-2015 with various significant taxing jurisdictions, including the U.S., Brazil, Canada, China, France, Mexico and the U.K. These open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, timing or inclusion of revenue and expenses or the sustainability of income tax credits for a given audit cycle. The company has recorded a tax benefit only for those positions that meet the more-likely-than-not standard.

23. 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

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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 September 30, 2016 to be approximately $9 million, of which $2 million is 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. Environmental remediation costs recorded with respect to the Superfund sites was $1 million in fiscal year 2014. Costs were not substantial in fiscal years 2015 and 2016.

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 September 30, 2016 to be approximately $28 million, of which $11 million is probable and recorded as a liability. During fiscal years 2016, 2015 and 2014, the company recorded environmental remediation costs of $3 million, $3 million and $5 million, respectively, with respect to these matters, resulting from revised estimates to remediate these sites.

Included in the company’s environmental liabilities are costs for on-going operation, maintenance and monitoring at environmental sites in which remediation has been put into place. This liability is discounted using discount rates in the range of 1 to 2.75 percent and is approximately $7 million at September 30, 2016. The undiscounted estimate of these costs is approximately $8 million.

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

	Superfund Sites		Non-Superfund Sites			Total
Balance at September 30, 2015	$	2	$	14		$	16
Payments and other	—		(6		)	(6		)
Accruals	—		3			3
Balance at September 30, 2016	$	2	$	11		$	13

There were $3 million, $2 million, and $2 million of environmental remediation costs recognized in other operating expense in the consolidated statement of operations in fiscal years 2016, 2015 and 2014, respectively. In addition, $4 million of environmental remediation costs was recorded in loss from discontinued operations in the consolidated statement of operations for fiscal year 2014.

Environmental reserves are included in Other Current Liabilities (see Note 14) and Other Liabilities (see Note 15) in the 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.

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Asbestos

Maremont Corporation (“Maremont”), a subsidiary of Meritor, manufactured friction products containing asbestos from 1953 through 1977, when it sold its friction product business. Arvin Industries, Inc., a predecessor of the company, acquired Maremont in 1986. Maremont and many other companies are defendants in suits brought by individuals claiming personal injuries as a result of exposure to asbestos-containing products. Maremont had approximately 5,800 and 5,600 pending asbestos-related claims at September 30, 2016 and 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):

	September 30,
	2016		2015
Pending and future claims	$	70	$	71
Billed but unpaid claims	2		3
Asbestos-related liabilities	$	72	$	74
Asbestos-related insurance recoveries	$	32	$	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 10, 12, 14 and 15).

Pending and Future Claims: Maremont 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. 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, 2016, 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 $70 million to $83 million. After consultation with Bates White, Maremont recognized a liability for pending and future claims over the next ten years of $70 million and $71 million as of September 30, 2016 and 2015, respectively. 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. Maremont recognized $2 million of expense and $2 million of income in fiscal years 2016 and 2015, respectively, associated with its annual valuation of asbestos-related liabilities and receivables. 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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 2026;

• 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 historically had insurance that reimburses a substantial portion of the costs incurred defending against asbestos-related claims. The insurance receivable related to asbestos-related liabilities was $32 million and $41 million as of September 30, 2016 and 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.

Maremont maintained insurance coverage with other insurance carriers that management believed also provided coverage for 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. During the first quarter of fiscal year 2016, the dispute related to these insurance policies was settled. As part of this settlement, on December 12, 2015, Maremont received $17 million in cash, 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. During the fourth quarter of fiscal year 2016, Maremont recognized an additional $9 million of the cash settlement proceeds as a reduction in asbestos expense. As of September 30, 2016, $3 million remained recorded as a liability to the insurance carrier. The settlement also provides additional recovery for Maremont if certain future defense and indemnity 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 firm, jurisdiction and disease; 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 September 30, 2016 and 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.

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

	September 30,
	2016		2015
Pending and future claims	$	60	$	55
Billed but unpaid claims	1		3
Asbestos-related liabilities	$	61	$	58
Asbestos-related insurance recoveries	$	27	$	14

Pending and Future Claims: The company 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. As of September 30, 2016, 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 $60 million to $75 million. After consultation with Bates White, management recognized a liability for pending and future claims over the next ten years of $60 million as of September 30, 2016 compared to $55 million as of 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. The increase in the estimated liability is primarily due to higher settlement values, compared to the prior year. AM recognized a $2 million and $4 million charge in the fourth quarter of fiscal years 2016 and 2015, respectively, associated with its annual valuation of asbestos-related liabilities and receivables.

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 2026;

• 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 declines 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: Rockwell has insurance coverage that management believes covers indemnity and defense costs, over and above self-insurance retentions, for a significant portion of these claims. In 2004, the company initiated litigation against certain of these carriers to enforce the insurance policies. During the fourth quarter of fiscal year 2016, the company executed settlement agreements with two of these carriers, thereby resolving the litigation against those particular carriers. Pursuant to the terms of one of those settlement agreements, the company received $32 million in cash from an insurer, of which $10 million was recognized as a reduction in asbestos expense, and $22 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 ultimately incurred. Pursuant to the terms of a second settlement agreement, the company recorded a $12 million receivable to reflect expected reimbursement of future defense and indemnity payments under a coverage-in-place arrangement with that insurer. In addition to the coverage provided from the settlements executed during the fourth quarter of fiscal year 2016, the company continues to maintain a receivable of $6 million related to a previously executed coverage-in-place arrangement with other insurers. The insurance receivables for Rockwell’s asbestos-related liabilities totaled $27 million and $14 million as of September 30, 2016 and 2015, respectively. Included in these amounts are insurance receivables of $9 million at both September 30, 2016 and 2015, which are associated with policies in dispute. Although the company continues to pursue litigation and believes it has insurance coverage, the collection of the $9 million has become doubtful; therefore, in the fourth quarter of fiscal year 2016, the company recorded a $9 million reserve.

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Also, during the third quarter of fiscal year 2016, the company reached a settlement relating to certain proofs of claim filed under certain insurance policies with an insolvent insurer for $6 million (the "allowed claim"). On June 17, 2016, the company entered into an assignment of claim (“Assignment”) with a third party to assign the allowed claim the company had against the insolvent insurer. The Assignment was approved by the liquidator, which resulted in the receipt by the company of $3 million and was recognized as a reduction of selling, general and administrative expenses in the consolidated statement of operations in the third quarter of fiscal year 2016.

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

Indemnifications

The company has provided 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 September 30, 2016 and September 30, 2015, the remaining estimated liability for this matter was approximately $11 million and $13 million, respectively.

On January 3, 2011, the company completed the sale of its Body Systems business. The sale agreement contains certain customary representations, warranties and covenants of the seller and the purchaser. The agreement also includes provisions governing post-closing indemnities between the seller and the purchaser for losses arising from specified events. At September 30, 2014, the company had an accrual of $6 million for such indemnities, of which $2 million was for a contingency-related income tax matter, which was included in other liabilities in the accompanying consolidated balance sheet. In the second quarter of fiscal year 2015, the company settled all remaining matters related to the Body Systems business and recorded a net gain, after tax in discontinued operations of $6 million.

In connection with the sale of its interest in MSSC in October 2009, the company provided certain indemnifications 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. The company's estimated exposure under these indemnities at September 30, 2016 and September 30, 2015 was approximately $1 million and $2 million, respectively, and is included in other liabilities in the 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 may have been required to be remitted to certain tax jurisdictions for tax years 2009 through 2016. At both September 30, 2016 and September 30, 2015, the company’s estimate of the probable liability to settle the audit was $10 million.

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On June 24, 2014, the company filed a complaint in the Circuit Court for Oakland County, Michigan against a supplier alleging that certain bearings supplied by the supplier for TL Trailer Axles were faulty, and as a result, the company suffered product liability damages and expenses with respect to vehicle recalls. On May 13, 2016, the company entered into a settlement agreement with the supplier pursuant to which the company received approximately $6 million and was recognized as a reduction of selling, general and administrative expenses in the consolidated statement of operations in the third quarter of fiscal year 2016. The settlement does not relieve the company of its current liability for past or future claims related to TL Axles. The company has the right to seek future indemnification from the supplier with respect to any currently unasserted claims.

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 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 2016, 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. In September 2016, the company filed a motion to dismiss. The company intends to defend itself vigorously against these claims. The company believes at this time that liabilities associated with this case, while possible, are not probable, and therefore has not recorded any accrual for them as of September 30, 2016. Further, any possible range of loss cannot be reasonably estimated at this time.

In April 2016, the company was served with several complaints filed against the company and other defendants in the United States District Court for the Northern District of Mississippi. The complaints were amended in July 2016. These complaints allege damages, including diminution of property value, concealment/fraud and emotional distress resulting from alleged environmental pollution in and around a neighborhood in Grenada, Mississippi. Rockwell owned and operated a facility near the neighborhood from 1965 to 1985. The company filed answers to the complaints in July 2016 and intends to defend itself vigorously against these claims. The company believes at this time that liabilities associated with this case, while possible, are not probable, and therefore has not recorded any accrual for them as of September 30, 2016. Further, any possible range of loss cannot be reasonably estimated at this time.

In addition, various lawsuits, claims and proceedings, other than those specifically disclosed in the 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. 

24. 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 has three operating segments, America's Commercial Truck and Industrial, International Commercial Truck and Industrial, and Aftermarket and Trailer. America's Commercial Truck and Industrial and International Commercial Truck and Industrial are aggregated into one reportable segment, Commercial Truck and Industrial. The company’s Chief Operating Decision Maker (CODM) is the Chief Executive Officer.

      The two reportable segments at September 30, 2016, are 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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 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		Elims			Total
Fiscal year 2016 Sales:
External Sales	$	2,369	$	830	$	—		$	3,199
Intersegment Sales	76		30		(106		)	—
Total Sales	$	2,445	$	860	$	(106	)	$	3,199
Fiscal year 2015 Sales:
External Sales	$	2,649	$	856	$	—		$	3,505
Intersegment Sales	90		28		(118		)	—
Total Sales	$	2,739	$	884	$	(118	)	$	3,505
Fiscal year 2014 Sales:
External Sales	$	2,876	$	890	$	—		$	3,766
Intersegment Sales	104		30		(134		)	—
Total Sales	$	2,980	$	920	$	(134	)	$	3,766

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Segment EBITDA:	2016			2015			2014
Commercial Truck & Industrial	$	208		$	216		$	218
Aftermarket & Trailer	115			123			106
Segment EBITDA	323			339			324
Unallocated legacy and corporate income (expense), net (1)	4			(5		)	(10		)
Interest expense, net	(84		)	(105		)	(130		)
Benefit (provision) for income taxes	424			(1		)	(31		)
Depreciation and amortization	(67		)	(65		)	(67		)
Loss on sale of receivables	(5		)	(5		)	(8		)
Restructuring costs	(16		)	(16		)	(10		)
Antitrust settlement with Eaton, net of tax (2)	—			—			208
Reduction of specific warranty contingency, net of supplier recovery	—			—			8
Pension settlement losses	—			(59		)	—
Goodwill and asset impairment charges	—			(17		)	—
Noncontrolling interests	(2		)	(1		)	(5		)
Income from continuing operations attributable to Meritor, Inc.	$	577		$	65		$	279

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

(2) Adjustment associated with the company's share of the antitrust settlement with Eaton less legal expenses incurred in fiscal year 2014.

Depreciation and Amortization:	2016			2015			2014
Commercial Truck & Industrial	$	59		$	59		$	61
Aftermarket & Trailer	8			6			6
Total depreciation and amortization	$	67		$	65		$	67
Capital Expenditures:	2016			2015			2014
Commercial Truck & Industrial	$	83		$	71		$	71
Aftermarket & Trailer	10			8			6
Total capital expenditures	$	93		$	79		$	77
Segment Assets:	2016			2015
Commercial Truck & Industrial	$	1,433		$	1,569
Aftermarket & Trailer	436			448
Total segment assets	1,869			2,017
Corporate (1)	845			434
Less: Accounts receivable sold under off-balance sheet factoring programs	(220		)	(256		)
Total assets	$	2,494		$	2,195

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Sales by geographic area are based on the location of the selling unit. Information on the company’s geographic areas is summarized as follows (in millions): 

Sales by Geographic Area:
	2016		2015		2014
U.S.	$	1,617	$	1,733	$	1,466
Canada	67		70		68
Mexico	390		491		652
Total North America	2,074		2,294		2,186
Sweden	250		325		369
Italy	201		204		234
United Kingdom	136		76		82
Other Europe	86		90		111
Total Europe	673		695		796
Brazil	130		198		408
China	84		90		146
India	152		140		114
Other Asia-Pacific	86		88		116
Total sales	$	3,199	$	3,505	$	3,766

Assets by Geographic Area:
	2016		2015
U.S.	$	1,359	$	995
Canada	33		30
Mexico	202		236
Total North America	1,594		1,261
Sweden	104		108
United Kingdom	212		211
Italy	65		77
Other Europe	164		176
Total Europe	545		572
Brazil	146		136
China	97		118
Other Asia-Pacific	112		108
Total	$	2,494	$	2,195

Sales to AB Volvo represented approximately 23 percent, 24 percent and 27 percent of the company’s sales in each of fiscal years 2016, 2015 and 2014, respectively. Sales to Daimler AG represented approximately 18 percent, 20 percent and 18 percent of the company’s sales in fiscal years 2016, 2015 and 2014, respectively. Sales to Navistar International Corporation represented approximately 9 percent, 11 percent and 12 percent of the company's sales in each of fiscal years 2016, 2015 and 2014, respectively. No other customer comprised 10 percent or more of the company’s total sales in any of the three fiscal years ended September 30, 2016.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

25. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following is a condensed summary of the company’s unaudited quarterly results of continuing operations for fiscal years 2016 and 2015. Per share amounts are based on the weighted average shares outstanding for that quarter. Earnings per share for the year may not equal the sum of the four fiscal quarters’ earnings per share due to changes in basic and diluted shares outstanding.

	2016 Fiscal Quarters (Unaudited)
	First			Second			Third			Fourth			2016
	(In millions, except share related data)
Sales	$	809		$	821		$	841		$	728		$	3,199
Cost of sales	(705		)	(700		)	(714		)	(644		)	(2,763		)
Gross margin	104			121			127			84			436
Benefit (provision) for income taxes	(7		)	(7		)	(8		)	446			424
Net income	27			32			42			474			575
Net income from continuing operations attributable to Meritor, Inc.	28			33			42			474			577
Net income attributable to Meritor, Inc.	26			32			41			474			573
Basic earnings per share from continuing operations	$	0.30		$	0.36		$	0.47		$	5.47		$	6.40
Diluted earnings per share from continuing operations	$	0.30		$	0.36		$	0.46		$	5.34		$	6.27

The company recognized restructuring costs in its continuing operations during fiscal year 2016 as follows: $1 million in the first quarter, $2 million in the second quarter, $6 million in the third quarter and $7 million in the fourth quarter (see Note 5). During the fourth quarter of fiscal year 2016, the company recognized a $438 million tax benefit from the partial reversal of the U.S. valuation allowance and a $25 million income tax benefit related to other correlated tax relief, which were partially offset by a $9 million non-cash charge to income tax expense in Brazil related to the establishment of a valuation allowance (see Note 22). Also in the fourth quarter of fiscal year 2016, the company recognized $31 million as reduction in asbestos expense due to settlement agreements (see Note 23).

	2015 Fiscal Quarters (Unaudited)
	First			Second			Third			Fourth			2015
	(In millions, except share related data)
Sales	$	879		$	864		$	909		$	853		$	3,505
Cost of sales	(764		)	(749		)	(785		)	(745		)	(3,043		)
Gross margin	115			115			124			108			462
Benefit (provision) for income taxes	(7		)	(6		)	(6		)	18			(1		)
Net income (loss)	30			43			14			(22		)	65
Net income (loss) from continuing operations attributable to Meritor, Inc.	32			39			15			(21		)	65
Net income (loss) attributable to Meritor, Inc.	29			43			13			(21		)	64
Basic earnings (loss) per share from continuing operations	$	0.33		$	0.40		$	0.15		$	(0.22	)	$	0.67
Diluted earnings (loss) per share from continuing operations	$	0.32		$	0.38		$	0.15		$	(0.22	)	$	0.65

The company recognized restructuring costs in its continuing operations during fiscal year 2015 as follows: $3 million in the first quarter, $3 million in the second quarter, $9 million in the third quarter and $1 million in the fourth quarter (see Note 5). During the fourth quarter of fiscal year 2015, the company settled the remaining liabilities associated with its German and Canadian pension plans and recognized a pre-tax settlement loss of $59 million associated with the annuity purchases and lump-sum payments (see Note 21). During the fourth quarter of fiscal year 2015 the company recorded an impairment of $15 million of goodwill (see Note 4). In addition, the company recorded an impairment of $2 million of long-lived assets in the fourth quarter of fiscal year

134

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

2015 (see Note 11). During the fourth quarter of fiscal year 2015, as a result of sustained profitability in Germany, Italy, Mexico and Sweden evidenced by a strong earnings history and additional positive evidence, the company determined it was more likely than not future earnings would be sufficient to realize deferred tax assets in these jurisdictions. Accordingly, the company reversed valuation allowances in Germany, Italy, Mexico, and Sweden, resulting in non-cash income tax benefits of $16 million.

26. OPERATING CASH FLOWS AND OTHER SUPPLEMENTAL FINANCIAL INFORMATION

	Year Ended September 30,
	2016			2015			2014
	(in millions)
OPERATING ACTIVITIES
Net income	$	575		$	65		$	254
Less: Loss from discontinued operations, net of tax	(4		)	(1		)	(30		)
Income from continuing operations	579			66			284
Adjustments to income from continuing operations to arrive at cash provided by (used for) operating activities:
Depreciation and amortization	67			65			67
Deferred income tax benefit	(415		)	(24		)	(2		)
Restructuring costs	16			16			10
Loss on debt extinguishment	—			25			31
Goodwill and asset impairment	—			17			—
Equity in earnings of ZF Meritor	—			—			(190		)
Equity in earnings of other affiliates	(36		)	(39		)	(38		)
Stock compensation expense	9			10			8
Provision for doubtful accounts	2			2			—
Pension and retiree medical expense	20			82			25
Gain on sale of property	(2		)	(3		)	—
Dividends received from ZF Meritor	—			—			190
Dividends received from other equity method investments	37			32			36
Pension and retiree medical contributions	(42		)	(141		)	(177		)
Restructuring payments	(11		)	(16		)	(10		)
Changes in off-balance sheet receivable securitization and factoring programs	(31		)	39			(46		)
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, foreign currency adjustments and discontinued operations:
Receivables	89			54			34
Inventories	28			4			(9		)
Accounts payable	(89		)	(70		)	(5		)
Other current assets and liabilities	(18		)	(52		)	19
Other assets and liabilities	6			40			—
Operating cash flows provided by continuing operations	209			107			227
Operating cash flows used for discontinued operations	(5		)	(10		)	(12		)
CASH PROVIDED BY OPERATING ACTIVITIES	$	204		$	97		$	215

135

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

	September 30,
	2016			2015			2014
	(In millions)
Balance sheet data:
Allowance for doubtful accounts	$	6		$	9		$	6
Statement of operations data:
Maintenance and repairs expense	45			52			59
Research, development and engineering expense	68			69			71
Depreciation expense	61			60			62
Rental expense	15			11			16
Interest income	3			9			2
Interest expense	(87		)	(114		)	(132		)
Statement of cash flows data:
Interest payments	71			64			84
Income tax payments, net of refunds	24			14			26
Non-cash investing activities - capital asset additions from capital leases	—			9			5

27. SUPPLEMENTAL PARENT AND GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

Article 3-10 of Regulation S-X (S-X Rule 3-10) requires that separate financial information for issuers and guarantors of registered securities be filed in certain circumstances. Certain of the company's 100% 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 publicly-held notes outstanding under the company's indentures (see Note 16).

Schedule I of Article 5-04 of Regulation S-X (S-X Rule 5-04) requires that condensed financial information of the registrant (Parent) 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. As of September 30, 2016, net assets that exceed 25 percent of the consolidated net assets of Meritor, Inc. of certain subsidiaries in China and India and certain unconsolidated subsidiaries are restricted by law from transfer by cash dividends, loans or advances to Meritor, Inc. As of September 30, 2016 the amount of the net assets restricted from transfer by law was $36 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 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 Guarantor subsidiaries are combined in the condensed consolidated financial statements.

136

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (In millions)
	Fiscal Year Ended September 30, 2016
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,616		$	1,583		$	—		$	3,199
Subsidiaries	—			112			61			(173		)	—
Total sales	—			1,728			1,644			(173		)	3,199
Cost of sales	(57		)	(1,439		)	(1,440		)	173			(2,763		)
GROSS MARGIN	(57		)	289			204			—			436
Selling, general and administrative	(64		)	(75		)	(74		)	—			(213		)
Restructuring costs	(7		)	(4		)	(5		)	—			(16		)
Other operating expense, net	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(131		)	210			125			—			204
Other income (expense), net	34			(35		)	—			—			(1		)
Equity in earnings of affiliates	—			32			4			—			36
Interest income (expense), net	(117		)	27			6			—			(84		)
INCOME (LOSS) BEFORE INCOME TAXES	(214		)	234			135			—			155
Benefit (provision) for income taxes	526			(88		)	(14		)	—			424
Equity income from continuing operations of subsidiaries	265			106			—			(371		)	—
INCOME FROM CONTINUING OPERATIONS	577			252			121			(371		)	579
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(4		)	(4		)	(2		)	6			(4		)
NET INCOME	573			248			119			(365		)	575
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	573		$	248		$	117		$	(365	)	$	573

137

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) (In millions)
	Fiscal Year Ended September 30, 2016
	Parent			Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	573		$	248	$	119		$	(365	)	$	575
Other comprehensive income (loss)	(43		)	55		(44		)	(11		)	(43		)
Total comprehensive income	530			303		75			(376		)	532
Less: Comprehensive income attributable to noncontrolling interests	—			—		(2		)	—			(2		)
Comprehensive income attributable to Meritor, Inc.	$	530		$	303	$	73		$	(376	)	$	530

138

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (In millions)
	Fiscal Year Ended September 30, 2015
	Parent			Guarantors			Non-Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,734		$	1,771		$	—		$	3,505
Subsidiaries	—			129			71			(200		)	—
Total sales	—			1,863			1,842			(200		)	3,505
Cost of sales	(52		)	(1,579		)	(1,612		)	200			(3,043		)
GROSS MARGIN	(52		)	284			230			—			462
Selling, general and administrative	(53		)	(118		)	(72		)	—			(243		)
Pension settlement losses	—			—			(59		)	—			(59		)
Restructuring costs	(2		)	(5		)	(9		)	—			(16		)
Goodwill impairment	—			(15		)	—			—			(15		)
Other operating income (expense), net	(2		)	(2		)	3			—			(1		)
OPERATING INCOME (LOSS)	(109		)	144			93			—			128
Other income (expense), net	36			18			(49		)	—			5
Equity in earnings of affiliates	—			36			3			—			39
Interest income (expense), net	(138		)	26			7			—			(105		)
INCOME (LOSS) BEFORE INCOME TAXES	(211		)	224			54			—			67
Provision for income taxes	(2		)	2			(1		)	—			(1		)
Equity income from continuing operations of subsidiaries	278			38			—			(316		)	—
INCOME FROM CONTINUING OPERATIONS	65			264			53			(316		)	66
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	(2		)	(3		)	5			(1		)
NET INCOME	64			262			50			(311		)	65
Less: Net income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	64		$	262		$	49		$	(311	)	$	64

139

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) (In millions)
	Fiscal Year Ended September 30, 2015
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	64		$	262		$	50		$	(311	)	$	65
Other comprehensive loss	(19		)	(61		)	(16		)	77			(19		)
Total comprehensive income	45			201			34			(234		)	46
Less: Comprehensive income attributable to noncontrolling interests	2			—			(1		)	—			1
Comprehensive income attributable to Meritor, Inc.	$	47		$	201		$	33		$	(234	)	$	47

140

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (In millions)
	Fiscal Year Ended September 30, 2014
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,467		$	2,299		$	—		$	3,766
Subsidiaries	—			142			62			(204		)	—
Total sales	—			1,609			2,361			(204		)	3,766
Cost of sales	(56		)	(1,343		)	(2,084		)	204			(3,279		)
GROSS MARGIN	(56		)	266			277			—			487
Selling, general and administrative	(65		)	(102		)	(91		)	—			(258		)
Restructuring costs	—			(1		)	(9		)	—			(10		)
Other operating expense, net	(1		)	(1		)	—			—			(2		)
OPERATING INCOME (LOSS)	(122		)	162			177			—			217
Other income (expense), net	35			23			(58		)	—			—
Equity in earnings of ZF Meritor	—			190			—			—			190
Equity in earnings of affiliates	—			30			8			—			38
Interest income (expense), net	(159		)	35			(6		)	—			(130		)
INCOME (LOSS) BEFORE INCOME TAXES	(246		)	440			121			—			315
Provision for income taxes	—			(1		)	(30		)	—			(31		)
Equity income from continuing operations of subsidiaries	525			71			—			(596		)	—
INCOME FROM CONTINUING OPERATIONS	279			510			91			(596		)	284
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(30		)	(31		)	(12		)	43			(30		)
NET INCOME	249			479			79			(553		)	254
Less: Net income attributable to noncontrolling interests	—			—			(5		)	—			(5		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	249		$	479		$	74		$	(553	)	$	249

141

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) (In millions)
	Fiscal Year Ended September 30, 2014
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income (loss)	$	249		$	479		$	79		$	(553	)	$	254
Other comprehensive income (loss)	(15		)	(54		)	25			29			(15		)
Total comprehensive income	234			425			104			(524		)	239
Less: Comprehensive income attributable to noncontrolling interests	—			—			(5		)	—			(5		)
Comprehensive income attributable to Meritor, Inc.	$	234		$	425		$	99		$	(524	)	$	234

142

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING BALANCE SHEET (In millions)
	September 30, 2016
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS
Cash and cash equivalents	$	90		$	4		$	66	$	—		$	160
Receivables, trade and other, net	1			39			356		—			396
Inventories	—			143			173		—			316
Other current assets	5			12			16		—			33
TOTAL CURRENT ASSETS	96			198			611		—			905
NET PROPERTY	22			198			219		—			439
GOODWILL	—			219			171		—			390
OTHER ASSETS	447			132			181		—			760
INVESTMENTS IN SUBSIDIARIES	2,575			679			—		(3,254		)	—
TOTAL ASSETS	$	3,140		$	1,426		$	1,182	$	(3,254	)	$	2,494
CURRENT LIABILITIES
Short-term debt	$	1		$	4		$	9	$	—		$	14
Accounts and notes payable	42			172			261		—			475
Other current liabilities	90			74			104		—			268
TOTAL CURRENT LIABILITIES	133			250			374		—			757
LONG-TERM DEBT	971			3			8		—			982
RETIREMENT BENEFITS	680			—			23		—			703
INTERCOMPANY PAYABLE (RECEIVABLE)	1,534			(1,768		)	234		—			—
OTHER LIABILITIES	34			162			42		—			238
EQUITY (DEFICIT) ATTRIBUTABLE TO        MERITOR, INC.	(212		)	2,779			476		(3,254		)	(211		)
NONCONTROLLING INTERESTS	—			—			25		—			25
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	3,140		$	1,426		$	1,182	$	(3,254	)	$	2,494

143

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING BALANCE SHEET (In millions)
	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

144

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (In millions)
	Fiscal Year Ended September 30, 2016
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	196		$	40		$	(32	)	$	—	$	204
INVESTING ACTIVITIES
Capital expenditures	(19		)	(43		)	(31		)	—		(93		)
Proceeds from sale of property	—			4			—			—		4
Other investing activities	—			—			(1		)	—		(1		)
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(19		)	(38		)	(29		)	—		(86		)
FINANCING ACTIVITIES
Repayment of notes and term loan	(55		)	—			—			—		(55		)
Other financing cash flows	(1		)	(4		)	(11		)	—		(16		)
Repurchase of common stock	(81		)	—			—			—		(81		)
Intercompany advances	(23		)	—			23			—		—
CASH USED FOR FINANCING ACTIVITIES	(160		)	(4		)	12			—		(152		)
EFFECT OF CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	17			(2		)	(48		)	—		(33		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	73			6			114			—		193
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	90		$	4		$	66		$	—	$	160

145

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (In millions)
	Fiscal Year Ended September 30, 2015
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	57		$	62		$	(22	)	$	—	$	97
INVESTING ACTIVITIES
Capital expenditures	(4		)	(41		)	(34		)	—		(79		)
Proceeds from sale of property	—			—			4			—		4
Cash paid for acquisition of Morganton	—			(16		)	—			—		(16		)
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(4		)	(56		)	(27		)	—		(87		)
FINANCING ACTIVITIES
Proceeds from debt issuance	225			—			—			—		225
Repayment of notes and term loan	(199		)	—			—			—		(199		)
Other financing cash flows	—			(5		)	(4		)	—		(9		)
Repurchase of common stock	(55		)	—			—			—		(55		)
Debt issuance costs	(4		)	—			—			—		(4		)
CASH USED FOR FINANCING ACTIVITIES	(33		)	(5		)	(4		)	—		(42		)
EFFECT OF CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			(22		)	—		(22		)
CHANGE IN CASH AND CASH EQUIVALENTS	2			1			(57		)	—		(54		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	71			5			171			—		247
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	73		$	6		$	114		$	—	$	193

146

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (In millions)
	Fiscal Year Ended September 30, 2014
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	245		$	34		$	(64	)	$	—	$	215
INVESTING ACTIVITIES
Capital expenditures	(4		)	(37		)	(36		)	—		(77		)
Net investing cash flows provided by discontinued operations	—			4			3			—		7
CASH USED FOR INVESTING ACTIVITIES	(4		)	(33		)	(33		)	—		(70		)
FINANCING ACTIVITIES
Proceeds from debt issuance	225			—			—			—		225
Repayment of notes and term loan	(439		)	—			—			—		(439		)
Debt issuance costs	(10		)	—			—			—		(10		)
Other financing cash flows	—			(2		)	14			—		12
Intercompany advances	(90		)	—			90			—		—
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(314		)	(2		)	104			—		(212		)
EFFECT OF CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			(4		)	—		(4		)
CHANGE IN CASH AND CASH EQUIVALENTS	(73		)	(1		)	3			—		(71		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	144			6			168			—		318
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	71		$	5		$	171		$	—	$	247

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 SEC. As of September 30, 2016 and 2015, parent company only obligations included $708 million and $631 million, respectively, of pension and retiree medical benefits (see Notes 20 and 21). All debt is debt of the parent company other than $24 million and $33 million at September 30, 2016, and 2015 respectively (see Note 16) and is primarily related to capital lease obligations and lines of credit. Cash dividends paid to the parent by subsidiaries and investments accounted for by the equity method were $25 million, $37 million, $5 million for 2016, 2015, and 2014, respectively.

147

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A.Controls and Procedures.

Disclosure Controls and Procedures

Subsequent to the issuance of our consolidated financial statements for the quarterly period ended June 30, 2016, we identified and concluded that there were material weaknesses in our internal control over financial reporting at September 30, 2015 with respect to the design and operating effectiveness of our controls over the assessment of uncertain tax positions and our deferred tax asset valuation allowance in accordance with Accounting Standards Codification (ASC) 740, Income Taxes. These material weaknesses allowed errors to occur that were not detected in a timely manner therefore requiring a correction of certain disclosure information in the Income Taxes footnote in our consolidated financial statements for fiscal years 2015 and 2014. The material weaknesses had no impact on our financial position, results of operations or cash flows as of and for the years ended September 30, 2015 and 2014.

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (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 September 30, 2016. Based upon that evaluation, the chief executive officer and the chief financial officer have concluded that, as of September 30, 2016, our disclosure controls and procedures were not effective because of the material weaknesses in our internal control over financial reporting described above. Notwithstanding the material weaknesses in our internal control over financial reporting, the consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.

Management Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, our chief executive officer and chief financial officer and effected by the Company’s board of directors, management, and other personnel 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. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2016. In making this assessment, management used the criteria established in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Subsequent to the issuance of our consolidated financial statements for the quarterly period ended June 30, 2016, we identified and concluded that there were material weaknesses in our internal control over financial reporting at September 30, 2015 with respect to the design and operating effectiveness of our controls over the assessment of uncertain tax positions and our deferred tax asset valuation allowance in accordance with ASC 740, Income Taxes. These material weaknesses allowed errors to occur that were not detected in a timely manner therefore requiring a correction of certain disclosure information in the Income Taxes footnote in our consolidated financial statements for fiscal years 2015 and 2014. The material weaknesses had no impact on our financial position, results of operations or cash flows as of and for the years ended September 30, 2015 and 2014.

As a result of the material weaknesses noted above, which were not remediated as of September 30, 2016, management has concluded that our internal control over financial reporting was not effective as of September 30, 2016. Notwithstanding the material weaknesses in our internal control over financial reporting, the consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.

148

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Deloitte & Touche LLP, Meritor’s independent registered public accounting firm, has issued an attestation report on Meritor’s internal control over financial reporting, which follows.

Remediation Plan

With the oversight of senior management and the Audit Committee, subsequent to September 30, 2016, we have begun to develop plans to remediate the underlying cause of the material weaknesses and improve the design and operating effectiveness of internal control over financial reporting and our disclosure controls.

We are committed to maintaining a strong internal control environment and will make remediation efforts to improve our controls. However, some of these remediation efforts will take time to be fully integrated and confirmed to be effective and sustainable. Additional controls may also be required over time. Until remediation steps are fully implemented and tested, the material weaknesses described above will continue to exist.

149

Changes in Internal Control Over Financial Reporting

Management, with the participation of the chief executive officer and chief financial officer, has evaluated any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2016 and found no change that has materially affected or is reasonable likely to materially affect our internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareowners of Meritor, Inc.

Troy, Michigan

We have audited the internal control over financial reporting of Meritor, Inc. and subsidiaries (the "Company") as of October 2, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control of Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel 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. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management's assessment: management has identified material weaknesses in the design and operating effectiveness in the Company’s controls over the assessment of uncertain tax positions and the deferred tax asset valuation allowance. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended October 2, 2016 of the Company and this report does not affect our report on such financial statements.

In our opinion, because of the effect of the material weaknesses identified above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of October 2, 2016, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended October 2, 2016, of the Company and our report dated December 1, 2016, expressed an unqualified opinion on those financial statements.

/s/	DELOITTE & TOUCHE LLP
	DELOITTE & TOUCHE LLP

Detroit, Michigan

December 1, 2016

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Item 9B.Other Information.

On November 30, 2016, the Board of Directors, acting by written consent pursuant to Indiana Code § 23-1-34-2 of the Indiana Business Corporation Law, as amended, approved an amendment adding a new Section 3.18 to Article 3 of its Amended and Restated By-laws to elect that the classes and terms of office of the Board shall not be governed by Indiana Code § 23-1-33-6(c), which provides that publicly traded companies organized under Indiana law are required to maintain staggered terms for the directors unless the by-laws expressly opt out of such provision. This amendment is effective as of July 29, 2009. The preceding is qualified in its entirety by reference to the Amended and Restated By-laws, which are attached hereto as Exhibit 3-b and are incorporated herein by reference.

PART III

Item 10.Directors, Executive Officers and Corporate Governance.

The information required by Item 10 regarding directors is incorporated by reference from the information under the caption Election of Directors – Information as to Nominees for Director and Continuing Directors in Meritor’s definitive Proxy Statement for its 2017 Annual Meeting (the “2017 Proxy Statement”), which will be filed within 120 days after Meritor’s fiscal year end. The information required by Item 10 regarding executive officers is set forth in Item 4A of Part I of this Form 10-K. The other information required by Item 10, including regarding the audit committee, audit committee financial expert disclosure and our code of ethics, is incorporated by reference from the information under the captions Code of Ethics, Board of Directors and Committees and Director Qualifications and Nominating Procedures in the 2017 Proxy Statement. Disclosure of delinquent Section 16 filers pursuant to Item 405 of Regulation S-K will be contained in the 2017 Proxy Statement.

Item 11.Executive Compensation.

See the information under the captions Director Compensation in Fiscal Year 2016 and Executive Compensation in the 2017 Proxy Statement.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Security Ownership of Certain Beneficial Owners and Management

See the information under the captions Voting Securities and Ownership by Management of Equity Securities in the 2017 Proxy Statement.

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Securities Authorized for Issuance under Equity Compensation Plans

The number of stock options outstanding under our equity compensation plans, the weighted average exercise price of outstanding options, and the number of securities remaining available for issuance, as of September 30, 2016, were as follows:

Plan Category	(column a) Number of securities to be issued upon exercise of outstanding options, warrants and rights1	(column b) Weighted average exercise price of outstanding options, warrants and rights		(column c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a)
Equity compensation plans approved by security holders	233,334	$	8.22	2,893,906
Equity compensation plans not approved by security holders	—	—		—
Total	233,334	8.22		2,893,906

____________________

1 In addition to stock options, shares of common stock, restricted shares of common stock, restricted share units and performance share units, all of which do not have an exercise price, have been awarded under the Company’s equity compensation plans and were outstanding at September 30, 2016. The number of weighted average shares in column (a) and the weighted average exercise price reported in column (b) does not take these awards into account.

All of the equity compensation plans under which grants are outstanding as shown above were approved by Meritor shareholders.

The following number of shares remained available for issuance under our equity compensation plans at September 30, 2016. Grants may be in the form of any of the listed type of awards.

Plan	Number of shares	Type of award
2010 Long-Term Incentive Plan*	2,893,906	Stock options, stock appreciation rights, stock awards and other stock-based awards

____________________

* The 2010 Long-Term Incentive Plan was approved by the Company’s shareholders on January 28, 2010. At that time, the 2007 Long-Term Incentive Plan and the 2004 Directors Stock Plan were terminated. No further awards will be made under those plans, and no stock awards will be made under the Incentive Compensation Plan. On January 20, 2011 and January 23, 2014, the Company’s shareholders approved amendments to the 2010 Long-Term Incentive Plan to increase the maximum number of shares that may be granted under the plan. Earlier equity compensation plans were terminated on January 26, 2007, in connection with the approval of the 2007 Long-Term Incentive Plan by the Company’s shareholders.

Item 13.Certain Relationships and Related Transactions, and Director Independence.

See the information under the captions Board of Directors and Committees and Certain Relationships and Related Transactions in the 2017 Proxy Statement.

Item 14.Principal Accountant Fees and Services.

See the information under the caption Independent Accountants’ Fees in the 2017 Proxy Statement.

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PART IV

Item 15.Exhibits and Financial Statement Schedules.

(a) Financial Statements, Financial Statement Schedules and Exhibits.

(1) Financial Statements (all financial statements listed below are those of the company and its consolidated subsidiaries):

Consolidated Statement of Operations, years ended September 30, 2016, 2015 and 2014.

Consolidated Statement of Comprehensive Income, years ended September 30, 2016, 2015 and 2014.

Consolidated Balance Sheet, September 30, 2016 and 2015.

Consolidated Statement of Cash Flows, years ended September 30, 2016, 2015 and 2014.

Consolidated Statement of Shareholders' Equity (Deficit), years ended September 30, 2016, 2015 and 2014.

Notes to Consolidated Financial Statements.

Report of Independent Registered Public Accounting Firm.

(2) Financial Statement Schedule for the years ended September 30, 2016, 2015 and 2014.

Schedules not filed with this Annual Report on Form 10-K are omitted because of the absence of conditions under which they are required or because the information called for is shown in the financial statements or related notes.

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(3) Exhibits
3-a	Amended and Restated Articles of Incorporation of Meritor, filed as Exhibit 3-a to Meritor's Annual Report on Form 10-K for the fiscal year ended September 27, 2015, is incorporated herein by reference.
3-b**	Amended and Restated By-laws of Meritor effective November 30, 2016.
4-a	Indenture, dated as of April 1, 1998, between Meritor and The Bank of New York Mellon Trust Company, N.A. (as successor to BNY Midwest Trust Company as successor to The Chase Manhattan Bank), as trustee, filed as Exhibit 4 to Meritor's Registration Statement on Form S-3 (Registration No. 333- 49777), is incorporated herein by reference.
4a-1	First Supplemental Indenture, dated as of July 7, 2000, to the Indenture, dated as of April 1, 1998, between Meritor and The Bank of New York Mellon Trust Company, N.A. (as successor to BNY Midwest Trust Company as successor to The Chase Manhattan Bank), as trustee, filed as Exhibit 4-b-1 to Meritor's Annual Report on Form 10-K for the fiscal year ended September 30, 2000, is incorporated herein by reference.
4-a-2	Third Supplemental Indenture, dated as of June 23, 2006, to the Indenture, dated as of April 1, 1998, between Meritor and The Bank of New York Mellon Trust Company, N.A. (as successor to BNY Midwest Trust Company as successor to The Chase Manhattan Bank), as trustee (including Subsidiary Guaranty dated as of June 23, 2006), filed as Exhibit 4.2 to Meritor’s Current Report on Form 8-K filed on June 27, 2006, is incorporated herein by reference.
4-a-3	Sixth Supplemental Indenture, dated as of May 31, 2013, to the Indenture, dated as of April 1, 1998, between Meritor and The Bank of New York Mellon Trust Company, N.A. (as successor to BNY Midwest Trust Company as successor to The Chase Manhattan Bank), as trustee, filed as Exhibit 4 to Meritor's Current Report on Form 8-K filed on May 31, 2013, is incorporated herein by reference.
4-a-4	Seventh Supplemental Indenture, dated as of February 13, 2014, to the Indenture, dated as of April 1, 1998, between Meritor and The Bank of New York Mellon Trust Company, N.A. (as successor to BNY Midwest Trust Company as successor to The Chase Manhattan Bank), as trustee, filed as Exhibit 4.1 to Meritor's Current Report on Form 8-K filed on February 13, 2014, is incorporated herein by reference.
4-b	Indenture, dated as of February 8, 2007, between Meritor and The Bank of New York Mellon Trust Company, N.A. (as successor to The Bank of New York Trust Company, N.A.), as trustee (including the note and form of subsidiary guaranty), filed as Exhibit 4-a to Meritor's Quarterly Report on Form 10-Q for the fiscal quarter ended April 1, 2007, is incorporated herein by reference.

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4-c	Indenture, dated as of December 4, 2012, between Meritor and The Bank of New York Mellon Trust Company, N.A., as trustee (including form of the note and form of subsidiary guaranty), filed as Exhibit 4.1 to Meritor’s Current Report on Form 8-K filed on December 4, 2012, is incorporated herein by reference.
10-a-1	Second Amendment and Restatement Agreement relating to Second Amended and Restated Credit Agreement, dated as of February 13, 2014, among Meritor, ArvinMeritor Finance Ireland (“AFI”), the financial institutions party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, filed as Exhibit 10 to Meritor’s Current Report on Form 8-K filed on February 18, 2014, is incorporated herein by reference.
10-a-2	Second Amended and Restated Pledge and Security Agreement, dated as of February 13, 2014, by and among Meritor, the subsidiaries named therein and JPMorgan Chase Bank, N.A., as Administrative Agent, filed as Exhibit 10.2 to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2014, is incorporated herein by reference.
10-a-3	Amendment No. 1 to Second Amended and Restated Credit Agreement and Second Amended and Restated Pledge and Security Agreement, dated as of September 12, 2014, among Meritor, AFI, the financial institutions party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, filed as Exhibit 10.1 to Meritor’s Current Report on Form 8-K filed on September 15, 2014, is incorporated herein by reference.
10-a-4	Amendment No. 2 to Second Amended and Restated Credit Agreement, dated as of May 22, 2015, among Meritor, AFI, the financial institutions party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, filed as Exhibit 10-a-2 to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2015, is incorporated herein by reference.
10-a-5	Amendment No. 3 to Second Amended and Restated Credit Agreement, dated as of June 2, 2016, among Meritor, AFI, the financial institutions party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, filed as Exhibit 10-a to Meritor’s Current Report on Form 8-K filed on June 6, 2016, is incorporated herein by reference.
*10-b	1997 Long-Term Incentives Plan, as amended and restated, filed as Exhibit 10 to Meritor’s Current Report on Form 8-K filed on April 20, 2005, is incorporated herein by reference.
*10-b-1	Form of Option Agreement under the 1997 Long-Term Incentives Plan, filed as Exhibit 10(a) to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998, is incorporated herein by reference.
*10-c	2007 Long-Term Incentive Plan, as amended, filed as Exhibit 10-a to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 1, 2007, is incorporated herein by reference.
*10-c-1	Form of Restricted Stock Agreement under the 2007 Long-Term Incentive Plan, filed as Exhibit 10-c-1 to Meritor’s Annual Report on Form 10-K for the fiscal year ended September 30, 2007, is incorporated herein by reference.
*10-c-2	Option Agreement under the 2007 Long-Term Incentive Plan between Meritor and Charles G. McClure, filed as Exhibit 10-c to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2008, is incorporated herein by reference.
*10-d	Description of Compensation of Non-Employee Directors, filed as Exhibit 10-d to Meritor's Annual Report on Form 10-K for the fiscal year ended September 30, 2012, is incorporated herein by reference.

*10-e	2004 Directors Stock Plan, filed as Exhibit 10-a to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 28, 2004, is incorporated herein by reference.
*10-e-1	Form of Restricted Share Unit Agreement under the 2004 Directors Stock Plan, filed as Exhibit 10-c-3 to Meritor’s Annual Report on Form 10-K for the fiscal year ended October 3, 2004, is incorporated herein by reference.

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*10-e-2	Form of Restricted Stock Agreement under the 2004 Directors Stock Plan, filed as Exhibit 10-c-4 to Meritor’s Annual Report on Form 10-K for the fiscal year ended October 2, 2005, is incorporated herein by reference.
*10-f	2010 Long-Term Incentive Plan, as amended and restated as of January 23, 2014, filed as Exhibit 10-f to Meritor’s Annual Report on Form 10-K for the fiscal year ended September 28, 2014, is incorporated herein by reference.
*10-f-1	Form of Restricted Stock Unit Agreement for Employees under 2010 Long-Term Incentive Plan, filed as Exhibit 10.2 to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 3, 2010, is incorporated herein by reference.
*10-f-2	Form of Restricted Stock Unit Agreement for Directors under 2010 Long-Term Incentive Plan, filed as Exhibit 10.3 to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 3, 2010, is incorporated herein by reference.
*10-f-3	Form of Restricted Stock Agreement for Directors under 2010 Long-term Incentive Plan, filed as Exhibit 10.4 to Meritor’s Report on Form 10-Q for the fiscal quarter ended January 3, 2010, is incorporated herein by reference.
*10-f-4	Description of Performance Goals for fiscal years 2014-2016 established in connection with Performance Plans under the 2010 Long Term Incentive Plan, filed as Exhibit 10-b-3 to Meritor’s Annual Report on Form 10-K for the fiscal year ended September 29, 2013 (the “2013 Form 10-K”), is incorporated herein by reference.
*10-f-5	Form of Performance Share Agreement under 2010 Long-Term Incentive Plan, as amended, filed as Exhibit 10-e-8 to the 2013 Form 10-K, is incorporated herein by reference.
*10-f-6	Form of Restricted Stock Unit Agreement for Employees for grants on or after December 1, 2013 under 2010 Long-Term Incentive Plan, as amended, filed as Exhibit 10-e-9 to the 2013 Form 10-K, is incorporated herein by reference.
*10-f-7	Form of Restricted Stock Unit Agreement for Directors for grants on or after January 23, 2014 under 2010 Long-Term Incentive Plan, as amended, filed as Exhibit 10-e-10 to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2014, is incorporated herein by reference.
*10-f-8	Form of Restricted Stock Agreement for Directors for grants on or after on or after January 23, 2014 under 2010 Long-Term Incentive Plan, as amended, filed as Exhibit 10-e-11 to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2014, is incorporated herein by reference.
*10-f-9	Form of Performance Share Unit Agreement for Employees for grants on or after December 1, 2015 under 2010 Long Term Incentive Plan, as amended, filed as Exhibit 10-f-9 to Meritor's Annual Report on Form 10-K for the fiscal year ended September 27, 2015, is incorporated herein by reference.
*10-f-10	Form of Restricted Share Unit Agreement for Employees for grants on or after December 1, 2015 under 2010 Long Term Incentive Plan, as amended, filed as Exhibit 10-f-10 to Meritor's Annual Report on Form 10-K for the fiscal year ended September 27, 2015, is incorporated herein by reference.
*10-g	Incentive Compensation Plan, as amended and restated, effective January 22, 2015, filed as Appendix A to Meritor's Definitive Proxy Statement for the 2015 Annual Meeting of Shareholders of Meritor, is incorporated herein by reference.
*10-h	Deferred Compensation Plan, filed as Exhibit 10-e-1 to Meritor’s Annual Report on Form 10-K for the fiscal year ended September 30, 1998, is incorporated herein by reference.
*10-i	Form of Deferred Share Agreement, filed as Exhibit 10-a to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 2, 2005, is incorporated herein by reference.
*10-j**	Non-Employee Director Retainer Deferral Policy, effective November 3, 2016.

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*10-j-1**	Form of Restricted Share Unit Agreement for Director Deferral Elections pursuant to the Non-Employee Director Retainer Deferral Policy under the 2010 Long-Term Incentive Plan, as amended.
*10-j-2**	Form of Restricted Stock Agreement for Director Deferral Elections pursuant to the Non-Employee Director Retainer Deferral Policy under the 2010 Long-Term Incentive Plan, as amended.
10-k	Receivables Purchase Agreement dated as of February 19, 2016, by and among Meritor Heavy Vehicle Braking Systems (USA), LLC and Meritor Heavy Vehicle Systems, LLC, as sellers, and Nordea Bank AB, as purchaser, filed as Exhibit 10-a to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2016, is incorporated herein by reference.
10-l	Receivables Purchase Agreement dated as of June 28, 2011, by and among Meritor HVS AB, as seller, Viking Asset Purchaser No 7 IC, as purchaser, and Citicorp Trustee Company Limited, as programme trustee, filed as Exhibit 10-b to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 3, 2011, is incorporated herein by reference.
10-l-1**	Extension Letter dated June 8, 2012 from Meritor HVS AB to Viking Asset Purchaser No. 7 IC and Citicorp Trustee Company Limited.
10-l-2	Extension Letter dated June 10, 2013 from Meritor HVS AB to Viking Asset Purchaser No. 7 IC and Citicorp Trustee Company Limited, filed as Exhibit 10-d to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2013, is incorporated herein by reference.
10-l-3	Amendment No. 1 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, filed as Exhibit 10-c to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 29, 2013, is incorporated herein by reference.
10-l-4	Extension Letter dated June 27, 2014 from Meritor HVS AB to Viking Asset Purchaser No. 7 IC and Citicorp Trustee Company Limited, filed as Exhibit 10-a to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 29, 2014, is incorporated herein by reference.
10-l-5	Extension Letter dated June 23, 2015 from Meritor HVS AB to Viking Asset Purchaser No. 7 IC and Citicorp Trustee Company Limited, filed as Exhibit 10-b to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2015, is incorporated herein by reference.
10-l-6	Amendment No. 2 to Receivables Purchase Agreement dated as of March 29, 2016 among Meritor HVS AB, as seller, Viking Asset Purchaser No 7 IC, as purchaser, and Citicorp Trustee Company Limited, as programme trustee, filed as Exhibit 10-b to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2016, is incorporated herein by reference.
10-l-7	Extension Letter dated June 15, 2016 from Meritor HVS AB to Viking Asset Purchaser No. 7 IC and Citicorp Trustee Company Limited, filed as Exhibit 10-b to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 3, 2016, is incorporated herein by reference.
10-l-8**	Extension Letter dated October 14, 2016 from Meritor HVS AB to Viking Asset Purchaser No. 7 IC and Citicorp Trustee Company Limited.
10-m	Receivable Purchase Agreement dated February 2, 2012 between Meritor Heavy Vehicle Braking Systems (UK) Limited, as seller, and Viking Asset Purchaser No. 7 IC, as purchaser, and Citicorp Trustee Company Limited, as programme trustee, filed as Exhibit 10-b to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 1, 2012, is incorporated herein by reference.
10-m-1	Extension dated January 24, 2013 of Receivable Purchase Agreement dated February 2, 2012 between Meritor Heavy Vehicle Braking Systems (UK) Limited, as seller, and Viking Asset Purchaser No. 7 IC, as purchaser, and Citicorp Trustee Company Limited, as programme trustee, filed as Exhibit 10-d to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 30, 2012, is incorporated herein by reference.

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10-n Receivables Purchase Agreement dated June 18, 2012 between Meritor Heavy Vehicle Systems Cameri S.P.A., as seller, and Nordea Bank AB (pbl), as purchaser, filed as Exhibit 10-d to the Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2012, is incorporated herein by reference.

10-o	Receivables Purchase Agreement dated June 18, 2012 among ArvinMeritor Receivables Corporation, as seller, Meritor, Inc., as initial servicer, the various Conduit Purchasers, Related Committed Purchasers, LC Participants and Purchaser Agents from time to time party thereto, and PNC Bank, National Association, as issuers of Letters of Credit and as Administrator, filed as Exhibit 10-b to the Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2012, is incorporated herein by reference.
10-o-1	First Amendment to Receivables Purchase Agreement dated as of December 14, 2012 among ArvinMeritor Receivables Corporation, as seller, Meritor, Inc., as initial servicer, PNC Bank, National Association, as a Related Committed Purchaser, as an LC Participant, as a Purchaser Agent, as LC Bank and as Administrator, and Market Street Funding, LLC, as a Conduit Purchaser, filed as Exhibit 10-a to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 30, 2012, is incorporated herein by reference.
10-o-2	Second Amendment to Receivables Purchase Agreement dated June 21, 2013 among ArvinMeritor Receivables Corporation, as seller, Meritor, Inc., as initial servicer, PNC Bank, National Association, as a Related Committed Purchaser, as an LC Participant, as a Purchaser Agent, as LC Bank and as Administrator, and Market Street Funding LLC, as a Conduit Purchaser, filed as Exhibit 10 to Meritor’s Current Report on Form 8-K filed on June 21, 2013, is incorporated herein by reference.
10-o-3	Third Amendment to Receivables Purchase Agreement dated as of October 11, 2013 among ArvinMeritor Receivables Corporation, as seller, Meritor, Inc., as servicer, PNC Bank, National Association, as a Related Committed Purchaser, as an LC Participant, as a Purchaser Agent, as LC Bank, as Administrator and as Assignee, and Market Street Funding LLC, as Conduit Purchaser and as Assignor, filed as Exhibit 10-m-16 to the 2013 Form 10-K, is incorporated herein by reference.
10-o-4	Fourth Amendment to the Receivables Purchase Agreement dated as of October 15, 2014, by and among ArvinMeritor Receivables Corporation, as Seller, Meritor, Inc., as Initial Servicer, and PNC Bank, National Association, as a Related Committed Purchaser, as an LC Participant, as a Purchaser Agent, as LC Bank and as Administrator, filed as Exhibit 10 to Meritor’s Current Report on Form 8-K filed on October 20, 2014, is incorporated herein by reference.
10-o-5	Fifth Amendment to the Receivables Purchase Agreement dated as of December 4, 2015, by and among ArvinMeritor Receivables Corporation, as Seller, Meritor, Inc., as Initial Servicer, and PNC Bank, National Association, as a Related Committed Purchaser, as an LC Participant, as a Purchaser Agent, as LC Bank and as Administrator, filed as Exhibit 10-a to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 3, 2016, is incorporated herein by reference.
10-p	Fourth Amended and Restated Purchase and Sale Agreement dated June 18, 2012 among Meritor Heavy Vehicle Braking Systems (U.S.A.), LLC, and Meritor Heavy Vehicle Systems, LLC, as originators, Meritor, Inc., as initial servicer, and ArvinMeritor Receivables Corporation, as buyer, filed as Exhibit 10-a to the Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2012, is incorporated herein by reference.
10-p-1	Letter Agreement relating to Fourth Amended and Restated Receivables Purchase Agreement dated as of December 14, 2012 among Meritor Heavy Vehicle Braking Systems (U.S.A.), LLC, Meritor Heavy Vehicle Systems, LLC, ArvinMeritor Receivables Corporation, Meritor, Inc. and PNC Bank, National Association, filed as Exhibit 10-b to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 30, 2012, is incorporated herein by reference.
10-q	Purchase and Sale Agreement dated as of August 3, 2010 among Meritor France (as Seller), Meritor, Inc. (as Seller Guarantor) and 81 Acquisition LLC (as Buyer), filed as Exhibit 10 to Meritor’s Current Report on Form 8-K filed on August 5, 2010, is incorporated herein by reference.
10-q-1	First Amendment dated as of December 6, 2010 to Purchase and Sale Agreement dated as of August 3, 2010 among Meritor France (as Seller), Meritor, Inc. (as Seller Guarantor) and 81 Acquisition LLC (as Buyer), filed as Exhibit 10 to Meritor’s Current Report on Form 8-K filed December 8, 2010, is incorporated herein by reference.

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10-q-2	Second Amendment dated as of January 3, 2011 to Purchase and Sale Agreement dated as of August 3, 2010 among Meritor France (as Seller), Meritor, Inc. (as Seller Guarantor) and Inteva Products Holding Coöperatieve U.A., as assignee of 81 Acquisition LLC (as Buyer), as amended, filed as Exhibit 10 to Meritor’s Current Report on Form 8-K filed on January 3, 2011, is incorporated herein by reference.
10-r	Purchase and Sale Agreement dated August 4, 2009 among Meritor, Iochpe-Maxion, S.A. and the other parties listed therein, filed as Exhibit 10 to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2009, is incorporated herein by reference.
*10-s	Employment Agreement between Meritor, Inc. and Kevin Nowlan dated May 1, 2013, filed as Exhibit 10-f to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2013, is incorporated herein by reference.
*10-t	Amended and Restated Employment Letter between Meritor, Inc. and Jeffrey A. Craig dated April 29, 2015, filed as Exhibit 10-a-2 to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2015, is incorporated herein by reference.
*10-u	Letter Agreement dated as of June 5, 2013 between Meritor, Inc. and Ivor J. Evans, filed as Exhibit 10-a to Meritor’s Current Report on Form 8-K filed on June 5, 2013, is incorporated herein by reference.
*10-v	Letter Agreement dated as of September 11, 2013 between Meritor, Inc. and Ivor J. Evans, filed as Exhibit 10-a to Meritor’s Current Report on Form 8-K filed on September 11, 2013, is incorporated herein by reference.
*10-w	Option Grant agreement dated as of September 11, 2013 between Meritor, Inc. and Ivor J. Evans, filed as Exhibit 10-z to the 2013 Form 10-K, is incorporated herein by reference.
*10-x	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.
*10-y	Form of Performance Share Agreement for grant from Meritor, Inc. to Jeffrey Craig on December 1, 2013, filed as Exhibit 10-zz to the 2013 Form 10-K, is incorporated herein by reference.
*10-z	Compensation Letter dated as of April 29, 2015 between Meritor, Inc. and Jeffrey A. Craig, filed as Exhibit 10-a-1 to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2015, is incorporated herein by reference.
*10-aa	Form of Employment Agreement, filed as Exhibit 10-b to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 3, 2016, is incorporated herein by reference.
*10-bb**	Schedule identifying agreements substantially identical to the Form of Employment Agreement constituting Exhibit 10-aa hereto.
12**	Computation of ratio of earnings to fixed charges.
21**	List of Subsidiaries of Meritor, Inc.
23-a**	Consent of April Miller Boise, Esq., Senior Vice President, General Counsel and Corporate Secretary.
23-b**	Consent of Deloitte & Touche LLP, independent registered public accounting firm.
23-c**	Consent of Bates White LLC.
24**	Power of Attorney authorizing certain persons to sign this Annual Report on Form 10-K on behalf of certain directors and officers of Meritor.

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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

____________________

*Management contract or compensatory plan or arrangement.

** Filed herewith.

161

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.
By:	/s/ April Miller Boise
	April Miller Boise
	Senior Vice President, General Counsel and Corporate Secretary

Date: December 1, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on the 1^st day of December, 2016 by the following persons on behalf of the registrant and in the capacities indicated.

William R. Newlin *	Chairman of the Board of Directors
Ivor J. Evans, Joseph B. Anderson, Jr.,	Directors
Victoria B. Jackson Bridges, Jan A. Bertsch,
Rhonda L. Brooks, Lloyd G. Trotter, William J. Lyons,
Thomas L. Pajonas*
Jay A. Craig*	Chief Executive Officer and President (Principal Executive Officer) and Director
Kevin A. Nowlan*	Senior Vice President and Chief Financial Officer (Principal Financial Officer)
Paul D. Bialy*	Vice President, Controller and Principal Accounting Officer

* By:	/s/ April Miller Boise
	April Miller Boise
	Attorney-in-fact **

** By authority of powers of attorney filed herewith.

162

EX-3.B

AMENDED AND RESTATED BY-LAWS

OF

MERITOR, INC.

(As of November 30, 2016)

ARTICLE I

OFFICE

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

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

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

ARTICLE 2

MEETING OF SHAREHOLDERS

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

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

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

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

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

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

SECTION 2.5. Record Dates.

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

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

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

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

(c)    Only those who shall be shareholders of record on the record date so fixed as aforesaid shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend or other distribution, or to receive such allotment of rights, or to exercise such rights, as the case may be,

notwithstanding the transfer of any shares on the books of the Corporation after the applicable record date, provided, however, the Board of Directors may fix a new record date for any adjourned meeting and shall fix a new record date if a meeting is adjourned to a date more than 120 days after the date originally fixed for the meeting.

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

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

SECTION 2.8. Voting by Shareholders; Proxies. Except as otherwise provided by law, the Articles of Incorporation or these By‑Laws, each shareholder entitled to vote shall at every meeting of the shareholders have one vote for each share entitled to vote held by such shareholder. Any vote on shares may be given by the shareholder entitled thereto in person or by proxy appointed by an instrument in writing, subscribed (or

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

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

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

SECTION 2.9. Conduct of Business.

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

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

(c)    Annual Meetings of Shareholders.

(i)    Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders (A) pursuant to the Corporation's notice of meeting, (B) by or at the direction of the Board of Directors or (C) by any shareholder of the Corporation who was a shareholder of record at the time of giving of notice provided

for in this Section 2.9, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.9.

(ii)    For nominations or other business to be properly brought before any annual meeting by a shareholder pursuant to clause (C) of paragraph (c)(i) of this Section 2.9, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for shareholder action. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a shareholder's notice as described above. Such shareholder's notice shall set forth (A) as to each person whom the shareholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; (C) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (x) the name and address of such shareholder, as they appear on the Corporation's books, and of such beneficial owner and (y) the class and number of shares of the Corporation which are owned beneficially and of record by such shareholder and such beneficial owner.

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

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

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

(e) General.

(i)    Except where the terms of any class or series of Preferred Stock of the Corporation require the election of one or more directors by the holders of such Preferred Stock voting as a single class and except as provided in Section 3.3 of these By-Laws, only such persons who are nominated in accordance with the procedures set forth in this Section 2.9 shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.9. Except as otherwise provided by law, the Articles of Incorporation of these By-Laws, the person presiding at

the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed in accordance with the procedures set forth in this Section 2.9 and, if any nomination or business proposed is not in compliance with this Section 2.9, to declare that such defective nomination or proposal shall be disregarded.

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

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

SECTION 2.10. Inspectors. There shall be appointed by the Board of Directors, before each meeting of shareholders, two inspectors of the vote. Such inspectors shall first take and subscribe an oath or affirmation faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of their ability. If two inspectors are not appointed in advance of any such meeting by the Board of Directors or one or both appointed inspectors fail or refuse to act, then one or both inspectors, as the case may be, shall be appointed for the meeting by the person presiding thereat. Such inspectors shall be responsible for tallying and certifying the vote taken on any matter at each meeting which is required to be tallied and certified by them in the resolution of the Board of Directors appointing them or the appointment of the person presiding at such meeting as the case may be. Except as otherwise provided by these By-Laws or the laws of the State of Indiana, such inspectors shall also decide all questions touching upon the qualification of voters, the validity of proxies and ballots, and the acceptance and rejection of votes. In the case of a tie vote by the inspectors on any question, the person presiding at the meeting shall decide such question. The Board of Directors shall have the authority to make rules establishing presumptions as to the validity and sufficiency of proxies.

ARTICLE 3

DIRECTORS

SECTION 3.1. Number. Subject to the rights of the holders of any class or series of Preferred Stock to elect additional directors under specified circumstances, the number

of directors shall be set, and from time to time may be increased or decreased to the extent provided for in the Articles of Incorporation, exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the Whole Board. A director need not be a shareholder.

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

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

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

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

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

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

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

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

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

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

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

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

SECTION 3.14. Resignations. Any director of the Corporation may resign at any time by giving written notice to the Chairman of the Board or the Secretary of the

Corporation. The resignation of any director shall take effect at the time of the receipt of such notice or at any later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 3.15. Committees.

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

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

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

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

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

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

(g)    Regular meetings of each committee, of which no notice shall be necessary, shall be held on such days and at such places as the chairman of the committee shall determine or as shall be fixed by a resolution passed by a majority of all the members of such committee. Special meetings of each committee will be called by the Secretary at the request of any two members of such committee (or the sole member, if a committee of one), or in such other manner as may be determined by the committee. Notice of each special meeting of a committee shall be mailed to each member thereof at least two days before the meeting or shall be given personally or by telephone or other electronic transmission at least one day before the meeting. Every such notice shall state

the time and place, but need not state the purposes of the meeting. No notice of any meeting of a committee shall be required to be given to any alternate.

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

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

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

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

ARTICLE 4

NOTICES

SECTION 4.1. Notices. Notices to directors and shareholders shall be in writing and delivered personally or mailed to their addresses appearing on the records of the Corporation or, if to directors, by telegram, cable, telephone, telecopy, facsimile, other electronic transmission, wireless or a nationally recognized overnight delivery service or personally. Notice to directors by mail shall be given at least five days before the meeting. Notice to directors by telegram, cable, telephone, telecopy, facsimile, other electronic transmission, wireless or personal delivery, shall be given a reasonable time before the meeting, but in no event less than two days before the meeting. Notice by mail shall be deemed to be given when mailed to the director at his or her address appearing on the records of the Corporation. Notice by telegram or cable shall be deemed to be given when the telegram or cable addressed to the director at his or her address appearing on the records of the Corporation is delivered to the telegraph company. Notice by telephone, telecopy, facsimile, other electronic transmission or wireless shall be deemed

to be given when transmitted by telephone, telecopy, facsimile, other electronic transmission or wireless to the number, electronic address or wireless call designation appearing on the records of the Corporation for the director (regardless of whether the director shall have personally received such telephone call or wireless message), provided confirmation of transmission shall be made promptly by telegram or cable in the manner specified above.

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

ARTICLE 5

OFFICERS

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

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

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

SECTION 5.2. Term of Office; Removal; Resignations; Vacancies. The term of each officer shall be for one year and continue until his or her successor is chosen and

qualified or until the earlier of his or her death, resignation or removal, except that any such officer elected by the Board of Directors, excluding the the Chief Executive Officer and President, at any time, may be suspended by the the Chief Executive Officer and President until the Board of Directors convenes, and any such officer, including the the Chief Executive Officer and President, may be removed at any time by the affirmative vote of a majority of the members of the Whole Board.

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

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

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

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

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

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

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

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

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

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

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

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

SECTION 5.10. Secretary. Subject to control and supervision by the Board of Directors and the Chief Executive Officer and President, the Secretary shall attend and record proceedings of meetings of shareholders, the Board of Directors and any committee of the Board of Directors, keep or cause to be kept in books provided for such purpose such records of proceedings and have the other powers and duties prescribed by these By-Laws or by the Board of Directors or the Chief Executive Officer and

President, and the usual powers and duties pertaining to his or her office, including having custody of the corporate seal, if any, and affixing it to all documents as required to attest the same.

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

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

ARTICLE 6

CONDUCT OF BUSINESS

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

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

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

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

may endorse, assign and deliver checks, drafts, and other orders for the payment of money which are payable to the order of the Corporation.

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

ARTICLE 7

SHARE CERTIFICATES AND THEIR TRANSFER

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

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

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

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

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

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

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

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

SECTION 7.6. Transfer Agents and Registrars. The Board of Directors may from time to time appoint a transfer agent and a registrar in one or more cities, may

require all certificates evidencing shares of the Corporation to bear the signatures of a transfer agent and a registrar, may provide that such certificates shall be transferable in more than one city, and may provide for the functions of transfer agent and registrar to be combined in one agency.

ARTICLE 8

INDEMNIFICATION

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

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

the extent that a court of equity or the court in which such Action was pending shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court of equity or other court shall deem proper.

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

Notwithstanding any other provision of this section, to the extent any person is a witness in, but not a party to, any Action, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a Corporate Person or serving at the request of the Corporation in an Authorized Capacity of or for Another Entity, he or she shall be indemnified against all Expenses actually and reasonably incurred by or on behalf of him or her in connection therewith.

SECTION 8.4. Determination of Conduct.

(a) Any indemnification under Section 8.1 or 8.2 of this Article (unless ordered by a court) shall be made by the Corporation only upon a determination that indemnification of the person is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 8.1 or 8.2. Such determination shall be made (1) if a Change of Control (as hereinafter defined) shall not have occurred, (A) by the Board of Directors by a majority vote of a quorum consisting of the Disinterested Directors (as hereinafter defined) or, if such a quorum cannot be obtained, by majority vote of a committee duly designated by the Board of Directors consisting solely of two (2) or more Disinterested Directors or (B) if there are no Disinterested Directors or, even if there are Disinterested Directors and a majority of such Disinterested Directors so directs, by (i) Independent Counsel (as hereinafter defined) in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, or (ii) the shareholders of the Corporation, provided, however, that shares owned by or voted under the control of directors who are at the time not Disinterested Directors may not be voted on the determination; or (2) if a Change of Control shall have occurred, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, unless the claimant shall request that such determination be

made by or at the direction of the Board of Directors, in which case it shall be made in accordance with clause (1) of this sentence. Any claimant shall be entitled to be indemnified against the Expenses actually and reasonably incurred by such claimant in cooperating with the person or entity making the determination of entitlement to indemnification (irrespective of the determination as to the claimant's entitlement to indemnification) and, to the extent successful, in connection with any litigation or arbitration with respect to such claim or the enforcement thereof.

(b)    If a Change of Control shall not have occurred, or if a Change of Control shall have occurred and a director, officer, employee or agent requests pursuant to clause (2) of the second sentence in Section 8.4(a) that the determination whether the claimant is entitled to indemnification be made by or at the direction of the Board of Directors, the claimant shall be conclusively presumed to have been determined pursuant to Section 8.4(a) to be entitled to indemnification if (1)(a) within fifteen days after the next regularly scheduled meeting of the Board of Directors following receipt by the Corporation of the request therefor, the Board of Directors shall not have resolved by majority vote of the Disinterested Directors to submit such determination to (i) Independent Counsel for its determination or (ii) the shareholders for their determination at the next annual meeting, or any special meeting that may be held earlier, after such receipt, and (b) within sixty days after receipt by the Corporation of the request therefor (or within ninety days after such receipt if the Board of Directors in good faith determines that additional time is required by it for the determination and, prior to expiration of such sixty‑day period, notifies the claimant thereof), the Board of Directors shall not have made the determination by a majority vote of the Disinterested Directors, or (2) after a resolution of the Board of Directors, timely made pursuant to clause (1)(a)(ii) above, to submit the determination to the shareholders, the shareholders meeting at which the determination is to be made shall not have been held on or before the date prescribed (or on or before a later date, not to exceed sixty days beyond the original date, to which such meeting may have been postponed or adjourned on good cause by the Board of Directors acting in good faith); provided, however, that this sentence shall not apply if the claimant has misstated or failed to state a material fact in connection with his or her request for indemnification. Such presumed determination that a claimant is entitled to indemnification shall be deemed to have been made (I) at the end of the sixty‑day or ninety‑day period (as the case may be) referred to in clause (1)(b) of the immediately preceding sentence or (II) if the Board of Directors has resolved on a timely basis to submit the determination to the shareholders, on the last date within the period prescribed by law for holding such shareholders meeting (or a postponement or adjournment thereof as permitted above).

SECTION 8.5. Advance Payment. Expenses incurred in defending an Action shall be paid by the Corporation in advance of the final disposition of such Action to a director or officer, promptly after receipt of a request therefor stating in reasonable detail the expenses incurred, and to an employee or agent as authorized by the Board of Directors; provided that in each case (a) the Corporation shall have received an undertaking by or on behalf of the director, officer, employee or agent to repay such

amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation hereunder, (b) the indemnitee furnishes the Corporation a written affirmation of his or her good faith belief that he or she has satisfied the standard of conduct in Section 8.1 or 8.2 and (c) a determination is made by those making the decision pursuant to Section 8.4 that the facts then known would not preclude indemnification under these By-Laws.

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

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

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

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

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

(a) "Change of Control" means a change of control of the Corporation at any time after the effective time of the merger of Arvin Industries, Inc. with and into the Corporation of a nature that would be required to be reported in a proxy statement pursuant to Section 14(a) of the Exchange Act or in a Form 8-K pursuant to Section 13 of

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

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

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

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

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

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

ARTICLE 9

GENERAL

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

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

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

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

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

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

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

SECTION 2. Definitions. For purposes of these Procedures:

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

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

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

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

SECTION 3. Submission and Determination of Claims.

(A) To obtain indemnification or advancement of Expenses under Article 8 of the By-Laws, an Indemnitee shall submit to the Secretary of the Corporation a written request therefor, including therein or therewith such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to permit a determination as to whether and what extent the Indemnitee is entitled to indemnification or advancement of Expenses, as the case may be. The Secretary shall, promptly upon receipt of a request for indemnification, advise the Board of Directors thereof in writing if a determination in accordance with Section 8.4 of the By-Laws is required.

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

(C) If entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8.4 of the By-Laws, the Independent Counsel shall be selected as provided in this Section 3(C). The Independent Counsel shall be selected by the Board of Directors by majority vote of a quorum consisting of Disinterested Directors, or, if such a quorum cannot be obtained, by majority vote of a committee duly designated by the Board of Directors consisting solely of two or more Disinterested Directors, or, if such a quorum cannot be obtained and such a committee cannot be designated, by a majority vote of the full Board of Directors (in which selection Directors who are not Disinterested Directors may participate), and the Corporation shall give written notice to the Indemnitee advising the Indemnitee of the identity of the Independent Counsel so selected. The Indemnitee may, within seven days after such written notice of selection shall have been given, deliver to the Corporation a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Article 8 of the By-Laws, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is made, the Independent Counsel so selected may not serve as Independent Counsel unless and until a court has determined that such objection is without merit. If, within twenty days after the next regularly scheduled Board of Directors meeting following submission by the Indemnitee of a written request for indemnification pursuant to Section 3(A) hereof, no Independent Counsel shall have been selected and not objected to, either the Corporation or the Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Indemnitee to the selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom an objection is favorably resolved or the person so appointed shall act as Independent Counsel under Section 8.4 of the By-Laws. The Corporation shall pay any and all reasonable fees and expenses (including without limitation any advance retainers reasonably required by counsel) of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 8.4 of the By-Laws, and the Corporation shall pay all reasonable fees and expenses (including without limitation any advance retainers reasonably required by counsel) incident to the procedures of Section 8.4 of the By-Laws and this Section 3(C), regardless of the manner in which Independent Counsel was selected or appointed. Upon the delivery of its opinion pursuant to Article 8 of the By-Laws or, if earlier, the due commencement of any judicial proceeding or arbitration pursuant to Section 4(A)(3) of these Procedures, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

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

SECTION 4. Review and Enforcement of Determination.

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

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

(C) If a determination shall have been made or deemed to have been made pursuant to Section 8.4 of the By-Laws that an Indemnitee is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 4, absent (1) a misstatement or omission of a material fact in connection with the Indemnitee's request for indemnification, or (2) a prohibition of such indemnification under applicable law.

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

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

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

EX-10.J

MERITOR, INC.

NON-EMPLOYEE DIRECTOR RETAINER DEFERRAL POLICY

1.    Purpose and Effective Date. The purpose of this Policy is to provide the Non-Employee Directors of Meritor, Inc. (the “Company”) with an opportunity to defer payment of all or a portion of their annual retainer. The Policy is effective as of November 3, 2016.

2.    Definitions. As used in the Policy, the following terms will have the respective meanings specified below:

a. “Board” means the board of directors of the Company as it may be comprised from time to time.

b. “Code” means the Internal Revenue Code of 1986, as amended.

c. “Committee” means the Corporate Governance and Nominating Committee of the Company.

d. “Company” means Meritor, Inc. and any successor thereto.

e. “Deferred Cash Account” means an account maintained for each Non-Employee Director who makes a deferral election as described in Section 4.

f. “Non-Employee Director” means a member of the Board of Directors who is not an employee of the Company or any of its subsidiaries.

g. “Plan” means the Company’s 2010 Long-Term Incentive Plan, as amended and in effect from time to time, and any other equity plan of the Company covering director equity grants to accommodate deferrals under the Policy.

h. “Policy” means the Meritor, Inc. Non-Employee Director Retainer Deferral Policy as adopted by the Company and in effect from time to time.

i. “Policy Administrator” means the Committee or its designee.

j. “Participant” means any Non-Employee Director who has elected to defer Retainer Fees in accordance with the Policy.

k. “Restricted Stock” mean restricted Shares as described in and subject to the terms and conditions of the Plan.

l. RSU” means a Restricted Share Unit as described in and subject to the terms and conditions of the Plan.

m. “Retainer Fees” means the annual cash retainer fees receivable for service as a director of the Company, including committee chairperson retainer fees, if applicable, and meeting fees.

3.    Eligibility. All Non-Employee Directors will be eligible to participate in the Policy.

4.    Election to Defer Retainer.

a.    Deferral Elections Generally. Each Non-Employee Director may elect to defer all or any part of his or her future Retainer Fees by filing with the Policy Administrator written notice of such election, on a form approved by the Policy Administrator (an “Election Form”), specifying the percentage of such future Retainer Fees to be deferred and the time and manner of payment in which such deferred Retainer Fees will be paid to him or her or, in the event of his or her death, to his or her designated beneficiary or estate. Any deferral election to receive Retainer Fees in the form of Restricted Stock or RSUs will be accompanied by a form of Restricted Stock or RSU award agreement, which shall set forth such additional terms and conditions (including any applicable vesting or alternate dates) and which shall be on a form approved by the Policy Administrator. Any deferral election to receive Retainer Fees in the form of Restricted Stock or RSUs will also be subject to the terms of the Plan. Any such deferral election form must be filed with the Policy Administrator no later than December 31^st of the year immediately preceding the calendar year to which such Retainer Fees relates and will become final, binding and irrevocable on such December 31^st.

b.    New Non-Employee Directors. Notwithstanding any other provision of this Policy to the contrary, any newly elected Non-Employee Director may elect to defer his or her Retainer Fees no later than 30 days after the date he or she commences membership on the Board by filing with the Policy Administrator an Election Form. Such deferral election will be effective for Retainer Fees paid on and following the date such Board membership commences.

5.    Deferred Cash Accounts. The Company will establish on its books and records a Deferred Cash Account for each Participant. Any deferred Retainer Fees that provide for the payment of deferred cash will be credited to the Participant’s Deferred Cash Account. The Company will credit the total amount deferred by each Participant as of the end of each calendar quarter with an additional amount equal to the amount then deferred and owing multiplied by one-fourth of the annual rate for quarterly compounding that is 120% of the “applicable Federal long-term rate” determined by the Secretary of the Treasury pursuant to Code Section 1273(d), or any successor provision, for the last month in such quarter, such additional amounts to be paid at the same time and in the same proportion as the payments of the fees so deferred.

6.    Payment of Deferred Compensation. A Participant’s Deferred Cash Account under the Policy will be distributed in the time and manner of payment specified on the properly and timely filed Election Form filed with the Policy Administrator.

7.    Unfunded Promise to Pay; No Segregation of Funds or Assets. Nothing in this Policy will require the segregation of any assets of the Company or any type of funding by the Company, it being the intention of the parties that the Policy be an unfunded arrangement for federal income tax purposes. No Participants will have any rights under the Policy other than as unsecured general creditors of the Company or any of its subsidiaries, except as otherwise provided by applicable law insofar as they may have become entitled to payment of additional Retainer Fees for service as a member of the Board.

8.    Administration. This Policy will be administered by the Policy Administrator, who will have the authority to adopt rules and regulations for carrying out the Policy and to interpret, construe and implement the provisions thereof. The Policy Administrator’s interpretation of the Policy will be final and binding on all parties.

9.    Non-Assignability. Except as otherwise provided by the Board, no deferred Retainer Fees or amounts in a Participant’s Deferral Compensation Account will be assignable or transferrable except by the laws of descent or distribution.

10.    Withholding. Applicable taxes, to the extent required by law, will be withheld from distributions under the Policy.

11.    Compliance with Section 409A.

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

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

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

12.    Invalidity; Inconsistency. If any term or provision contained in the Policy will to any extent be invalid or unenforceable, such term or provision will be reformed so that it is valid, and such invalidity or unenforceability will not affect any other provision or part thereof. With respect to deferral elections to receive Retainer Fees in the form of Restricted Stock or RSUs, in the event of any inconsistency between the Policy and the Plan, the Plan will govern.

13.    Applicable Law. The Policy and all actions taken under the Policy will be governed by, and construed in accordance with, the laws of the State of Indiana without regard to the conflict of law principles thereof. This document constitutes the entire Policy, and supersedes any prior oral or written agreements on the subject matter hereof.

14.    Amendment and Termination. The Committee may at any time amend, suspend or terminate the Policy, in whole or in part. Notwithstanding the foregoing, no such amendment, suspension or termination will, without the consent of a Participant, adversely affect the amounts theretofore accrued in the Participant’s Deferred Cash Account or any earnings deemed credited thereon.

1

EX-10.J-1

FORM OF AWARD AGREEMENT FOR DIRECTOR DEFERRAL ELECTION

Grant Date: [●]

Units Granted: [●]

Vesting: 100% in the third year

Director

MERITOR, INC.

2010 LONG-TERM INCENTIVE PLAN

RESTRICTED SHARE UNIT AGREEMENT

In accordance with Section 11 of the 2010 Long-Term Incentive Plan, as amended and restated (the “Plan”), of Meritor, Inc. (the “Company”), and your election pursuant to the Meritor, Inc. Non-Employee Director Retainer Deferral Policy (the “Policy”), the number of restricted share units specified above have been granted to you as of the date listed above (“Grant Date”) as restricted share units (“Restricted Share Units”). By accepting such award (the “Award”), you agree to the terms and conditions of this restricted share unit agreement (this “Agreement”). Each Restricted Share Unit represents a right to receive one share of common stock, par value $1.00 per share, of the Company (the "Common Stock") or its cash equivalent in the future. All capitalized terms used herein and not otherwise defined will have the meanings set forth in the Plan.

1. Vesting of Restricted Share Units

(a)    Except as otherwise provided in this Agreement, the Restricted Share Units will vest on January __, 2020 provided that you continue to serve as a member of the Board for the period from the Grant Date through such date (the “Vesting Period”).

(b)    If your membership on the Board terminates prior to the last day of the Vesting Period due to your Disability or death or due to a Qualifying Termination within the two (2) year period immediately following a Change of Control, then the Restricted Share Units will vest on the date of such termination of membership on the Board and will be payable within thirty (30) days of the date of such termination of membership on the Board in the form specified in Section 2.

(c)    If you resign from the Board or cease to be a member of the Board by reason of the antitrust laws, compliance with the Company’s conflict of interest policies, or other circumstances that the Board determines not to be adverse to the best interests of the Company prior to the end of the Vesting Period, the Board may, upon resolution, determine that the Restricted Share Units will vest prior to the third anniversary of the Grant Date, in which case such Restricted Share Units will be payable within thirty (30) days of the date of vesting.

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

2. Payment of Restricted Share Units

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

3.    Forfeiture of Unearned Restricted Share Units

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

4.    Transferability

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

5.    Interpretations and Determinations

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

6.    Withholding and Sale of Shares for Taxes

The Company shall have the right, in connection with the delivery of shares of Common Stock in respect of the Restricted Share Units subject to this Agreement, (i) to deduct from any payment otherwise due by the Company to you or any other person receiving delivery of the shares of Common Stock an amount equal to any taxes required to be withheld by law with respect to such delivery, (ii) to require you or any other person receiving such delivery to pay to it an amount sufficient to provide for any such taxes so required to be withheld or (iii) to sell such number of shares of Common Stock as may be necessary so that the net proceeds of such sale shall be an amount sufficient to provide for any such taxes so required to be withheld.

1. No Acquired Rights

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

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

1. Section 409A

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

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

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

9.    Applicable Law

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

10.    Entire Agreement

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

This Agreement is effective as of the Grant Date, and is executed as of the respective dates set forth below.

MERITOR, INC.

By:______________________________

April Miller Boise
Senior Vice President, General Counsel and Corporate Secretary

Executed as of _____________ ___, 2016

Agreed to this __ day of __________, 2016

_______________________________

Address:

Social Security Number:

CPAM: 8391095.4

EX-10.J-2

FORM OF AWARD AGREEMENT FOR DIRECTOR DEFERRAL ELECTION

Grant Date: [●]

Restricted Shares Granted: [●]

Vesting: 100% in the third year

Director

MERITOR, INC.

2010 LONG-TERM INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

In accordance with Section 11 of the 2010 Long-Term Incentive Plan, as amended and restated (the “Plan”), of Meritor, Inc. (the “Company”), and your election pursuant to the Meritor, Inc. Non-Employee Director Retainer Deferral Policy (the “Policy”), the number of shares of Common Stock of the Company specified above have been granted to you as of the date listed above (“Grant Date”) as restricted shares (“Restricted Shares”). By accepting such award (the “Award”), you agree to the terms and conditions of this restricted stock agreement (this “Agreement”). All capitalized terms used herein and not otherwise defined will have the meanings set forth in the Plan.

1. Earning of Restricted Shares

(a)    Except as otherwise provided in this Agreement, you will be deemed to have earned the Restricted Shares on the earlier of (1) January __, 2020 provided that you continue to serve as a member of the Board for the period from the Grant Date through such date (the “Vesting Period”), and (2) the date of your death, Disability or Qualifying Termination.

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

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

2. Retention of Certificates for Restricted Shares

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

3. Dividends and Voting Rights

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

4. Delivery of Earned Restricted Shares

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

5. Forfeiture of Unearned Restricted Shares

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

6. Transferability

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

7. Interpretations and Determinations

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

8. Withholding and Sale of Shares for Taxes

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

9. No Acquired Rights

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

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

10. Section 409A

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

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

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

11.    Applicable Law

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

12.    Entire Agreement

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

This Agreement is effective as of the Grant Date, and is executed as of the respective dates set forth below.

MERITOR, INC.

By:______________________________

April Miller Boise
Senior Vice President, General Counsel and Corporate Secretary

Attachment 1 - Stock Transfer Power

Executed as of _____________ ___, 2016

Agreed to this __ day of __________, 2016

_______________________________

Address:

Social Security Number:

Attachment 1

STOCK TRANSFER POWER SEPARATE FROM CERTIFICATE

FOR VALUE RECEIVED, I, [●], hereby sell, assign and transfer unto Meritor, Inc. (the “Company”) (i) the [●] shares of the Common Stock of the Company standing in my name on the books of the Company evidenced by certificates or by book entry, granted to me on [●] as Restricted Shares pursuant to the Company’s 2010 Long-Term Incentive Plan, as amended and restated; and (ii) any additional shares of the Company’s Common Stock, other securities issued by the Company or securities of another entity (“Stock Dividends”) distributed, paid or payable on or in respect of the Shares and Stock Dividends during the period the Shares are held by the Company pursuant to a certain Restricted Stock Agreement effective as of [●] and executed as of the dates set forth thereon with respect to the Shares; and I do hereby irrevocably constitute and appoint _______________________________________ attorney with full power of substitution in the premises to transfer the Shares on the books of the Company.

Dated:                

____________________________

(Signature)

CPAM: 8391096.4

EX-10.L-1

To:

Viking Asset Purchaser No. 7 IC (the “Purchaser”)
Citicorp Trustee Company Limited (the “Programme Trustee”)

8 June 2012

Dear Sirs,

Extension of a receivables purchase agreement between the Purchaser, the Programme Trustee and ourselves as Seller dated 28 June 2011 as amended, (the “Receivables Purchase Agreement”).

We refer to the Receivables Purchase Agreement. We write to record the terms and conditions upon which the parties have agreed to extend the Receivables Purchase Agreement.

In the definition of Termination Event, sub-clause (a) which appears in Clause 1 of the Receivables Purchase Agreement, the reference to “one (1) year” shall be replaced by “two (2) years”.

Please acknowledge your acceptance of the terms and conditions contained in this Letter of Agreement by signing and returning the enclosed duplicate.

Yours faithfully,

/s/ Eric Moss                

for and on behalf of
Meritor HVS AB

We accept the terms and conditions set out in the Letter of Agreement of which the foregoing is the duplicate.

/s/ Cheryl Heslop            
for and on behalf of Viking Asset Purchaser No. 7 IC

/s/ David Mares            
for and on behalf of
Citicorp Trustee Company Limited

EX-10.L-8

To:

Viking Asset Purchaser No. 7 IC (the “Purchaser”)
Citicorp Trustee Company Limited (the “Programme Trustee”)

14 October 2016

Dear Sirs,

Extension of a receivables purchase agreement between the Purchaser, the Programme Trustee and ourselves as Seller dated 28 June 2011 as amended, (the “Receivables Purchase Agreement”).

We refer to the Receivables Purchase Agreement. We write to record the terms and conditions upon which the parties have agreed to extend the Receivables Purchase Agreement.

In the definition of Termination Event, sub-clause (a) which appears in Clause 1 of the Receivables Purchase Agreement shall be replaced by “December 9, 2016, is reached;”, which, for the avoidance of doubt, means that the Receivables Purchase Agreement will terminate on 9 December 2016.

Please acknowledge your acceptance of the terms and conditions contained in this Letter of Agreement by signing and returning the enclosed duplicate.

Yours faithfully,

for and on behalf ofMeritor HVS AB

/s/ Carl D. Anderson II        Carl D. Anderson II

We accept the terms and conditions set out in the Letter of Agreement of which the foregoing is the duplicate.

/s/ Michael Lombardi        
Michael Lombardi, Directorfor and on behalf of Viking Asset Purchaser No. 7 IC

/s/ David Mares            
David Mares, Director
for and on behalf of
Citicorp Trustee Company Limited

EX-10.BB

Exhibit 10-bb

Schedule identifying agreements substantially identical to the Form of Employment Agreement constituting Exhibit 10-aa hereto entered into by Meritor, Inc. and each of the following persons:

April Miller Boise (term ends August 14, 2018)

Timothy J. Heffron

Joseph Plomin

Robert H. Speed

Chris Villavarayan (term ends December 1, 2017)

1

CPAM: 8604758.1

EX-12

Exhibit 12

Meritor, Inc.

Computation of Ratio of Earnings to Fixed Charges

Year Ended September 30, 2016

(Amounts in millions, except the ratio)

Earnings Available for Fixed Charges (A):
Pre-tax income from continuing operations	$	155
Add:
Distributed income of affiliates		37
Less:
Equity in earnings of affiliates		(36	)
		156
Add: fixed charges included in earnings:
Interest expense		87
Interest element of rentals		5
Total		92
Total earnings available for fixed charges:	$	248
Fixed Charges (B):
Fixed charges included in earnings	$	92
Capitalized interest		—
Total fixed charges	$	92
Ratio of Earnings to Fixed Charges		2.70

(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-21

Exhibit 21

MERITOR, INC.

SUBSIDIARIES

The following lists the subsidiaries, direct and indirect, of Meritor, Inc., and their state or other jurisdiction of incorporation or organization, along with ownership percentage (directly or indirectly) as of September 30, 2016 (50% or more interest).

Name	Jurisdiction	Ownership %
AVM, Inc.	South Carolina	100%
Arvin Canada Holding Limited	Canada (Ontario)	100%
Arvin European Holdings (UK) Limited	England & Wales	100%
Arvin European Holdings (UK) Limited French Branch	France	100%
Arvin Finance, LLC	Delaware	100%
Arvin Holdings Netherlands B.V.	Netherlands	100%
Arvin Innovation Australia Pty. Limited	Australia	100%
Arvin International (UK) Limited	England & Wales	100%
Arvin Motion Control Limited	England & Wales	100%
ArvinMeritor A&ET Limited	England & Wales	100%
ArvinMeritor CV Aftermarket GmbH	Germany	100%
ArvinMeritor OE, LLC	Delaware	100%
ArvinMeritor, Inc.	Delaware	100%
ArvinMeritor Brake Holdings, LLC	Delaware	100%
ArvinMeritor Filters Operating Co., LLC	Delaware	100%
ArvinMeritor Finance (Barbados) Inc.	Barbados	100%

Subsidiaries

Page 2

Name	Jurisdiction	Ownership %
ArvinMeritor Finance Ireland	Ireland	100%
ArvinMeritor Holdings France SNC	France	100%
ArvinMeritor Light Vehicle Systems Australia Pty. Ltd.	Australia	100%
ArvinMeritor Light Vehicle Systems (UK) Limited	England & Wales	100%
ArvinMeritor Limited	England & Wales	100%
ArvinMeritor Pension Trustees Limited	England & Wales	100%
ArvinMeritor Receivables Corporation	Delaware	100%
Arvinmeritor Sweden AB	Sweden	100%
ArvinMeritor Technology, LLC	Delaware	100%
Arvin Replacement Products S.r.L.	Italy	100%
Arvin Technologies, Inc.	Michigan	100%
Braseixos Administradora de Bens Ltd.	Brazil	100%
Fonderie Vénissieux SAS	France	51.00%
MSS Holdings, Limited	Canada (Ontario)	100%
Maremont Corporation	Delaware	100%
Maremont Exhaust Products, Inc.	Delaware	100%
Meritor, Inc.	Nevada	100%
Meritor HVS AB	Sweden	100%
Meritor HVS (India) Limited	India	51.00%
Meritor HVS Istanbul Irtibat Burosu	Turkish branch of Italian Company (Meritor HVS Cameri-Istanbul Liaison office)	100%
Meritor LVS Holdings Mexico, LLC	Delaware	100%
Meritor Aftermarket Canada Inc.	Canada (Ontario)	100%

Subsidiaries

Page 3

Name	Jurisdiction	Ownership %
Meritor Aftermarket France SAS	France	100%
Meritor Aftermarket Italy, S.r.l.	Italy	100%
Meritor Aftermarket Netherlands B.V.	Netherlands	100%
Meritor Aftermarket Spain, S.A.	Spain	100%
Meritor Aftermarket Switzerland AG	Switzerland	100%
Meritor Aftermarket UK Limited	England	100%
Meritor Aftermarket USA, LLC	Delaware	100%
Meritor Automotive Export Limited	England & Wales	100%
Meritor Axles France SAS	France	100%
Meritor Brazil Holdings, LLC	Delaware	100%
Meritor Cayman Islands, Ltd.	Cayman Islands	100%
Meritor (China) Holdings, Limited	China	100%
Meritor Commercial Vehicle Systems India Private Limited	India	100%
Meritor do Brasil Sistemas Automotivos Ltda.	Brazil	100%
Meritor Drivetrain Systems (Nanjing) Co. Ltd.	China	100%
Meritor Drivetrain Systems (Nanjing) Co. Ltd. – Shanghai Branch	China	100%
Meritor Finance (Barbados) Limited	Barbados	100%
Meritor Finance Netherlands B.V.	Netherlands/Luxembourg	100%
Meritor France Holdings, LLC	Delaware	100%
Meritor France SNC	France	100%
Meritor Golde GmbH	Germany	100%
Meritor Heavy Vehicle Braking Systems (UK) Limited	England & Wales	100%
Meritor Heavy Vehicle Braking Systems (U.S.A.), LLC	Delaware	100%
Meritor Heavy Vehicle Systems B.V.	Netherlands	100%
Meritor Heavy Vehicle Systems, LLC	Delaware	100%
Meritor Heavy Vehicle Systems Australia Ltd.	Australia	100%
Meritor Heavy Vehicle Systems Cameri SpA	Italy	100%
Meritor Heavy Vehicle Systems de Venezuela S.A.	Venezuela	100%
Meritor Heavy Vehicle Systems Limited	England	100%
Meritor Heavy Vehicle Systems (Manufacturing) Limited	England	100%
Meritor Heavy Vehicle Systems (Singapore) Pte., Ltd.	Delaware	100%
Meritor Heavy Vehicle Systems (Venezuela), Inc.	Delaware	100%

Subsidiaries

Page 4

Name	Jurisdiction	Ownership %
Meritor Holdings, LLC	Delaware	100%
Meritor Holdings (Barbados) Limited	Barbados	100%
Meritor Holdings Canada SNC	France	100%
Meritor Holdings France SNC	France	100%
Meritor Holdings Netherlands B.V.	Netherlands	100%
Meritor Holdings Spain, S.A.	Spain	100%
Meritor Huayang Vehicle Braking Company, Ltd.	China	60%
Meritor International Holdings, LLC	Delaware	100%
Meritor Japan K.K.	Japan	100%
Meritor Luxembourg S.a.r.l.	Luxembourg	100%
Meritor Management Corp.	Delaware	100%
Meritor Manufacturing de México, S.A. de C.V.	Mexico	100%
Meritor Mexicana, S.A. de C.V.	Mexico	100%
Meritor Netherlands B.V.	Netherlands	100%
Meritor Services de Mexico, S.A. de C.V.	Mexico	100%
Meritor Technology, LLC	Delaware	100%
Meritor Vehicle Systems (Nanjing) Co., Ltd.	China	100%
Meritor WABCO Vehicle Control Systems	Delaware	50%
Meritor WABCO Vehicle Control Systems, S. de R.L. de C.V.	Mexico	50%
Trucktechnic S.A.	Belgium	100%
Wilmot-Breeden (Holdings) Limited	England & Wales	100%
Xuzhou Meritor Axles Co. Ltd.	People’s Republic of China	60%

EX-23.A

Exhibit 23-a

CONSENT OF EXPERT

I consent to the reference to me under the headings “Item 1. Business – Environmental Matters” and “Item 3. Legal Proceedings” in the Annual Report on Form 10-K of Meritor, Inc. (“Meritor”) for the fiscal year ended October 2, 2016, and to the incorporation by reference of such reference into the following Registration Statements of Meritor:

Form	Registration No.	Purpose
S-8	333-192458	Amended and Restated 2010 Long-Term Incentive Plan
S-3	333-200858	Registration of common stock, preferred stock, warrants, debt securities and guarantees
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
December 1, 2016		/s/ April Miller Boise
		April Miller Boise
		Senior Vice President, General Counsel and Corporate Secretary

EX-23.B

Exhibit 23-b

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference of our reports dated December 1, 2016, relating to the consolidated financial statements of Meritor, Inc., and subsidiaries (the "Company"), and the effectiveness of the Company's internal control over financial reporting (which report expresses an adverse opinion on the effectiveness of the Company's internal control over financial reporting because of material weaknesses), appearing in this Annual Report on Form 10-K of the Company for the year ended October 2, 2016 in the following Registration Statements ofMeritor, Inc.:

Form	Registration No.	Purpose
S-8	333-192458	Amended and Restated 2010 Long-Term Incentive Plan
S-3	333-200858	Registration of common stock, preferred stock, warrants, debt securities and guarantees
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 Saving 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

/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP

Detroit, Michigan

December 1, 2016

EX-23.C

Exhibit 23-c

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 under the headings “Item 3. Legal Proceedings,” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 23 of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K of Meritor, Inc. (“Meritor”) for the fiscal year ended October 2, 2016 and to the incorporation by reference of such reference into the following Registration Statements of Meritor:

Form	Registration No.	Purpose
S-8	333-192458	Amended and Restated 2010 Long-Term Incentive Plan
S-3	333-200858	Registration of common stock, preferred stock, warrants, debt securities and guarantees
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: December 1, 2016

EX-24

Exhibit 24

POWER OF ATTORNEY

I, the undersigned Director and/or Officer of Meritor, Inc., an Indiana corporation (the “Company”), hereby constitute JEFFREY A. CRAIG, KEVIN A. NOWLAN AND APRIL MILLER BOISE, and each of them singly, my true and lawful attorney, with full power to sign for me, and in my name and in the capacity or capacities indicated below, the Annual Report on Form 10-K for the fiscal year ended October 2, 2016, and any amendments and supplements thereto, to be filed by the Company with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934.

Signature	Title	Date
/s/ Jeffrey A. Craig Jeffrey A. Craig	Chief Executive Officer and President (principal executive officer) and Director	November 3, 2016
/s/ Kevin Nowlan Kevin Nowlan	Senior Vice President and Chief Financial Officer (principal financial officer)	November 3, 2016
/s/ Paul Bialy Paul Bialy	Vice President and Controller (principal accounting officer)	November 3, 2016
/s/ Joseph B. Anderson, Jr Joseph B. Anderson, Jr	Director	November 3, 2016
/s/ Jan A. Bertsch Jan A. Bertsch	Director	November 3, 2016
/s/ Rhonda L. Brooks Rhonda L. Brooks	Director	November 3, 2016
/s/ Victoria B. Jackson Bridges Victoria B. Jackson Bridges	Director	November 3, 2016
/s/ Ivor J. Evans Ivor J. Evans	Director	November 3, 2016
/s/ William J. Lyons William J. Lyons	Director	November 3, 2016
/s/ William R. Newlin William R. Newlin	Chairman of the Board	November 3, 2016
/s/ Thomas L. Pajonas Thomas L. Pajonas	Director	November 3, 2016
/s/ Lloyd G. Trotter Lloyd G. Trotter	Director	November 3, 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 Annual Report on Form 10-K of Meritor, Inc. for the fiscal year ended October 2, 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: December 1, 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 Annual Report on Form 10-K of Meritor, Inc. for the fiscal year ended October 2, 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: December 1, 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 Annual Report of Meritor, Inc. on Form 10-K for the fiscal year ended October 2, 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: December 1, 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 Annual Report of Meritor, Inc. on Form 10-K for the fiscal year ended October 2, 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: December 1, 2016

XML

DOCUMENT AND ENTITY INFORMATION - USD ($)	12 Months Ended
	Sep. 30, 2016	Nov. 30, 2016	Apr. 01, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	MERITOR INC
Entity Central Index Key	0001113256
Current Fiscal Year End Date	--10-02
Entity Filer Category	Large Accelerated Filer
Trading Symbol	MTOR
Entity Common Stock, Shares Outstanding		86,767,764
Document Period End Date	Oct. 02, 2016
Document Type	10-K
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2016
Amendment Flag	false
Entity Well-Known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 731,839,701

XML

CONSOLIDATED STATEMENT OF OPERATIONS - USD ($) shares in Millions, $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Income Statement [Abstract]
Sales	$ 3,199	$ 3,505	$ 3,766
Cost of sales	(2,763)	(3,043)	(3,279)
GROSS MARGIN	436	462	487
Selling, general and administrative	(213)	(243)	(258)
Pension settlement losses	0	(59)	0
Restructuring costs	(16)	(16)	(10)
Goodwill impairment	0	(15)	0
Other operating expense, net	(3)	(1)	(2)
OPERATING INCOME	204	128	217
Other income (expense), net	(1)	5	0
Equity in earnings of ZF Meritor	0	0	190
Equity in earnings of other affiliates	36	39	38
Interest expense, net	(84)	(105)	(130)
INCOME BEFORE INCOME TAXES	155	67	315
Benefit (provision) for income taxes	424	(1)	(31)
INCOME FROM CONTINUING OPERATIONS	579	66	284
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(4)	(1)	(30)
NET INCOME	575	65	254
Less: Net income attributable to noncontrolling interests	(2)	(1)	(5)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	573	64	249
NET INCOME ATTRIBUTABLE TO MERITOR, INC.
Net income from continuing operations	577	65	279
Loss from discontinued operations	(4)	(1)	(30)
Net income	$ 573	$ 64	$ 249
BASIC EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share from continuing operations (in dollars per share)	$ 6.40	$ 0.67	$ 2.86
Basic earnings (loss) per share from discontinued operations (in dollars per share)	(0.04)	(0.01)	(0.31)
Basic earnings (loss) per share (in dollars per share)	6.36	0.66	2.55
DILUTED EARNINGS (LOSS) PER SHARE
Diluted earnings (loss) per share from continuing operations (in dollars per share)	6.27	0.65	2.81
Diluted earnings (loss) per share from discontinued operations (in dollars per share)	(0.04)	(0.01)	(0.30)
Diluted earnings (loss) per share (in dollars per share)	$ 6.23	$ 0.64	$ 2.51
Basic average common shares outstanding (in shares)	90.1	96.9	97.5
Diluted average common shares outstanding (in shares)	92.0	100.1	99.2

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Statement of Comprehensive Income [Abstract]
Net income	$ 575	$ 65	$ 254
Other comprehensive income:
Foreign currency translation adjustments	(12)	(97)	(20)
Pension and other postretirement benefit related adjustments (net of tax of $33, $5 and $2 at September 30, 2016, 2015 and 2014, respectively)	(35)	84	3
Unrealized gain (loss) on investment and foreign exchange contracts	4	(6)	2
Total comprehensive income	532	46	239
Less: Comprehensive (income) loss attributable to noncontrolling interest	(2)	1	(5)
Comprehensive income attributable to Meritor, Inc.	$ 530	$ 47	$ 234

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Statement of Comprehensive Income [Abstract]
Pension and other postretirement benefit, tax	$ 33	$ 5	$ 2

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CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
ASSETS
Cash and cash equivalents	$ 160	$ 193
Receivables, trade and other, net	396	461
Inventories	316	338
Other current assets	33	50
TOTAL CURRENT ASSETS	905	1,042
NET PROPERTY	439	419
GOODWILL	390	402
OTHER ASSETS	760	332
TOTAL ASSETS	2,494	2,195
LIABILITIES AND EQUITY (DEFICIT)
Short-term debt	14	15
Accounts and notes payable	475	574
Other current liabilities	268	279
TOTAL CURRENT LIABILITIES	757	868
LONG-TERM DEBT	982	1,036
RETIREMENT BENEFITS	703	632
OTHER LIABILITIES	238	305
TOTAL LIABILITIES	2,680	2,841
COMMITMENTS AND CONTINGENCIES (NOTE 23)
EQUITY (DEFICIT):
Common stock (September 30, 2016 and 2015, 99.6 and 98.8 shares issued and 86.8 and 94.6 shares outstanding, respectively)	99	99
Additional paid-in capital	876	865
Accumulated deficit	(241)	(814)
Treasury stock, at cost (September 30, 2016 and 2015, 12.8 and 4.2 shares, respectively)	(136)	(55)
Accumulated other comprehensive loss	(809)	(766)
Total deficit attributable to Meritor, Inc.	(211)	(671)
Noncontrolling interests	25	25
TOTAL DEFICIT	(186)	(646)
TOTAL LIABILITIES AND DEFICIT	$ 2,494	$ 2,195

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CONSOLIDATED BALANCE SHEET (Parenthetical) - shares shares in Millions	Sep. 30, 2016	Sep. 30, 2015
Statement of Financial Position [Abstract]
Common stock issued (in shares)	99.6	98.8
Common stock outstanding (in shares)	86.8	94.6
Treasury stock, at cost (in shares)	12.8	4.2

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CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
OPERATING ACTIVITIES
CASH PROVIDED BY OPERATING ACTIVITIES (see Note 26)	$ 204	$ 97	$ 215
INVESTING ACTIVITIES
Capital expenditures	(93)	(79)	(77)
Proceeds from sale of property	4	4	0
Cash paid for acquisition of Morganton	0	(16)	0
Other investing activities	(1)	0	0
Net investing cash flows used for continuing operations	(90)	(91)	(77)
Net investing cash flows provided by discontinued operations	4	4	7
CASH USED FOR INVESTING ACTIVITIES	(86)	(87)	(70)
FINANCING ACTIVITIES
Proceeds from debt issuances	0	225	225
Repayment of notes and term loan	(55)	(199)	(439)
Debt issuance costs	0	(4)	(10)
Other financing activities	(16)	(9)	12
Net change in debt	(71)	13	(212)
Repurchase of common stock	(81)	(55)	0
CASH USED FOR FINANCING ACTIVITIES	(152)	(42)	(212)
EFFECT OF CHANGES IN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1	(22)	(4)
CHANGE IN CASH AND CASH EQUIVALENTS	(33)	(54)	(71)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	193	247	318
CASH AND CASH EQUIVALENTS AT END OF YEAR	$ 160	$ 193	$ 247

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CONSOLIDATED STATEMENT OF EQUITY (DEFICIT) - USD ($)	Total	Total Deficit Attributable to Meritor, Inc.	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Treasury Stock	Accumulated Other Comprehensive Loss	Non-controlling Interests
Beginning balance at Sep. 30, 2013	$ (822,000,000)	$ (850,000,000)	$ 97,000,000	$ 914,000,000	$ (1,127,000,000)	$ 0	$ (734,000,000)	$ 28,000,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	239,000,000	234,000,000			249,000,000		(15,000,000)	5,000,000
Repurchase of convertible notes	(4,000,000)	(4,000,000)		(4,000,000)
Equity based compensation expense	8,000,000	8,000,000		8,000,000
Non-controlling interest dividends	(6,000,000)							(6,000,000)
Ending Balance at Sep. 30, 2014	(585,000,000)	(612,000,000)	97,000,000	918,000,000	(878,000,000)	0	(749,000,000)	27,000,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	46,000,000	47,000,000			64,000,000		(17,000,000)	(1,000,000)
Vesting of restricted stock	0		2,000,000	(2,000,000)
Repurchase of convertible notes	(62,000,000)	(62,000,000)		(62,000,000)
Equity based compensation expense	10,000,000	10,000,000		10,000,000
Repurchase of common stock	(55,000,000)	(55,000,000)				(55,000,000)
Non-controlling interest dividends	(1,000,000)							(1,000,000)
Other	1,000,000	1,000,000		1,000,000
Ending Balance at Sep. 30, 2015	(646,000,000)	(671,000,000)	99,000,000	865,000,000	(814,000,000)	(55,000,000)	(766,000,000)	25,000,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	532,000,000	530,000,000			573,000,000		(43,000,000)	2,000,000
Equity based compensation expense	9,000,000	9,000,000		9,000,000
Repurchase of common stock	(81,000,000)	(81,000,000)	0			(81,000,000)
Non-controlling interest dividends	(2,000,000)							(2,000,000)
Other	2,000,000	2,000,000		2,000,000
Ending Balance at Sep. 30, 2016	$ (186,000,000)	$ (211,000,000)	$ 99,000,000	$ 876,000,000	$ (241,000,000)	$ (136,000,000)	$ (809,000,000)	$ 25,000,000

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BASIS OF PRESENTATION

12 Months Ended

Sep. 30, 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 consolidated financial statements are those of the company and its consolidated subsidiaries.

Certain businesses are reported in discontinued operations in the consolidated statement of operations, consolidated statement of cash flows and related notes for all periods presented. In fiscal year 2014, the company exited its Mascot business, a remanufacturer and distributor of all makes differentials, transmissions and steering gears. The results of operations and cash flows of the company’s former Mascot business are presented in discontinued operations in the consolidated statement of operations and consolidated statement of cash flows. Additional information regarding discontinued operations is discussed in Note 3.

The company’s fiscal year ends on the Sunday nearest September 30. The 2016, 2015 and 2014 fiscal years ended on October 2, 2016, September 27, 2015 and September 28, 2014, 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 is used consistently throughout this report to represent the fiscal year end.

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SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) requires the use of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses and related disclosures. Actual results could differ from these estimates. Significant estimates and assumptions were used to review goodwill and other long-lived assets for impairment (see Notes 4 and 11), costs associated with the company’s restructuring actions (see Note 5), product warranty liabilities (see Note 14), long-term incentive compensation plan obligations (see Note 19), retiree medical and pension obligations (see Notes 20 and 21), income taxes (see Note 22), and contingencies including asbestos (see Note 23).

Concentration of Credit Risk

In the normal course of business, the company provides credit to customers. The company limits its credit risk by performing ongoing credit evaluations of its customers and maintaining reserves for potential credit losses and through accounts receivable factoring programs. The company’s accounts receivables are generally due from medium- and heavy-duty truck OEMs, specialty vehicle manufacturers, aftermarket customers, and trailer producers. The company’s ten largest customers accounted for 73 percent , 75 percent and 76 percent of sales in fiscal years 2016, 2015 and 2014, respectively. Sales to the company's top three customers were 50 percent, 55 percent and 57 percent of total sales in fiscal 2016, 2015 and 2014, respectively. At September 30, 2016 and 2015, 22 percent and 21 percent of the company's trade accounts receivables were from the company's three largest customers, respectively.

Consolidation and Joint Ventures

The consolidated financial statements include the accounts of the company and those subsidiaries in which the company has control. All intercompany balances and transactions are eliminated in consolidation. The results of operations of controlled subsidiaries are included in the consolidated financial statements and are offset by a related noncontrolling interest recorded for the noncontrolling partners’ ownership. Investments in affiliates that are not controlled or majority-owned are reported using the equity method of accounting (see Note 13).

Foreign Currency

Local currencies are generally considered the functional currencies for operations outside the U.S. For operations reporting in local currencies, assets and liabilities are translated at year-end exchange rates with cumulative currency translation adjustments included as a component of Accumulated Other Comprehensive Loss in the consolidated balance sheet. Income and expense items are translated at average rates of exchange during the year.

Impairment of Long-Lived Assets

Long-lived assets, excluding goodwill, to be held and used are reviewed for impairment whenever adverse events or changes in circumstances indicate a possible impairment. An impairment loss is recognized when a long-lived asset’s carrying value exceeds the fair value.

Long-lived assets held for sale are recorded at the lower of their carrying amount or estimated fair value less cost to sell.

Discontinued Operations

A business component that either has been disposed of or is classified as held for sale is reported as discontinued operations if the cash flows of the component have been or will be eliminated from the ongoing operations of the company, and the company will no longer have any significant continuing involvement in the business component. The results of discontinued operations are aggregated and presented separately in the consolidated statement of operations and consolidated statement of cash flows (see Note 3).

Revenue Recognition

Revenues are recognized upon shipment of product and transfer of ownership to the customer. Provisions for customer sales allowances and incentives are recorded as a reduction of sales at the time of product shipment.

Allowance for Doubtful Accounts

An allowance for uncollectible trade receivables is recorded when accounts are deemed uncollectible based on consideration of write-off history, aging analysis, and any specific, known troubled accounts.

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 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):

	YearEnded September 30,
	2016	2015	2014
Basic average common shares outstanding	90.1	96.9	97.5
Impact of stock options	—	0.1	0.1
Impact of restricted shares, restricted share units and performance share units	1.9	2.0	1.6
Impact of convertible notes	—	1.1	—
Diluted average common shares outstanding	92.0	100.1	99.2

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 shares.

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 units which includes incremental performance share units that were issued subsequent to the December 1, 2013 grant date. There were 1.3 million, 0.9 million and 0.1 million shares related to these performance share units included in the diluted earnings per share calculation for the years ended September 30, 2016, 2015 and 2014, respectively, as certain payout thresholds were achieved in fiscal years 2016, 2015 and 2014 relative to the Adjusted EBITDA, net debt reduction and incremental booked revenue targets.

For the years ended September 30, 2016, 2015 and 2014, the dilutive impact of previously issued restricted shares, restricted share units, and performance share units was 1.9 million, 2.0 million and 1.6 million, respectively. For the years ended September 30, 2016, 2015 and 2014, compensation cost related to restricted shares, restricted share units, performance share units and stock options was $9 million,$10 million and $8 million, respectively.

At September 30, 2014, options to purchase 0.3 million shares of common stock were excluded in the computation of diluted earnings per share because their exercise price exceeded the average market price for the twelve-month period and thus their inclusion would be anti-dilutive.

For the fiscal year ended 2015, 1.1 million shares were included in the computation of diluted earnings per share because the average stock price exceeded the conversion price for the 7.875 percent convertible notes due 2026. For the years ended September 30, 2016 and September 30, 2014, 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 these periods was less than the conversion price for the 7.875 percent convertible notes due 2026.

Other

Other significant accounting policies are included in the related notes, specifically, goodwill (Note 4), inventories (Note 9), property and depreciation (Note 11), capitalized software (Note 12), product warranties (Note 14), financial instruments (Note 17), equity based compensation (Note 19), retirement medical plans (Note 20), retirement pension plans (Note 21), income taxes (Note 22) and environmental and asbestos-related liabilities (Note 23).

Accounting standards to be implemented

In October 2016, the FASB issued Accounting Standards Update (ASU) 2016-17, Consolidation (Topic 810): Interests held through Related Parties that are under Common Control, which alters how a decision maker needs to consider indirect interests in a variable interest entity (VIE) held through an entity under common control. Under the ASU, if a decision maker is required to evaluate whether it is the primary beneficiary of a VIE, it will need to consider only its proportionate indirect interest in the VIE held through a common control party. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements and does not expect a material impact upon adoption.

In October 2016, the FASB issued ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. The ASU was issued to remove the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. The amendments in this update are effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted however the guidance can only be adopted in the first interim period of a fiscal year. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force). The ASU was issued to reduce differences in practice with respect to how specific transactions are classified in the statement of cash flows. The update provides guidance on the following eight types of transactions: debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investments, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. The amendments in this update are effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

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

In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The ASU clarifies the assessment of the likelihood that revenue will be collected from a contract, the guidance for presenting sales taxes and similar taxes, and the timing for measuring customer payments that are not in cash. The ASU also establishes a practical expedient for contract modifications at the transition. 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 2016-12 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 May 2016, the FASB issued ASU 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting (SEC Update). The ASU was issued to remove from the Codification certain SEC staff guidance that the SEC staff stated would be rescinded: Revenue and Expense Recognition for Freight Services in Process; Accounting for Shipping and Handling Fees and Costs; and Accounting for Consideration Given by a Vendor to a Customer (including a Reseller of the Vendor’s Products). 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 2016-11 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 April, 2016, the FASB issued 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, including accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The standard is required to be adopted by public business entities in fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. 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 years beginning after December 15, 2016, including interim periods within those fiscal years. 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 years beginning after December 15, 2016, including interim periods within those fiscal years. 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 years beginning after December 15, 2016, including interim years 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 years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2019 and is currently assessing the potential impact of this 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 years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

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 years beginning after December 15, 2016, including interim periods within those fiscal years. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

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 annual period ending after December 15, 2016 and for annual periods and interim periods thereafter. 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 does not expect a material impact on its consolidated financial statements from adoption of this guidance.

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 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 non-current amounts in a classified balance sheet. Deferred taxes are 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 implemented this guidance on a prospective basis in the fourth quarter of fiscal year 2016. Prior periods were not retrospectively adjusted. The impact as of September 30, 2016 was a reclassification between current and non-current deferred tax assets of $17 million.

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 years beginning after December 15, 2015, including interim periods within those fiscal years. Early adoption is permitted. The company adopted this standard in the first quarter of 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

12 Months Ended

Sep. 30, 2016

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

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

	Year Ended September 30,
	2016			2015			2014
Sales	$	—		$	1		$	29
Operating losses, net	$	—		$	—		$	(8	)
Net loss on sales of businesses	—			—			(23		)
Environmental remediation charges (see Note 23)	—			—			(4		)
Litigation settlement	(3		)	—			—
Other, net	(4		)	(2		)	(2		)
Loss before income taxes	(7		)	(2		)	(37		)
Benefit for income taxes	3			1			7
Loss from discontinued operations attributable to Meritor, Inc.	$	(4	)	$	(1	)	$	(30	)

Loss from discontinued operations attributable to the company for the twelve months ended September 30, 2016 was primarily attributable to a litigation settlement.

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

Prior Period Divestitures

Mascot

On August 15, 2014, the company completed its strategic review of certain remanufacturing product lines within the aftermarket business in North America, and the Board of Directors concluded the company should exit the Mascot business. Mascot is a remanufacturer and distributor of all makes differentials, transmissions and steering gears primarily for OEMs. In the fourth quarter of fiscal year 2014, the company disposed of its Mascot business which was part of the company's Aftermarket & Trailer segment. The company sold certain long-lived and current assets of the business to a third party and recognized a loss of $23 million during the fourth quarter of fiscal year 2014 in connection with the disposal. These charges included loss on sale, severance and other disposal costs. Total sales from this business were $1 million in fiscal year 2015 and $29 million in fiscal year 2014.

The results of operations and cash flows of the company's Mascot business are presented in discontinued operations in the consolidated statements of operations and consolidated statement of cash flows.

Body Systems

On January 3, 2011, the company completed the sale of its Body Systems business to Inteva Products Holding Coöperatieve U.A., an assignee of 81 Acquisition LLC and an affiliate of Inteva Products, LLC pursuant to the sale agreement signed in August 2010. The purchase price included a five-year, 8-percent promissory note for $15 million, payable in five annual installments beginning in January 2012 and is included in receivables, trade and other, net in the consolidated balance sheet. The notes receivable balance as of September 30, 2016 and September 30, 2015 was $0 million and $3 million, respectively.

MSSC

In October, 2009, the company closed on the sale of its 57 percent interest in MSSC, a joint venture that manufactured and supplied automotive coil springs, torsion bars and stabilizer bars in North America, to the joint venture partner, a subsidiary of Mitsubishi Steel Mfg. Co., LTD (MSM). In connection with the sale of its interest in MSSC, the company provided certain indemnifications 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. The company’s estimated exposure under these indemnities at September 30, 2016 and September 30, 2015 was $1 million and $2 million, respectively, and is included in other liabilities in the consolidated balance sheet. Adjustments to amounts previously reported in discontinued operations that are related to the disposal of the company’s MSSC business are reflected in discontinued operations for all periods presented.

European Trailer

In the second quarter of fiscal year 2011, the company announced the planned closure of its European Trailer business which was part of the company’s Aftermarket & Trailer segment. All manufacturing operations and use of productive assets ceased prior to September 30, 2011. In the fourth quarter of fiscal year 2014, the company recognized a $5 million charge, included in other, net, related to a specific product warranty matter.

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GOODWILL

12 Months Ended

Sep. 30, 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.

Annual Impairment Analysis

ASC Topic 350 allows entities to perform an initial qualitative evaluation to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The results of this qualitative assessment determine whether it is necessary to perform step one of the required two-step impairment test. As allowed by the revised guidance, the company has elected to bypass the qualitative assessment for fiscal year 2016 and proceed directly to the two-step impairment test.

Excluding the qualitative evaluation discussed above, the goodwill impairment review is a two-step process. Step one consists of a comparison of the fair value of a reporting unit with its carrying amount. An impairment loss may be recognized if the review indicates that the carrying value of a reporting unit exceeds its fair value. Estimates of fair value are primarily determined by using discounted cash flows and market multiples on earnings. If the carrying amount of a reporting unit exceeds its fair value, step two requires the fair value of the reporting unit to be allocated to the underlying assets and liabilities of that reporting unit, resulting in an implied fair value of goodwill. If the carrying amount of the goodwill of the reporting unit exceeds the implied fair value, an impairment charge is recorded equal to the excess.

The impairment review is highly judgmental and involves the use of significant estimates and assumptions. These estimates and assumptions have a significant impact on the amount of any impairment charge recorded. Discounted cash flow methods are dependent upon assumptions of future sales trends, market conditions and cash flows of each reporting unit over several years. Actual cash flows in the future may differ significantly from those previously forecasted.

Sales of the company’s primary military program wound down to insignificant levels in 2015. Additionally, the U.S. Army awarded a new contract for the production of the Joint Light Tactical Vehicle to Oshkosh for which the company is expected to supply wheel-ends. Revenue is expected to be significantly less than if the program had been awarded differently and the company was supplying its ProTec independent suspension. The company continues to work toward securing participation in additional military programs; however, based on sales expectations for currently awarded programs, the company's fair value of the Defense business did not exceed its carrying value. Since the fair value of the business did not exceed the implied fair value of its net assets without goodwill enough to support the full amount of goodwill, the company's Defense reporting unit, which is included in the Commercial Truck and Industrial segment, recorded a goodwill impairment of $15 million in the fourth quarter of 2015, which is the total accumulated impairment loss. The fair value of the other reporting units exceeded their carrying values. For fiscal year 2016, the fair value of all of the company’s reporting units exceeded their carrying values.

A summary of the changes in the carrying value of goodwill is presented below (in millions):

	Commercial Truck & Industrial			Aftermarket & Trailer			Total
Balance at September 30, 2014	$	261		$	170		$	431
Impairment	(15		)	—			(15		)
Foreign currency translation	(7		)	(7		)	(14		)
Balance at September 30, 2015	239			163			402
Impairment	—			—			—
Foreign currency translation	(9		)	(3		)	(12		)
Balance at September 30, 2016	$	230		$	160		$	390

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RESTRUCTURING COSTS

12 Months Ended

Sep. 30, 2016

Restructuring and Related Activities [Abstract]

RESTRUCTURING COSTS

RESTRUCTURING COSTS

At September 30, 2016 and 2015, $16 million and $10 million, respectively, of restructuring reserves primarily related to unpaid employee termination benefits remained in the consolidated balance sheet. Asset impairment charges relate to manufacturing facilities that have been sold and machinery and equipment that became idle and obsolete as a result of these actions.

The following table summarizes changes in restructuring reserves (in millions):

	Employee Termination Benefits			Asset Impairment			Plant Shutdown & Other		Total
Balance at September 30, 2013	$	12		$	—		$	—	$	12
Activity during the period:
Charges to continuing operations	10			—			—		10
Cash payments – continuing operations	(10		)	—			—		(10		)
Other	(1		)	—			—		(1		)
Balance at September 30, 2014	11			—			—		11
Activity during the period:
Charges to continuing operations	15			1			—		16
Asset write-offs	—			(1		)	—		(1		)
Cash payments – continuing operations	(16		)	—			—		(16		)
Balance at September 30, 2015	10			—			—		10
Activity during the period:
Charges to continuing operations	15			—			1		16
Cash payments – continuing operations	(11		)	—			—		(11		)
Other	1			—			—		1
Total restructuring reserves, end of year	15			—			1		16
Less: non-current restructuring reserves	(2		)	—			—		(2		)
Restructuring reserves – current, at September 30, 2016	$	13		$	—		$	1	$	14

Restructuring costs attributable to the company’s business segments during fiscal years 2016, 2015 and 2014 are as follows (in millions):

	Commercial Truck & Industrial		Aftermarket & Trailer		Corporate		Total
Fiscal year 2016:
Market related actions	$	5	$	1	$	2	$	8
Aftermarket actions	—		5		—		5
Other	1		2		—		3
Total restructuring costs	$	6	$	8	$	2	$	16
Fiscal year 2015:
South America labor reduction II	$	6	$	—	$	—	$	6
M2016 footprint actions	5		—		—		5
Closure of engineering facility	—		—		2		2
European labor reductions	2		—		—		2
Other	1		—		—		1
Total restructuring costs	$	14	$	—	$	2	$	16
Fiscal year 2014:
South America labor reduction I	$	7	$	—	$	—	$	7
Other	1		1		1		3
Total restructuring costs	$	8	$	1	$	1	$	10

Fourth Quarter 2016 Market Related Actions: In response to the decline in revenue in North America and South America, during the fourth quarter of fiscal year 2016, the company approved various headcount reduction plans targeting different areas of the business. The company expects to incur an aggregate of $10 million in restructuring costs associated with these plans, primarily related to a total reduction of approximately 100 salaried and hourly positions. During the fourth quarter of fiscal year 2016, the company incurred a total of $5 million in restructuring costs in the Commercial Truck & Industrial segment, $1 million in Aftermarket & Trailer segments and $2 million in their corporate locations. Restructuring actions with these plans are expected to be substantially complete by the first half of fiscal year 2017. 

Aftermarket Actions: During the third quarter of fiscal year 2016, the company approved various restructuring plans in the North American and European aftermarket businesses. The company expects to incur an aggregate of approximately $8 million in restructuring costs associated with these plans in the Aftermarket & Trailer segment primarily for severance. The company recorded $5 million of restructuring costs during the third quarter of fiscal year 2016. Restructuring actions associated with these plans are expected to be completed by the end of fiscal year 2017.  

Other Fiscal 2016 Actions: During the first half of fiscal year 2016, the company recorded restructuring costs of $3 million primarily associated with a labor reduction program in China in the Commercial Truck & Industrial segment and a labor reduction program in the Aftermarket and Trailer segment. Restructuring actions with these plans were substantially complete as of September 30, 2016.

M2016 Footprint Actions: As part of the company's M2016 Strategy, during fiscal year 2013 the company announced a North American footprint realignment action and a European shared services reorganization. Restructuring actions associated with these programs were substantially complete as of September 30, 2015. In total, the company eliminated approximately 140 hourly and salaried positions and incurred approximately $7 million of associated restructuring costs, primarily in the Commercial Truck & Industrial segment in connection with the consolidation of certain gearing and machining operations in North America and the closure of a North America manufacturing facility.

South America Labor Reduction: During fiscal years 2014 and 2015, the company completed a South America headcount reduction plan intended to reduce labor costs in response to softening economic conditions in the region. In response to decreasing production volumes in South America, the company eliminated approximately 420 hourly and 40 salaried positions and incurred $13 million of restructuring costs, primarily severance benefits, in the Commercial Truck & Industrial segment. This plan was substantially complete as of September 30, 2015.

Closure of a Corporate Engineering Facility: 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 $2 million associated with this plan. Restructuring actions associated with this program were substantially complete as of September 30, 2015.

European Labor Reductions: 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 fiscal year 2015. Restructuring actions associated with this program were substantially complete as of June 30, 2015.

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ACQUISITIONS

12 Months Ended

Sep. 30, 2016

Business Combinations [Abstract]

ACQUISITIONS

ACQUISITIONS

On July 9, 2015, the company purchased from Sypris Solutions, Inc. (“Sypris”), a supplier of axle shafts and trailer beams for Meritor and Sistemas Automotrices De Mexico S.A. de C.V., a joint venture that is 50%-owned by Meritor, the majority of the assets of Sypris’s Morganton, North Carolina manufacturing facility for $16 million cash consideration. The fair value of the net assets acquired was $16 million, which consisted mainly of property, plant and equipment. Of the equipment acquired, $2 million was classified as held for sale at the acquisition date and was recorded in net property as of September 30, 2015.  The revenue and earnings of the combined entity as though the business combination had occurred as of the beginning of the comparable prior annual reporting period was insignificant to the consolidated financial statements as the majority of sales were eliminated upon consolidation.

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ACCOUNTS RECEIVABLE FACTORING AND SECURITIZATION

12 Months Ended

Sep. 30, 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 from AB Volvo through one of its European subsidiaries. On October 14, 2016, Meritor extended this Swedish factoring facility with Nordea Bank until December 9, 2016. All other terms of the agreement remain unchanged. Under this arrangement, the company can sell up to, at any point in time, €155 million ($174 million) of eligible trade receivables. 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 consolidated balance sheet. The company had utilized €121 million ($135 million) and €108 million ($121 million) of this accounts receivable factoring facility as of September 30, 2016 and 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 was set to expire February 28, 2016. Under this arrangement, which terminates on February 19, 2019, the company can sell up to, at any point in time, €80 million ($90 million) of eligible trade receivables from AB Volvo and its U.S. subsidiaries through one of the company's U.S. subsidiaries. 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 €39 million ($44 million) and €74 million ($83 million) of this accounts receivable factoring facility as of September 30, 2016 and 2015, respectively. As of September 30, 2015, the company had utilized more than the committed eligible trade receivable amount of €65 million ($73 million) then in effect based on approval from the bank.

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 consolidated balance sheet. The company had utilized €6 million ($6 million) and €8 million ($8 million) of this accounts receivable factoring facility as of September 30, 2016 and 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 consolidated balance sheet. The company had utilized €22 million ($24 million) and €22 million ($24 million) of this accounts receivable factoring facility as of September 30, 2016 and 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 $10 million and $18 million at September 30, 2016 and 2015, respectively.

Total costs associated with all of the off-balance sheet arrangements described above were $5 million, $6 million and $8 million in fiscal years 2016, 2015 and 2014, respectively, and are included in selling, general and administrative expenses in the condensed consolidated statement 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 U.S. securitization facility at 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 consolidated balance sheet. At September 30, 2016 and 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 in amounts exceeding the amounts shown as outstanding at fiscal year ends.

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GAIN ON SALE OF PROPERTY AND OTHER OPERATING EXPENSE, NET

12 Months Ended

Sep. 30, 2016

Other Income and Expenses [Abstract]

GAIN ON SALE OF PROPERTY AND OTHER OPERATING EXPENSE, NET

GAIN ON SALE OF PROPERTY AND OTHER OPERATING EXPENSE, NET

The company recognized a gain on sale of property of $3 million during fiscal year 2015. This gain is associated with the sale of excess land at the company's facility at Cwmbran, Wales.

Other operating expense, net for fiscal years 2016 and 2014 primarily relates to environmental remediation costs incurred by the company (see Note 23).

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INVENTORIES

12 Months Ended

Sep. 30, 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):

	September 30,
	2016		2015
Finished goods	$	125	$	133
Work in process	26		28
Raw materials, parts and supplies	165		177
Total	$	316	$	338

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OTHER CURRENT ASSETS

12 Months Ended

Sep. 30, 2016

Other Current Assets Disclosure [Abstract]

OTHER CURRENT ASSETS

OTHER CURRENT ASSETS

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

	September 30,
	2016		2015
Current deferred income tax assets (see Note 22)	$	—	$	20
Asbestos-related recoveries (see Note 23)	10		13
Prepaid and other	23		17
Other current assets	$	33	$	50

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NET PROPERTY

12 Months Ended

Sep. 30, 2016

Property, Plant and Equipment [Abstract]

NET PROPERTY

NET PROPERTY

Property is stated at cost. Depreciation of property is based on estimated useful lives, generally using the straight-line method. Estimated useful lives for buildings and improvements range from 10 to 50 years and estimated useful lives for machinery and equipment range from 3 to 20 years. Significant improvements are capitalized, and disposed or replaced property is written off. Maintenance and repairs are charged to expense in the period they are incurred. Company-owned tooling is classified as property and depreciated over the shorter of its expected life or the life of the production contract, generally not to exceed three years.

In accordance with the FASB guidance on property, plant and equipment, the company reviews the carrying value of long-lived assets, excluding goodwill, to be held and used, for impairment whenever events or changes in circumstances indicate a possible impairment. An impairment loss is recognized when a long-lived asset’s carrying value is not recoverable and exceeds estimated fair value.

In the fourth quarter of fiscal year 2015, the U.S. Army awarded a new contract for the production of the Joint Light Tactical Vehicle (JLTV) to Oshkosh, for which the company is expected to supply wheel-ends. However, the company made certain capital investments and commitments to supply its ProTec Independent Suspension had the JLTV program been awarded differently. As a result, the company recorded an impairment of $2 million of long-lived assets in the fourth quarter of fiscal year 2015.

Net property is summarized as follows (in millions):

	September 30,
	2016			2015
Property at cost:
Land and land improvements	$	30		$	31
Buildings	231			214
Machinery and equipment	839			864
Company-owned tooling	113			116
Construction in progress	56			62
Total	1,269			1,287
Less: accumulated depreciation	(830		)	(868		)
Net property	$	439		$	419

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OTHER ASSETS

12 Months Ended

Sep. 30, 2016

Other Assets, Noncurrent [Abstract]

OTHER ASSETS

OTHER ASSETS

Other assets are summarized as follows (in millions):

	September 30,
	2016		2015
Investments in non-consolidated joint ventures (see Note 13)	$	100	$	96
Asbestos-related recoveries (see Note 23)	49		42
Unamortized revolver debt issuance costs (see Note 16)	7		10
Capitalized software costs, net (1)	29		28
Non-current deferred income tax assets (see Note 22)	413		28
Assets for uncertain tax positions (see Note 22)	35		3
Prepaid pension costs (see Note 21)	123		110
Other	4		15
Other assets	$	760	$	332

(1) 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.

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INVESTMENTS IN NON-CONSOLIDATED JOINT VENTURES

12 Months Ended

Sep. 30, 2016

Equity Method Investments and Joint Ventures [Abstract]

INVESTMENTS IN NON-CONSOLIDATED JOINT VENTURES

INVESTMENTS IN NON-CONSOLIDATED JOINT VENTURES

The company’s non-consolidated joint ventures and related direct ownership interest are as follows:

	September 30,
	2016		2015		2014
Meritor WABCO Vehicle Control Systems (Commercial Truck & Industrial)	50	%	50	%	50	%
Master Sistemas Automotivos Ltda. (Commercial Truck & Industrial)	49	%	49	%	49	%
Sistemas Automotrices de Mexico S.A. de C.V. (Commercial Truck & Industrial)	50	%	50	%	50	%
Ege Fren Sanayii ve Ticaret A.S. (Commercial Truck & Industrial)	49	%	49	%	49	%
Automotive Axles Limited (Commercial Truck & Industrial)	36	%	36	%	36	%
ZF Meritor LLC (Commercial Truck & Industrial)	—	%	—	%	50	%

In June 2014, ZF Meritor LLC, a joint venture between ZF Friedrichshafen AG and the company's subsidiary, Meritor Transmission LLC, entered into a settlement agreement with Eaton Corporation relating to an antitrust lawsuit filed by ZF Meritor in 2006. Pursuant to the terms of the settlement agreement, Eaton agreed to pay $500 million to ZF Meritor. In July 2014, ZF Meritor received proceeds of $400 million, net of attorney's contingency fees. In July 2014, the company received proceeds of $210 million representing its share based on the company's ownership interest in ZF Meritor and including a recovery of current and prior years' attorney expenses paid by Meritor. ZF Meritor and Meritor Transmission agreed to dismiss all pending antitrust litigation with Eaton. ZF Meritor did not have any operating activities and was dissolved in fiscal year 2015.

The company's pre-tax share of the settlement was $210 million ($209 million after-tax), of which $190 million was recognized as equity in earnings of ZF Meritor, and $20 million for the recovery of legal expenses from ZF Meritor was recognized as a reduction of selling, general and administrative expenses ("SG&A") in the consolidated statement of operations. The company recognized the recovery in SG&A as the historical incurrence of these costs was included in SG&A in the consolidated statement of operations in prior periods.

The company’s investments in non-consolidated joint ventures are as follows (in millions): 

	September 30,
	2016		2015
Commercial Truck & Industrial	$	100	$	96
Aftermarket & Trailer	—		—
Total investments in non-consolidated joint ventures	$	100	$	96

The company’s equity in earnings of non-consolidated joint ventures is as follows (in millions): 

	Year Ended September 30,
	2016		2015		2014
Commercial Truck & Industrial	$	36	$	39	$	38
Aftermarket & Trailer	—		—		—
Total equity in earnings of affiliates	$	36	$	39	$	38

The summarized financial information presented below represents the combined accounts of the company’s non-consolidated joint ventures related to its continuing operations (in millions):

	September 30,
	2016		2015
Current assets	$	337	$	393
Non-current assets	151		140
Total assets	$	488	$	533
Current liabilities	$	192	$	239
Non-current liabilities	103		111
Total liabilities	$	295	$	350

	Year Ended September 30,
	2016		2015		2014
Sales	$	1,101	$	1,288	$	1,268
Gross profit	165		187		167
Net income	73		83		458

Dividends received from the company’s non-consolidated joint ventures were $37 million in fiscal year 2016, $32 million in fiscal year 2015 and $36 million in fiscal year 2014.

The company had sales to its non-consolidated joint ventures of approximately $9 million, $5 million and $3 million in fiscal years 2016, 2015 and 2014, respectively. These sales exclude sales of $124 million, $135 million and $141 million in fiscal years 2016, 2015 and 2014, respectively, to a joint venture in the company’s Commercial Truck & Industrial segment, which are eliminated as the company purchases these components back after value add provided by the joint venture. The company had purchases from its non-consolidated joint ventures of approximately $753 million, $855 million and $760 million in fiscal years 2016, 2015 and 2014, respectively. Additionally, the company leases space and provides certain administrative and technical services to various non-consolidated joint ventures. The company collected $12 million, $9 million and $5 million for such leases and services during fiscal years 2016, 2015 and 2014, respectively.

Amounts due from the company’s non-consolidated joint ventures were $22 million and $35 million at September 30, 2016 and 2015, respectively, and are included in Receivables, trade and other, net in the consolidated balance sheet. Amounts due to the company’s non-consolidated joint ventures were $84 million and $107 million at September 30, 2016 and 2015, respectively, and are included in Accounts payable in the consolidated balance sheet.

The fair value of the company’s investment in its Automotive Axles Limited joint venture was approximately $59 million and $57 million at September 30, 2016 and 2015, respectively, based on quoted market prices as this joint venture is listed and publicly traded on the Bombay Stock Exchange in India.

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 September 30, 2016 and 2015, the company’s investment in the joint venture was $45 million and $42 million, respectively, representing the company’s maximum exposure to loss. This amount is included in investments in non-consolidated joint ventures (see Note 12).

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OTHER CURRENT LIABILITIES

12 Months Ended

Sep. 30, 2016

Other Current Liabilities Disclosure [Abstract]

OTHER CURRENT LIABILITIES

OTHER CURRENT LIABILITIES

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

	September 30,
	2016		2015
Compensation and benefits	$	115	$	122
Income taxes	8		9
Taxes other than income taxes	21		23
Accrued interest	14		14
Product warranties	18		22
Restructuring (see Note 5)	14		7
Asbestos-related liabilities (see Note 23)	18		17
Indemnity obligations (see Note 23)	2		2
Other	58		63
Other current liabilities	$	268	$	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 relationship 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):

	September 30,
	2016			2015			2014
Total product warranties – beginning of year	$	48		$	51		$	57
Accruals for product warranties	10			15			22
Payments	(14		)	(18		)	(22		)
Change in estimates and other	—			—			(6		)
Total product warranties – end of year	44			48			51
Less: non-current product warranties (see Note 15)	(26		)	(26		)	(24		)
Product warranties – current	$	18		$	22		$	27

XML

OTHER LIABILITIES

12 Months Ended

Sep. 30, 2016

Other Liabilities Disclosure [Abstract]

OTHER LIABILITIES

OTHER LIABILITIES

Other liabilities are summarized as follows (in millions):

	September 30,
	2016		2015
Asbestos-related liabilities (see Note 23)	$	136	$	109
Restructuring (see Note 5)	2		3
Non-current deferred income tax liabilities (see Note 22)	12		99
Liabilities for uncertain tax positions (see Note 22)	16		15
Product warranties (see Note 14)	26		26
Environmental (see Note 23)	6		8
Indemnity obligations (see Note 23)	11		13
Other	29		32
Other liabilities	$	238	$	305

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LONG-TERM DEBT

12 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

LONG-TERM DEBT

LONG-TERM DEBT

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

	September 30,
	2016			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)	129			127
6.75 percent notes due 2021(3)(6)	271			270
6.25 percent notes due 2024(3)(7)	442			442
Capital lease obligation	16			17
Export financing arrangements and other	10			18
Unamortized discount on convertible notes (8)	(14		)	(20		)
Subtotal	996			1,051
Less: current maturities	(14		)	(15		)
Long-term debt	$	982		$	1,036

⁽¹⁾ The 4.625 percent convertible notes contained a put and call feature, which allowed for earlier redemption beginning in 2016. As of June 30, 2016 all of these notes were redeemed.

⁽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 millionunamortized issuance costs as of September 30, 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 September 30, 2016 and September 30, 2015, respectively, and$9 millionand$10 million original issuance discount as of September 30, 2016 and September 30, 2015.

⁽⁶⁾ The 6.75 percent notes due 2021 are presented net of $4 million and $5 million unamortized issuance costs as of September 30, 2016 and September 30, 2015.

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

⁽⁸⁾ The carrying amount of the equity component related to convertible debt.

Revolving Credit Facility

On June 2, 2016, the company entered into a third amendment of its senior secured revolving credit facility. The amendment increased the 2019 revolving loan commitment to $466 million, permits the company to execute certain internal restructuring plans, including the release of certain guarantors when required by such plans, and reset covenant basket amounts. Pricing and maturity dates remained unchanged. Subsequent to the amendment, certain lenders converted their $32 million 2017 revolving loan commitments to 2019 revolving loan commitments and are now subject to the terms of 2019 lenders. Pursuant to the revolving credit agreement, the company now has a $506 million revolving credit facility, $8 million of which matures in April 2017 for banks not electing to extend their commitments under the revolving credit facility, and $498 million of which matures 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 September 30, 2016, the revolving credit facility was collateralized by approximately $693 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 September 30, 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 27).

No borrowings were outstanding under the revolving credit facility at September 30, 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 September 30, 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.

Issuance of Debt Securities - 2024 Notes

On February 13, 2014, the company 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 offering and sale were made pursuant to the company's February 2012 shelf registration statement. The Initial 2024 Notes were issued under the company's indenture dated as of April 1, 1998, as supplemented. The Initial 2024 Notes were issued at 100 percent of their principal amount. The proceeds from the sale of the Initial 2024 Notes were $225 million and, together with cash on hand, were primarily used to repurchase $250 million principal amount of the company’s previously outstanding 10.625 percent notes due 2018.

On June 11, 2015, the company completed a public offering of an additional $225 million aggregate principal amount of 6.25 percent notes due 2024 (the "Additional 2024 Notes"), in an underwritten public offering pursuant to the company's December 2014 shelf registration statement. 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 the company's 7.875 percent convertible notes due 2026 (the "7.875 convertible notes"). The company used the remaining net proceeds to purchase an annuity to satisfy its obligations under the Canadian and German pension plans for its employees and for general corporate purposes. The Additional 2024 Notes constitute a further issuance of, and are fungible with, the $225 million aggregate principal amount of Initial 2024 Notes that the company 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 bear interest at a fixed rate of 6.25 percent per annum. The company pays interest on the 2024 Notes semi-annually, in arrears, on February 15 and August 15 of each year. The 2024 Notes constitute senior unsecured obligations of the company and rank equally in right of payment with existing and future senior unsecured indebtedness and effectively junior to existing and future secured indebtedness. The 2024 Notes are guaranteed on a senior unsecured basis by each of the company's subsidiaries from time to time guaranteeing its senior secured credit facility. The guarantees rank equally with existing and future senior unsecured indebtedness of the guarantors and will be effectively subordinated to all of the existing and future secured indebtedness of the guarantors, to the extent of the value of the assets securing such indebtedness.

Prior to February 15, 2019, the company may redeem, at its option, from time to time, the 2024 Notes, in whole or in part, at a redemption price equal to 100 percent of the principal amount of the 2024 Notes to be redeemed, plus an applicable make-whole premium (as defined in the indenture under which the 2024 Notes were issued) and any accrued and unpaid interest. On or after February 15, 2019, the company may redeem, at its option, from time to time, the 2024 Notes, in whole or in part, at the redemption prices (expressed as percentages of the principal amount of the 2024 Notes to be redeemed) set forth below, plus accrued and unpaid interest, if any, if redeemed during the 12-month period beginning on February 15 of the years indicated below:

Year	Redemption Price
2019	103.125%
2020	102.083%
2021	101.042%
2022 and thereafter	100.000%

Prior to February 15, 2017, the company may redeem, at its option, from time to time, up to approximately $79 million aggregate principal amount of the 2024 Notes with the net cash proceeds of one or more public sales of the company's 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 remain outstanding after each such redemption and notice of any such redemption is mailed within 90 days of any such sale of common stock.

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

Issuance of Debt Securities - 2021 Notes

On May 31, 2013, the company completed an 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 offering and sale were made pursuant to the company's shelf registration statement that was effective at the time of the offering. The 2021 Notes were issued under the company's indenture dated as of April 1, 1998, as supplemented. The 2021 Notes were issued at 100 percent of their principal amount. The proceeds from the sale of the 2021 Notes were $275 million and were primarily used to complete a cash tender offer for $167 million of the 8.125 percent notes due 2015.

The 2021 Notes bear interest at a fixed rate of 6.75 percent per annum. The company pays interest on the 2021 Notes semi-annually, in arrears, on June 15 and December 15 of each year. The 2021 Notes constitute senior unsecured obligations of the company and rank equally in right of payment with existing and future senior unsecured indebtedness and effectively junior to existing and future secured indebtedness to the extent of the security therefor. The 2021 Notes are guaranteed on a senior unsecured basis by each of the company's subsidiaries from time to time guaranteeing its senior secured credit facility. The guarantees rank equally with existing and future senior unsecured indebtedness of the guarantors and will be effectively subordinated to all of the existing and future secured indebtedness of the guarantors, to the extent of the value of the assets securing such indebtedness.

Prior to June 15, 2016, the company may redeem, at its option, from time to time, the 2021 Notes, in whole or in part, at a redemption price equal to the 100 percent of the principal amount of the 2021 Notes to be redeemed plus an applicable make-whole premium (as defined in the indenture under which the 2021 Notes were issued) and any accrued and unpaid interest. On or after June 15, 2016, the company may redeem, at its option, from time to time, the 2021 Notes, in whole or in part, at the redemption prices (expressed as percentages of the principal amount of the 2021 Notes to be redeemed) set forth below, plus accrued and unpaid interest, if any, if redeemed during the 12-month period beginning on June 15 of the years indicated below:

Year	Redemption Price
2016	105.063%
2017	103.375%
2018	101.688%
2019 and thereafter	100.000%

Prior to June 15, 2016, the company also may redeem, at its option, from time to time, up to 35 percent of the aggregate principal amount of the 2021 Notes with the net cash proceeds of one or more public sales of the company's common stock at a redemption price equal to 106.75 percent of the principal amount, plus accrued and unpaid interest, if any, so long as at least 65 percent the aggregate principal amount of 2021 Notes originally issued remains outstanding after each such redemption and notice of any such redemption is mailed within 90 days of any such sale of common stock.

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 2021 Notes, each holder of 2021 Notes may require the company to repurchase some or all of such holder's 2021 Notes at a purchase price equal to 101 percent of the principal amount of the 2021 Notes to be repurchased, plus accrued and unpaid interest, if any.

Repurchase of Debt Securities

In fiscal year 2014, the company repurchased $38 million principal amount of its 4.0 percent convertible notes due 2027. The notes were repurchased at a premium equal to 7 percent of their principal amount. The repurchase of $38 million principal amount of 4.0 percent convertible notes was accounted for as an extinguishment of debt, and accordingly, the company recognized a net loss on debt extinguishment of $5 million, the majority of which is premium. The net loss on debt extinguishment is included in Interest expense, net in the consolidated statement of operations.

On September 20, 2014, the company completed the redemption of its outstanding 8.125 percent notes due 2015. The notes were redeemed at a premium equal to 7 percent of their principal amount. The repurchase of $84 million principal amount of 8.125 percent notes was accounted for as an extinguishment of debt, and accordingly, the company recognized a net loss on debt extinguishment of $5 million consisting of $6 million of premium net of $1 million acceleration of the remaining unamortized gain on a related interest rate swap termination. The net loss on debt extinguishment is included in Interest expense, net in the consolidated statement of operations.

On March 15, 2014, the company completed the redemption of its 10.625 percent notes due 2018. The notes were redeemed at a premium equal to approximately 5 percent of their principal amount. The repurchase of $250 million principal amount of 10.625 percent notes was accounted for as an extinguishment of debt, and accordingly, the company recognized a net loss on debt extinguishment of $19 million, which consisted of $6 million of unamortized discount and deferred issuance costs and $13 million of premium. The net loss on debt extinguishment is included in Interest expense, net in the consolidated statement of operations.

In fiscal year 2015, the company repurchased $110 million principal amount at maturity of the company's 7.875 percent convertible notes, of which $85 million were repurchased at a premium equal to approximately 64 percent of their principal amount in the third quarter of 2015, and $25 million were purchased at a premium equal to approximately 58 percent of their principal amount in the fourth quarter of 2015. The 7.875 percent convertible notes contain a conversion to equity feature which can be settled in cash upon conversion. Accordingly, the liability and equity components are required to be separately accounted for upon recognition. Subsequently, upon derecognition of the convertible notes, the total cash consideration paid by the company is required to be allocated between the extinguishment of the liability component and the reacquisition of the equity component. Of the fiscal year 2015 total cash consideration of $179 million paid, $121 million and $58 million were allocated between the liability and equity components, respectively. The repurchase of $110 million principal amount at maturity of the company's 7.875 percent convertible notes was accounted for as an extinguishment of debt, and accordingly, the company recognized a net loss on debt extinguishment of $24 million, which consisted of $14 million of unamortized discount and deferred issuance costs and $10 million of premium. The net loss on debt extinguishment was included in Interest expense, net in the consolidated statement of operations. The repurchase was made under the company's 2026 convertible notes repurchase authorization.

In fiscal year 2015, the company repurchased $19 million principal amount of the company's 4.0 percent convertible notes. In the second quarter of fiscal year 2015, $15 million of the notes were repurchased at a premium equal to approximately 6 percent of their principal amount. In the third quarter of fiscal year 2015, $4 million of the notes were repurchased at a premium equal to approximately 5 percent of their principal amount. The repurchase of $19 million of 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 was premium. The net loss on debt extinguishment was included in Interest expense, net in the consolidated statement of operations.

On March 1, 2016, substantially all $55 million outstanding principal amount of the company's 4.625 percent convertible notes were repurchased at 100 percent of the face value of the notes. On April 15, 2016, the remaining 4.625 percent convertible notes were redeemed at 100 percent of the face value. As of September 30, 2016 none of the 4.625 percent convertible notes were outstanding. The repurchases were made under the company's equity and equity linked repurchase authorizations (see Note 18). The repurchase program under these authorizations was complete as of September 30, 2016.

2013 Convertible Senior Unsecured Notes

In December 2012, the company issued $250 million principal amount of 7.875 percent convertible notes due 2026 (the "2013 convertible notes"). The 2013 convertible notes were sold by the company to qualified institutional buyers in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended. The 2013 convertible notes have an initial principal amount of $900 per note and will accrete to $1,000 per note on December 1, 2020 at an effective interest rate of 10.9 percent. Net proceeds received by the company, after issuance costs and discounts, were approximately $220 million.

The company pays 7.875 percent cash interest on the principal amount of the 2013 convertible notes semi-annually in arrears on June 1 and December 1 of each year to holders of record at the close of business on the preceding May 15 and November 15, respectively, and at maturity to the holders that present the 2013 convertible notes for payment. Interest accrues on the principal amount thereof from and including the date the 2013 convertible notes were issued or from, and including, the last date in respect of which interest has been paid or provided for, as the case may be, to, but excluding, the next interest payment date.

The 2013 convertible notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of the company's subsidiaries. The 2013 convertible notes are senior unsecured obligations and rank equally in right of payment with all of the company's existing and future senior unsecured indebtedness and are junior to any of the company's existing and future secured indebtedness.

The 2013 convertible notes will be convertible into cash up to the principal amount at maturity of the 2013 convertible note surrendered for conversion and, if applicable, shares of the company's common stock (subject to a conversion share cap as described below), based on an initial conversion rate, subject to adjustment, equivalent to 83.3333 shares per $1,000 principal amount at maturity of 2013 convertible notes (which represents an initial conversion price of $12.00 per share), only under the following circumstances:

• prior to June 1, 2025, during any calendar quarter after the calendar quarter ending December 31, 2012, if the closing sale price of the company's common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 120 percent of the applicable conversion price in effect on the last trading day of the immediately preceding calendar quarter;

• prior to June 1, 2025, during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount at maturity of 2013 convertible notes was equal to or less than 97 percent of the conversion value of the 2013 convertible notes on each trading day during such five consecutive trading day period;

• prior to June 1, 2025, if the company has called the 2013 convertible notes for redemption;

• prior to June 1, 2025, upon the occurrence of specified corporate transactions; or

• at any time on or after June 1, 2025.

On or after December 1, 2020, the company may redeem the 2013 convertible notes at its option, in whole or in part, at a redemption price in cash equal to 100 percent of the principal amount at maturity of the 2013 convertible notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Further, holders may require the company to purchase all or a portion of their 2013 convertible notes at a purchase price in cash equal to 100 percent of the principal amount at maturity of the 2013 convertible notes to be purchased, plus accrued and unpaid interest, on December 1, 2020 or upon certain fundamental changes. The maximum number of shares of common stock into which the 2013 convertible notes are convertible is approximately 11 million shares.

The company used the net proceeds of approximately $220 million from the offering of the 2013 convertible notes (after discounts and issuance costs) and additional cash to acquire a portion of its outstanding 4.625 percent convertible senior notes due 2026 (the "4.625 percent convertible notes") in transactions that settled concurrently with the closing of the 2013 convertible note offering. Approximately $245 million of $300 million principal amount of the 4.625 percent convertible notes were repurchased for an aggregate purchase price of approximately $236 million (including accrued interest).

Accounting guidance requires that cash-settled convertible debt, such as the 2013 convertible notes, be separated into debt and equity components at issuance and a value be assigned to each. The value assigned to the debt component is the estimated fair value, as of the issuance date, of a similar bond without the conversion feature. The difference between the bond cash proceeds and this estimated fair value, representing the value assigned to the equity component, is recorded as a debt discount. The company measures the debt component at fair value by utilizing a discounted cash flow model. This model utilizes observable inputs such as contractual repayment terms, benchmark forward yield curves, yield curves and quoted market prices of its own nonconvertible debt. The yield curves are acquired from an independent source that is widely used in the financial industry and reviewed internally by personnel with appropriate expertise in valuation methodologies.

2027 Convertible Notes

In February 2007, the company issued $200 million principal amount of 4.00 percent convertible notes due 2027 (the "2027 convertible notes"). The 2027 convertible notes bear cash interest at a rate of 4.00 percent per annum from the date of issuance through February 15, 2019, payable semi-annually in arrears on February 15 and August 15 of each year. After February 15, 2019, the principal amount of the notes will be subject to accretion at a rate that provides holders with an aggregate annual yield to maturity of 4.00 percent.

The 2027 convertible notes are convertible into shares of the company’s common stock at an initial conversion rate, subject to adjustment, equivalent to 37.4111 shares of common stock per $1,000 initial principal amount of notes, which represents an initial conversion price of approximately $26.73 per share. If converted, the accreted principal amount will be settled in cash and the remainder of the company’s conversion obligation, if any, in excess of such accreted principal amount will be settled in cash, shares of common stock, or a combination thereof, at the company’s election. Holders may convert their 2027 convertible notes at any time on or after February 15, 2025. The maximum number of shares of common stock into which the 2027 convertible notes are convertible is approximately 5 million shares.

Prior to February 15, 2025, holders may convert their notes only under the following circumstances:

• during any calendar quarter, if the closing price of the company’s common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 120 percent of the applicable conversion price;

• during the five business day period after any five consecutive trading day period in which the average trading price per $1,000 initial principal amount of notes is equal to or less than 97 percent of the average conversion value of the notes during such five consecutive trading day period;

• upon the occurrence of specified corporate transactions; or

• if the notes are called by the company for redemption.

On or after February 15, 2019, the company may redeem the 2027 convertible notes, in whole or in part, for cash at a redemption price equal to 100 percent of the accreted principal amount plus any accrued and unpaid interest. On each of February 15, 2019 and 2022, or upon certain fundamental changes, holders may require the company to purchase all or a portion of their 2027 convertible notes at a purchase price in cash equal to 100 percent of the accreted principal amount plus any accrued and unpaid interest.

The 2027 convertible notes are fully and unconditionally guaranteed by certain subsidiaries of the company that currently guarantee the company’s obligations under its senior secured credit facility and other publicly held notes (see Revolving Credit Facility above).

Accounting guidance requires that cash-settled convertible debt, such as the 2027 convertible notes, be separated into debt and equity components at issuance and a value be assigned to each. The value assigned to the debt component is the estimated fair value, as of the issuance date, of a similar bond without the conversion feature. The difference between the bond cash proceeds and this estimated fair value, representing the value assigned to the equity component, is recorded as a debt discount. The company measures the debt component at fair value by utilizing a discounted cash flow model. This model utilizes observable inputs such as contractual repayment terms, benchmark forward yield curves, yield curves and quoted market prices of its own nonconvertible debt. The yield curves are acquired from an independent source that is widely used in the financial industry and reviewed internally by personnel with appropriate expertise in valuation methodologies.

The following table summarizes the principal amounts and related unamortized discount on all convertible notes (in millions):

	September 30, 2016			September 30, 2015
Principal amount of convertible notes	$	283		$	338
Unamortized discount on convertible notes	(23		)	(30		)
Net carrying value	$	260		$	308

The following table summarizes other information related to the convertible notes:

	Convertible Notes
		2027		2013
Total amortization period for debt discount (in years):		12		8
Remaining amortization period for debt discount (in years):		3		4
Effective interest rates on convertible notes:		7.7	%	10.9	%

The following table summarizes interest costs recognized on convertible notes (in millions):

	Year Ended September 30,
	2016		2015		2014
Contractual interest coupon	$	18	$	26	$	30
Amortization of debt discount	8		8		9
Repurchase of convertible notes	—		24		5
Total	$	26	$	58	$	44

Debt Maturities

As of September 30, 2016, the company is contractually obligated to make payments as follows (in millions):

	Total		2017		2018		2019		2020		2021		Thereafter(2)
Total debt (1)	$	1,034	$	14	$	4	$	2	$	1	$	277	$	736

(1) Total debt excludes unamortized discount on convertible notes of $14 million, unamortized issuance costs of $15 million, and original issuance discount of $9 million.

(2) Includes the company's 4.0 percent and 7.875 percent convertible notes, which contain a put and call feature that allows for earlier redemption beginning in 2019 and 2020, respectively.

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 Wells Fargo Equipment Finance ("Wells Fargo"), which acquired the equipment financing business from GE Capital Commercial, Inc., 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 Wells Fargo 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 $7 million and $10 million outstanding under this capital lease arrangement as of September 30, 2016 and 2015, respectively. In addition, the company had another $9 million and $7 million outstanding through other capital lease arrangements at September 30, 2016 and 2015, respectively.

As of September 30, 2016, the future minimum lease payments for noncancelable capital leases with initial terms in excess of one year were as follows:

	Total			2017			2018			2019			2020			2021		Thereafter
Capital lease obligation	$	20		$	6		$	4		$	3		$	2		$	2	$	3
Less amounts representing interest	(4		)	(1		)	(1		)	(1		)	(1		)	—		—
Principal on capital lease	$	16		$	5		$	3		$	2		$	1		$	2	$	3

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. At September 30, 2016 and 2015, $23 million and $24 million of letters of credit were outstanding under this facility. In addition, the company had another $5 million and $6 million of letters of credit outstanding through other letter of credit facilities at September 30, 2016 and 2015, respectively.

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 were $9 million and $18 million outstanding under these arrangements at September 30, 2016 and 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 unpaid amount exceeds $35 million per bank. As of September 30, 2016 and 2015, the company had $10 million and $13 million, respectively, outstanding under this program at more than one bank.

Operating Leases

The company has various operating leasing arrangements. Future minimum lease payments under these operating leases are $16 million in 2017, $15 million in 2018, $15 million in 2019, $14 million in 2020, $11 million in 2021 and $26 million thereafter.

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FINANCIAL INSTRUMENTS

12 Months Ended

Sep. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

FINANCIAL INSTRUMENTS

FINANCIAL INSTRUMENTS

The company’s financial instruments include cash and cash equivalents, short-term debt, long-term debt, and foreign exchange forward and options contracts. The company uses derivatives for hedging and non-trading purposes in order to manage its foreign exchange rate exposures.

Foreign Exchange Contracts

As a result of the company’s substantial international operations, it is exposed to foreign currency risks that arise from normal business operations, including in connection with transactions that are denominated in foreign currencies. In addition, the company translates sales and financial results denominated in foreign currencies into U.S. dollars for purposes of its consolidated financial statements. As a result, appreciation of the U.S. dollar against these foreign currencies generally will have a negative impact on 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. For fiscal years 2016, 2015 and 2014, the company's reported financial results were adversely affected by appreciation of the U.S. dollar against foreign currencies relative to the prior years.

The company has a foreign currency cash flow hedging program to reduce the company’s exposure to changes in exchange rates on foreign currency purchases and sales. The company uses foreign currency forward contracts to manage the company’s exposures arising from foreign currency exchange risk. Gains and losses on the underlying foreign currency exposures are partially offset with gains and losses on the foreign currency forward contracts. Under this foreign currency cash flow hedging program, the company has designated the foreign exchange 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 consolidated balance sheet and is recognized in operating income when the underlying forecasted transaction impacts earnings. The terms of the foreign exchange contracts generally require the company to place cash on deposit as collateral if the fair value of these contracts represents a liability for the company. The fair values of the foreign exchange derivative instruments and any related collateral cash deposits are presented on a net basis as the derivative contracts are subject to master netting arrangements.

At September 30, 2016, 2015 and 2014, the notional amount of the company's foreign exchange contracts outstanding under its foreign currency cash flow hedging program were $190 million, $137 million, and $47 million respectively. The company classifies the cash flows associated with the contracts in cash flows from operating activities in the consolidated statement of cash flows. This is consistent with the classification of the cash flows associated with the underlying hedged item.

From time to time the company hedges against foreign currency exposure related to translations to U.S. dollars of financial results denominated in foreign currencies. Changes in fair value associated with these contracts are recorded in other income, net, in the consolidated statement of operations. The company also uses option contracts to mitigate foreign currency exposure on expected future Indian Rupee-denominated purchases. Changes in fair value associated with these contracts are recorded in cost of sales in the consolidated statement of operations.

The following table summarizes the impact of the company’s derivatives instruments on comprehensive income for fiscal years ended September 30 (in millions): 

	Location of Gain (Loss)	2016			2015		2014
Derivatives designated as hedging instruments:
Amount of gain (loss) recognized in AOCL (effective portion)	AOCL	$	(3	)	$	3	$	3
Amount of gain (loss) reclassified from AOCL into income (effective portion)	Cost of Sales	(4		)	6		1
Derivatives not designated as hedging instruments: Amount of gain recognized in income	Cost of Sales	(1		)	2		—
Derivatives not designated as hedging instruments: Amount of gain recognized in income	Other Income (expense)	(1		)	2		—

Fair Value

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

	September 30, 2016				September 30, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	160	$	160	$	193	$	193
Short-term debt	14		14		15		15
Long-term debt	982		1,051		1,036		1,123
Foreign exchange forward contracts (other assets)	1		1		1		1
Foreign exchange forward contracts (other liabilities)	2		2		3		3
Short-term foreign currency option contracts (other assets)	—		—		1		1
Long-term foreign currency option contracts (other assets)	2		2		1		1

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

	September 30, 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	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 September 30, 2016 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash equivalents	$	160	$	—	$	—
Short-term debt	—		—		14
Long-term debt	—		1,040		11
Foreign exchange forward contracts (asset)	—		1		—
Foreign exchange forward contracts (liability)	—		2		—
Short-term foreign currency option contracts (asset)	—		—		—
Long-term foreign currency option contracts (asset)	—		—		2

Fair value of financial instruments by the valuation hierarchy at September 30, 2015 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash equivalents	$	193	$	—	$	—
Short-term debt	—		—		15
Long-term debt	—		1,102		21
Foreign exchange forward contracts (asset)	—		1		—
Foreign exchange forward contracts (liability)	—		3		—
Short-term foreign currency option contracts (asset)	—		—		1
Long-term foreign currency option contracts (asset)	—		—		1

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 consolidated balance sheet for the twelve months ended September 30, 2016 and September 30, 2015, respectively. No transfers of assets between any of the Levels occurred during these periods.

Twelve months ended September 30, 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, net	(2		)	—			(2		)
Included in cost of sales	—			(1		)	(1		)
Total realized gains (losses):
Included in other income, net	—			—			—
Included in cost of sales	—			—			—
Purchases, issuances, sales and settlements:
Purchases	1			—			1
Settlements	—			2			2
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	—			—			—
Fair Value as of September 30, 2016	$	—		$	2		$	2

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

Twelve months ended September 30, 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 unrealized gains (losses):
Included in other income, net	(1		)	—			(1		)
Included in cost of sales	(1		)	—			(1		)
Total realized gains (losses):
Included in other income, net	2			—			2
Included in cost of sales	3			—			3
Purchases, issuances, sales and settlements:
Purchases	6			—			6
Settlements	(10		)	(1		)	(11		)
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	—			1			1
Fair Value as of September 30, 2015	$	1		$	1		$	2

⁽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 September 30, 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 16 months 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 cash flow hedges, the effective portion of changes in the fair value of the contracts is recorded in Accumulated Other Comprehensive Loss in the statement of shareholders’ equity and is recognized in operating income when the underlying forecasted transaction impacts earnings.

Foreign currency option contracts — The company uses option contracts to mitigate foreign currency exposure on expected future Indian Rupee-denominated purchases. In the second quarter of fiscal year 2015, the company entered into a new series of foreign currency option contracts with effective dates from the start of third quarter of fiscal year 2015 through the end of fiscal year 2017. In the fourth quarter of fiscal year 2016, the company entered into a new series of foreign currency option contracts with effective dates from the start of the first quarter of fiscal year 2017 through the end of fiscal year 2018. At September 30, 2016, the notional amount of the company's Indian Rupee foreign exchange contracts outstanding was $174 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. 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.

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 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. As of the end of fiscal year 2016, there are no Brazilian real foreign currency option contracts outstanding. 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 other income, net, in the consolidated statement of operations.

Also in 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 Swedish krona and euro earnings, to U.S. dollars. These foreign currency option contracts did not qualify for a hedge accounting election. As of the end of fiscal year 2016, there were no Swedish krona and euro foreign currency option contracts outstanding. 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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SHAREHOLDERS' EQUITY

12 Months Ended

Sep. 30, 2016

Equity [Abstract]

SHAREHOLDERS' EQUITY

SHAREHOLDERS’ EQUITY

Common Stock

The company is authorized to issue 500 million shares of common stock, with a par value of $1 per share, and 30 million shares of Preferred Stock, without par value, of which 2 million shares are designated as Series A Junior Participating Preferred Stock (Junior Preferred Stock). No shares of Preferred Stock or Junior Preferred Stock have been issued.

In the first quarter of fiscal year 2015, the company filed a shelf registration statement with the Securities and Exchange Commission, registering an unlimited amount of debt and/or equity securities that may be offered in one or more offerings on terms to be determined at the time of sale. 

The company has reserved approximately 10 million shares of common stock in connection with its 2010 Long-Term Incentive Plan, as amended ("LTIP") for grants of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, performance shares, restricted share units and stock awards to key employees and directors. At September 30, 2016, there were 2.9 million shares available for future grants the LTIP.

Repurchase Authorizations

On July 21, 2016, the Board of Directors authorized the repurchase of up to $100 million of the company’s common stock and up to $150 million aggregate principal amount of any of the company’s debt securities (including convertible debt securities), in each case from time to time through open market purchases, privately negotiated transactions or otherwise, until September 30, 2019, subject to compliance with legal and regulatory requirements and our debt covenants. This repurchase authorization superseded and replaced the January 2015 repurchase authorization described below. No repurchases were made under these authorizations during fiscal 2016.

In June 2014, the company's Board of Directors authorized the repurchase of up to $210 million of the company's 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. During fiscal year 2016, the company repurchased 8.7 million shares of common stock for $81 million (including commission costs) and all $55 million outstanding principal amount 4.625% convertible notes at 100 percent of the face value of the notes. In the aggregate, the company repurchased 12.8 million shares of common stock for $136 million (including commission costs), $19 million principal amount of its 4.0 percent convertible notes, and all of the $55 million outstanding principal amount 4.625% convertible notes at 100 percent of the face value of the notes. (see Note 18). The repurchase program under the $210 million authorization was complete as of September 30, 2016.

In January 2015, the Offering Committee of the company's Board of Directors authorized the repurchase of up to $150 million aggregate principal amount of any of the company's debt securities (including convertible debt securities). No repurchases were made under this authorization prior to its replacement with the authorization described above on July 21, 2016.

In May 2015, the Offering Committee of the company's Board of Directors authorized the repurchase of up to $175 million aggregate principal amount at maturity of the company’s 7.875 percent convertible notes, subject to compliance with legal and regulatory requirements and its debt covenants. This repurchase authorization expired on September 30, 2015. During fiscal year 2015, the company repurchased $110 million principal amount at maturity of the company's 7.875 percent convertible notes for $179 million (see Note 16) pursuant to this repurchase authorization.

Accumulated Other Comprehensive Loss (AOCL)

The components of AOCL as reported in the Consolidated Balance Sheet and Statement of Equity (Deficit), and the changes in AOCL by components, net of tax, 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	(12		)	(70		)	4			(78		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			35			—			35
Net current-period other comprehensive income (loss)	$	(12	)	$	(35	)	$	4		$	(43	)
Balance at September 30, 2016	$	(66	)	$	(740	)	$	(3	)	$	(809	)

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Amortization of prior service costs	$	(1	)	(a)
Amortization of actuarial losses	36			(a)
	35			Total before tax
	—			Tax (benefit) expense
	$	35		Net of tax
Total reclassifications for the period	$	35		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 and 21 for additional details), which is recorded in cost of sales and selling, general and administrative expenses

	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 (loss) before reclassification	(96		)	(18		)	(6		)	(120		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	1			102			—			103
Net current-period other comprehensive income (loss)	$	(95	)	$	84		$	(6	)	$	(17	)
Balance at September 30, 2015	$	(54	)	$	(705	)	$	(7	)	$	(766	)

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Amortization of prior service costs	$	(1	)	(a)
Amortization of actuarial losses	47			(a)
Recognized prior service costs due to settlement	56			(a)
	102			Total before tax
	—			Tax (benefit) expense
	$	102		Net of tax
Employee Benefit Related Adjustment
Other reclassification adjustment	$	1		(b)
	1			Total before tax
	—			Tax (benefit) expense
	$	1		Net of tax
Total reclassifications for the period	$	103		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 and 21 for additional details).
(b)  These accumulated other comprehensive income components are included in the computation of loss from discontinued operations (see Note 3).

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at September 30, 2013	$	61		$	(792	)	$	(3	)	$	(734	)
Other comprehensive income (loss) before reclassification	(20		)	(21		)	2			(39		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			24			—			24
Net current-period other comprehensive income (loss)	$	(20	)	$	3		$	2		$	(15	)
Balance at September 30, 2014	$	41		$	(789	)	$	(1	)	$	(749	)

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Amortization of prior service costs	$	(7	)	(a)
Amortization of actuarial losses	46			(a)
Recognized prior service costs due to curtailment	(15		)	(a)
	24			Total before tax
	—			Tax (benefit) expense
	$	24		Net of tax
Total reclassifications for the period	$	24		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 and 21 for additional details).

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EQUITY BASED COMPENSATION

12 Months Ended

Sep. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

EQUITY BASED COMPENSATION

EQUITY BASED COMPENSATION

Stock Options

Under the company’s incentive plans, stock options are typically granted at prices equal to the fair value on the grant date and have a maximum term of 10 years. Stock options generally vest over a three-year period from the grant date. No stock options were granted or exercised during fiscal years 2016, 2015 and 2014.

The following is a rollforward of stock options for fiscal year 2016 (shares in thousands, exercise price and remaining contractual term represent weighted averages and aggregate intrinsic values in millions):

	Shares		Exercise Price		Remaining Contractual Life (years)	Aggregate Intrinsic Value
Outstanding — beginning of year	650		$	10.32
Cancelled or expired	(417	)	11.50
Outstanding — end of year	233		$	8.22	1.9	—
Exercisable — end of year	233		$	8.22	1.9	—

Stock-based compensation is measured at the grant date based on the fair value of the award and is generally recognized as expense ratably on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award. No compensation cost is ultimately recognized for awards for which employees do not render the requisite service and are forfeited.

Compensation expense is recognized for the non-vested portion of previously issued stock options. No compensation expense associated with the expensing of stock options was recognized in fiscal years 2016 and 2015. During fiscal year 2014, the company recognized $1.2 million in compensation expense associated with the expensing of stock options. No options were exercised in fiscal years 2016, 2015 and 2014.

Restricted Stock and Restricted Share Units

The company has granted shares of restricted stock and restricted share units to certain employees and non-employee members of the Board of Directors in accordance with the existing plans. The company measures the grant price fair value of these stock-based awards at the market price of the company’s common stock as of the date of the grant. Employee awards typically vest at the end of three years and are subject to continued employment by the employee. Compensation cost associated with stock-based awards is recognized ratably over the vesting period. Cash dividends on the restricted stock, if any, are reinvested in additional shares of common stock during the vesting period.

The following is a rollforward of the company’s non-vested restricted stock and restricted share units as of September 30, 2016, and the activity during fiscal year 2016 is summarized as follows (shares in thousands):

Non-vested Shares	Number of Shares		Weighted-Average Grant-Date Fair Value
Non-vested - beginning of year	1,447		$	8.23
Granted	713		9.72
Vested	(744	)	4.44
Forfeited	(184	)	12.14
Non-vested - end of year	1,232		11.00

In fiscal years 2016, 2015 and 2014, the company granted 0.7 million, 0.5 million, and 0.2 million shares of restricted stock and restricted share units, respectively. The grant date weighted average fair value of these restricted share units was $9.72, $13.91, and $9.23 for shares of restricted stock and restricted share units granted in fiscal years 2016, 2015 and 2014, respectively. The number of non-vested restricted shares and restricted share units as of September 30, 2016 was 1.2 million. The per share weighted average fair value of these non-vested shares was $11.00.

As of September 30, 2016, there was $8 million of total unrecognized compensation costs related to non-vested restricted shares and restricted share units. These costs are expected to be recognized over a weighted average period of 1.49 years. Total compensation expense recognized for restricted stock and restricted share units was $5 million in fiscal year 2016, $4 million in fiscal year 2015 and fiscal year 2014.

Performance Share Units

The company has granted performance share units to all executives eligible to participate in the LTIP. The company measures the grant price fair value of these units-based awards at the market price of the company’s common stock as of the date of the grant. Compensation cost associated with these stock-based awards is recognized ratably over the vesting period.

In November 2015, the Board of Directors approved a grant of performance share units to all executives eligible to participate in the LTIP. 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 LTIP. 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 shares.

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 units which includes incremental performance share units that were issued subsequent to the December 1, 2013 grant date.

The following is a rollforward of the company’s non-vested performance share units as of September 30, 2016, and the activity during fiscal year 2016 is summarized as follows (shares in thousands):

Non-vested Shares	Number of Shares		Weighted-Average Grant-Date Fair Value
Non-vested - beginning of year	2,310		$	10.01
Granted	810		10.31
Vested	—		—
Forfeited	(460	)	11.31
Non-vested - end of year	2,660		9.88

There were 0.8 million performance share units granted during fiscal 2016 and 2.7 million of non-vested performance shares as of September 30, 2016. The per share weighted average fair value of the performance share units was $9.88 as of September 30, 2016.

For the years ended September 30, 2016, 2015 and 2014, compensation cost recognized related to the performance share units was $6 million , $8 million and $4 million, respectively. As of September 30, 2016, there were $15.9 million of total unrecognized compensation costs related to non-vested performance share unit equity compensation arrangements. These costs are expected to be recognized over a weighted average period of 3.74 years.

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RETIREMENT MEDICAL PLANS

12 Months Ended

Sep. 30, 2016

Postretirement Medical Plans with Prescription Drug Benefits [Abstract]

RETIREMENT MEDICAL PLANS

RETIREMENT MEDICAL PLANS

The company has retirement medical plans that cover certain of its U.S. and non-U.S. employees, including certain employees of divested businesses, and provide for medical payments to eligible employees and dependents upon retirement. These plans are unfunded.

The company approved amendments to certain retiree medical plans in fiscal years 2002 and 2004. Certain of these plan amendments were challenged in lawsuits that were filed in the United States District Court for the Eastern District of Michigan ("District Court") alleging the changes breached the terms of various collective bargaining agreements entered into with the United Auto Workers (the "UAW lawsuit") at facilities that have either been closed or sold and alleging a companion claim under the Employee Retirement Income Security Act of 1974 ("ERISA").

On December 22, 2005, the District Court issued a preliminary injunction enjoining the company from implementing the changes to retiree health benefits and ordered the company to reinstate and resume paying the full cost of health benefits for the UAW retirees at the levels existing prior to the changes made in 2002 and 2004. On September 13, 2006, the District Court granted a motion by the UAW for summary judgment and granted the UAW’s request to make the terms of the preliminary injunction permanent (the "injunction"). The company accounted for the injunction as a rescission of the 2002 and 2004 plan amendments and began recording the impact of the injunction in March 2006. In addition, the injunction ordered the defendants to reimburse the plaintiffs for out-of-pocket expenses incurred since the date of the earlier benefit modifications. The company has recorded a $2 million reserve at September 30, 2016 and 2015, as the best estimate of its liability for these retroactive benefits. The company appealed the District Court’s order to the U.S. Court of Appeals for the Sixth Circuit. The Sixth Circuit ruled to affirm the District Court’s ruling and the company moved for an en banc rehearing.  The motion for an en banc rehearing was held in abeyance while the parties attempted to settle the case.  In July, 2016 the company moved for re-hearing based on a Supreme Court decision on the subject matter and subsequent Sixth Circuit ruling in a separate case on the same subject matter.  The company believes it has meritorious defenses and continues to pursue a reversal of the Sixth Circuit’s previous decision.  The ultimate outcome of the UAW lawsuit may result in future plan amendments. The impact of any future plan amendments cannot be reasonably estimated at this time.

The mortality assumptions for participants in the company’s U.S. plans incorporates future mortality improvements from tables published by the Society of Actuaries ("SOA"). In October 2014, the SOA issued new mortality and mortality improvement tables that raised the life expectancies. The company reviewed the new SOA mortality and mortality improvement tables and utilized an actuary to conduct a study based on the company’s plan participants. The company determined that the best representation of the plans' mortality is to utilize the new SOA mortality and mortality improvement tables as the reference table for credibility-weighted mortality rates, blended with company-specific mortality based on the study conducted by the actuary. The company incorporated the updated tables into the 2015 year-end measurement of the plans’ benefit obligations. As a result of this change in actuarial assumption, the company’s U.S. OPEB obligations decreased by $18 million in the fourth quarter of fiscal year 2015. The company considers improvement scales released annually by the SOA. These did not have an impact in fiscal year 2016.

On September 26, 2014, Meritor amended its retiree medical and retiree life insurance plan in the United States to cease retiree medical coverage for salaried and non-union hourly employees under the age of 65 and eliminate retiree life insurance coverage with face amounts ranging from $3,750 to $15,000. The amendment triggered a curtailment in the fourth quarter of fiscal year 2014 which immediately reduced the retiree medical liability by $16 million (i.e., a curtailment gain) and reduced retiree medical expense by $15 million. The reduction in expense was primarily attributable to the required immediate recognition of negative prior service costs which were previously being amortized into net periodic expense over the active participants remaining average service life. The $16 million reduction to the retiree medical liability established a new negative prior service cost base, which, subsequent to the curtailment, is being amortized over an average expected lifetime of inactive participants of approximately 10 years.

The company’s retiree medical obligations were measured as of September 30, 2016, 2015, and 2014. The following are the assumptions used in the measurement of the APBO and retiree medical expense:

	2016		2015		2014
Discount rate	3.45	%	4.20	%	4.20	%
Health care cost trend rate	7.10	%	7.00	%	7.40	%
Ultimate health care trend rate	4.75	%	5.00	%	5.00	%
Year ultimate rate is reached	2024		2022		2022

The assumptions noted above are used to calculate the APBO for each fiscal year end and retiree medical expense for the subsequent fiscal year.

The discount rate is used to calculate the present value of the APBO. This rate is determined based on high-quality fixed income investments that match the duration of expected retiree medical benefits. The company has used the corporate AA/Aa bond rate for this assumption. The health care cost trend rate represents the company’s expected annual rates of change in the cost of health care benefits. The company’s projection for fiscal year 2017 health care cost trend rate is 7.10 percent.

The APBO as of the September 30, 2016 and 2015 measurement dates are summarized as follows (in millions):

	2016		2015
Retirees	$	444	$	433
Employees eligible to retire	1		3
Total	$	445	$	436

The following reconciles the change in APBO and the amounts included in the consolidated balance sheet for years ended September 30, 2016 and 2015, respectively (in millions):

	2016			2015
APBO — beginning of year	$	436		$	477
Service cost	—			—
Interest cost	18			19
Participant contributions	—			2
Actuarial loss (gain)	27			(19		)
Foreign currency rate changes	—			(3		)
Benefit payments (2)	(36		)	(40		)
APBO — end of year	445			436
Other (1)	2			2
Retiree medical liability	$	447		$	438

⁽¹⁾  The company recorded a $2 million reserve for retiree medical liabilities at September 30, 2016 and 2015 as its best estimate for retroactive benefits related to the previously mentioned injunction

⁽²⁾  Net of subsidies and rebates available under Employer Group Waiver Plan (EGWP).

Actuarial losses/(gains) relate to changes in the discount rate and other actuarial assumptions. In accordance with FASB ASC Topic 715, “Compensation – Retirement Benefits”, a portion of the actuarial losses is not subject to amortization. The actuarial losses that are subject to amortization are generally amortized over the average lifetime of inactive participants of approximately 10 years.

The Medicare Prescription Drug Improvement and Modernization Act of 2003 provides for a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit at least actuarially equivalent to the benefit established by the law. The company provides retiree medical benefits under certain plans that exceed the value of the benefits that are provided by the Medicare Part D plan. Therefore, management concluded that these plans are at least actuarially equivalent to the Medicare Part D plan and the company is eligible for the federal subsidy. In September 2011, in connection with the Health Care and Education Reconciliation Act of 2010, the company converted its current prescription drug program for certain retirees to a group-based, company-sponsored Medicare Part D program, or Employer Group Waiver Plan (EGWP). In September 2012, the company converted certain additional groups of retirees to EGWP and as a result, reduced its APBO by an additional amount of approximately $25 million. In 2013, the company began using use the Part D subsidies delivered through EGWP to reduce its net retiree medical costs. As a result of this change in assumption, the company reduced its APBO by approximately $35 million. These reductions to APBO are being amortized over an average expected lifetime of inactive participants of approximately 10 years.

The retiree medical liability is included in the consolidated balance sheet as follows (in millions):

	September 30,
	2016		2015
Current — included in compensation and benefits	$	33	$	33
Long-term — included in retirement benefits	414		405
Retiree medical liability	$	447	$	438

The following table summarizes the amounts included in Accumulated Other Comprehensive Loss net of tax related to retiree medical liabilities as of September 30, 2016 and 2015 and changes recognized in Other Comprehensive Income (Loss) net of tax for the years ended September 30, 2016 and 2015.

	Net Actuarial Loss			Prior Service Cost (Benefit)			Total
Balance at September 30, 2015	$	101		$	(12	)	$	89
Net actuarial loss for the year	27			—			27
Amortization for the year	(13		)	1			(12		)
Deferred tax impact	(8		)	—			(8		)
Balance at September 30, 2016	$	107		$	(11	)	$	96
Balance at September 30, 2014	$	142		$	(13	)	$	129
Net actuarial gain for the year	(19		)	—			(19		)
Amortization for the year	(22		)	1			(21		)
Balance at September 30, 2015	$	101		$	(12	)	$	89

The net actuarial loss and prior service benefit that are estimated to be amortized from accumulated other comprehensive loss into net periodic retiree medical expense in fiscal year 2017 are $15 million and $(3) million, respectively.

The components of retiree medical expense for years ended September 30 are as follows (in millions):

	2016			2015			2014
Service cost	$	—		$	—		$	—
Interest cost	18			19			23
Amortization of:
Prior service benefit	(1		)	(1		)	(7		)
Actuarial losses	13			22			23
Recognized prior service costs due to curtailment	—			—			(15		)
Retiree medical expense	$	30		$	40		$	24

A one-percentage point change in the assumed health care cost trend rate for all years to, and including, the ultimate rate would have the following effects (in millions):

	2016			2015
Effect on total service and interest cost
1% Increase	$	1		$	2
1% Decrease	(1		)	(1		)
Effect on APBO
1% Increase	40			39
1% Decrease	(35		)	(34		)

The company expects future benefit payments as follows (in millions):

	Gross Benefit Payments		Gross Receipts (1)
Fiscal 2017	$	40	$	7
Fiscal 2018	40		7
Fiscal 2019	40		7
Fiscal 2020	40		7
Fiscal 2021	40		7
Fiscal 2022 – 2026	184		34

⁽¹⁾  Consists of subsidies and rebates available under EGWP.

XML

RETIREMENT PENSION PLANS

12 Months Ended

Sep. 30, 2016

Compensation and Retirement Disclosure [Abstract]

RETIREMENT PENSION PLANS

RETIREMENT PENSION PLANS

The company sponsors defined benefit pension plans that cover certain of its U.S. and non-U.S. employees. Pension benefits for salaried employees are based on years of credited service and compensation. Pension benefits for hourly employees are based on years of service and specified benefit amounts. The company’s funding policy provides that annual contributions to the pension trusts will be at least equal to the minimum amounts required by ERISA in the U.S. and the actuarial recommendations or statutory requirements in other countries.

The mortality assumptions for participants in the company’s U.S. plans incorporates future mortality improvements from tables published by the SOA. In October 2014, the SOA issued new mortality and mortality improvement tables that raised the life expectancies. The company reviewed the new SOA mortality and mortality improvement tables and utilized an actuary to conduct a study based on the company’s plan participants. The company determined that the best representation of the plans' mortality is to utilize the new SOA mortality and mortality improvement tables as the reference table for credibility-weighted mortality rates, blended with company specific mortality based on the study conducted by the actuary. The company incorporated the updated tables into the 2015 year-end measurement of the plans’ benefit obligations. As a result of this change in actuarial assumption, the company’s U.S. pension obligations increased by $24 million in the fourth quarter of fiscal year 2015. The company considers improvement scales released annually by the SOA. These did not have an impact in fiscal year 2016.

On August 1, 2010, Meritor amended its defined benefit pension plan in the United Kingdom to cease the accrual of future benefits for all of its active plan participants. Subsequent to the freeze date, the company began making contributions to its defined contribution savings plan on behalf of the affected employees. The amount of the savings plan contribution is based on a percentage of the employees’ pay. These changes did not affect then-current retirees. The company began recording the impact of the plan freeze in the fourth quarter of fiscal year 2010. Subsequent to the plan freeze, accumulated actuarial losses are being amortized into net periodic pension expense over the average life expectancy of inactive plan participants of approximately 27 years rather than over their remaining average service life.

In April 2007, the company announced a freeze of its defined benefit pension plan for salaried and non-represented employees in the United States, effective January 1, 2008. The change affected approximately 3,800 employees including certain employees who continued to accrue benefits for an additional transition period, ending June 30, 2011. After these freeze dates, the company started making additional contributions to its defined contribution savings plan on behalf of the affected employees. The amount of the savings plan contribution is based on a percentage of the employees’ pay, with the contribution percentage increasing as a function of employees’ age. These changes do not affect plan participants who had retired prior to the freeze dates or represented employees. Accumulated actuarial losses are being amortized into net periodic pension expense over the average life expectancy of inactive plan participants of approximately 21 years.

During fiscal year 2015, the company settled the remaining liabilities associated with its Canadian pension plans through lump-sum payments made from plan assets to plan participants and by purchasing annuity contracts from an insurance company. The company recognized a primarily non-cash pre-tax settlement loss of $16 million associated with the annuity purchases and lump-sum payments. The company settled a net pension obligation of $16 million using $20 million of pension plan assets, such that the assets and liabilities were derecognized from the balance sheet during the quarter ended September 30, 2015.

Additionally, in fiscal year 2015, the company settled the remaining liabilities associated with its German pension plans by purchasing annuity contracts from an insurance company. The company recognized a primarily non-cash pre-tax settlement loss of $43 million associated with the annuity purchases. The company settled a net pension obligation of $91 million, which was derecognized from the balance sheet during the quarter ended September 30, 2015.

In June 2013, the company amended its U.S. Retirement Plan to allow all terminated vested participants with an accrued benefit of $5,000 or less to receive a full lump-sum distribution of their benefit. The lump-sum amounts were rolled into individual retirement accounts for those participants that had an accrued benefit of $1,000 to $5,000 who did not make an affirmative election to receive their benefits. For those participants with an accrued benefit of less than $1,000, the benefits were automatically distributed to the participant.

Effective October 2014, the company amended the U.S. Retirement Plan to include an additional distribution option in the form of a Lump Sum Benefit from the Plan. The majority of Plan members are eligible for this distribution option following termination or when making their retirement payment election. The Lump Sum Benefit equals the present value of a member's vested accrued benefit paid in one lump sum payment.

The company’s pension obligations are generally measured as of September 30, 2016, 2015 and 2014, while the pension obligations associated with the fourth quarter fiscal year 2015 settled Canadian and German pension plans were measured as of August 31, 2015. The U.S. plans include qualified and non-qualified pension plans. The company’s only significant non-U.S. plan is located in the United Kingdom.

The following are the significant assumptions used in the measurement of the projected benefit obligation (PBO) and net periodic pension expense:

	U.S. Plans
	2016			2015			2014
Discount Rate	3.50%	—	3.55%	4.25%	—	4.35%	4.20%	—	4.30%
Assumed return on plan assets (beginning of the year)	7.75%			8.00%			8.00%

	Non-U.S. Plans (2)
	2016	2015			2014
Discount Rate (1)	2.50%	1.00%	—	3.80%	1.90%	—	4.10%
Assumed return on plan assets (beginning of the year) (1)	6.00%	2.25%	—	7.25%	2.25%	—	7.25%
Rate of compensation increase (3)	N/A	2.00%			2.00%	—	3.00%

⁽¹⁾  The discount rate for the company’s U.K. pension plan was 2.50 percent, 3.80 percent and 4.10 percent for 2016, 2015 and 2014, respectively. The assumed return on plan assets for this plan was 6.00 percent for 2016 and 7.25 percent for 2015 and 2014.

⁽²⁾  In fiscal year 2015, our German and Canadian pension plans were settled. In 2016, assumptions presented are for the U.K pension plan, which is the only significant non-U.S. plan remaining.

⁽³⁾  Rate of compensation expense for 2016 is not applicable as the U.K. pension plan is frozen.

The discount rate is used to calculate the present value of the PBO at the balance sheet date and net periodic pension expense for the subsequent fiscal year. The rate used reflects a rate of return on high-quality fixed income investments that match the duration of expected benefit payments. Generally, the company uses a portfolio of long-term corporate AA/Aa bonds that match the duration of the expected benefit payments, except for the company's U.K. pension plan which uses an annualized yield curve, to establish the discount rate for this assumption.

The assumed return on plan assets is used to determine net periodic pension expense. The rate of return assumptions are based on projected long-term market returns for the various asset classes in which the plans are invested, weighted by the target asset allocations. An incremental amount for active plan asset management and diversification, where appropriate, is included in the rate of return assumption. The return assumption is reviewed annually.

The rate of compensation increase represents the long-term assumption for expected increases to salaries for pay-related plans. The accompanying disclosures include pension obligations associated with businesses classified as discontinued operations.

The following table reconciles the change in the PBO, the change in plan assets and amounts included in the consolidated balance sheet for the years ended September 30, 2016 and 2015, respectively (in millions):

	2016									2015
	U.S.			Non- U.S.			Total			U.S.			Non- U.S.			Total
PBO — beginning of year	$	1,042		$	614		$	1,656		$	1,059		$	735		$	1,794
Service cost	—			1			1			1			1			2
Interest cost	45			20			65			44			26			70
Actuarial loss	105			115			220			10			48			58
Settlements	—			—			—			—			(111		)	(111		)
Benefit payments	(80		)	(35		)	(115		)	(72		)	(29		)	(101		)
Foreign currency rate changes	—			(99		)	(99		)	—			(56		)	(56		)
PBO — end of year	$	1,112		$	616		$	1,728		$	1,042		$	614		$	1,656
Change in plan assets
Fair value of assets — beginning of year	$	830		$	717		$	1,547		$	832		$	743		$	1,575
Actual return on plan assets	79			169			248			65			67			132
Employer contributions	5			1			6			5			7			12
Settlements	—			—			—			—			(20		)	(20		)
Benefit payments	(80		)	(35		)	(115		)	(72		)	(29		)	(101		)
Foreign currency rate changes	—			(118		)	(118		)	—			(51		)	(51		)
Fair value of assets — end of year	$	834		$	734		$	1,568		$	830		$	717		$	1,547
Funded status	$	(278	)	$	118		$	(160	)	$	(212	)	$	103		$	(109	)

Amounts included in the consolidated balance sheet at September 30 are comprised of the following (in millions):

	2016									2015
	U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total
Non-current assets	$	—		$	123		$	123		$	—		$	110		$	110
Current liabilities	(6		)	—			(6		)	(5		)	—			(5		)
Retirement benefits-non-current	(272		)	(5		)	(277		)	(207		)	(7		)	(214		)
Net amount recognized	$	(278	)	$	118		$	(160	)	$	(212	)	$	103		$	(109	)

The following tables summarize the amounts included in Accumulated Other Comprehensive Loss net of tax related to pension liabilities as of September 30, 2016 and 2015 and changes recognized in Other Comprehensive Income (Loss) net of tax for the year ended September 30, 2016.

	Net Actuarial Loss
	U.S.			Non-U.S.			Total
Balance at September 30, 2015	$	410		$	206		$	616
Net actuarial loss for the year	87			(11		)	76
Amortization for the year	(18		)	(5		)	(23		)
Deferred tax impact	(25		)	—			(25		)
Balance at September 30, 2016	$	454		$	190		$	644
Balance at September 30, 2014	$	419		$	241		$	660
Net actuarial loss for the year	8			24			32
Amortization for the year	(17		)	(8		)	(25		)
Deferred tax impact	—			5			5
Settlements	—			(56		)	(56		)
Balance at September 30, 2015	$	410		$	206		$	616

The company estimates that $30 million of net actuarial losses will be amortized from accumulated other comprehensive loss into net periodic pension expense during fiscal year 2017. The non-current portion of the pension liability is included in Retirement Benefits in the consolidated balance sheet as follows (in millions):

	September 30,
	2016		2015
Pension liability	$	277	$	214
Retiree medical liability — long term (see Note 20)	414		405
Other	12		13
Total retirement benefits	$	703	$	632

In accordance with FASB guidance, the PBO, accumulated benefit obligation (ABO) and fair value of plan assets are required to be disclosed for all plans where the ABO is in excess of plan assets. The difference between the PBO and ABO is that the PBO includes projected compensation increases.

Additional information is as follows (in millions):

	2016						2015
	ABO Exceeds Assets		Assets Exceed ABO		Total		ABO Exceeds Assets		Assets Exceed ABO		Total
PBO	$	1,116	$	612	$	1,728	$	1,057	$	599	$	1,656
ABO	1,116		612		1,728		1,057		598		1,655
Plan Assets	834		734		1,568		838		709		1,547

The components of net periodic pension expense are as follows (in millions):

	2016			2015			2014
Service cost	$	1		$	2		$	2
Interest cost	65			70			80
Assumed rate of return on plan assets	(99		)	(111		)	(104		)
Amortization of —
Actuarial losses	23			26			23
Settlement loss	—			59			—
Net periodic pension expense	$	(10	)	$	46		$	1

Disclosures on investment policies and strategies, categories of plan assets, fair value measurements of plan assets, and significant concentrations of risk are included below.

Investment Policy and Strategy

The company’s primary investment objective for its pension plan assets is to generate a total investment return sufficient to meet present and future benefit payments while minimizing the company’s cash contributions over the life of the plans. In order to accomplish this objective, the company maintains target allocations to identify and manage exposures. The target asset allocation ranges for the U.S. plan are 30–50 percent equity investments, 30–50 percent fixed income investments and 10–30 percent alternative investments. Alternative investments include private equities, real estate, hedge funds, diversified growth funds, and partnership interests. The target asset allocation ranges for the non-U.S. plans are 15–35 percent equity investments, 30–60 percent fixed income investments, 0–10 percent real estate and 10–30 percent alternative investments.

Investment strategies and policies for the company’s pension plan assets reflect a balance of risk-reducing and return-seeking considerations. The objective of minimizing the volatility of assets relative to liabilities is addressed primarily through asset diversification. Assets are broadly diversified across several asset classes to achieve risk-adjusted returns that accomplish this objective.

The majority of pension plan assets are externally managed through active managers. Managers are only permitted to invest within established asset classes and follow the strategies for which they have been appointed. The company uses investment guidelines and reviews asset returns and investment decisions made by the managers to ensure that they are in accordance with the company’s strategies.

Concentration of Risk

The company seeks to mitigate risks relative to performance of the plan assets. Assets are invested in various classes with different risk and return characteristics in order to ensure that they are sufficient to pay benefits. The company’s investment strategies incorporate a return-seeking approach through equity and alternative investments, while seeking to minimize the volatility of the plans’ assets relative to its liabilities through investments in fixed income securities. The significant areas of risk related to these strategies include equity, interest rate, and operating risk.

A portion of plan assets is allocated to equity and alternative investments that are expected, over time, to earn higher returns. Within this return-seeking portfolio, asset diversification is utilized to reduce uncompensated risk.

Plan assets are also allocated to fixed income investments, which seek to minimize interest rate risk volatility relative to pension liabilities. The fixed income portfolio partially matches the long-dated nature of the pension liabilities reducing interest rate risk. Interest rate decreases generally increase the value of fixed income assets, partially offsetting the related increase in the liabilities, while interest rate increases generally result in a decline in the value of fixed income assets while reducing the present value of the liabilities.

Operating risks consist of the risks of inadequate diversification and weak controls. The company has established policies and procedures in order to mitigate this risk by monitoring investment manager performance, reviewing periodic compliance information, and ensuring that the plans’ managers invest in accordance with the company’s investment strategies.

Fair Value of Investments

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 assets (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 assets that the Plan has the ability to access.

• Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets 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 asset.

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.

Following are descriptions, valuation methodologies and other information related to plan assets.

Cash and cash equivalents: The fair value of cash and cash equivalents is valued at cost.

Equity Securities: The overall equity category includes common and preferred stocks issued by U.S. and international companies as well as equity funds that invest in these instruments. All investments generally allow near-term (within 90 days of the measurement date)  liquidity and are held in issues that are actively traded to facilitate transactions at minimum cost. The aggregate equity portfolio is diversified to avoid exposure to any investment strategy, single economic sector, industry group, or individual security. 

The fair value of equity securities is determined by either direct or indirect quoted market prices. When the value of assets held in separate accounts is not published, the value is based on the underlying holdings, which are primarily direct quoted market prices on regulated financial exchanges.

Most of the equity investments allow daily redemptions, with some providing monthly liquidity or requiring a 30-day notice. 

Fixed Income Securities: The overall fixed income category includes U.S. dollar-denominated and international marketable bonds and convertible debt securities as well as fixed income funds that invest in these instruments. All assets generally allow near-term liquidity and are held in issues which are actively traded to facilitate transactions at minimum cost. The aggregate fixed income portfolio is diversified to avoid exposure to any investment strategy, maturity, issuer or credit quality.

The fair value of fixed income securities is determined by either direct or indirect quoted market prices. When the value of assets held in separate accounts is not published, the value is based on the underlying holdings, which are primarily direct quoted market prices on regulated financial exchanges.

U.S. fixed income securities typically offer daily liquidity, with only one investment allowing quarterly redemptions. International and emerging fixed income investment vehicles generally provide daily liquidity.

Commingled Funds: The fair value of commingled funds is accounted for by a custodian. The custodian obtains valuations from underlying fund managers based on market quotes for the most liquid assets and alternative methods for assets that do not have sufficient trading activity to derive prices. The company and custodian review the methods used by the underlying managers to value the assets.

Real Estate: Real estate provides an indirect investment into a diversified and multi-sector portfolio of property assets. The fair value of real estate investments is valued by the fund managers. The fund managers value the real estate investments via independent third-party appraisals on a periodic basis. Assumptions used to revalue the properties are updated every quarter. For the component of the real estate portfolio under development, the investments are carried at cost, which approximates fair value, until they are completed and valued by a third-party appraiser.

Due to the long-term nature of real estate investments, liquidity is provided on a quarterly basis.

Futures Contracts:  The plan enters into futures contracts in the normal course of its investing activities to manage market risk and to achieve overall investment portfolio objectives.  The credit risk associated with these contracts is minimal as they are traded on organized exchanges and settled daily.  The fair value of futures contracts is determined by direct quoted market prices.  Cash margin for these futures contracts is included in Cash and Cash Equivalents in the leveling table.

Alternatives/Partnerships/Private Equity: This category includes investments in private equity and hedge funds.  Such investments may be made directly or through pooled funds, including fund of funds structures. The fair market value of the company’s interest in partnerships and private equity is valued by the fund managers. The valuation is based on the net present value of observable inputs (dividends, cash flows, earnings, etc.), which are discounted at applicable discount rates. The company and custodian review the methods used by the underlying managers to value the assets. 

Most of these investments offer quarterly redemption opportunities. Some partnerships and private equity investments, due to the nature of their investment strategy and underlying holdings, offer less frequent liquidity. When available, liquidity events are closely evaluated.

The valuation methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The fair value of plan assets at September 30, 2016 by asset category is as follows (in millions):

U.S. Plans	2016
Asset Category	Level 1		Level 2		Level 3		Total
Equity investments
U.S. – Large cap	$	71	$	—	$	—	$	71
U.S. – Small cap	22		—		—		22
Private equity	—		—		11		11
International equity	41		—		—		41
Equity investments measured at net asset value (1)	—		—		—		152
Total equity investments	$	134	$	—	$	11	$	297
Fixed income investments
U.S. fixed income	$	10	$	265	$	—	$	275
Emerging fixed income	—		20		—		20
Partnerships fixed income	—		—		1		1
Fixed income investments measured at net asset value (1)	—		—		—		45
Total fixed income	$	10	$	285	$	1	$	341
Alternatives – Partnerships	—		—		77		77
Alternatives – Partnerships measured at net asset value (1)	—		—		—		84
Cash and cash equivalents	—		35		—		35
Total assets at fair value	$	144	$	320	$	89	$	834
Non-U.S. Plans	2016
Asset Category	Level 1		Level 2		Level 3		Total
Equity investments
International equity	$	61	$	—	$	—	$	61
Equity investments measured at net asset value (1)	—		—		—		82
Total equity investments	$	61	$	—	$	—	$	143
Fixed income investments
Other fixed income investments	$	—	$	222	$	—	$	222
Fixed income investments measured at net asset value (1)	—		—		—		198
Total fixed income	$	—	$	222	$	—	$	420
Commingled funds	—		6		—		6
Alternative investments measured at net asset value (1)	—		—		—		114
Real estate measured at net asset value (1)	—		—		—		37
Cash and cash equivalents	—		14		—		14
Total assets at fair value	$	61	$	242	$	—	$	734

⁽¹⁾  In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

The fair value of plan assets at September 30, 2015 by asset category is as follows (in millions):

U.S. Plans	2015
Asset Category	Level 1		Level 2		Level 3		Total
Equity investments
U.S. – Large cap	$	88	$	—	$	—	$	88
U.S. – Small cap	21		—		—		21
Private equity	—		—		15		15
International equity	53		—		—		53
Equity investments measured at net asset value (1)	—		—		—		160
Total equity investments	$	162	$	—	$	15	$	337
Fixed income investments
U.S. fixed income	$	8	$	263	$	—	$	271
Emerging fixed income	—		20		—		20
Partnerships fixed income	—		—		1		1
Fixed income investments measured at net asset value (1)	—		—		—		45
Total fixed income	$	8	$	283	$	1	$	337
Alternatives – Partnerships	—		—		84		84
Alternatives – Partnerships measured at net asset value (1)	—		—		—		65
Cash and cash equivalents	—		7		—		7
Total assets at fair value	$	170	$	290	$	100	$	830
Non-U.S. Plans	2015
Asset Category	Level 1		Level 2		Level 3		Total
Equity investments
International equity	$	55	$	—	$	—	$	55
Equity investments measured at net asset value (1)	—		—		—		106
Total equity investments	$	55	$	—	$	—	$	161
Fixed income investments
Other fixed income investments	$	—	$	186	$	—	$	186
Fixed income investments measured at net asset value (1)	—		—		—		158
Total fixed income	$	—	$	186	$	—	$	344
Commingled funds	—		8		—		8
Alternative investments measured at net asset value (1)	—		—		—		133
Real estate measured at net asset value (1)	—		—		—		43
Cash and cash equivalents	—		28		—		28
Total assets at fair value	$	55	$	222	$	—	$	717

⁽¹⁾  In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

Unfunded Commitment

As of September 30, 2016, the U.S. plan had $20 million of unfunded investment commitments related to plan assets. The majority of this amount is attributed to partnership investments that the plan will invest in gradually over the course of several years. Non-U.S. plans currently do not have any unfunded commitments.

The following table summarizes the changes in Level 3 pension plan assets measured at fair value on a recurring basis for the year ended September 30, 2016 (in millions):   

U.S. Plans	2016
	Fair Value at October 1, 2015		Return on Plan Assets: Attributable to Assets Held at September 30, 2016			Purchases		Settlements			Net Transfers Into (Out of) Level 3		Fair Value at September 30, 2016
Asset Category
Private equity	$	15	$	(4	)	$	—	$	—		$	—	$	11
Partnerships –
Fixed income	1		—			—		—			—		1
Alternatives –
Partnerships	84		(5		)	—		(2		)	—		77
Total Level 3 fair value	$	100	$	(9	)	$	—	$	(2	)	$	—	$	89

The following table summarizes the changes in Level 3 pension plan assets measured at fair value on a recurring basis for the year ended September 30, 2015 (in millions):

U.S. Plans	2015
	Fair Value at October 1, 2014		Return on Plan Assets: Attributable to Assets Held at September 30, 2015		Purchases		Settlements			Net Transfers Into (Out of) Level 3		Fair Value at September 30, 2015
Asset Category
Private equity	$	15	$	—	$	—	$	—		$	—	$	15
Partnerships –
Fixed income	1		—		—		—			—		1
Alternatives –
Partnerships	58		19		8		(1		)	—		84
Total Level 3 fair value	$	74	$	19	$	8	$	(1	)	$	—	$	100

Information about the expected cash flows for the U.S. and non-U.S. pension plans is as follows (in millions): 

	U.S.		Non U.S.		Total
Expected employer contributions:
Fiscal 2017	$	5	$	1	$	6
Expected benefit payments:
Fiscal 2017	78		20		98
Fiscal 2018	76		20		96
Fiscal 2019	74		21		95
Fiscal 2020	73		22		95
Fiscal 2021	71		22		93
Fiscal 2022-2026	336		121		457

The company also sponsors certain defined contribution savings plans for eligible employees. Expense related to these plans, including company matching contributions, was $16 million, $15 million and $14 million for fiscal years 2016, 2015 and 2014, respectively.

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INCOME TAXES

12 Months Ended

Sep. 30, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The income tax provisions were calculated based upon the following components of income before income taxes (in millions):

	2016		2015		2014
U.S. income	$	71	$	24	$	204
Foreign income	84		43		111
Total	$	155	$	67	$	315

The components of the benefit (provision) for income taxes are summarized as follows (in millions):    

	2016			2015			2014
Current tax benefit (expense):
U.S.	$	(1	)	$	(4	)	$	(1	)
Foreign	11			(20		)	(32		)
State and local	(1		)	(1		)	—
Total current tax benefit (expense)	9			(25		)	(33		)
Deferred tax benefit (expense):
U.S.	394			3			(1		)
Foreign	(22		)	21			3
State and local	43			—			—
Total deferred tax benefit	415			24			2
Income tax benefit (expense)	$	424		$	(1	)	$	(31	)

The deferred tax expense or benefit represents tax effects of current year deductions or items of income that will be recognized in future periods for tax purposes. In fiscal year 2016, the U.S. and state and local deferred tax benefit was primarily attributable to the valuation allowance reversal in the U.S. In fiscal year 2015, the foreign deferred tax benefit was primarily attributable to valuation allowance reversals in Germany, Italy, Mexico and Sweden in addition to the tax benefit received from the Canadian and German pension settlement charges.

Net current and non-current deferred income tax assets (liabilities) included in the consolidated balance sheet consist of the tax effects of temporary differences related to the following (in millions): 

	September 30,
	2016			2015 (1)
Accrued compensation and benefits	$	21		$	27
Accrued product warranties	13			19
Inventory costs	8			20
Receivables	15			16
Accrued retiree healthcare benefits	169			175
Retirement pension plans	119			95
Property	7			9
Loss and credit carryforwards	455			487
Other	67			77
Sub-total	874			925
Less: Valuation allowances	(379		)	(834		)
Deferred income taxes - asset	$	495		$	91
Taxes on undistributed income	$	(7	)	$	(51	)
Intangible assets	(82		)	(85		)
Debt basis difference	(5		)	(8		)
Deferred income taxes - liability	$	(94	)	$	(144	)
Net deferred income tax assets (liabilities)	$	401		$	(53	)

(1) Immaterial Restatement- Subsequent to the issuance of Meritor’s consolidated financial statements as of and for the year ended September 30, 2015, it was determined that (i) Loss and credit carryforwards; (ii) Valuation allowances; and (iii) Taxes on undistributed income as of and for the year ended September 30, 2015 were overstated by approximately $121 million, overstated by approximately $127 million, and understated by approximately $6 million, respectively. As a result, September 30, 2015 Loss and credit carryforwards, Valuation allowances and Taxes on undistributed income have been corrected in the above reconciliation to appropriately reflect these balances. The errors had no impact on the consolidated balance sheet as of September 30, 2015 or the related consolidated statement of operations, comprehensive income, equity (deficit), or cash flows for the year ended September 30, 2015.

Net current and non-current deferred income tax assets (liabilities) are included in the consolidated balance sheet as follows (in millions): 

	September 30,
	2016			2015
Other current assets (see Note 10)	$	—		$	20
Other current liabilities	—			(2		)
Net current deferred income taxes — asset	—			18
Other assets (see Note 12)	413			28
Other liabilities (see Note 15)	(12		)	(99		)
Net non-current deferred income taxes — asset (liability)	$	401		$	(71	)

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%-owned subsidiaries in France, Germany, Italy, Sweden, the U.K. 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.

During the fourth quarter of fiscal year 2016, as a result of sustained profitability in the U.S. evidenced by a strong earnings history, future forecasted earnings, and additional positive evidence, the company determined it was more likely than not it would be able to realize deferred tax assets in the U.S. Accordingly, the company reversed a portion of the valuation allowance in the U.S., resulting in a non-cash income tax benefit of $438 million. In fiscal year 2015, the company reversed valuation allowances in Germany, Italy, Mexico, and Sweden, resulting in a non-cash income tax benefit of $16 million.

During the fourth quarter of fiscal year 2016, due to a three-year cumulative loss and future economic uncertainty, the company concluded that a valuation allowance was required in Brazil. This resulted in a non-cash charge to income tax expense of $9 million. As of September 30, 2016, the company continues to maintain the valuation allowances in France, the U.K. and certain other jurisdictions, as the company believes the negative evidence that it will be able to recover these net deferred tax assets continues to outweigh the positive evidence. If, in the future, the company generates taxable income on a sustained basis, its conclusion regarding the need for valuation allowances in these jurisdictions could change.

The expiration periods for deferred tax assets related to net operating losses and tax credit carryforwards as of September 30, 2016 are included below (in millions). Also included are the associated valuation allowances on these deferred tax assets (in millions).

	Fiscal Year Expiration Periods
	2017-2021		2022-2031		2032-2036		Indefinite		Total
Net Operating Losses and Tax Credit Carryforwards	$	25	$	160	$	10	$	260	$	455
Valuation Allowances on these Deferred Tax Assets	$	24	$	56	$	8	$	253	$	341

Realization of deferred tax assets representing net operating loss carryforwards for which a valuation allowance has not been provided is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Although realization is not assured, management believes it is more likely than not that all of such deferred tax assets will be realized. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if the company is unable to generate sufficient future taxable income during the carryforward period.

For fiscal years 2016 and 2015, no provision has been made for U.S., state or additional foreign income taxes related to approximately $687 million and $686 million of undistributed earnings of foreign subsidiaries that have been or are intended to be permanently reinvested. Quantification of the deferred tax liability, if any, associated with permanently reinvested earnings is not practicable.

The company’s provision for income taxes was different from the provision for income taxes calculated at the U.S. statutory rate for the reasons set forth below (in millions): 

	2016			2015 (1)			2014 (1)
Expense for income taxes at statutory tax rate of 35%	$	(54	)	$	(23	)	$	(110	)
State and local income taxes	(7		)	(1		)	—
Foreign income taxed at rates other than 35%	5			7			13
Joint venture equity income	3			3			5
Tax effect of nonfunctional currency transaction	(30		)	—			(4		)
Correlated tax relief	51			—			—
U.S. tax impact on distributions from subsidiaries and joint ventures	14			(11		)	(26		)
Nondeductible expenses	(12		)	(9		)	(10		)
Tax credits	61			—			—
Valuation allowances	418			49			113
Tax rate change	(14		)	—			—
Other	(11		)	(16		)	(12		)
Income tax benefit (expense)	$	424		$	(1	)	$	(31	)

(1) Immaterial Restatement- Subsequent to the issuance of Meritor’s consolidated financial statements as of and for the year ended September 30, 2015, it was determined that (i) U.S. tax impact on distributions from subsidiaries and joint ventures; (ii) Valuation allowances; and (iii) Other as of and for the year ended September 30, 2015 were overstated by approximately $7 million, understated by approximately $2 million, and understated by approximately $9 million, respectively. As a result, September 30, 2015 U.S. tax impact on distributions from subsidiaries and joint ventures, Valuation allowances and Other have been corrected in the above reconciliation to appropriately reflect these balances. Also, it was determined that (i) Tax effect of nonfunctional currency transaction; (ii) U.S. tax impact on distributions from subsidiaries and joint ventures; (iii) Valuation allowances; and (iv) Other as of and for the year ended September 30, 2014 were understated by approximately $4 million, understated by approximately $8 million, understated by approximately $24 million, and understated by approximately $12 million, respectively. As a result, September 30, 2014 Tax effect of nonfunctional currency transaction, U.S. tax impact on distributions from subsidiaries and joint ventures, Valuation allowances and Other have been corrected in the above reconciliation to appropriately reflect these balances. The errors had no impact on the consolidated balance sheets as of September 30, 2015 and September 30, 2014 or the related consolidated statement of operations, comprehensive income, equity (deficit), or cash flows for the years ended September 30, 2015 and September 30, 2014.

In fiscal year 2016, the company determined it is now more favorable to take a foreign tax credit instead of foreign tax deduction, and as a result, a $61 million income tax benefit was recorded. Additionally, the company established a $51 millioncorrelated relief asset against a related uncertain tax position.

In fiscal year 2014, the company recorded $210 million of earnings related to the antitrust lawsuit settlement with Eaton Corporation. The earnings did not impact U.S. federal income tax expense, since they were offset by a corresponding valuation allowance in the U.S.

The total amount of gross unrecognized tax benefits the company recorded in accordance with FASB ASC Topic 740 as of September 30, 2016 was $243 million, of which $215 million represents the amount that, if recognized, would favorably affect the effective income tax rate in future periods.

A reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period is as follows (in millions): 

	2016			2015 (1)			2014 (1)
Balance at beginning of the period	$	207		$	209		$	190
Additions to tax positions recorded during the current year	39			15			28
Reductions to tax position recorded in prior years	—			(2		)	(2		)
Reductions to tax positions due to lapse of statutory limits	(3		)	(11		)	(7		)
Translation, other	—			(4		)	—
Balance at end of the period	$	243		$	207		$	209

(1) Immaterial Restatement- Subsequent to the issuance of Meritor’s consolidated financial statements as of and for the year ended September 30, 2015, it was determined that unrecognized tax benefits as of and for the years ended September 30, 2015 and September 30, 2014 were understated by approximately $131 million and $121 million, respectively. As a result, September 30, 2015 and September 30, 2014 total unrecognized tax benefits have been corrected in the above reconciliation to appropriately reflect these balances. The errors had no impact on the consolidated balance sheet as of September 30, 2015 or the related consolidated statement of operations, comprehensive income, equity (deficit), or cash flows for the years ended September 30, 2015 and September 30, 2014.

The company’s continuing practice is to recognize interest and penalties on uncertain tax positions in the provision for income taxes in the consolidated statement of operations. At September 30, 2016 and September 30, 2015, the company recorded a $4 million asset and a $3 million liability, respectively of interest on uncertain tax positions in the consolidated balance sheet. In addition, penalties of $2 million were recorded at each of September 30, 2016 and September 30, 2015. The income tax benefit related to interest was $8 million for the year ended September 30, 2016. The income tax benefit amount related to interest and penalties was immaterial for the years ended September 30, 2015 and 2014. The income tax benefit related to penalties was immaterial for years ended September 30, 2016, 2015 and 2014.

The company files tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout the world. The company’s Canadian federal income tax returns for fiscal years 2010 through 2014 are currently under audit. The company’s Brazil subsidiary is currently under audit for calendar years 2011, 2014 and 2015. The company's German subsidiary is currently under audit for fiscal years 2008 through 2013. The company's Singapore subsidiary is currently under audit for fiscal year 2013. The company's Indian subsidiary is currently under audit for fiscal years 2013 through 2015. In addition, the company is under audit in the U.S. for federal, fiscal years 2010 and 2011, along with various state tax jurisdictions for various years. It is reasonably possible that audit settlements, the conclusion of current examinations or the expiration of the statute of limitations in several jurisdictions could change the company’s unrecognized tax benefits during the next twelve months. It is not possible to reasonably estimate the expected change to the total amount of unrecognized tax benefit in the next twelve months.

In addition to the audits listed above, the company has open tax years primarily from 2001-2015 with various significant taxing jurisdictions, including the U.S., Brazil, Canada, China, France, Mexico and the U.K. These open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, timing or inclusion of revenue and expenses or the sustainability of income tax credits for a given audit cycle. The company has recorded a tax benefit only for those positions that meet the more-likely-than-not standard.

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CONTINGENCIES

12 Months Ended

Sep. 30, 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 September 30, 2016 to be approximately $9 million, of which $2 million is 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. Environmental remediation costs recorded with respect to the Superfund sites was $1 million in fiscal year 2014. Costs were not substantial in fiscal years 2015 and 2016.

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 September 30, 2016 to be approximately $28 million, of which $11 million is probable and recorded as a liability. During fiscal years 2016, 2015 and 2014, the company recorded environmental remediation costs of $3 million, $3 million and $5 million, respectively, with respect to these matters, resulting from revised estimates to remediate these sites.

Included in the company’s environmental liabilities are costs for on-going operation, maintenance and monitoring at environmental sites in which remediation has been put into place. This liability is discounted using discount rates in the range of 1 to 2.75 percent and is approximately $7 million at September 30, 2016. The undiscounted estimate of these costs is approximately $8 million.

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

	Superfund Sites		Non-Superfund Sites			Total
Balance at September 30, 2015	$	2	$	14		$	16
Payments and other	—		(6		)	(6		)
Accruals	—		3			3
Balance at September 30, 2016	$	2	$	11		$	13

There were $3 million, $2 million, and $2 million of environmental remediation costs recognized in other operating expense in the consolidated statement of operations in fiscal years 2016, 2015 and 2014, respectively. In addition, $4 million of environmental remediation costs was recorded in loss from discontinued operations in the consolidated statement of operations for fiscal year 2014.

Environmental reserves are included in Other Current Liabilities (see Note 14) and Other Liabilities (see Note 15) in the 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

Maremont Corporation (“Maremont”), a subsidiary of Meritor, manufactured friction products containing asbestos from 1953 through 1977, when it sold its friction product business. Arvin Industries, Inc., a predecessor of the company, acquired Maremont in 1986. Maremont and many other companies are defendants in suits brought by individuals claiming personal injuries as a result of exposure to asbestos-containing products. Maremont had approximately 5,800 and 5,600 pending asbestos-related claims at September 30, 2016 and 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):

	September 30,
	2016		2015
Pending and future claims	$	70	$	71
Billed but unpaid claims	2		3
Asbestos-related liabilities	$	72	$	74
Asbestos-related insurance recoveries	$	32	$	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 10, 12, 14 and 15).

Pending and Future Claims: Maremont 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. 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, 2016, 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 $70 million to $83 million. After consultation with Bates White, Maremont recognized a liability for pending and future claims over the next ten years of $70 million and $71 million as of September 30, 2016 and 2015, respectively. 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. Maremont recognized $2 million of expense and $2 million of income in fiscal years 2016 and 2015, respectively, associated with its annual valuation of asbestos-related liabilities and receivables. 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.

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 2026;

• 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 historically had insurance that reimburses a substantial portion of the costs incurred defending against asbestos-related claims. The insurance receivable related to asbestos-related liabilities was $32 million and $41 million as of September 30, 2016 and 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.

Maremont maintained insurance coverage with other insurance carriers that management believed also provided coverage for 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. During the first quarter of fiscal year 2016, the dispute related to these insurance policies was settled. As part of this settlement, on December 12, 2015, Maremont received $17 million in cash, 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. During the fourth quarter of fiscal year 2016, Maremont recognized an additional $9 million of the cash settlement proceeds as a reduction in asbestos expense. As of September 30, 2016, $3 million remained recorded as a liability to the insurance carrier. The settlement also provides additional recovery for Maremont if certain future defense and indemnity 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 firm, jurisdiction and disease; 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 September 30, 2016 and 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):

	September 30,
	2016		2015
Pending and future claims	$	60	$	55
Billed but unpaid claims	1		3
Asbestos-related liabilities	$	61	$	58
Asbestos-related insurance recoveries	$	27	$	14

Pending and Future Claims: The company 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. As of September 30, 2016, 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 $60 million to $75 million. After consultation with Bates White, management recognized a liability for pending and future claims over the next ten years of $60 million as of September 30, 2016 compared to $55 million as of 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. The increase in the estimated liability is primarily due to higher settlement values, compared to the prior year. AM recognized a $2 million and $4 million charge in the fourth quarter of fiscal years 2016 and 2015, respectively, associated with its annual valuation of asbestos-related liabilities and receivables.

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 2026;

• 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 declines 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: Rockwell has insurance coverage that management believes covers indemnity and defense costs, over and above self-insurance retentions, for a significant portion of these claims. In 2004, the company initiated litigation against certain of these carriers to enforce the insurance policies. During the fourth quarter of fiscal year 2016, the company executed settlement agreements with two of these carriers, thereby resolving the litigation against those particular carriers. Pursuant to the terms of one of those settlement agreements, the company received $32 million in cash from an insurer, of which $10 million was recognized as a reduction in asbestos expense, and $22 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 ultimately incurred. Pursuant to the terms of a second settlement agreement, the company recorded a $12 million receivable to reflect expected reimbursement of future defense and indemnity payments under a coverage-in-place arrangement with that insurer. In addition to the coverage provided from the settlements executed during the fourth quarter of fiscal year 2016, the company continues to maintain a receivable of $6 million related to a previously executed coverage-in-place arrangement with other insurers. The insurance receivables for Rockwell’s asbestos-related liabilities totaled $27 million and $14 million as of September 30, 2016 and 2015, respectively. Included in these amounts are insurance receivables of $9 million at both September 30, 2016 and 2015, which are associated with policies in dispute. Although the company continues to pursue litigation and believes it has insurance coverage, the collection of the $9 million has become doubtful; therefore, in the fourth quarter of fiscal year 2016, the company recorded a $9 million reserve.

Also, during the third quarter of fiscal year 2016, the company reached a settlement relating to certain proofs of claim filed under certain insurance policies with an insolvent insurer for $6 million (the "allowed claim"). On June 17, 2016, the company entered into an assignment of claim (“Assignment”) with a third party to assign the allowed claim the company had against the insolvent insurer. The Assignment was approved by the liquidator, which resulted in the receipt by the company of $3 million and was recognized as a reduction of selling, general and administrative expenses in the consolidated statement of operations in the third quarter of fiscal year 2016.

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

Indemnifications

The company has provided 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 September 30, 2016 and September 30, 2015, the remaining estimated liability for this matter was approximately $11 million and $13 million, respectively.

On January 3, 2011, the company completed the sale of its Body Systems business. The sale agreement contains certain customary representations, warranties and covenants of the seller and the purchaser. The agreement also includes provisions governing post-closing indemnities between the seller and the purchaser for losses arising from specified events. At September 30, 2014, the company had an accrual of $6 million for such indemnities, of which $2 million was for a contingency-related income tax matter, which was included in other liabilities in the accompanying consolidated balance sheet. In the second quarter of fiscal year 2015, the company settled all remaining matters related to the Body Systems business and recorded a net gain, after tax in discontinued operations of $6 million.

In connection with the sale of its interest in MSSC in October 2009, the company provided certain indemnifications 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. The company's estimated exposure under these indemnities at September 30, 2016 and September 30, 2015 was approximately $1 million and $2 million, respectively, and is included in other liabilities in the 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 may have been required to be remitted to certain tax jurisdictions for tax years 2009 through 2016. At both September 30, 2016 and September 30, 2015, the company’s estimate of the probable liability to settle the audit was $10 million.

On June 24, 2014, the company filed a complaint in the Circuit Court for Oakland County, Michigan against a supplier alleging that certain bearings supplied by the supplier for TL Trailer Axles were faulty, and as a result, the company suffered product liability damages and expenses with respect to vehicle recalls. On May 13, 2016, the company entered into a settlement agreement with the supplier pursuant to which the company received approximately $6 million and was recognized as a reduction of selling, general and administrative expenses in the consolidated statement of operations in the third quarter of fiscal year 2016. The settlement does not relieve the company of its current liability for past or future claims related to TL Axles. The company has the right to seek future indemnification from the supplier with respect to any currently unasserted claims.

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 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 2016, 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. In September 2016, the company filed a motion to dismiss. The company intends to defend itself vigorously against these claims. The company believes at this time that liabilities associated with this case, while possible, are not probable, and therefore has not recorded any accrual for them as of September 30, 2016. Further, any possible range of loss cannot be reasonably estimated at this time.

In April 2016, the company was served with several complaints filed against the company and other defendants in the United States District Court for the Northern District of Mississippi. The complaints were amended in July 2016. These complaints allege damages, including diminution of property value, concealment/fraud and emotional distress resulting from alleged environmental pollution in and around a neighborhood in Grenada, Mississippi. Rockwell owned and operated a facility near the neighborhood from 1965 to 1985. The company filed answers to the complaints in July 2016 and intends to defend itself vigorously against these claims. The company believes at this time that liabilities associated with this case, while possible, are not probable, and therefore has not recorded any accrual for them as of September 30, 2016. Further, any possible range of loss cannot be reasonably estimated at this time.

In addition, various lawsuits, claims and proceedings, other than those specifically disclosed in the 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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BUSINESS SEGMENT INFORMATION

12 Months Ended

Sep. 30, 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 has three operating segments, America's Commercial Truck and Industrial, International Commercial Truck and Industrial, and Aftermarket and Trailer. America's Commercial Truck and Industrial and International Commercial Truck and Industrial are aggregated into one reportable segment, Commercial Truck and Industrial. The company’s Chief Operating Decision Maker (CODM) is the Chief Executive Officer.

      The two reportable segments at September 30, 2016, are 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 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		Elims			Total
Fiscal year 2016 Sales:
External Sales	$	2,369	$	830	$	—		$	3,199
Intersegment Sales	76		30		(106		)	—
Total Sales	$	2,445	$	860	$	(106	)	$	3,199
Fiscal year 2015 Sales:
External Sales	$	2,649	$	856	$	—		$	3,505
Intersegment Sales	90		28		(118		)	—
Total Sales	$	2,739	$	884	$	(118	)	$	3,505
Fiscal year 2014 Sales:
External Sales	$	2,876	$	890	$	—		$	3,766
Intersegment Sales	104		30		(134		)	—
Total Sales	$	2,980	$	920	$	(134	)	$	3,766

Segment EBITDA:	2016			2015			2014
Commercial Truck & Industrial	$	208		$	216		$	218
Aftermarket & Trailer	115			123			106
Segment EBITDA	323			339			324
Unallocated legacy and corporate income (expense), net (1)	4			(5		)	(10		)
Interest expense, net	(84		)	(105		)	(130		)
Benefit (provision) for income taxes	424			(1		)	(31		)
Depreciation and amortization	(67		)	(65		)	(67		)
Loss on sale of receivables	(5		)	(5		)	(8		)
Restructuring costs	(16		)	(16		)	(10		)
Antitrust settlement with Eaton, net of tax (2)	—			—			208
Reduction of specific warranty contingency, net of supplier recovery	—			—			8
Pension settlement losses	—			(59		)	—
Goodwill and asset impairment charges	—			(17		)	—
Noncontrolling interests	(2		)	(1		)	(5		)
Income from continuing operations attributable to Meritor, Inc.	$	577		$	65		$	279

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

(2) Adjustment associated with the company's share of the antitrust settlement with Eaton less legal expenses incurred in fiscal year 2014.

Depreciation and Amortization:	2016			2015			2014
Commercial Truck & Industrial	$	59		$	59		$	61
Aftermarket & Trailer	8			6			6
Total depreciation and amortization	$	67		$	65		$	67
Capital Expenditures:	2016			2015			2014
Commercial Truck & Industrial	$	83		$	71		$	71
Aftermarket & Trailer	10			8			6
Total capital expenditures	$	93		$	79		$	77
Segment Assets:	2016			2015
Commercial Truck & Industrial	$	1,433		$	1,569
Aftermarket & Trailer	436			448
Total segment assets	1,869			2,017
Corporate (1)	845			434
Less: Accounts receivable sold under off-balance sheet factoring programs	(220		)	(256		)
Total assets	$	2,494		$	2,195

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

Sales by geographic area are based on the location of the selling unit. Information on the company’s geographic areas is summarized as follows (in millions): 

Sales by Geographic Area:
	2016		2015		2014
U.S.	$	1,617	$	1,733	$	1,466
Canada	67		70		68
Mexico	390		491		652
Total North America	2,074		2,294		2,186
Sweden	250		325		369
Italy	201		204		234
United Kingdom	136		76		82
Other Europe	86		90		111
Total Europe	673		695		796
Brazil	130		198		408
China	84		90		146
India	152		140		114
Other Asia-Pacific	86		88		116
Total sales	$	3,199	$	3,505	$	3,766

Assets by Geographic Area:
	2016		2015
U.S.	$	1,359	$	995
Canada	33		30
Mexico	202		236
Total North America	1,594		1,261
Sweden	104		108
United Kingdom	212		211
Italy	65		77
Other Europe	164		176
Total Europe	545		572
Brazil	146		136
China	97		118
Other Asia-Pacific	112		108
Total	$	2,494	$	2,195

Sales to AB Volvo represented approximately 23 percent, 24 percent and 27 percent of the company’s sales in each of fiscal years 2016, 2015 and 2014, respectively. Sales to Daimler AG represented approximately 18 percent, 20 percent and 18 percent of the company’s sales in fiscal years 2016, 2015 and 2014, respectively. Sales to Navistar International Corporation represented approximately 9 percent, 11 percent and 12 percent of the company's sales in each of fiscal years 2016, 2015 and 2014, respectively. No other customer comprised 10 percent or more of the company’s total sales in any of the three fiscal years ended September 30, 2016.

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QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

12 Months Ended

Sep. 30, 2016

Quarterly Financial Information Disclosure [Abstract]

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following is a condensed summary of the company’s unaudited quarterly results of continuing operations for fiscal years 2016 and 2015. Per share amounts are based on the weighted average shares outstanding for that quarter. Earnings per share for the year may not equal the sum of the four fiscal quarters’ earnings per share due to changes in basic and diluted shares outstanding.

	2016 Fiscal Quarters (Unaudited)
	First			Second			Third			Fourth			2016
	(In millions, except share related data)
Sales	$	809		$	821		$	841		$	728		$	3,199
Cost of sales	(705		)	(700		)	(714		)	(644		)	(2,763		)
Gross margin	104			121			127			84			436
Benefit (provision) for income taxes	(7		)	(7		)	(8		)	446			424
Net income	27			32			42			474			575
Net income from continuing operations attributable to Meritor, Inc.	28			33			42			474			577
Net income attributable to Meritor, Inc.	26			32			41			474			573
Basic earnings per share from continuing operations	$	0.30		$	0.36		$	0.47		$	5.47		$	6.40
Diluted earnings per share from continuing operations	$	0.30		$	0.36		$	0.46		$	5.34		$	6.27

The company recognized restructuring costs in its continuing operations during fiscal year 2016 as follows: $1 million in the first quarter, $2 million in the second quarter, $6 million in the third quarter and $7 million in the fourth quarter (see Note 5). During the fourth quarter of fiscal year 2016, the company recognized a $438 million tax benefit from the partial reversal of the U.S. valuation allowance and a $25 million income tax benefit related to other correlated tax relief, which were partially offset by a $9 million non-cash charge to income tax expense in Brazil related to the establishment of a valuation allowance (see Note 22). Also in the fourth quarter of fiscal year 2016, the company recognized $31 million as reduction in asbestos expense due to settlement agreements (see Note 23).

	2015 Fiscal Quarters (Unaudited)
	First			Second			Third			Fourth			2015
	(In millions, except share related data)
Sales	$	879		$	864		$	909		$	853		$	3,505
Cost of sales	(764		)	(749		)	(785		)	(745		)	(3,043		)
Gross margin	115			115			124			108			462
Benefit (provision) for income taxes	(7		)	(6		)	(6		)	18			(1		)
Net income (loss)	30			43			14			(22		)	65
Net income (loss) from continuing operations attributable to Meritor, Inc.	32			39			15			(21		)	65
Net income (loss) attributable to Meritor, Inc.	29			43			13			(21		)	64
Basic earnings (loss) per share from continuing operations	$	0.33		$	0.40		$	0.15		$	(0.22	)	$	0.67
Diluted earnings (loss) per share from continuing operations	$	0.32		$	0.38		$	0.15		$	(0.22	)	$	0.65

The company recognized restructuring costs in its continuing operations during fiscal year 2015 as follows: $3 million in the first quarter, $3 million in the second quarter, $9 million in the third quarter and $1 million in the fourth quarter (see Note 5). During the fourth quarter of fiscal year 2015, the company settled the remaining liabilities associated with its German and Canadian pension plans and recognized a pre-tax settlement loss of $59 million associated with the annuity purchases and lump-sum payments (see Note 21). During the fourth quarter of fiscal year 2015 the company recorded an impairment of $15 million of goodwill (see Note 4). In addition, the company recorded an impairment of $2 million of long-lived assets in the fourth quarter of fiscal year 2015 (see Note 11). During the fourth quarter of fiscal year 2015, as a result of sustained profitability in Germany, Italy, Mexico and Sweden evidenced by a strong earnings history and additional positive evidence, the company determined it was more likely than not future earnings would be sufficient to realize deferred tax assets in these jurisdictions. Accordingly, the company reversed valuation allowances in Germany, Italy, Mexico, and Sweden, resulting in non-cash income tax benefits of $16 million.

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OPERATING CASH FLOWS AND OTHER SUPPLEMENTAL FINANCIAL INFORMATION

12 Months Ended

Sep. 30, 2016

Operating Cash Flow Disclosure [Abstract]

OPERATING CASH FLOWS AND OTHER SUPPLEMENTAL FINANCIAL INFORMATION

OPERATING CASH FLOWS AND OTHER SUPPLEMENTAL FINANCIAL INFORMATION

	Year Ended September 30,
	2016			2015			2014
	(in millions)
OPERATING ACTIVITIES
Net income	$	575		$	65		$	254
Less: Loss from discontinued operations, net of tax	(4		)	(1		)	(30		)
Income from continuing operations	579			66			284
Adjustments to income from continuing operations to arrive at cash provided by (used for) operating activities:
Depreciation and amortization	67			65			67
Deferred income tax benefit	(415		)	(24		)	(2		)
Restructuring costs	16			16			10
Loss on debt extinguishment	—			25			31
Goodwill and asset impairment	—			17			—
Equity in earnings of ZF Meritor	—			—			(190		)
Equity in earnings of other affiliates	(36		)	(39		)	(38		)
Stock compensation expense	9			10			8
Provision for doubtful accounts	2			2			—
Pension and retiree medical expense	20			82			25
Gain on sale of property	(2		)	(3		)	—
Dividends received from ZF Meritor	—			—			190
Dividends received from other equity method investments	37			32			36
Pension and retiree medical contributions	(42		)	(141		)	(177		)
Restructuring payments	(11		)	(16		)	(10		)
Changes in off-balance sheet receivable securitization and factoring programs	(31		)	39			(46		)
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, foreign currency adjustments and discontinued operations:
Receivables	89			54			34
Inventories	28			4			(9		)
Accounts payable	(89		)	(70		)	(5		)
Other current assets and liabilities	(18		)	(52		)	19
Other assets and liabilities	6			40			—
Operating cash flows provided by continuing operations	209			107			227
Operating cash flows used for discontinued operations	(5		)	(10		)	(12		)
CASH PROVIDED BY OPERATING ACTIVITIES	$	204		$	97		$	215

	September 30,
	2016			2015			2014
	(In millions)
Balance sheet data:
Allowance for doubtful accounts	$	6		$	9		$	6
Statement of operations data:
Maintenance and repairs expense	45			52			59
Research, development and engineering expense	68			69			71
Depreciation expense	61			60			62
Rental expense	15			11			16
Interest income	3			9			2
Interest expense	(87		)	(114		)	(132		)
Statement of cash flows data:
Interest payments	71			64			84
Income tax payments, net of refunds	24			14			26
Non-cash investing activities - capital asset additions from capital leases	—			9			5

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SUPPLEMENTAL PARENT AND GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

12 Months Ended

Sep. 30, 2016

Supplemental Guarantor Condensed Consolidating Financial Statements [Abstract]

SUPPLEMENTAL PARENT AND GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

SUPPLEMENTAL PARENT AND GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

Article 3-10 of Regulation S-X (S-X Rule 3-10) requires that separate financial information for issuers and guarantors of registered securities be filed in certain circumstances. Certain of the company's 100% 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 publicly-held notes outstanding under the company's indentures (see Note 16).

Schedule I of Article 5-04 of Regulation S-X (S-X Rule 5-04) requires that condensed financial information of the registrant (Parent) 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. As of September 30, 2016, net assets that exceed 25 percent of the consolidated net assets of Meritor, Inc. of certain subsidiaries in China and India and certain unconsolidated subsidiaries are restricted by law from transfer by cash dividends, loans or advances to Meritor, Inc. As of September 30, 2016 the amount of the net assets restricted from transfer by law was $36 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 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 Guarantor subsidiaries are combined in the condensed consolidated financial statements.

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (In millions)
	Fiscal Year Ended September 30, 2016
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,616		$	1,583		$	—		$	3,199
Subsidiaries	—			112			61			(173		)	—
Total sales	—			1,728			1,644			(173		)	3,199
Cost of sales	(57		)	(1,439		)	(1,440		)	173			(2,763		)
GROSS MARGIN	(57		)	289			204			—			436
Selling, general and administrative	(64		)	(75		)	(74		)	—			(213		)
Restructuring costs	(7		)	(4		)	(5		)	—			(16		)
Other operating expense, net	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(131		)	210			125			—			204
Other income (expense), net	34			(35		)	—			—			(1		)
Equity in earnings of affiliates	—			32			4			—			36
Interest income (expense), net	(117		)	27			6			—			(84		)
INCOME (LOSS) BEFORE INCOME TAXES	(214		)	234			135			—			155
Benefit (provision) for income taxes	526			(88		)	(14		)	—			424
Equity income from continuing operations of subsidiaries	265			106			—			(371		)	—
INCOME FROM CONTINUING OPERATIONS	577			252			121			(371		)	579
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(4		)	(4		)	(2		)	6			(4		)
NET INCOME	573			248			119			(365		)	575
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	573		$	248		$	117		$	(365	)	$	573

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) (In millions)
	Fiscal Year Ended September 30, 2016
	Parent			Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	573		$	248	$	119		$	(365	)	$	575
Other comprehensive income (loss)	(43		)	55		(44		)	(11		)	(43		)
Total comprehensive income	530			303		75			(376		)	532
Less: Comprehensive income attributable to noncontrolling interests	—			—		(2		)	—			(2		)
Comprehensive income attributable to Meritor, Inc.	$	530		$	303	$	73		$	(376	)	$	530

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (In millions)
	Fiscal Year Ended September 30, 2015
	Parent			Guarantors			Non-Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,734		$	1,771		$	—		$	3,505
Subsidiaries	—			129			71			(200		)	—
Total sales	—			1,863			1,842			(200		)	3,505
Cost of sales	(52		)	(1,579		)	(1,612		)	200			(3,043		)
GROSS MARGIN	(52		)	284			230			—			462
Selling, general and administrative	(53		)	(118		)	(72		)	—			(243		)
Pension settlement losses	—			—			(59		)	—			(59		)
Restructuring costs	(2		)	(5		)	(9		)	—			(16		)
Goodwill impairment	—			(15		)	—			—			(15		)
Other operating income (expense), net	(2		)	(2		)	3			—			(1		)
OPERATING INCOME (LOSS)	(109		)	144			93			—			128
Other income (expense), net	36			18			(49		)	—			5
Equity in earnings of affiliates	—			36			3			—			39
Interest income (expense), net	(138		)	26			7			—			(105		)
INCOME (LOSS) BEFORE INCOME TAXES	(211		)	224			54			—			67
Provision for income taxes	(2		)	2			(1		)	—			(1		)
Equity income from continuing operations of subsidiaries	278			38			—			(316		)	—
INCOME FROM CONTINUING OPERATIONS	65			264			53			(316		)	66
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	(2		)	(3		)	5			(1		)
NET INCOME	64			262			50			(311		)	65
Less: Net income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	64		$	262		$	49		$	(311	)	$	64

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) (In millions)
	Fiscal Year Ended September 30, 2015
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	64		$	262		$	50		$	(311	)	$	65
Other comprehensive loss	(19		)	(61		)	(16		)	77			(19		)
Total comprehensive income	45			201			34			(234		)	46
Less: Comprehensive income attributable to noncontrolling interests	2			—			(1		)	—			1
Comprehensive income attributable to Meritor, Inc.	$	47		$	201		$	33		$	(234	)	$	47

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (In millions)
	Fiscal Year Ended September 30, 2014
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,467		$	2,299		$	—		$	3,766
Subsidiaries	—			142			62			(204		)	—
Total sales	—			1,609			2,361			(204		)	3,766
Cost of sales	(56		)	(1,343		)	(2,084		)	204			(3,279		)
GROSS MARGIN	(56		)	266			277			—			487
Selling, general and administrative	(65		)	(102		)	(91		)	—			(258		)
Restructuring costs	—			(1		)	(9		)	—			(10		)
Other operating expense, net	(1		)	(1		)	—			—			(2		)
OPERATING INCOME (LOSS)	(122		)	162			177			—			217
Other income (expense), net	35			23			(58		)	—			—
Equity in earnings of ZF Meritor	—			190			—			—			190
Equity in earnings of affiliates	—			30			8			—			38
Interest income (expense), net	(159		)	35			(6		)	—			(130		)
INCOME (LOSS) BEFORE INCOME TAXES	(246		)	440			121			—			315
Provision for income taxes	—			(1		)	(30		)	—			(31		)
Equity income from continuing operations of subsidiaries	525			71			—			(596		)	—
INCOME FROM CONTINUING OPERATIONS	279			510			91			(596		)	284
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(30		)	(31		)	(12		)	43			(30		)
NET INCOME	249			479			79			(553		)	254
Less: Net income attributable to noncontrolling interests	—			—			(5		)	—			(5		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	249		$	479		$	74		$	(553	)	$	249

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) (In millions)
	Fiscal Year Ended September 30, 2014
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income (loss)	$	249		$	479		$	79		$	(553	)	$	254
Other comprehensive income (loss)	(15		)	(54		)	25			29			(15		)
Total comprehensive income	234			425			104			(524		)	239
Less: Comprehensive income attributable to noncontrolling interests	—			—			(5		)	—			(5		)
Comprehensive income attributable to Meritor, Inc.	$	234		$	425		$	99		$	(524	)	$	234

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING BALANCE SHEET (In millions)
	September 30, 2016
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS
Cash and cash equivalents	$	90		$	4		$	66	$	—		$	160
Receivables, trade and other, net	1			39			356		—			396
Inventories	—			143			173		—			316
Other current assets	5			12			16		—			33
TOTAL CURRENT ASSETS	96			198			611		—			905
NET PROPERTY	22			198			219		—			439
GOODWILL	—			219			171		—			390
OTHER ASSETS	447			132			181		—			760
INVESTMENTS IN SUBSIDIARIES	2,575			679			—		(3,254		)	—
TOTAL ASSETS	$	3,140		$	1,426		$	1,182	$	(3,254	)	$	2,494
CURRENT LIABILITIES
Short-term debt	$	1		$	4		$	9	$	—		$	14
Accounts and notes payable	42			172			261		—			475
Other current liabilities	90			74			104		—			268
TOTAL CURRENT LIABILITIES	133			250			374		—			757
LONG-TERM DEBT	971			3			8		—			982
RETIREMENT BENEFITS	680			—			23		—			703
INTERCOMPANY PAYABLE (RECEIVABLE)	1,534			(1,768		)	234		—			—
OTHER LIABILITIES	34			162			42		—			238
EQUITY (DEFICIT) ATTRIBUTABLE TO        MERITOR, INC.	(212		)	2,779			476		(3,254		)	(211		)
NONCONTROLLING INTERESTS	—			—			25		—			25
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	3,140		$	1,426		$	1,182	$	(3,254	)	$	2,494

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING BALANCE SHEET (In millions)
	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

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (In millions)
	Fiscal Year Ended September 30, 2016
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	196		$	40		$	(32	)	$	—	$	204
INVESTING ACTIVITIES
Capital expenditures	(19		)	(43		)	(31		)	—		(93		)
Proceeds from sale of property	—			4			—			—		4
Other investing activities	—			—			(1		)	—		(1		)
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(19		)	(38		)	(29		)	—		(86		)
FINANCING ACTIVITIES
Repayment of notes and term loan	(55		)	—			—			—		(55		)
Other financing cash flows	(1		)	(4		)	(11		)	—		(16		)
Repurchase of common stock	(81		)	—			—			—		(81		)
Intercompany advances	(23		)	—			23			—		—
CASH USED FOR FINANCING ACTIVITIES	(160		)	(4		)	12			—		(152		)
EFFECT OF CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	17			(2		)	(48		)	—		(33		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	73			6			114			—		193
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	90		$	4		$	66		$	—	$	160

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (In millions)
	Fiscal Year Ended September 30, 2015
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	57		$	62		$	(22	)	$	—	$	97
INVESTING ACTIVITIES
Capital expenditures	(4		)	(41		)	(34		)	—		(79		)
Proceeds from sale of property	—			—			4			—		4
Cash paid for acquisition of Morganton	—			(16		)	—			—		(16		)
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(4		)	(56		)	(27		)	—		(87		)
FINANCING ACTIVITIES
Proceeds from debt issuance	225			—			—			—		225
Repayment of notes and term loan	(199		)	—			—			—		(199		)
Other financing cash flows	—			(5		)	(4		)	—		(9		)
Repurchase of common stock	(55		)	—			—			—		(55		)
Debt issuance costs	(4		)	—			—			—		(4		)
CASH USED FOR FINANCING ACTIVITIES	(33		)	(5		)	(4		)	—		(42		)
EFFECT OF CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			(22		)	—		(22		)
CHANGE IN CASH AND CASH EQUIVALENTS	2			1			(57		)	—		(54		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	71			5			171			—		247
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	73		$	6		$	114		$	—	$	193

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (In millions)
	Fiscal Year Ended September 30, 2014
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	245		$	34		$	(64	)	$	—	$	215
INVESTING ACTIVITIES
Capital expenditures	(4		)	(37		)	(36		)	—		(77		)
Net investing cash flows provided by discontinued operations	—			4			3			—		7
CASH USED FOR INVESTING ACTIVITIES	(4		)	(33		)	(33		)	—		(70		)
FINANCING ACTIVITIES
Proceeds from debt issuance	225			—			—			—		225
Repayment of notes and term loan	(439		)	—			—			—		(439		)
Debt issuance costs	(10		)	—			—			—		(10		)
Other financing cash flows	—			(2		)	14			—		12
Intercompany advances	(90		)	—			90			—		—
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(314		)	(2		)	104			—		(212		)
EFFECT OF CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			(4		)	—		(4		)
CHANGE IN CASH AND CASH EQUIVALENTS	(73		)	(1		)	3			—		(71		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	144			6			168			—		318
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	71		$	5		$	171		$	—	$	247

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 SEC. As of September 30, 2016 and 2015, parent company only obligations included $708 million and $631 million, respectively, of pension and retiree medical benefits (see Notes 20 and 21). All debt is debt of the parent company other than $24 million and $33 million at September 30, 2016, and 2015 respectively (see Note 16) and is primarily related to capital lease obligations and lines of credit. Cash dividends paid to the parent by subsidiaries and investments accounted for by the equity method were $25 million, $37 million, $5 million for 2016, 2015, and 2014, respectively.

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) requires the use of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses and related disclosures. Actual results could differ from these estimates. Significant estimates and assumptions were used to review goodwill and other long-lived assets for impairment (see Notes 4 and 11), costs associated with the company’s restructuring actions (see Note 5), product warranty liabilities (see Note 14), long-term incentive compensation plan obligations (see Note 19), retiree medical and pension obligations (see Notes 20 and 21), income taxes (see Note 22), and contingencies including asbestos (see Note 23).

Concentration of Credit Risk

Concentration of Credit Risk

In the normal course of business, the company provides credit to customers. The company limits its credit risk by performing ongoing credit evaluations of its customers and maintaining reserves for potential credit losses and through accounts receivable factoring programs. The company’s accounts receivables are generally due from medium- and heavy-duty truck OEMs, specialty vehicle manufacturers, aftermarket customers, and trailer producers.

Consolidation and Joint Ventures

Consolidation and Joint Ventures

The consolidated financial statements include the accounts of the company and those subsidiaries in which the company has control. All intercompany balances and transactions are eliminated in consolidation. The results of operations of controlled subsidiaries are included in the consolidated financial statements and are offset by a related noncontrolling interest recorded for the noncontrolling partners’ ownership. Investments in affiliates that are not controlled or majority-owned are reported using the equity method of accounting (see Note 13).

Foreign Currency

Foreign Currency

Local currencies are generally considered the functional currencies for operations outside the U.S. For operations reporting in local currencies, assets and liabilities are translated at year-end exchange rates with cumulative currency translation adjustments included as a component of Accumulated Other Comprehensive Loss in the consolidated balance sheet. Income and expense items are translated at average rates of exchange during the year.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Long-lived assets, excluding goodwill, to be held and used are reviewed for impairment whenever adverse events or changes in circumstances indicate a possible impairment. An impairment loss is recognized when a long-lived asset’s carrying value exceeds the fair value.

Long-lived assets held for sale are recorded at the lower of their carrying amount or estimated fair value less cost to sell.

Discontinued Operations

Discontinued Operations

A business component that either has been disposed of or is classified as held for sale is reported as discontinued operations if the cash flows of the component have been or will be eliminated from the ongoing operations of the company, and the company will no longer have any significant continuing involvement in the business component. The results of discontinued operations are aggregated and presented separately in the consolidated statement of operations and consolidated statement of cash flows (see Note 3).

Revenue Recognition

Revenue Recognition

Revenues are recognized upon shipment of product and transfer of ownership to the customer. Provisions for customer sales allowances and incentives are recorded as a reduction of sales at the time of product shipment.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

An allowance for uncollectible trade receivables is recorded when accounts are deemed uncollectible based on consideration of write-off history, aging analysis, and any specific, known troubled accounts.

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 awards, and convertible securities, if applicable.

Other

Other

Other significant accounting policies are included in the related notes, specifically, goodwill (Note 4), inventories (Note 9), property and depreciation (Note 11), capitalized software (Note 12), product warranties (Note 14), financial instruments (Note 17), equity based compensation (Note 19), retirement medical plans (Note 20), retirement pension plans (Note 21), income taxes (Note 22) and environmental and asbestos-related liabilities (Note 23).

Accounting Standards to be Implemented and Implemented in Fiscal Year 2014

Accounting standards to be implemented

In October 2016, the FASB issued Accounting Standards Update (ASU) 2016-17, Consolidation (Topic 810): Interests held through Related Parties that are under Common Control, which alters how a decision maker needs to consider indirect interests in a variable interest entity (VIE) held through an entity under common control. Under the ASU, if a decision maker is required to evaluate whether it is the primary beneficiary of a VIE, it will need to consider only its proportionate indirect interest in the VIE held through a common control party. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements and does not expect a material impact upon adoption.

In October 2016, the FASB issued ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. The ASU was issued to remove the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. The amendments in this update are effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted however the guidance can only be adopted in the first interim period of a fiscal year. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force). The ASU was issued to reduce differences in practice with respect to how specific transactions are classified in the statement of cash flows. The update provides guidance on the following eight types of transactions: debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investments, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. The amendments in this update are effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

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

In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The ASU clarifies the assessment of the likelihood that revenue will be collected from a contract, the guidance for presenting sales taxes and similar taxes, and the timing for measuring customer payments that are not in cash. The ASU also establishes a practical expedient for contract modifications at the transition. 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 2016-12 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 May 2016, the FASB issued ASU 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting (SEC Update). The ASU was issued to remove from the Codification certain SEC staff guidance that the SEC staff stated would be rescinded: Revenue and Expense Recognition for Freight Services in Process; Accounting for Shipping and Handling Fees and Costs; and Accounting for Consideration Given by a Vendor to a Customer (including a Reseller of the Vendor’s Products). 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 2016-11 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 April, 2016, the FASB issued 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, including accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The standard is required to be adopted by public business entities in fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. 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 years beginning after December 15, 2016, including interim periods within those fiscal years. 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 years beginning after December 15, 2016, including interim periods within those fiscal years. 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 years beginning after December 15, 2016, including interim years 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 years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The company plans to implement this standard in the first quarter of the fiscal year beginning October 1, 2019 and is currently assessing the potential impact of this 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 years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

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 years beginning after December 15, 2016, including interim periods within those fiscal years. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

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 annual period ending after December 15, 2016 and for annual periods and interim periods thereafter. 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 does not expect a material impact on its consolidated financial statements from adoption of this guidance.

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 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 non-current amounts in a classified balance sheet. Deferred taxes are 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 implemented this guidance on a prospective basis in the fourth quarter of fiscal year 2016. Prior periods were not retrospectively adjusted. The impact as of September 30, 2016 was a reclassification between current and non-current deferred tax assets of $17 million.

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 years beginning after December 15, 2015, including interim periods within those fiscal years. Early adoption is permitted. The company adopted this standard in the first quarter of 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)

Net Property

Property is stated at cost. Depreciation of property is based on estimated useful lives, generally using the straight-line method. Estimated useful lives for buildings and improvements range from 10 to 50 years and estimated useful lives for machinery and equipment range from 3 to 20 years. Significant improvements are capitalized, and disposed or replaced property is written off. Maintenance and repairs are charged to expense in the period they are incurred. Company-owned tooling is classified as property and depreciated over the shorter of its expected life or the life of the production contract, generally not to exceed three years.

In accordance with the FASB guidance on property, plant and equipment, the company reviews the carrying value of long-lived assets, excluding goodwill, to be held and used, for impairment whenever events or changes in circumstances indicate a possible impairment. An impairment loss is recognized when a long-lived asset’s carrying value is not recoverable and exceeds estimated fair value.

Product Warranty

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 relationship 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.

Environmental Costs

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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SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Schedule of Reconciliation of Basic Average Common Shares Outstanding to Diluted Average Common Shares Outstanding

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

	YearEnded September 30,
	2016	2015	2014
Basic average common shares outstanding	90.1	96.9	97.5
Impact of stock options	—	0.1	0.1
Impact of restricted shares, restricted share units and performance share units	1.9	2.0	1.6
Impact of convertible notes	—	1.1	—
Diluted average common shares outstanding	92.0	100.1	99.2

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DISCONTINUED OPERATIONS (Tables)

12 Months Ended

Sep. 30, 2016

Discontinued Operations and Disposal Groups [Abstract]

Summary of discontinued operations

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

	Year Ended September 30,
	2016			2015			2014
Sales	$	—		$	1		$	29
Operating losses, net	$	—		$	—		$	(8	)
Net loss on sales of businesses	—			—			(23		)
Environmental remediation charges (see Note 23)	—			—			(4		)
Litigation settlement	(3		)	—			—
Other, net	(4		)	(2		)	(2		)
Loss before income taxes	(7		)	(2		)	(37		)
Benefit for income taxes	3			1			7
Loss from discontinued operations attributable to Meritor, Inc.	$	(4	)	$	(1	)	$	(30	)

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GOODWILL (Tables)

12 Months Ended

Sep. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of the Changes in the Carrying Value of Goodwill

A summary of the changes in the carrying value of goodwill is presented below (in millions):

	Commercial Truck & Industrial			Aftermarket & Trailer			Total
Balance at September 30, 2014	$	261		$	170		$	431
Impairment	(15		)	—			(15		)
Foreign currency translation	(7		)	(7		)	(14		)
Balance at September 30, 2015	239			163			402
Impairment	—			—			—
Foreign currency translation	(9		)	(3		)	(12		)
Balance at September 30, 2016	$	230		$	160		$	390

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RESTRUCTURING COSTS (Tables)

12 Months Ended

Sep. 30, 2016

Restructuring and Related Activities [Abstract]

Schedule of Changes in Restructuring Reserves

The following table summarizes changes in restructuring reserves (in millions):

	Employee Termination Benefits			Asset Impairment			Plant Shutdown & Other		Total
Balance at September 30, 2013	$	12		$	—		$	—	$	12
Activity during the period:
Charges to continuing operations	10			—			—		10
Cash payments – continuing operations	(10		)	—			—		(10		)
Other	(1		)	—			—		(1		)
Balance at September 30, 2014	11			—			—		11
Activity during the period:
Charges to continuing operations	15			1			—		16
Asset write-offs	—			(1		)	—		(1		)
Cash payments – continuing operations	(16		)	—			—		(16		)
Balance at September 30, 2015	10			—			—		10
Activity during the period:
Charges to continuing operations	15			—			1		16
Cash payments – continuing operations	(11		)	—			—		(11		)
Other	1			—			—		1
Total restructuring reserves, end of year	15			—			1		16
Less: non-current restructuring reserves	(2		)	—			—		(2		)
Restructuring reserves – current, at September 30, 2016	$	13		$	—		$	1	$	14

Schedule of Restructuring Expense Recognized By Segment

Restructuring costs attributable to the company’s business segments during fiscal years 2016, 2015 and 2014 are as follows (in millions):

	Commercial Truck & Industrial		Aftermarket & Trailer		Corporate		Total
Fiscal year 2016:
Market related actions	$	5	$	1	$	2	$	8
Aftermarket actions	—		5		—		5
Other	1		2		—		3
Total restructuring costs	$	6	$	8	$	2	$	16
Fiscal year 2015:
South America labor reduction II	$	6	$	—	$	—	$	6
M2016 footprint actions	5		—		—		5
Closure of engineering facility	—		—		2		2
European labor reductions	2		—		—		2
Other	1		—		—		1
Total restructuring costs	$	14	$	—	$	2	$	16
Fiscal year 2014:
South America labor reduction I	$	7	$	—	$	—	$	7
Other	1		1		1		3
Total restructuring costs	$	8	$	1	$	1	$	10

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INVENTORIES (Tables)

12 Months Ended

Sep. 30, 2016

Inventory Disclosure [Abstract]

Schedule of Inventory

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):

	September 30,
	2016		2015
Finished goods	$	125	$	133
Work in process	26		28
Raw materials, parts and supplies	165		177
Total	$	316	$	338

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OTHER CURRENT ASSETS (Tables)

12 Months Ended

Sep. 30, 2016

Other Current Assets Disclosure [Abstract]

Schedule of Other Current Assets

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

	September 30,
	2016		2015
Current deferred income tax assets (see Note 22)	$	—	$	20
Asbestos-related recoveries (see Note 23)	10		13
Prepaid and other	23		17
Other current assets	$	33	$	50

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NET PROPERTY (Tables)

12 Months Ended

Sep. 30, 2016

Property, Plant and Equipment [Abstract]

Schedule of Net Property

Net property is summarized as follows (in millions):

	September 30,
	2016			2015
Property at cost:
Land and land improvements	$	30		$	31
Buildings	231			214
Machinery and equipment	839			864
Company-owned tooling	113			116
Construction in progress	56			62
Total	1,269			1,287
Less: accumulated depreciation	(830		)	(868		)
Net property	$	439		$	419

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OTHER ASSETS (Tables)

12 Months Ended

Sep. 30, 2016

Other Assets, Noncurrent [Abstract]

Schedule of Other Assets

Other assets are summarized as follows (in millions):

	September 30,
	2016		2015
Investments in non-consolidated joint ventures (see Note 13)	$	100	$	96
Asbestos-related recoveries (see Note 23)	49		42
Unamortized revolver debt issuance costs (see Note 16)	7		10
Capitalized software costs, net (1)	29		28
Non-current deferred income tax assets (see Note 22)	413		28
Assets for uncertain tax positions (see Note 22)	35		3
Prepaid pension costs (see Note 21)	123		110
Other	4		15
Other assets	$	760	$	332

(1) 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.

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INVESTMENTS IN NON-CONSOLIDATED JOINT VENTURES (Tables)

12 Months Ended

Sep. 30, 2016

Equity Method Investments and Joint Ventures [Abstract]

Schedule of Non-Consolidated Joint Ventures and Direct Ownership Interests

The company’s non-consolidated joint ventures and related direct ownership interest are as follows:

	September 30,
	2016		2015		2014
Meritor WABCO Vehicle Control Systems (Commercial Truck & Industrial)	50	%	50	%	50	%
Master Sistemas Automotivos Ltda. (Commercial Truck & Industrial)	49	%	49	%	49	%
Sistemas Automotrices de Mexico S.A. de C.V. (Commercial Truck & Industrial)	50	%	50	%	50	%
Ege Fren Sanayii ve Ticaret A.S. (Commercial Truck & Industrial)	49	%	49	%	49	%
Automotive Axles Limited (Commercial Truck & Industrial)	36	%	36	%	36	%
ZF Meritor LLC (Commercial Truck & Industrial)	—	%	—	%	50	%

Schedule Of Investments In Non-Consolidated Joint Ventures

The company’s investments in non-consolidated joint ventures are as follows (in millions): 

	September 30,
	2016		2015
Commercial Truck & Industrial	$	100	$	96
Aftermarket & Trailer	—		—
Total investments in non-consolidated joint ventures	$	100	$	96

Schedule of Equity in Earnings of Non-Consolidated Joint Ventures

The company’s equity in earnings of non-consolidated joint ventures is as follows (in millions): 

	Year Ended September 30,
	2016		2015		2014
Commercial Truck & Industrial	$	36	$	39	$	38
Aftermarket & Trailer	—		—		—
Total equity in earnings of affiliates	$	36	$	39	$	38

Summarized Balance Sheet Information Of Non-Consolidated Joint Ventures

The summarized financial information presented below represents the combined accounts of the company’s non-consolidated joint ventures related to its continuing operations (in millions):

	September 30,
	2016		2015
Current assets	$	337	$	393
Non-current assets	151		140
Total assets	$	488	$	533
Current liabilities	$	192	$	239
Non-current liabilities	103		111
Total liabilities	$	295	$	350

Summarized Income Statement Information Of Non-Consolidated Joint Ventures

	Year Ended September 30,
	2016		2015		2014
Sales	$	1,101	$	1,288	$	1,268
Gross profit	165		187		167
Net income	73		83		458

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OTHER CURRENT LIABILITIES (Tables)

12 Months Ended

Sep. 30, 2016

Other Current Liabilities Disclosure [Abstract]

Schedule Of Other Current Liabilities

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

	September 30,
	2016		2015
Compensation and benefits	$	115	$	122
Income taxes	8		9
Taxes other than income taxes	21		23
Accrued interest	14		14
Product warranties	18		22
Restructuring (see Note 5)	14		7
Asbestos-related liabilities (see Note 23)	18		17
Indemnity obligations (see Note 23)	2		2
Other	58		63
Other current liabilities	$	268	$	279

Schedule of Product Warranties

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

	September 30,
	2016			2015			2014
Total product warranties – beginning of year	$	48		$	51		$	57
Accruals for product warranties	10			15			22
Payments	(14		)	(18		)	(22		)
Change in estimates and other	—			—			(6		)
Total product warranties – end of year	44			48			51
Less: non-current product warranties (see Note 15)	(26		)	(26		)	(24		)
Product warranties – current	$	18		$	22		$	27

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OTHER LIABILITIES (Tables)

12 Months Ended

Sep. 30, 2016

Other Liabilities Disclosure [Abstract]

Schedule Of Other Liabilities

Other liabilities are summarized as follows (in millions):

	September 30,
	2016		2015
Asbestos-related liabilities (see Note 23)	$	136	$	109
Restructuring (see Note 5)	2		3
Non-current deferred income tax liabilities (see Note 22)	12		99
Liabilities for uncertain tax positions (see Note 22)	16		15
Product warranties (see Note 14)	26		26
Environmental (see Note 23)	6		8
Indemnity obligations (see Note 23)	11		13
Other	29		32
Other liabilities	$	238	$	305

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LONG-TERM DEBT (Tables)

12 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Schedule of long-term debt instruments

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

	September 30,
	2016			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)	129			127
6.75 percent notes due 2021(3)(6)	271			270
6.25 percent notes due 2024(3)(7)	442			442
Capital lease obligation	16			17
Export financing arrangements and other	10			18
Unamortized discount on convertible notes (8)	(14		)	(20		)
Subtotal	996			1,051
Less: current maturities	(14		)	(15		)
Long-term debt	$	982		$	1,036

⁽¹⁾ The 4.625 percent convertible notes contained a put and call feature, which allowed for earlier redemption beginning in 2016. As of June 30, 2016 all of these notes were redeemed.

⁽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 millionunamortized issuance costs as of September 30, 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 September 30, 2016 and September 30, 2015, respectively, and$9 millionand$10 million original issuance discount as of September 30, 2016 and September 30, 2015.

⁽⁶⁾ The 6.75 percent notes due 2021 are presented net of $4 million and $5 million unamortized issuance costs as of September 30, 2016 and September 30, 2015.

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

⁽⁸⁾ The carrying amount of the equity component related to convertible debt.

Debt instrument redemption summary

On or after June 15, 2016, the company may redeem, at its option, from time to time, the 2021 Notes, in whole or in part, at the redemption prices (expressed as percentages of the principal amount of the 2021 Notes to be redeemed) set forth below, plus accrued and unpaid interest, if any, if redeemed during the 12-month period beginning on June 15 of the years indicated below:

Year	Redemption Price
2016	105.063%
2017	103.375%
2018	101.688%
2019 and thereafter	100.000%

On or after February 15, 2019, the company may redeem, at its option, from time to time, the 2024 Notes, in whole or in part, at the redemption prices (expressed as percentages of the principal amount of the 2024 Notes to be redeemed) set forth below, plus accrued and unpaid interest, if any, if redeemed during the 12-month period beginning on February 15 of the years indicated below:

Year	Redemption Price
2019	103.125%
2020	102.083%
2021	101.042%
2022 and thereafter	100.000%

Schedule of principle and unamortized discount on convertible notes

The following table summarizes the principal amounts and related unamortized discount on all convertible notes (in millions):

	September 30, 2016			September 30, 2015
Principal amount of convertible notes	$	283		$	338
Unamortized discount on convertible notes	(23		)	(30		)
Net carrying value	$	260		$	308

Summary of convertible notes

The following table summarizes other information related to the convertible notes:

	Convertible Notes
		2027		2013
Total amortization period for debt discount (in years):		12		8
Remaining amortization period for debt discount (in years):		3		4
Effective interest rates on convertible notes:		7.7	%	10.9	%

Schedule of interest costs on convertible notes

The following table summarizes interest costs recognized on convertible notes (in millions):

	Year Ended September 30,
	2016		2015		2014
Contractual interest coupon	$	18	$	26	$	30
Amortization of debt discount	8		8		9
Repurchase of convertible notes	—		24		5
Total	$	26	$	58	$	44

Schedule of long-term debt maturities

As of September 30, 2016, the company is contractually obligated to make payments as follows (in millions):

	Total		2017		2018		2019		2020		2021		Thereafter(2)
Total debt (1)	$	1,034	$	14	$	4	$	2	$	1	$	277	$	736

(1) Total debt excludes unamortized discount on convertible notes of $14 million, unamortized issuance costs of $15 million, and original issuance discount of $9 million.

(2) Includes the company's 4.0 percent and 7.875 percent convertible notes, which contain a put and call feature that allows for earlier redemption beginning in 2019 and 2020, respectively.

Future minimum lease payments for capital leases

As of September 30, 2016, the future minimum lease payments for noncancelable capital leases with initial terms in excess of one year were as follows:

	Total			2017			2018			2019			2020			2021		Thereafter
Capital lease obligation	$	20		$	6		$	4		$	3		$	2		$	2	$	3
Less amounts representing interest	(4		)	(1		)	(1		)	(1		)	(1		)	—		—
Principal on capital lease	$	16		$	5		$	3		$	2		$	1		$	2	$	3

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FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Sep. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of the impact of derivatives on comprehensive income

The following table summarizes the impact of the company’s derivatives instruments on comprehensive income for fiscal years ended September 30 (in millions): 

	Location of Gain (Loss)	2016			2015		2014
Derivatives designated as hedging instruments:
Amount of gain (loss) recognized in AOCL (effective portion)	AOCL	$	(3	)	$	3	$	3
Amount of gain (loss) reclassified from AOCL into income (effective portion)	Cost of Sales	(4		)	6		1
Derivatives not designated as hedging instruments: Amount of gain recognized in income	Cost of Sales	(1		)	2		—
Derivatives not designated as hedging instruments: Amount of gain recognized in income	Other Income (expense)	(1		)	2		—

Summary of fair value of financial instruments

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

	September 30, 2016				September 30, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	160	$	160	$	193	$	193
Short-term debt	14		14		15		15
Long-term debt	982		1,051		1,036		1,123
Foreign exchange forward contracts (other assets)	1		1		1		1
Foreign exchange forward contracts (other liabilities)	2		2		3		3
Short-term foreign currency option contracts (other assets)	—		—		1		1
Long-term foreign currency option contracts (other assets)	2		2		1		1

Schedule of offsetting of derivative assets and liabilities

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

	September 30, 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	1	—	1
Derivative Liabilities
Foreign exchange forward contract	2	—	2	3	—	3

Fair value of financial instruments by the valuation hierarchy

Fair value of financial instruments by the valuation hierarchy at September 30, 2016 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash equivalents	$	160	$	—	$	—
Short-term debt	—		—		14
Long-term debt	—		1,040		11
Foreign exchange forward contracts (asset)	—		1		—
Foreign exchange forward contracts (liability)	—		2		—
Short-term foreign currency option contracts (asset)	—		—		—
Long-term foreign currency option contracts (asset)	—		—		2

Fair value of financial instruments by the valuation hierarchy at September 30, 2015 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash equivalents	$	193	$	—	$	—
Short-term debt	—		—		15
Long-term debt	—		1,102		21
Foreign exchange forward contracts (asset)	—		1		—
Foreign exchange forward contracts (liability)	—		3		—
Short-term foreign currency option contracts (asset)	—		—		1
Long-term foreign currency option contracts (asset)	—		—		1

Reconciliation of changes in fair value of Level 3 financial assets and liabilities

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 consolidated balance sheet for the twelve months ended September 30, 2016 and September 30, 2015, respectively. No transfers of assets between any of the Levels occurred during these periods.

Twelve months ended September 30, 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, net	(2		)	—			(2		)
Included in cost of sales	—			(1		)	(1		)
Total realized gains (losses):
Included in other income, net	—			—			—
Included in cost of sales	—			—			—
Purchases, issuances, sales and settlements:
Purchases	1			—			1
Settlements	—			2			2
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	—			—			—
Fair Value as of September 30, 2016	$	—		$	2		$	2

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

Twelve months ended September 30, 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 unrealized gains (losses):
Included in other income, net	(1		)	—			(1		)
Included in cost of sales	(1		)	—			(1		)
Total realized gains (losses):
Included in other income, net	2			—			2
Included in cost of sales	3			—			3
Purchases, issuances, sales and settlements:
Purchases	6			—			6
Settlements	(10		)	(1		)	(11		)
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	—			1			1
Fair Value as of September 30, 2015	$	1		$	1		$	2

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

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SHAREHOLDERS' EQUITY (Tables)

12 Months Ended

Sep. 30, 2016

Equity [Abstract]

Components 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 (loss) before reclassification	(96		)	(18		)	(6		)	(120		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	1			102			—			103
Net current-period other comprehensive income (loss)	$	(95	)	$	84		$	(6	)	$	(17	)
Balance at September 30, 2015	$	(54	)	$	(705	)	$	(7	)	$	(766	)

The components of AOCL as reported in the Consolidated Balance Sheet and Statement of Equity (Deficit), and the changes in AOCL by components, net of tax, 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	(12		)	(70		)	4			(78		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			35			—			35
Net current-period other comprehensive income (loss)	$	(12	)	$	(35	)	$	4		$	(43	)
Balance at September 30, 2016	$	(66	)	$	(740	)	$	(3	)	$	(809	)

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at September 30, 2013	$	61		$	(792	)	$	(3	)	$	(734	)
Other comprehensive income (loss) before reclassification	(20		)	(21		)	2			(39		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			24			—			24
Net current-period other comprehensive income (loss)	$	(20	)	$	3		$	2		$	(15	)
Balance at September 30, 2014	$	41		$	(789	)	$	(1	)	$	(749	)

Changes in accumulated other comprehensive income

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Amortization of prior service costs	$	(7	)	(a)
Amortization of actuarial losses	46			(a)
Recognized prior service costs due to curtailment	(15		)	(a)
	24			Total before tax
	—			Tax (benefit) expense
	$	24		Net of tax
Total reclassifications for the period	$	24		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 and 21 for additional details).

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Amortization of prior service costs	$	(1	)	(a)
Amortization of actuarial losses	36			(a)
	35			Total before tax
	—			Tax (benefit) expense
	$	35		Net of tax
Total reclassifications for the period	$	35		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 and 21 for additional details), which is recorded in cost of sales and selling, general and administrative expenses

Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Amortization of prior service costs	$	(1	)	(a)
Amortization of actuarial losses	47			(a)
Recognized prior service costs due to settlement	56			(a)
	102			Total before tax
	—			Tax (benefit) expense
	$	102		Net of tax
Employee Benefit Related Adjustment
Other reclassification adjustment	$	1		(b)
	1			Total before tax
	—			Tax (benefit) expense
	$	1		Net of tax
Total reclassifications for the period	$	103		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 20 and 21 for additional details).
(b)  These accumulated other comprehensive income components are included in the computation of loss from discontinued operations (see Note 3).

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EQUITY BASED COMPENSATION (Tables)

12 Months Ended

Sep. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Rollforward of stock options

The following is a rollforward of stock options for fiscal year 2016 (shares in thousands, exercise price and remaining contractual term represent weighted averages and aggregate intrinsic values in millions):

	Shares		Exercise Price		Remaining Contractual Life (years)	Aggregate Intrinsic Value
Outstanding — beginning of year	650		$	10.32
Cancelled or expired	(417	)	11.50
Outstanding — end of year	233		$	8.22	1.9	—
Exercisable — end of year	233		$	8.22	1.9	—

Rollforward of non-vested restricted stock, restricted share, and performance share units and activity

The following is a rollforward of the company’s non-vested performance share units as of September 30, 2016, and the activity during fiscal year 2016 is summarized as follows (shares in thousands):

Non-vested Shares	Number of Shares		Weighted-Average Grant-Date Fair Value
Non-vested - beginning of year	2,310		$	10.01
Granted	810		10.31
Vested	—		—
Forfeited	(460	)	11.31
Non-vested - end of year	2,660		9.88

The following is a rollforward of the company’s non-vested restricted stock and restricted share units as of September 30, 2016, and the activity during fiscal year 2016 is summarized as follows (shares in thousands):

Non-vested Shares	Number of Shares		Weighted-Average Grant-Date Fair Value
Non-vested - beginning of year	1,447		$	8.23
Granted	713		9.72
Vested	(744	)	4.44
Forfeited	(184	)	12.14
Non-vested - end of year	1,232		11.00

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RETIREMENT MEDICAL PLANS (Tables)

12 Months Ended

Sep. 30, 2016

Postretirement Medical Plans with Prescription Drug Benefits [Abstract]

Schedule Of Retiree Medical Liability Expense Assumptions

The following are the assumptions used in the measurement of the APBO and retiree medical expense:

	2016		2015		2014
Discount rate	3.45	%	4.20	%	4.20	%
Health care cost trend rate	7.10	%	7.00	%	7.40	%
Ultimate health care trend rate	4.75	%	5.00	%	5.00	%
Year ultimate rate is reached	2024		2022		2022

Retiree Medical Liability Components As of Balance Sheet Date

The APBO as of the September 30, 2016 and 2015 measurement dates are summarized as follows (in millions):

	2016		2015
Retirees	$	444	$	433
Employees eligible to retire	1		3
Total	$	445	$	436

Rollforward Of Retiree Medical Liability

The following reconciles the change in APBO and the amounts included in the consolidated balance sheet for years ended September 30, 2016 and 2015, respectively (in millions):

	2016			2015
APBO — beginning of year	$	436		$	477
Service cost	—			—
Interest cost	18			19
Participant contributions	—			2
Actuarial loss (gain)	27			(19		)
Foreign currency rate changes	—			(3		)
Benefit payments (2)	(36		)	(40		)
APBO — end of year	445			436
Other (1)	2			2
Retiree medical liability	$	447		$	438

⁽¹⁾  The company recorded a $2 million reserve for retiree medical liabilities at September 30, 2016 and 2015 as its best estimate for retroactive benefits related to the previously mentioned injunction

⁽²⁾  Net of subsidies and rebates available under Employer Group Waiver Plan (EGWP).

Schedule Of Retiree Medical Liability Current and Long Term Components

The retiree medical liability is included in the consolidated balance sheet as follows (in millions):

	September 30,
	2016		2015
Current — included in compensation and benefits	$	33	$	33
Long-term — included in retirement benefits	414		405
Retiree medical liability	$	447	$	438

Amount Of Retiree Medical Obligations Recorded In Accumulated Other Comprehensive Loss Net Of Tax

The following table summarizes the amounts included in Accumulated Other Comprehensive Loss net of tax related to retiree medical liabilities as of September 30, 2016 and 2015 and changes recognized in Other Comprehensive Income (Loss) net of tax for the years ended September 30, 2016 and 2015.

	Net Actuarial Loss			Prior Service Cost (Benefit)			Total
Balance at September 30, 2015	$	101		$	(12	)	$	89
Net actuarial loss for the year	27			—			27
Amortization for the year	(13		)	1			(12		)
Deferred tax impact	(8		)	—			(8		)
Balance at September 30, 2016	$	107		$	(11	)	$	96
Balance at September 30, 2014	$	142		$	(13	)	$	129
Net actuarial gain for the year	(19		)	—			(19		)
Amortization for the year	(22		)	1			(21		)
Balance at September 30, 2015	$	101		$	(12	)	$	89

Components Of Retiree Medical Expense

The components of retiree medical expense for years ended September 30 are as follows (in millions):

	2016			2015			2014
Service cost	$	—		$	—		$	—
Interest cost	18			19			23
Amortization of:
Prior service benefit	(1		)	(1		)	(7		)
Actuarial losses	13			22			23
Recognized prior service costs due to curtailment	—			—			(15		)
Retiree medical expense	$	30		$	40		$	24

Retiree Medical Plan Effect Of One Percentage Point Change In Assumed Health Care Cost Trend Rates

A one-percentage point change in the assumed health care cost trend rate for all years to, and including, the ultimate rate would have the following effects (in millions):

	2016			2015
Effect on total service and interest cost
1% Increase	$	1		$	2
1% Decrease	(1		)	(1		)
Effect on APBO
1% Increase	40			39
1% Decrease	(35		)	(34		)

Retiree Medical Plan Estimated Future Benefit Payments

The company expects future benefit payments as follows (in millions):

	Gross Benefit Payments		Gross Receipts (1)
Fiscal 2017	$	40	$	7
Fiscal 2018	40		7
Fiscal 2019	40		7
Fiscal 2020	40		7
Fiscal 2021	40		7
Fiscal 2022 – 2026	184		34

⁽¹⁾  Consists of subsidies and rebates available under EGWP.

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RETIREMENT PENSION PLANS (Tables)

12 Months Ended

Sep. 30, 2016

Compensation and Retirement Disclosure [Abstract]

Schedule of US Pension Benefit Obligation Expense and Net Expense Assumptions

The following are the significant assumptions used in the measurement of the projected benefit obligation (PBO) and net periodic pension expense:

	U.S. Plans
	2016			2015			2014
Discount Rate	3.50%	—	3.55%	4.25%	—	4.35%	4.20%	—	4.30%
Assumed return on plan assets (beginning of the year)	7.75%			8.00%			8.00%

Schedule of Non-US Pension Benefit Obligation Expense and Net Expense Assumptions

	Non-U.S. Plans (2)
	2016	2015			2014
Discount Rate (1)	2.50%	1.00%	—	3.80%	1.90%	—	4.10%
Assumed return on plan assets (beginning of the year) (1)	6.00%	2.25%	—	7.25%	2.25%	—	7.25%
Rate of compensation increase (3)	N/A	2.00%			2.00%	—	3.00%

⁽¹⁾  The discount rate for the company’s U.K. pension plan was 2.50 percent, 3.80 percent and 4.10 percent for 2016, 2015 and 2014, respectively. The assumed return on plan assets for this plan was 6.00 percent for 2016 and 7.25 percent for 2015 and 2014.

⁽²⁾  In fiscal year 2015, our German and Canadian pension plans were settled. In 2016, assumptions presented are for the U.K pension plan, which is the only significant non-U.S. plan remaining.

⁽³⁾  Rate of compensation expense for 2016 is not applicable as the U.K. pension plan is frozen.

Rollforward of Pension Liability and Pension Plan Assets

The following table reconciles the change in the PBO, the change in plan assets and amounts included in the consolidated balance sheet for the years ended September 30, 2016 and 2015, respectively (in millions):

	2016									2015
	U.S.			Non- U.S.			Total			U.S.			Non- U.S.			Total
PBO — beginning of year	$	1,042		$	614		$	1,656		$	1,059		$	735		$	1,794
Service cost	—			1			1			1			1			2
Interest cost	45			20			65			44			26			70
Actuarial loss	105			115			220			10			48			58
Settlements	—			—			—			—			(111		)	(111		)
Benefit payments	(80		)	(35		)	(115		)	(72		)	(29		)	(101		)
Foreign currency rate changes	—			(99		)	(99		)	—			(56		)	(56		)
PBO — end of year	$	1,112		$	616		$	1,728		$	1,042		$	614		$	1,656
Change in plan assets
Fair value of assets — beginning of year	$	830		$	717		$	1,547		$	832		$	743		$	1,575
Actual return on plan assets	79			169			248			65			67			132
Employer contributions	5			1			6			5			7			12
Settlements	—			—			—			—			(20		)	(20		)
Benefit payments	(80		)	(35		)	(115		)	(72		)	(29		)	(101		)
Foreign currency rate changes	—			(118		)	(118		)	—			(51		)	(51		)
Fair value of assets — end of year	$	834		$	734		$	1,568		$	830		$	717		$	1,547
Funded status	$	(278	)	$	118		$	(160	)	$	(212	)	$	103		$	(109	)

Schedule of Balance Sheet Classification of Net Pension Liability

Amounts included in the consolidated balance sheet at September 30 are comprised of the following (in millions):

	2016									2015
	U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total
Non-current assets	$	—		$	123		$	123		$	—		$	110		$	110
Current liabilities	(6		)	—			(6		)	(5		)	—			(5		)
Retirement benefits-non-current	(272		)	(5		)	(277		)	(207		)	(7		)	(214		)
Net amount recognized	$	(278	)	$	118		$	(160	)	$	(212	)	$	103		$	(109	)

Schedule of Pension Costs Recognized in Other Comprehensive Loss

The following tables summarize the amounts included in Accumulated Other Comprehensive Loss net of tax related to pension liabilities as of September 30, 2016 and 2015 and changes recognized in Other Comprehensive Income (Loss) net of tax for the year ended September 30, 2016.

	Net Actuarial Loss
	U.S.			Non-U.S.			Total
Balance at September 30, 2015	$	410		$	206		$	616
Net actuarial loss for the year	87			(11		)	76
Amortization for the year	(18		)	(5		)	(23		)
Deferred tax impact	(25		)	—			(25		)
Balance at September 30, 2016	$	454		$	190		$	644
Balance at September 30, 2014	$	419		$	241		$	660
Net actuarial loss for the year	8			24			32
Amortization for the year	(17		)	(8		)	(25		)
Deferred tax impact	—			5			5
Settlements	—			(56		)	(56		)
Balance at September 30, 2015	$	410		$	206		$	616

Pension and Other Postretirement Benefits

The non-current portion of the pension liability is included in Retirement Benefits in the consolidated balance sheet as follows (in millions):

	September 30,
	2016		2015
Pension liability	$	277	$	214
Retiree medical liability — long term (see Note 20)	414		405
Other	12		13
Total retirement benefits	$	703	$	632

Schedule of Projected Benefit Obligation Accumulated Benefit Obligation and Plan Assets

Additional information is as follows (in millions):

	2016						2015
	ABO Exceeds Assets		Assets Exceed ABO		Total		ABO Exceeds Assets		Assets Exceed ABO		Total
PBO	$	1,116	$	612	$	1,728	$	1,057	$	599	$	1,656
ABO	1,116		612		1,728		1,057		598		1,655
Plan Assets	834		734		1,568		838		709		1,547

Schedule of Net Periodic Pension Benefit Costs

The components of net periodic pension expense are as follows (in millions):

	2016			2015			2014
Service cost	$	1		$	2		$	2
Interest cost	65			70			80
Assumed rate of return on plan assets	(99		)	(111		)	(104		)
Amortization of —
Actuarial losses	23			26			23
Settlement loss	—			59			—
Net periodic pension expense	$	(10	)	$	46		$	1

Pension Plan Investments Measured at Fair Value by Level Within Fair Value Hierarchy

The fair value of plan assets at September 30, 2016 by asset category is as follows (in millions):

U.S. Plans	2016
Asset Category	Level 1		Level 2		Level 3		Total
Equity investments
U.S. – Large cap	$	71	$	—	$	—	$	71
U.S. – Small cap	22		—		—		22
Private equity	—		—		11		11
International equity	41		—		—		41
Equity investments measured at net asset value (1)	—		—		—		152
Total equity investments	$	134	$	—	$	11	$	297
Fixed income investments
U.S. fixed income	$	10	$	265	$	—	$	275
Emerging fixed income	—		20		—		20
Partnerships fixed income	—		—		1		1
Fixed income investments measured at net asset value (1)	—		—		—		45
Total fixed income	$	10	$	285	$	1	$	341
Alternatives – Partnerships	—		—		77		77
Alternatives – Partnerships measured at net asset value (1)	—		—		—		84
Cash and cash equivalents	—		35		—		35
Total assets at fair value	$	144	$	320	$	89	$	834
Non-U.S. Plans	2016
Asset Category	Level 1		Level 2		Level 3		Total
Equity investments
International equity	$	61	$	—	$	—	$	61
Equity investments measured at net asset value (1)	—		—		—		82
Total equity investments	$	61	$	—	$	—	$	143
Fixed income investments
Other fixed income investments	$	—	$	222	$	—	$	222
Fixed income investments measured at net asset value (1)	—		—		—		198
Total fixed income	$	—	$	222	$	—	$	420
Commingled funds	—		6		—		6
Alternative investments measured at net asset value (1)	—		—		—		114
Real estate measured at net asset value (1)	—		—		—		37
Cash and cash equivalents	—		14		—		14
Total assets at fair value	$	61	$	242	$	—	$	734

⁽¹⁾  In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

The fair value of plan assets at September 30, 2015 by asset category is as follows (in millions):

U.S. Plans	2015
Asset Category	Level 1		Level 2		Level 3		Total
Equity investments
U.S. – Large cap	$	88	$	—	$	—	$	88
U.S. – Small cap	21		—		—		21
Private equity	—		—		15		15
International equity	53		—		—		53
Equity investments measured at net asset value (1)	—		—		—		160
Total equity investments	$	162	$	—	$	15	$	337
Fixed income investments
U.S. fixed income	$	8	$	263	$	—	$	271
Emerging fixed income	—		20		—		20
Partnerships fixed income	—		—		1		1
Fixed income investments measured at net asset value (1)	—		—		—		45
Total fixed income	$	8	$	283	$	1	$	337
Alternatives – Partnerships	—		—		84		84
Alternatives – Partnerships measured at net asset value (1)	—		—		—		65
Cash and cash equivalents	—		7		—		7
Total assets at fair value	$	170	$	290	$	100	$	830
Non-U.S. Plans	2015
Asset Category	Level 1		Level 2		Level 3		Total
Equity investments
International equity	$	55	$	—	$	—	$	55
Equity investments measured at net asset value (1)	—		—		—		106
Total equity investments	$	55	$	—	$	—	$	161
Fixed income investments
Other fixed income investments	$	—	$	186	$	—	$	186
Fixed income investments measured at net asset value (1)	—		—		—		158
Total fixed income	$	—	$	186	$	—	$	344
Commingled funds	—		8		—		8
Alternative investments measured at net asset value (1)	—		—		—		133
Real estate measured at net asset value (1)	—		—		—		43
Cash and cash equivalents	—		28		—		28
Total assets at fair value	$	55	$	222	$	—	$	717

⁽¹⁾  In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

Changes in Level 3, Pension Plan Investments

The following table summarizes the changes in Level 3 pension plan assets measured at fair value on a recurring basis for the year ended September 30, 2016 (in millions):   

U.S. Plans	2016
	Fair Value at October 1, 2015		Return on Plan Assets: Attributable to Assets Held at September 30, 2016			Purchases		Settlements			Net Transfers Into (Out of) Level 3		Fair Value at September 30, 2016
Asset Category
Private equity	$	15	$	(4	)	$	—	$	—		$	—	$	11
Partnerships –
Fixed income	1		—			—		—			—		1
Alternatives –
Partnerships	84		(5		)	—		(2		)	—		77
Total Level 3 fair value	$	100	$	(9	)	$	—	$	(2	)	$	—	$	89

The following table summarizes the changes in Level 3 pension plan assets measured at fair value on a recurring basis for the year ended September 30, 2015 (in millions):

U.S. Plans	2015
	Fair Value at October 1, 2014		Return on Plan Assets: Attributable to Assets Held at September 30, 2015		Purchases		Settlements			Net Transfers Into (Out of) Level 3		Fair Value at September 30, 2015
Asset Category
Private equity	$	15	$	—	$	—	$	—		$	—	$	15
Partnerships –
Fixed income	1		—		—		—			—		1
Alternatives –
Partnerships	58		19		8		(1		)	—		84
Total Level 3 fair value	$	74	$	19	$	8	$	(1	)	$	—	$	100

Pension Plan Estimated Future Contributions and Benefit Payments

Information about the expected cash flows for the U.S. and non-U.S. pension plans is as follows (in millions): 

	U.S.		Non U.S.		Total
Expected employer contributions:
Fiscal 2017	$	5	$	1	$	6
Expected benefit payments:
Fiscal 2017	78		20		98
Fiscal 2018	76		20		96
Fiscal 2019	74		21		95
Fiscal 2020	73		22		95
Fiscal 2021	71		22		93
Fiscal 2022-2026	336		121		457

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INCOME TAXES (Tables)

12 Months Ended

Sep. 30, 2016

Income Tax Disclosure [Abstract]

Components of Income Before Income Tax

The income tax provisions were calculated based upon the following components of income before income taxes (in millions):

	2016		2015		2014
U.S. income	$	71	$	24	$	204
Foreign income	84		43		111
Total	$	155	$	67	$	315

Summary of Components of the Benefit (Provision) for Income Taxes

The components of the benefit (provision) for income taxes are summarized as follows (in millions):    

	2016			2015			2014
Current tax benefit (expense):
U.S.	$	(1	)	$	(4	)	$	(1	)
Foreign	11			(20		)	(32		)
State and local	(1		)	(1		)	—
Total current tax benefit (expense)	9			(25		)	(33		)
Deferred tax benefit (expense):
U.S.	394			3			(1		)
Foreign	(22		)	21			3
State and local	43			—			—
Total deferred tax benefit	415			24			2
Income tax benefit (expense)	$	424		$	(1	)	$	(31	)

Summary of the Tax Effects of Temporary Differences

Net current and non-current deferred income tax assets (liabilities) included in the consolidated balance sheet consist of the tax effects of temporary differences related to the following (in millions): 

	September 30,
	2016			2015 (1)
Accrued compensation and benefits	$	21		$	27
Accrued product warranties	13			19
Inventory costs	8			20
Receivables	15			16
Accrued retiree healthcare benefits	169			175
Retirement pension plans	119			95
Property	7			9
Loss and credit carryforwards	455			487
Other	67			77
Sub-total	874			925
Less: Valuation allowances	(379		)	(834		)
Deferred income taxes - asset	$	495		$	91
Taxes on undistributed income	$	(7	)	$	(51	)
Intangible assets	(82		)	(85		)
Debt basis difference	(5		)	(8		)
Deferred income taxes - liability	$	(94	)	$	(144	)
Net deferred income tax assets (liabilities)	$	401		$	(53	)

(1) Immaterial Restatement- Subsequent to the issuance of Meritor’s consolidated financial statements as of and for the year ended September 30, 2015, it was determined that (i) Loss and credit carryforwards; (ii) Valuation allowances; and (iii) Taxes on undistributed income as of and for the year ended September 30, 2015 were overstated by approximately $121 million, overstated by approximately $127 million, and understated by approximately $6 million, respectively. As a result, September 30, 2015 Loss and credit carryforwards, Valuation allowances and Taxes on undistributed income have been corrected in the above reconciliation to appropriately reflect these balances. The errors had no impact on the consolidated balance sheet as of September 30, 2015 or the related consolidated statement of operations, comprehensive income, equity (deficit), or cash flows for the year ended September 30, 2015.

Schedule of Net Current and Non-Current Deferred Income Tax Assets (Liabilities)

Net current and non-current deferred income tax assets (liabilities) are included in the consolidated balance sheet as follows (in millions): 

	September 30,
	2016			2015
Other current assets (see Note 10)	$	—		$	20
Other current liabilities	—			(2		)
Net current deferred income taxes — asset	—			18
Other assets (see Note 12)	413			28
Other liabilities (see Note 15)	(12		)	(99		)
Net non-current deferred income taxes — asset (liability)	$	401		$	(71	)

Summary of Tax Credit Carryforwards and Deferred Tax Assets

The expiration periods for deferred tax assets related to net operating losses and tax credit carryforwards as of September 30, 2016 are included below (in millions). Also included are the associated valuation allowances on these deferred tax assets (in millions).

	Fiscal Year Expiration Periods
	2017-2021		2022-2031		2032-2036		Indefinite		Total
Net Operating Losses and Tax Credit Carryforwards	$	25	$	160	$	10	$	260	$	455
Valuation Allowances on these Deferred Tax Assets	$	24	$	56	$	8	$	253	$	341

Reconciliation of Income Tax (Benefit) Provision at the U.S Statutory Rate

The company’s provision for income taxes was different from the provision for income taxes calculated at the U.S. statutory rate for the reasons set forth below (in millions): 

	2016			2015 (1)			2014 (1)
Expense for income taxes at statutory tax rate of 35%	$	(54	)	$	(23	)	$	(110	)
State and local income taxes	(7		)	(1		)	—
Foreign income taxed at rates other than 35%	5			7			13
Joint venture equity income	3			3			5
Tax effect of nonfunctional currency transaction	(30		)	—			(4		)
Correlated tax relief	51			—			—
U.S. tax impact on distributions from subsidiaries and joint ventures	14			(11		)	(26		)
Nondeductible expenses	(12		)	(9		)	(10		)
Tax credits	61			—			—
Valuation allowances	418			49			113
Tax rate change	(14		)	—			—
Other	(11		)	(16		)	(12		)
Income tax benefit (expense)	$	424		$	(1	)	$	(31	)

(1) Immaterial Restatement- Subsequent to the issuance of Meritor’s consolidated financial statements as of and for the year ended September 30, 2015, it was determined that (i) U.S. tax impact on distributions from subsidiaries and joint ventures; (ii) Valuation allowances; and (iii) Other as of and for the year ended September 30, 2015 were overstated by approximately $7 million, understated by approximately $2 million, and understated by approximately $9 million, respectively. As a result, September 30, 2015 U.S. tax impact on distributions from subsidiaries and joint ventures, Valuation allowances and Other have been corrected in the above reconciliation to appropriately reflect these balances. Also, it was determined that (i) Tax effect of nonfunctional currency transaction; (ii) U.S. tax impact on distributions from subsidiaries and joint ventures; (iii) Valuation allowances; and (iv) Other as of and for the year ended September 30, 2014 were understated by approximately $4 million, understated by approximately $8 million, understated by approximately $24 million, and understated by approximately $12 million, respectively. As a result, September 30, 2014 Tax effect of nonfunctional currency transaction, U.S. tax impact on distributions from subsidiaries and joint ventures, Valuation allowances and Other have been corrected in the above reconciliation to appropriately reflect these balances. The errors had no impact on the consolidated balance sheets as of September 30, 2015 and September 30, 2014 or the related consolidated statement of operations, comprehensive income, equity (deficit), or cash flows for the years ended September 30, 2015 and September 30, 2014.

Reconciliation of Unrecognized Tax Benefits

A reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period is as follows (in millions): 

	2016			2015 (1)			2014 (1)
Balance at beginning of the period	$	207		$	209		$	190
Additions to tax positions recorded during the current year	39			15			28
Reductions to tax position recorded in prior years	—			(2		)	(2		)
Reductions to tax positions due to lapse of statutory limits	(3		)	(11		)	(7		)
Translation, other	—			(4		)	—
Balance at end of the period	$	243		$	207		$	209

(1) Immaterial Restatement- Subsequent to the issuance of Meritor’s consolidated financial statements as of and for the year ended September 30, 2015, it was determined that unrecognized tax benefits as of and for the years ended September 30, 2015 and September 30, 2014 were understated by approximately $131 million and $121 million, respectively. As a result, September 30, 2015 and September 30, 2014 total unrecognized tax benefits have been corrected in the above reconciliation to appropriately reflect these balances. The errors had no impact on the consolidated balance sheet as of September 30, 2015 or the related consolidated statement of operations, comprehensive income, equity (deficit), or cash flows for the years ended September 30, 2015 and September 30, 2014.

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CONTINGENCIES (Tables)

12 Months Ended

Sep. 30, 2016

Loss Contingencies [Line Items]

Schedule of Environmental Loss Contingencies by Site

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

	Superfund Sites		Non-Superfund Sites			Total
Balance at September 30, 2015	$	2	$	14		$	16
Payments and other	—		(6		)	(6		)
Accruals	—		3			3
Balance at September 30, 2016	$	2	$	11		$	13

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):

	September 30,
	2016		2015
Pending and future claims	$	70	$	71
Billed but unpaid claims	2		3
Asbestos-related liabilities	$	72	$	74
Asbestos-related insurance recoveries	$	32	$	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):

	September 30,
	2016		2015
Pending and future claims	$	60	$	55
Billed but unpaid claims	1		3
Asbestos-related liabilities	$	61	$	58
Asbestos-related insurance recoveries	$	27	$	14

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BUSINESS SEGMENT INFORMATION (Tables)

12 Months Ended

Sep. 30, 2016

Segment Reporting [Abstract]

Summary of Segment Information

Segment information is summarized as follows (in millions):

	Commercial Truck & Industrial		Aftermarket & Trailer		Elims			Total
Fiscal year 2016 Sales:
External Sales	$	2,369	$	830	$	—		$	3,199
Intersegment Sales	76		30		(106		)	—
Total Sales	$	2,445	$	860	$	(106	)	$	3,199
Fiscal year 2015 Sales:
External Sales	$	2,649	$	856	$	—		$	3,505
Intersegment Sales	90		28		(118		)	—
Total Sales	$	2,739	$	884	$	(118	)	$	3,505
Fiscal year 2014 Sales:
External Sales	$	2,876	$	890	$	—		$	3,766
Intersegment Sales	104		30		(134		)	—
Total Sales	$	2,980	$	920	$	(134	)	$	3,766

Segment Income Attributable to Parent

Segment EBITDA:	2016			2015			2014
Commercial Truck & Industrial	$	208		$	216		$	218
Aftermarket & Trailer	115			123			106
Segment EBITDA	323			339			324
Unallocated legacy and corporate income (expense), net (1)	4			(5		)	(10		)
Interest expense, net	(84		)	(105		)	(130		)
Benefit (provision) for income taxes	424			(1		)	(31		)
Depreciation and amortization	(67		)	(65		)	(67		)
Loss on sale of receivables	(5		)	(5		)	(8		)
Restructuring costs	(16		)	(16		)	(10		)
Antitrust settlement with Eaton, net of tax (2)	—			—			208
Reduction of specific warranty contingency, net of supplier recovery	—			—			8
Pension settlement losses	—			(59		)	—
Goodwill and asset impairment charges	—			(17		)	—
Noncontrolling interests	(2		)	(1		)	(5		)
Income from continuing operations attributable to Meritor, Inc.	$	577		$	65		$	279

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

(2) Adjustment associated with the company's share of the antitrust settlement with Eaton less legal expenses incurred in fiscal year 2014.

Schedule of Segment Assets

Depreciation and Amortization:	2016			2015			2014
Commercial Truck & Industrial	$	59		$	59		$	61
Aftermarket & Trailer	8			6			6
Total depreciation and amortization	$	67		$	65		$	67
Capital Expenditures:	2016			2015			2014
Commercial Truck & Industrial	$	83		$	71		$	71
Aftermarket & Trailer	10			8			6
Total capital expenditures	$	93		$	79		$	77
Segment Assets:	2016			2015
Commercial Truck & Industrial	$	1,433		$	1,569
Aftermarket & Trailer	436			448
Total segment assets	1,869			2,017
Corporate (1)	845			434
Less: Accounts receivable sold under off-balance sheet factoring programs	(220		)	(256		)
Total assets	$	2,494		$	2,195

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

Schedule of Revenues and Assets by Geographical Areas

Sales by geographic area are based on the location of the selling unit. Information on the company’s geographic areas is summarized as follows (in millions): 

Sales by Geographic Area:
	2016		2015		2014
U.S.	$	1,617	$	1,733	$	1,466
Canada	67		70		68
Mexico	390		491		652
Total North America	2,074		2,294		2,186
Sweden	250		325		369
Italy	201		204		234
United Kingdom	136		76		82
Other Europe	86		90		111
Total Europe	673		695		796
Brazil	130		198		408
China	84		90		146
India	152		140		114
Other Asia-Pacific	86		88		116
Total sales	$	3,199	$	3,505	$	3,766

Assets by Geographic Area:
	2016		2015
U.S.	$	1,359	$	995
Canada	33		30
Mexico	202		236
Total North America	1,594		1,261
Sweden	104		108
United Kingdom	212		211
Italy	65		77
Other Europe	164		176
Total Europe	545		572
Brazil	146		136
China	97		118
Other Asia-Pacific	112		108
Total	$	2,494	$	2,195

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QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (Tables)

12 Months Ended

Sep. 30, 2016

Quarterly Financial Information Disclosure [Abstract]

Summary of Unaudited Quarterly Results

The following is a condensed summary of the company’s unaudited quarterly results of continuing operations for fiscal years 2016 and 2015. Per share amounts are based on the weighted average shares outstanding for that quarter. Earnings per share for the year may not equal the sum of the four fiscal quarters’ earnings per share due to changes in basic and diluted shares outstanding.

	2016 Fiscal Quarters (Unaudited)
	First			Second			Third			Fourth			2016
	(In millions, except share related data)
Sales	$	809		$	821		$	841		$	728		$	3,199
Cost of sales	(705		)	(700		)	(714		)	(644		)	(2,763		)
Gross margin	104			121			127			84			436
Benefit (provision) for income taxes	(7		)	(7		)	(8		)	446			424
Net income	27			32			42			474			575
Net income from continuing operations attributable to Meritor, Inc.	28			33			42			474			577
Net income attributable to Meritor, Inc.	26			32			41			474			573
Basic earnings per share from continuing operations	$	0.30		$	0.36		$	0.47		$	5.47		$	6.40
Diluted earnings per share from continuing operations	$	0.30		$	0.36		$	0.46		$	5.34		$	6.27

	2015 Fiscal Quarters (Unaudited)
	First			Second			Third			Fourth			2015
	(In millions, except share related data)
Sales	$	879		$	864		$	909		$	853		$	3,505
Cost of sales	(764		)	(749		)	(785		)	(745		)	(3,043		)
Gross margin	115			115			124			108			462
Benefit (provision) for income taxes	(7		)	(6		)	(6		)	18			(1		)
Net income (loss)	30			43			14			(22		)	65
Net income (loss) from continuing operations attributable to Meritor, Inc.	32			39			15			(21		)	65
Net income (loss) attributable to Meritor, Inc.	29			43			13			(21		)	64
Basic earnings (loss) per share from continuing operations	$	0.33		$	0.40		$	0.15		$	(0.22	)	$	0.67
Diluted earnings (loss) per share from continuing operations	$	0.32		$	0.38		$	0.15		$	(0.22	)	$	0.65

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OPERATING CASH FLOWS AND OTHER SUPPLEMENTAL FINANCIAL INFORMATION (Tables)

12 Months Ended

Sep. 30, 2016

Operating Cash Flow Disclosure [Abstract]

Schedule of Operating Cash Flows

	Year Ended September 30,
	2016			2015			2014
	(in millions)
OPERATING ACTIVITIES
Net income	$	575		$	65		$	254
Less: Loss from discontinued operations, net of tax	(4		)	(1		)	(30		)
Income from continuing operations	579			66			284
Adjustments to income from continuing operations to arrive at cash provided by (used for) operating activities:
Depreciation and amortization	67			65			67
Deferred income tax benefit	(415		)	(24		)	(2		)
Restructuring costs	16			16			10
Loss on debt extinguishment	—			25			31
Goodwill and asset impairment	—			17			—
Equity in earnings of ZF Meritor	—			—			(190		)
Equity in earnings of other affiliates	(36		)	(39		)	(38		)
Stock compensation expense	9			10			8
Provision for doubtful accounts	2			2			—
Pension and retiree medical expense	20			82			25
Gain on sale of property	(2		)	(3		)	—
Dividends received from ZF Meritor	—			—			190
Dividends received from other equity method investments	37			32			36
Pension and retiree medical contributions	(42		)	(141		)	(177		)
Restructuring payments	(11		)	(16		)	(10		)
Changes in off-balance sheet receivable securitization and factoring programs	(31		)	39			(46		)
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, foreign currency adjustments and discontinued operations:
Receivables	89			54			34
Inventories	28			4			(9		)
Accounts payable	(89		)	(70		)	(5		)
Other current assets and liabilities	(18		)	(52		)	19
Other assets and liabilities	6			40			—
Operating cash flows provided by continuing operations	209			107			227
Operating cash flows used for discontinued operations	(5		)	(10		)	(12		)
CASH PROVIDED BY OPERATING ACTIVITIES	$	204		$	97		$	215

Schedule of Supplemental Disclosures

	September 30,
	2016			2015			2014
	(In millions)
Balance sheet data:
Allowance for doubtful accounts	$	6		$	9		$	6
Statement of operations data:
Maintenance and repairs expense	45			52			59
Research, development and engineering expense	68			69			71
Depreciation expense	61			60			62
Rental expense	15			11			16
Interest income	3			9			2
Interest expense	(87		)	(114		)	(132		)
Statement of cash flows data:
Interest payments	71			64			84
Income tax payments, net of refunds	24			14			26
Non-cash investing activities - capital asset additions from capital leases	—			9			5

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SUPPLEMENTAL PARENT AND GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (Tables)

12 Months Ended

Sep. 30, 2016

Supplemental Guarantor Condensed Consolidating Financial Statements [Abstract]

Schedule of Condensed Consolidating Statement of Operations

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (In millions)
	Fiscal Year Ended September 30, 2015
	Parent			Guarantors			Non-Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,734		$	1,771		$	—		$	3,505
Subsidiaries	—			129			71			(200		)	—
Total sales	—			1,863			1,842			(200		)	3,505
Cost of sales	(52		)	(1,579		)	(1,612		)	200			(3,043		)
GROSS MARGIN	(52		)	284			230			—			462
Selling, general and administrative	(53		)	(118		)	(72		)	—			(243		)
Pension settlement losses	—			—			(59		)	—			(59		)
Restructuring costs	(2		)	(5		)	(9		)	—			(16		)
Goodwill impairment	—			(15		)	—			—			(15		)
Other operating income (expense), net	(2		)	(2		)	3			—			(1		)
OPERATING INCOME (LOSS)	(109		)	144			93			—			128
Other income (expense), net	36			18			(49		)	—			5
Equity in earnings of affiliates	—			36			3			—			39
Interest income (expense), net	(138		)	26			7			—			(105		)
INCOME (LOSS) BEFORE INCOME TAXES	(211		)	224			54			—			67
Provision for income taxes	(2		)	2			(1		)	—			(1		)
Equity income from continuing operations of subsidiaries	278			38			—			(316		)	—
INCOME FROM CONTINUING OPERATIONS	65			264			53			(316		)	66
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	(2		)	(3		)	5			(1		)
NET INCOME	64			262			50			(311		)	65
Less: Net income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	64		$	262		$	49		$	(311	)	$	64

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (In millions)
	Fiscal Year Ended September 30, 2016
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,616		$	1,583		$	—		$	3,199
Subsidiaries	—			112			61			(173		)	—
Total sales	—			1,728			1,644			(173		)	3,199
Cost of sales	(57		)	(1,439		)	(1,440		)	173			(2,763		)
GROSS MARGIN	(57		)	289			204			—			436
Selling, general and administrative	(64		)	(75		)	(74		)	—			(213		)
Restructuring costs	(7		)	(4		)	(5		)	—			(16		)
Other operating expense, net	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(131		)	210			125			—			204
Other income (expense), net	34			(35		)	—			—			(1		)
Equity in earnings of affiliates	—			32			4			—			36
Interest income (expense), net	(117		)	27			6			—			(84		)
INCOME (LOSS) BEFORE INCOME TAXES	(214		)	234			135			—			155
Benefit (provision) for income taxes	526			(88		)	(14		)	—			424
Equity income from continuing operations of subsidiaries	265			106			—			(371		)	—
INCOME FROM CONTINUING OPERATIONS	577			252			121			(371		)	579
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(4		)	(4		)	(2		)	6			(4		)
NET INCOME	573			248			119			(365		)	575
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	573		$	248		$	117		$	(365	)	$	573

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (In millions)
	Fiscal Year Ended September 30, 2014
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,467		$	2,299		$	—		$	3,766
Subsidiaries	—			142			62			(204		)	—
Total sales	—			1,609			2,361			(204		)	3,766
Cost of sales	(56		)	(1,343		)	(2,084		)	204			(3,279		)
GROSS MARGIN	(56		)	266			277			—			487
Selling, general and administrative	(65		)	(102		)	(91		)	—			(258		)
Restructuring costs	—			(1		)	(9		)	—			(10		)
Other operating expense, net	(1		)	(1		)	—			—			(2		)
OPERATING INCOME (LOSS)	(122		)	162			177			—			217
Other income (expense), net	35			23			(58		)	—			—
Equity in earnings of ZF Meritor	—			190			—			—			190
Equity in earnings of affiliates	—			30			8			—			38
Interest income (expense), net	(159		)	35			(6		)	—			(130		)
INCOME (LOSS) BEFORE INCOME TAXES	(246		)	440			121			—			315
Provision for income taxes	—			(1		)	(30		)	—			(31		)
Equity income from continuing operations of subsidiaries	525			71			—			(596		)	—
INCOME FROM CONTINUING OPERATIONS	279			510			91			(596		)	284
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(30		)	(31		)	(12		)	43			(30		)
NET INCOME	249			479			79			(553		)	254
Less: Net income attributable to noncontrolling interests	—			—			(5		)	—			(5		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	249		$	479		$	74		$	(553	)	$	249

Schedule of Condensed Consolidating Statement of Comprehensive Income (Loss)

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) (In millions)
	Fiscal Year Ended September 30, 2015
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income	$	64		$	262		$	50		$	(311	)	$	65
Other comprehensive loss	(19		)	(61		)	(16		)	77			(19		)
Total comprehensive income	45			201			34			(234		)	46
Less: Comprehensive income attributable to noncontrolling interests	2			—			(1		)	—			1
Comprehensive income attributable to Meritor, Inc.	$	47		$	201		$	33		$	(234	)	$	47

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) (In millions)
	Fiscal Year Ended September 30, 2016
	Parent			Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	573		$	248	$	119		$	(365	)	$	575
Other comprehensive income (loss)	(43		)	55		(44		)	(11		)	(43		)
Total comprehensive income	530			303		75			(376		)	532
Less: Comprehensive income attributable to noncontrolling interests	—			—		(2		)	—			(2		)
Comprehensive income attributable to Meritor, Inc.	$	530		$	303	$	73		$	(376	)	$	530

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) (In millions)
	Fiscal Year Ended September 30, 2014
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Net income (loss)	$	249		$	479		$	79		$	(553	)	$	254
Other comprehensive income (loss)	(15		)	(54		)	25			29			(15		)
Total comprehensive income	234			425			104			(524		)	239
Less: Comprehensive income attributable to noncontrolling interests	—			—			(5		)	—			(5		)
Comprehensive income attributable to Meritor, Inc.	$	234		$	425		$	99		$	(524	)	$	234

Schedule of Condensed Consolidating Balance Sheet

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING BALANCE SHEET (In millions)
	September 30, 2016
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS
Cash and cash equivalents	$	90		$	4		$	66	$	—		$	160
Receivables, trade and other, net	1			39			356		—			396
Inventories	—			143			173		—			316
Other current assets	5			12			16		—			33
TOTAL CURRENT ASSETS	96			198			611		—			905
NET PROPERTY	22			198			219		—			439
GOODWILL	—			219			171		—			390
OTHER ASSETS	447			132			181		—			760
INVESTMENTS IN SUBSIDIARIES	2,575			679			—		(3,254		)	—
TOTAL ASSETS	$	3,140		$	1,426		$	1,182	$	(3,254	)	$	2,494
CURRENT LIABILITIES
Short-term debt	$	1		$	4		$	9	$	—		$	14
Accounts and notes payable	42			172			261		—			475
Other current liabilities	90			74			104		—			268
TOTAL CURRENT LIABILITIES	133			250			374		—			757
LONG-TERM DEBT	971			3			8		—			982
RETIREMENT BENEFITS	680			—			23		—			703
INTERCOMPANY PAYABLE (RECEIVABLE)	1,534			(1,768		)	234		—			—
OTHER LIABILITIES	34			162			42		—			238
EQUITY (DEFICIT) ATTRIBUTABLE TO        MERITOR, INC.	(212		)	2,779			476		(3,254		)	(211		)
NONCONTROLLING INTERESTS	—			—			25		—			25
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	3,140		$	1,426		$	1,182	$	(3,254	)	$	2,494

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING BALANCE SHEET (In millions)
	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

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (In millions)
	Fiscal Year Ended September 30, 2016
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	196		$	40		$	(32	)	$	—	$	204
INVESTING ACTIVITIES
Capital expenditures	(19		)	(43		)	(31		)	—		(93		)
Proceeds from sale of property	—			4			—			—		4
Other investing activities	—			—			(1		)	—		(1		)
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(19		)	(38		)	(29		)	—		(86		)
FINANCING ACTIVITIES
Repayment of notes and term loan	(55		)	—			—			—		(55		)
Other financing cash flows	(1		)	(4		)	(11		)	—		(16		)
Repurchase of common stock	(81		)	—			—			—		(81		)
Intercompany advances	(23		)	—			23			—		—
CASH USED FOR FINANCING ACTIVITIES	(160		)	(4		)	12			—		(152		)
EFFECT OF CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	17			(2		)	(48		)	—		(33		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	73			6			114			—		193
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	90		$	4		$	66		$	—	$	160

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (In millions)
	Fiscal Year Ended September 30, 2015
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	57		$	62		$	(22	)	$	—	$	97
INVESTING ACTIVITIES
Capital expenditures	(4		)	(41		)	(34		)	—		(79		)
Proceeds from sale of property	—			—			4			—		4
Cash paid for acquisition of Morganton	—			(16		)	—			—		(16		)
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(4		)	(56		)	(27		)	—		(87		)
FINANCING ACTIVITIES
Proceeds from debt issuance	225			—			—			—		225
Repayment of notes and term loan	(199		)	—			—			—		(199		)
Other financing cash flows	—			(5		)	(4		)	—		(9		)
Repurchase of common stock	(55		)	—			—			—		(55		)
Debt issuance costs	(4		)	—			—			—		(4		)
CASH USED FOR FINANCING ACTIVITIES	(33		)	(5		)	(4		)	—		(42		)
EFFECT OF CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			(22		)	—		(22		)
CHANGE IN CASH AND CASH EQUIVALENTS	2			1			(57		)	—		(54		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	71			5			171			—		247
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	73		$	6		$	114		$	—	$	193

MERITOR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (In millions)
	Fiscal Year Ended September 30, 2014
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	245		$	34		$	(64	)	$	—	$	215
INVESTING ACTIVITIES
Capital expenditures	(4		)	(37		)	(36		)	—		(77		)
Net investing cash flows provided by discontinued operations	—			4			3			—		7
CASH USED FOR INVESTING ACTIVITIES	(4		)	(33		)	(33		)	—		(70		)
FINANCING ACTIVITIES
Proceeds from debt issuance	225			—			—			—		225
Repayment of notes and term loan	(439		)	—			—			—		(439		)
Debt issuance costs	(10		)	—			—			—		(10		)
Other financing cash flows	—			(2		)	14			—		12
Intercompany advances	(90		)	—			90			—		—
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(314		)	(2		)	104			—		(212		)
EFFECT OF CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—			—			(4		)	—		(4		)
CHANGE IN CASH AND CASH EQUIVALENTS	(73		)	(1		)	3			—		(71		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	144			6			168			—		318
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	71		$	5		$	171		$	—	$	247

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SIGNIFICANT ACCOUNTING POLICIES - Reconciliation of Average Common Shares (Details) - shares shares in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Basic average common shares outstanding (in shares)	90.1	96.9	97.5
Impact of convertible notes (in shares)	0.0	1.1	0.0
Diluted average common shares outstanding (in shares)	92.0	100.1	99.2
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Impact of instruments attributable to dilutive effect of share-based payment arrangements (in shares)	0.0	0.1	0.1
Restricted Shares, Restricted Share Units and Performance Share Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Impact of instruments attributable to dilutive effect of share-based payment arrangements (in shares)	1.9	2.0	1.6

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SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) $ / shares in Units, $ in Millions				12 Months Ended
	Dec. 01, 2015 $ / shares shares	Dec. 01, 2014 $ / shares shares	Dec. 02, 2013 $ / shares	Sep. 30, 2016 USD ($) customer shares	Sep. 30, 2015 USD ($) customer shares	Sep. 30, 2014 USD ($) shares	Nov. 30, 2015 shares	Nov. 30, 2014 shares	Dec. 01, 2013 shares	Nov. 30, 2013 shares
Significant Accounting Policies [Line Items]
Concentration risk from significant customers, percentage				10.00%
Impact of convertible notes (in shares)				0	1,100,000	0
Compensation costs recognized | $				$ 9	$ 10	$ 8
Deferred tax asset reclassified | $				$ 0	$ (18)
7.875% convertible notes due 2026
Significant Accounting Policies [Line Items]
Stated interest rate				7.875%	7.875%
Convertible Notes | 7.875% convertible notes due 2026
Significant Accounting Policies [Line Items]
Stated interest rate				7.875%
Stock Options
Significant Accounting Policies [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)						300,000
Restricted Stock Units (RSUs)
Significant Accounting Policies [Line Items]
Shares granted in period (in shares)				700,000	500,000	200,000
Vesting term				3 years
Restricted Stock Units (RSUs) | Executive Officer
Significant Accounting Policies [Line Items]
Exercise price (usd per share) | $ / shares	$ 10.51	$ 13.74
Shares granted in period (in shares)	500,000	400,000
Vesting term	3 years	3 years
Performance Shares
Significant Accounting Policies [Line Items]
Compensation costs recognized | $				$ 6	$ 8	$ 4
Performance Shares | Executive Officer
Significant Accounting Policies [Line Items]
Number of shares issuable per performance share unit (in shares)							1	1		1
Exercise price (usd per share) | $ / shares	$ 10.51	$ 13.74	$ 7.97
Performance period	3 years	3 years	3 years
Shares authorized for grant (in shares)	700,000	600,000
Impact of convertible notes (in shares)				1,300,000	900,000	100,000
Performance Shares | Executive Officer | Minimum
Significant Accounting Policies [Line Items]
Performance-based vesting percentage	0.00%	0.00%	0.00%
Performance Shares | Executive Officer | Maximum
Significant Accounting Policies [Line Items]
Performance-based vesting percentage	200.00%	200.00%	200.00%
Performance Shares | Executive Officer | Performance Objective One
Significant Accounting Policies [Line Items]
Award vesting rights percentage	50.00%	75.00%
Performance Shares | Executive Officer | Performance Objective Two
Significant Accounting Policies [Line Items]
Award vesting rights percentage	50.00%	25.00%	25.00%
Performance Shares | Executive Officer | Performance Objective Three
Significant Accounting Policies [Line Items]
Award vesting rights percentage			25.00%
Restricted Shares, Restricted Share Units and Performance Share Units
Significant Accounting Policies [Line Items]
Impact of instruments attributable to dilutive effect of share-based payment arrangements (in shares)				1,900,000	2,000,000	1,600,000
M2016 Strategy | Performance Shares | Executive Officer
Significant Accounting Policies [Line Items]
Shares authorized for grant (in shares)									1,800,000
M2016 Strategy | Performance Shares | Executive Officer | Performance Objective One
Significant Accounting Policies [Line Items]
Award vesting rights percentage			50.00%
Ten Customers | Customer Concentration Risk | Sales
Significant Accounting Policies [Line Items]
Number of significant customer | customer				10	10
Concentration risk from significant customers, percentage				73.00%	75.00%	76.00%
Three Customers | Customer Concentration Risk | Sales
Significant Accounting Policies [Line Items]
Number of significant customer | customer				3	3
Concentration risk from significant customers, percentage				50.00%	55.00%	57.00%
Three Customers | Customer Concentration Risk | Trade Accounts Receivable
Significant Accounting Policies [Line Items]
Number of significant customer | customer				3	3
Concentration risk from significant customers, percentage				22.00%	21.00%
New Accounting Pronouncement, Early Adoption, Effect
Significant Accounting Policies [Line Items]
Deferred tax asset reclassified | $				$ 17

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DISCONTINUED OPERATIONS - Summary of Discontinued Operations (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Discontinued Operations and Disposal Groups [Abstract]
Sales	$ 0	$ 1	$ 29
Operating losses, net	0	0	(8)
Net loss on sales of businesses	0	0	(23)
Environmental remediation charges (see Note 23)	0	0	(4)
Litigation settlement	(3)	0	0
Other, net	(4)	(2)	(2)
Loss before income taxes	(7)	(2)	(37)
Benefit for income taxes	3	1	7
Loss from discontinued operations attributable to Meritor, Inc.	$ (4)	$ (1)	$ (30)

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DISCONTINUED OPERATIONS - Additional Information (Details) $ in Millions		1 Months Ended	3 Months Ended	12 Months Ended
	Jan. 03, 2011 USD ($) installment	Oct. 31, 2009	Sep. 30, 2014 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)
Discontinued operations assets				$ 1	$ 4
Discontinued operations liabilities				6	10
Net loss on sales of businesses				0	0	$ 23
Sales				0	1	29
Notes receivable				396	461
Mascot
Net loss on sales of businesses			$ 23
Sales					1	$ 29
MSSC
Ownership before transaction		57.00%
Exposure under Indemnity				1	2
EU Trailer
Expense related to specific warranty matter			$ 5
8%, Five Year Promissory Note | Body Systems | Promissory Notes
Debt term	5 years
Stated interest rate	8.00%
Debt instrument, face amount	$ 15
Number of installments | installment	5
Notes receivable				$ 0	$ 3

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GOODWILL (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Goodwill [Roll Forward]
Goodwill, beginning balance		$ 402	$ 431
Impairment	$ (15)	0	(15)	$ 0
Foreign currency translation		(12)	(14)
Goodwill, ending balance	402	390	402	431
Commercial Truck & Industrial
Goodwill [Roll Forward]
Goodwill, beginning balance		239	261
Impairment		0	(15)
Foreign currency translation		(9)	(7)
Goodwill, ending balance	239	230	239	261
Aftermarket & Trailer
Goodwill [Roll Forward]
Goodwill, beginning balance		163	170
Impairment		0	0
Foreign currency translation		(3)	(7)
Goodwill, ending balance	$ 163	$ 160	$ 163	$ 170

XML

RESTRUCTURING COSTS - Changes in Restructuring Reserves (Details) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Restructuring Reserve [Roll Forward]
Restructuring reserve, period start				$ 10				$ 11	$ 10	$ 11	$ 12
Charges to continuing operations	$ 7	$ 6	$ 2	1	$ 1	$ 9	$ 3	3	16	16	10
Asset write-offs										(1)
Cash payments – continuing operations									(11)	(16)	(10)
Other									1		(1)
Restructuring reserve, period end	16				10				16	10	11
Less: non-current restructuring reserves	(2)				(3)				(2)	(3)
Restructuring reserves – current	14				7				14	7
Employee Termination Benefits
Restructuring Reserve [Roll Forward]
Restructuring reserve, period start				10				11	10	11	12
Charges to continuing operations									15	15	10
Asset write-offs										0
Cash payments – continuing operations									(11)	(16)	(10)
Other									1		(1)
Restructuring reserve, period end	15				10				15	10	11
Less: non-current restructuring reserves	(2)								(2)
Restructuring reserves – current	13								13
Asset Impairment
Restructuring Reserve [Roll Forward]
Restructuring reserve, period start				0				0	0	0	0
Charges to continuing operations									0	1	0
Asset write-offs										(1)
Cash payments – continuing operations									0	0	0
Other									0		0
Restructuring reserve, period end	0				0				0	0	0
Less: non-current restructuring reserves	0								0
Restructuring reserves – current	0								0
Plant Shutdown & Other
Restructuring Reserve [Roll Forward]
Restructuring reserve, period start				$ 0				$ 0	0	0	0
Charges to continuing operations									1	0	0
Asset write-offs										0
Cash payments – continuing operations									0	0	0
Other									0		0
Restructuring reserve, period end	1				$ 0				1	$ 0	$ 0
Less: non-current restructuring reserves	0								0
Restructuring reserves – current	$ 1								$ 1

XML

RESTRUCTURING COSTS - Restructuring Expense Recognized By Segment (Details) - USD ($) $ in Millions	3 Months Ended								12 Months Ended			22 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015
Restructuring Cost and Reserve [Line Items]
Restructuring costs	$ 7	$ 6	$ 2	$ 1	$ 1	$ 9	$ 3	$ 3	$ 16	$ 16	$ 10
Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs	2								2	2	1
Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs									6	14	8
Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs									8	0	1
Market related actions
Restructuring Cost and Reserve [Line Items]
Restructuring costs									8
Market related actions | Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs									2
Market related actions | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs	5								5
Market related actions | Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs	$ 1								1
Aftermarket actions
Restructuring Cost and Reserve [Line Items]
Restructuring costs									5
Aftermarket actions | Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs									0
Aftermarket actions | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs									0
Aftermarket actions | Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs		$ 5							5
South America labor reduction II
Restructuring Cost and Reserve [Line Items]
Restructuring costs										6
South America labor reduction II | Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs										0
South America labor reduction II | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs										6
South America labor reduction II | Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs										0
M2016 footprint actions
Restructuring Cost and Reserve [Line Items]
Restructuring costs										5
M2016 footprint actions | Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs										0
M2016 footprint actions | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs										5		$ 7
M2016 footprint actions | Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs										0
Closure of engineering facility
Restructuring Cost and Reserve [Line Items]
Restructuring costs										2
Closure of engineering facility | Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs										2
Closure of engineering facility | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs										0
Closure of engineering facility | Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs										0
European labor reductions
Restructuring Cost and Reserve [Line Items]
Restructuring costs										2
European labor reductions | Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs										0
European labor reductions | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs										2
European labor reductions | Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs										0
South America labor reduction I
Restructuring Cost and Reserve [Line Items]
Restructuring costs											7
South America labor reduction I | Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs											0
South America labor reduction I | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs										13	7
South America labor reduction I | Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs											0
Other
Restructuring Cost and Reserve [Line Items]
Restructuring costs									3	1	3
Other | Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs									0	0	1
Other | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs									1	1	1
Other | Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs									$ 2	$ 0	$ 1

XML

RESTRUCTURING COSTS - Additional Information (Details) $ in Millions	3 Months Ended								6 Months Ended	12 Months Ended			22 Months Ended
	Sep. 30, 2016 USD ($) position	Jun. 30, 2016 USD ($)	Mar. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Sep. 30, 2015 USD ($)	Jun. 30, 2015 USD ($)	Mar. 31, 2015 USD ($) position	Dec. 31, 2014 USD ($)	Mar. 31, 2016 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($) position	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($)
Restructuring Cost and Reserve [Line Items]
Restructuring costs	$ 7	$ 6	$ 2	$ 1	$ 1	$ 9	$ 3	$ 3		$ 16	$ 16	$ 10
Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs	2									2	2	1
Employee separation
Restructuring Cost and Reserve [Line Items]
Restructuring costs										15	15	10
Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs										6	14	8
Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs										8	0	1
Market related actions
Restructuring Cost and Reserve [Line Items]
Restructuring costs expected to incur	10									10
Restructuring costs										8
Market related actions | Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs										2
Market related actions | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs	5									5
Market related actions | Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs	$ 1									1
Market related actions | Hourly and Salaried Positions
Restructuring Cost and Reserve [Line Items]
Number of positions expected to be eliminated | position	100
Aftermarket actions
Restructuring Cost and Reserve [Line Items]
Restructuring costs										5
Aftermarket actions | Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs										0
Aftermarket actions | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs										0
Aftermarket actions | Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs expected to incur	$ 8									8
Restructuring costs		$ 5								5
Other
Restructuring Cost and Reserve [Line Items]
Restructuring costs										3	1	3
Other | Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs										0	0	1
Other | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs										1	1	1
Other | Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs										$ 2	0	1
Other | Commercial Truck and Industrial, Aftermarket and Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs									$ 3
M2016 footprint actions
Restructuring Cost and Reserve [Line Items]
Restructuring costs											5
M2016 footprint actions | Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs											0
M2016 footprint actions | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs											5		$ 7
M2016 footprint actions | Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs											$ 0
M2016 footprint actions | Hourly and Salaried Positions | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Number of positions eliminated | position											140
South America labor reduction I
Restructuring Cost and Reserve [Line Items]
Restructuring costs												7
South America labor reduction I | Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs												0
South America labor reduction I | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs											$ 13	7
South America labor reduction I | Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs												$ 0
South America labor reduction I | Hourly Positions | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Number of positions eliminated | position											420
South America labor reduction I | Salaried Positions | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Number of positions eliminated | position											40
Closure of engineering facility
Restructuring Cost and Reserve [Line Items]
Restructuring costs											$ 2
Closure of engineering facility | Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs											2
Closure of engineering facility | Employee separation
Restructuring Cost and Reserve [Line Items]
Cost incurred to date					2						2		2
Closure of engineering facility | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs											0
Closure of engineering facility | Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs											0
Closure of engineering facility | Hourly and Salaried Positions
Restructuring Cost and Reserve [Line Items]
Number of positions eliminated | position							30
European labor reductions
Restructuring Cost and Reserve [Line Items]
Restructuring costs											2
European labor reductions | Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring costs											0
European labor reductions | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Cost incurred to date					$ 2						2		$ 2
Restructuring costs											2
European labor reductions | Aftermarket & Trailer
Restructuring Cost and Reserve [Line Items]
Restructuring costs											$ 0
European labor reductions | Hourly Positions | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Number of positions eliminated | position											20
European labor reductions | Salaried Positions | Commercial Truck & Industrial
Restructuring Cost and Reserve [Line Items]
Number of positions eliminated | position											20

XML

ACQUISITIONS (Details) - USD ($) $ in Millions		12 Months Ended
	Jul. 09, 2015	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Business Acquisition [Line Items]
Ownership percentage		100.00%
Purchase price		$ 0	$ 16	$ 0
Sypris Solutions, Inc. Manufacturing Facility
Business Acquisition [Line Items]
Purchase price	$ 16
Fair value of net assets acquired	16
Sistemas Automotrices De Mexico S.A. De C.V.
Business Acquisition [Line Items]
Ownership percentage		50.00%	50.00%	50.00%
Sistemas Automotrices De Mexico S.A. De C.V. | Corporate Joint Venture
Business Acquisition [Line Items]
Ownership percentage		50.00%
Property, Plant and Equipment | Equipment | Sypris Solutions, Inc. Manufacturing Facility
Business Acquisition [Line Items]
Equipment held for sale	$ 2

XML

ACCOUNTS RECEIVABLE FACTORING AND SECURITIZATION (Details)	12 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Oct. 14, 2016 EUR (€)	Oct. 14, 2016 USD ($)	Sep. 30, 2016 EUR (€)	Sep. 30, 2016 USD ($)	Feb. 19, 2016 EUR (€)	Feb. 19, 2016 USD ($)	Sep. 30, 2015 EUR (€)	Sep. 30, 2015 USD ($)
Accounts Receivable Factoring and Securitization [Line Items]
Costs associated with off-balance sheet factoring arrangements	$ 5,000,000	$ 6,000,000	$ 8,000,000
Sweden Factoring Facility
Accounts Receivable Factoring and Securitization [Line Items]
Utilization of accounts receivable factoring facility under arrangement						€ 121,000,000	$ 135,000,000			€ 108,000,000	$ 121,000,000
U.S Factoring Facility
Accounts Receivable Factoring and Securitization [Line Items]
Maximum limit for sale of eligible trade receivables								€ 80,000,000	$ 90,000,000	65,000,000	73,000,000
Utilization of accounts receivable factoring facility under arrangement						39,000,000	44,000,000			74,000,000	83,000,000
United Kingdom Factoring Facility
Accounts Receivable Factoring and Securitization [Line Items]
Maximum limit for sale of eligible trade receivables						25,000,000	28,000,000
Utilization of accounts receivable factoring facility under arrangement						6,000,000	6,000,000			8,000,000	8,000,000
Italy Factoring Facility
Accounts Receivable Factoring and Securitization [Line Items]
Maximum limit for sale of eligible trade receivables						30,000,000	34,000,000
Utilization of accounts receivable factoring facility under arrangement						€ 22,000,000	24,000,000			€ 22,000,000	24,000,000
Other Factoring Facility
Accounts Receivable Factoring and Securitization [Line Items]
Utilization of accounts receivable factoring facility under arrangement							10,000,000				18,000,000
U.S. Securitization Financing Facility
Accounts Receivable Factoring and Securitization [Line Items]
Maximum limit for securitization financing arrangement							100,000,000
Required ratio of total priority debt to EBITDA through period end	2.25
Outstanding balance under accounts receivable securitization program							$ 0				$ 0
Subsequent Event | Sweden Factoring Facility
Accounts Receivable Factoring and Securitization [Line Items]
Maximum limit for sale of eligible trade receivables				€ 155,000,000	$ 174,000,000

XML

GAIN ON SALE OF PROPERTY AND OTHER OPERATING EXPENSE, NET (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Other Income and Expenses [Abstract]
Gain on sale of property	$ 2	$ 3	$ 0

XML

INVENTORIES (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
Inventory Disclosure [Abstract]
Finished goods	$ 125	$ 133
Work in process	26	28
Raw materials, parts and supplies	165	177
Total	$ 316	$ 338

XML

OTHER CURRENT ASSETS (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
Other Current Assets Disclosure [Abstract]
Current deferred income tax assets (see Note 22)	$ 0	$ 20
Asbestos-related recoveries (see Note 23)	10	13
Prepaid and other	23	17
Other current assets	$ 33	$ 50

XML

NET PROPERTY - Schedule of Net Property (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
Property, Plant and Equipment [Line Items]
Property, gross	$ 1,269	$ 1,287
Less: accumulated depreciation	(830)	(868)
Net property	439	419
Land and land improvements
Property, Plant and Equipment [Line Items]
Property, gross	30	31
Buildings
Property, Plant and Equipment [Line Items]
Property, gross	231	214
Machinery and equipment
Property, Plant and Equipment [Line Items]
Property, gross	839	864
Company-owned tooling
Property, Plant and Equipment [Line Items]
Property, gross	113	116
Construction in progress
Property, Plant and Equipment [Line Items]
Property, gross	$ 56	$ 62

XML

NET PROPERTY - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Sep. 30, 2015	Sep. 30, 2016
Property, Plant and Equipment [Line Items]
Impairment of long-lived assets	$ 2
Minimum | Buildings
Property, Plant and Equipment [Line Items]
Estimated useful lives of property (in years)		10 years
Minimum | Machinery and equipment
Property, Plant and Equipment [Line Items]
Estimated useful lives of property (in years)		3 years
Maximum | Buildings
Property, Plant and Equipment [Line Items]
Estimated useful lives of property (in years)		50 years
Maximum | Machinery and equipment
Property, Plant and Equipment [Line Items]
Estimated useful lives of property (in years)		20 years
Maximum | Company-owned tooling
Property, Plant and Equipment [Line Items]
Estimated useful lives of property (in years)		3 years

XML

OTHER ASSETS (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
Other Assets, Noncurrent [Abstract]
Investments in non-consolidated joint ventures (see Note 13)	$ 100	$ 96
Asbestos-related recoveries (see Note 23)	49	42
Unamortized revolver debt issuance costs (see Note 16)	7	10
Capitalized software costs, net	29	28
Non-current deferred income tax assets (see Note 22)	413	28
Assets for uncertain tax positions (see Note 22)	35	3
Prepaid pension costs (see Note 21)	123	110
Other	4	15
Other assets	$ 760	$ 332

XML

INVESTMENTS IN NON-CONSOLIDATED JOINT VENTURES - Non-Consolidated Joint Ventures and Direct Ownership Interests (Details)	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Schedule of Equity Method Investments [Line Items]
Non-consolidated joint ventures and related direct ownership interest	100.00%
Meritor WABCO Vehicle Control Systems (Commercial Truck & Industrial)
Schedule of Equity Method Investments [Line Items]
Non-consolidated joint ventures and related direct ownership interest	50.00%	50.00%	50.00%
Master Sistemas Automotivos Ltda. (Commercial Truck & Industrial)
Schedule of Equity Method Investments [Line Items]
Non-consolidated joint ventures and related direct ownership interest	49.00%	49.00%	49.00%
Sistemas Automotrices de Mexico S.A. de C.V. (Commercial Truck & Industrial)
Schedule of Equity Method Investments [Line Items]
Non-consolidated joint ventures and related direct ownership interest	50.00%	50.00%	50.00%
Ege Fren Sanayii ve Ticaret A.S. (Commercial Truck & Industrial)
Schedule of Equity Method Investments [Line Items]
Non-consolidated joint ventures and related direct ownership interest	49.00%	49.00%	49.00%
Automotive Axles Limited (Commercial Truck & Industrial)
Schedule of Equity Method Investments [Line Items]
Non-consolidated joint ventures and related direct ownership interest	36.00%	36.00%	36.00%
ZF Meritor LLC (Commercial Truck & Industrial)
Schedule of Equity Method Investments [Line Items]
Non-consolidated joint ventures and related direct ownership interest	0.00%	0.00%	50.00%

XML

INVESTMENTS IN NON-CONSOLIDATED JOINT VENTURES - Investments In Non-Consolidated Joint Ventures (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
Segment Reporting Information [Line Items]
Investments in non-consolidated joint ventures	$ 100	$ 96
Commercial Truck & Industrial
Segment Reporting Information [Line Items]
Investments in non-consolidated joint ventures	100	96
Aftermarket & Trailer
Segment Reporting Information [Line Items]
Investments in non-consolidated joint ventures	$ 0	$ 0

XML

INVESTMENTS IN NON-CONSOLIDATED JOINT VENTURES - Equity in Earnings of Non-Consolidated Joint Ventures (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Segment Reporting Information [Line Items]
Equity in earnings of affiliates	$ 36	$ 39	$ 38
Commercial Truck & Industrial
Segment Reporting Information [Line Items]
Equity in earnings of affiliates	36	39	38
Aftermarket & Trailer
Segment Reporting Information [Line Items]
Equity in earnings of affiliates	$ 0	$ 0	$ 0

XML

INVESTMENTS IN NON-CONSOLIDATED JOINT VENTURES - Balance Sheet Information Of Non-Consolidated Joint Ventures (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
Equity Method Investment, Summarized Financial Information, Assets [Abstract]
Current assets	$ 337	$ 393
Non-current assets	151	140
Total assets	488	533
Equity Method Investment, Summarized Financial Information, Liabilities [Abstract]
Current liabilities	192	239
Non-current liabilities	103	111
Total liabilities	$ 295	$ 350

XML

INVESTMENTS IN NON-CONSOLIDATED JOINT VENTURES - Income Statement Information Of Non-Consolidated Joint Ventures (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Equity Method Investment, Summarized Financial Information, Income Statement [Abstract]
Sales	$ 1,101	$ 1,288	$ 1,268
Gross profit	165	187	167
Net income	$ 73	$ 83	$ 458

XML

INVESTMENTS IN NON-CONSOLIDATED JOINT VENTURES - Additional Information (Details) - USD ($) $ in Millions	1 Months Ended		3 Months Ended								12 Months Ended
	Jul. 31, 2014	Jun. 30, 2014	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Schedule of Equity Method Investments [Line Items]
Litigation settlement											$ (3)	$ 0	$ 0
Net income (loss)			$ 474	$ 41	$ 32	$ 26	$ (21)	$ 13	$ 43	$ 29	573	64	249
Equity in earnings of ZF Meritor											0	0	190
Dividends received from the company's non-consolidated joint ventures											37	32	36
Sales to non-consolidated joint ventures											9	5	3
Sales excluded from non-consolidated joint ventures through intercompany eliminations											124	135	141
Purchases from non-consolidated joint ventures											753	855	760
Lease and services payments from non-consolidated joint ventures											12	9	$ 5
Amounts due from non-consolidated joint ventures			22				35				22	35
Amounts due to non-consolidated joint ventures			84				107				84	107
Maximum exposure to loss in non-consolidated joint venture			45				42				45	42
Antitrust Lawsuit | ZF Meritor LLC (Commercial Truck & Industrial)
Schedule of Equity Method Investments [Line Items]
Litigation settlement		$ 500
Proceeds from legal settlements	$ 400
Antitrust Lawsuit | Meritor, Inc.
Schedule of Equity Method Investments [Line Items]
Litigation settlement	210
Proceeds from legal settlements	210
Net income (loss)	209
Antitrust Lawsuit | Meritor, Inc. | Equity in earnings of ZF Meritor
Schedule of Equity Method Investments [Line Items]
Equity in earnings of ZF Meritor	190
Antitrust Lawsuit | Meritor, Inc. | Selling, General and Administrative Expenses
Schedule of Equity Method Investments [Line Items]
Reimbursement of legal fees	$ 20
Automotive Axles Limited (Commercial Truck & Industrial)
Schedule of Equity Method Investments [Line Items]
Fair value of investment			$ 59				$ 57				$ 59	$ 57

XML

OTHER CURRENT LIABILITIES - Schedule of Other Current Liabilities (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Other Current Liabilities Disclosure [Abstract]
Compensation and benefits	$ 115	$ 122
Income taxes	8	9
Taxes other than income taxes	21	23
Accrued interest	14	14
Product warranties	18	22	$ 27
Restructuring (see Note 5)	14	7
Asbestos-related liabilities (see Note 23)	18	17
Indemnity obligations (see Note 23)	2	2
Other	58	63
Other current liabilities	$ 268	$ 279

XML

OTHER CURRENT LIABILITIES - Schedule of Product Warranties (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Other Liabilities, Current [Roll Forward]
Total product warranties - beginning of year	$ 48	$ 51	$ 57
Accruals for product warranties	10	15	22
Payments	(14)	(18)	(22)
Change in estimates and other	0	0	(6)
Total product warranties - end of year	44	48	51
Less: non-current product warranties (see Note 15)	(26)	(26)	(24)
Product warranties	$ 18	$ 22	$ 27

XML

OTHER LIABILITIES (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Other Liabilities Disclosure [Abstract]
Asbestos-related liabilities (see Note 23)	$ 136	$ 109
Restructuring (see Note 5)	2	3
Non-current deferred income tax liabilities (see Note 22)	12	99
Liabilities for uncertain tax positions (see Note 22)	16	15
Product warranties (see Note 14)	26	26	$ 24
Environmental (see Note 23)	6	8
Indemnity obligations (see Note 23)	11	13
Other	29	32
Other liabilities	$ 238	$ 305

XML

LONG-TERM DEBT - Summary of Long-Term Debt (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2012
Debt Instrument [Line Items]
Capital lease obligation	$ 16	$ 17
Unamortized discount on convertible notes	(23)	(30)
Subtotal	996	1,051
Less: current maturities	(14)	(15)
Long-term debt	982	1,036
Unamortized issuance costs	7	10
Unamortized discount on convertible notes	$ 23	$ 30
4.625% convertible notes due 2026
Debt Instrument [Line Items]
Stated interest rate	4.625%	4.625%
4.00% convertible notes due 2027
Debt Instrument [Line Items]
Stated interest rate	4.00%	4.00%
Unamortized issuance costs	$ 1	$ 1
7.875% convertible notes due 2026
Debt Instrument [Line Items]
Unamortized discount on convertible notes	$ (9)	$ (10)
Stated interest rate	7.875%	7.875%
Unamortized issuance costs	$ 2	$ 3
Unamortized discount on convertible notes	9	10
6.75% notes due 2021
Debt Instrument [Line Items]
Debt	$ 271	$ 270
Stated interest rate	6.75%	6.75%
Unamortized issuance costs	$ 4	$ 5
6.25% notes due 2024
Debt Instrument [Line Items]
Debt	$ 442	$ 442
Stated interest rate	6.25%	6.25%
Unamortized issuance costs	$ 8	$ 8
Export financing arrangements and other
Debt Instrument [Line Items]
Debt	10	18
Unamortized discount on convertible notes
Debt Instrument [Line Items]
Unamortized discount on convertible notes	(14)	(20)
Unamortized discount on convertible notes	14	20
Convertible Notes
Debt Instrument [Line Items]
Unamortized discount on convertible notes	(14)
Unamortized issuance costs	15
Unamortized discount on convertible notes	14
Convertible Notes | 4.625% convertible notes due 2026
Debt Instrument [Line Items]
Debt	$ 0	55		$ 300
Stated interest rate	4.625%
Convertible Notes | 4.00% convertible notes due 2027
Debt Instrument [Line Items]
Debt	$ 142	$ 142
Stated interest rate	4.00%	4.00%	4.00%
Convertible Notes | 7.875% convertible notes due 2026
Debt Instrument [Line Items]
Debt	$ 129	$ 127
Stated interest rate	7.875%

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LONG-TERM DEBT - Revolving Credit Facility (Details) - Revolving Credit Facility	12 Months Ended
	Sep. 30, 2016 USD ($)	Jun. 02, 2016 USD ($)	Sep. 30, 2015 USD ($)
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 506,000,000
Unused capacity, commitment fee percentage	0.50%
Amount outstanding	$ 0		$ 0
Amount outstanding, letters of credit	$ 0		$ 0
Revolving Credit Facility with Conversion Election Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 466,000,000
Amended Revolving Credit Facility
Debt Instrument [Line Items]
Collateral maximum test value	1.0
Value of company assets collateralized	$ 693,000,000
Maximum limit on issuance of letters of credit	100,000,000
Revolving Credit Facility - Amended - Matures In April 2017
Debt Instrument [Line Items]
Maximum borrowing capacity	8,000,000	$ 32,000,000
Revolving Credit Facility - Amended - Matures In February 2019
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 498,000,000
Triggering Event One
Debt Instrument [Line Items]
Required ratio of total priority debt to EBITDA through period end	2.25
LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	3.25%
Prime Rate | Overnight Revolving Credit Loans
Debt Instrument [Line Items]
Basis spread on variable rate	2.25%

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LONG-TERM DEBT - Issuance of Debt Securities - 2024 and 2021 Notes (Details) - USD ($)				12 Months Ended
	Jun. 11, 2015	Feb. 13, 2014	May 31, 2013	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014	Sep. 20, 2014	Dec. 31, 2012
Debt Instrument [Line Items]
Proceeds from debt issuances				$ 0	$ 225,000,000	$ 225,000,000
6.25% notes due 2024
Debt Instrument [Line Items]
Proceeds from debt issuances		$ 225,000,000
Stated interest rate				6.25%	6.25%
Debt				$ 442,000,000	$ 442,000,000
6.25% notes due 2024 | Redemption Period, Equity Clawback
Debt Instrument [Line Items]
Redemption price percentage				106.25%
7.875% convertible notes due 2026
Debt Instrument [Line Items]
Stated interest rate				7.875%	7.875%
10.625% Notes Due 2018
Debt Instrument [Line Items]
Stated interest rate				10.625%
6.75% notes due 2021
Debt Instrument [Line Items]
Stated interest rate				6.75%	6.75%
Debt				$ 271,000,000	$ 270,000,000
8.125% Notes Due 2015
Debt Instrument [Line Items]
Stated interest rate				8.125%			8.125%
Corporate Debt Securities | 6.25% notes due 2024 | Redemption period one
Debt Instrument [Line Items]
Redemption price percentage				103.125%
Corporate Debt Securities | 6.25% notes due 2024 | Redemption period two
Debt Instrument [Line Items]
Redemption price percentage				102.083%
Corporate Debt Securities | 6.25% notes due 2024 | Redemption period three
Debt Instrument [Line Items]
Redemption price percentage				101.042%
Corporate Debt Securities | 6.25% notes due 2024 | Redemption period four
Debt Instrument [Line Items]
Redemption price percentage				100.00%
Corporate Debt Securities | 6.25% notes due 2024 | Change in Control Redemption
Debt Instrument [Line Items]
Redemption price percentage				101.00%
Corporate Debt Securities | 10.625% Notes Due 2018
Debt Instrument [Line Items]
Repurchased amount of debt		$ 250,000,000
Stated interest rate		1062.50%
Corporate Debt Securities | 6.75% notes due 2021
Debt Instrument [Line Items]
Debt instrument, face amount			$ 275,000,000
Debt term			8 years
Proceeds from debt issuances			$ 275,000,000
Percentage of principal amount that may be redeemed				35.00%
Percentage of principal amount outstanding				65.00%
Redemption price				100.00%
Corporate Debt Securities | 6.75% notes due 2021 | Redemption period one
Debt Instrument [Line Items]
Redemption price percentage				105.063%
Corporate Debt Securities | 6.75% notes due 2021 | Redemption period two
Debt Instrument [Line Items]
Redemption price percentage				103.375%
Corporate Debt Securities | 6.75% notes due 2021 | Redemption period three
Debt Instrument [Line Items]
Redemption price percentage				101.688%
Corporate Debt Securities | 6.75% notes due 2021 | Redemption period four
Debt Instrument [Line Items]
Redemption price percentage				100.00%
Corporate Debt Securities | 6.75% notes due 2021 | Redemption Period, Equity Clawback
Debt Instrument [Line Items]
Redemption price percentage				106.75%
Corporate Debt Securities | 6.75% notes due 2021 | Change in Control Redemption
Debt Instrument [Line Items]
Redemption price percentage				101.00%
Corporate Debt Securities | 8.125% Notes Due 2015
Debt Instrument [Line Items]
Repurchased amount of debt			$ 167,000,000
Promissory Notes | 6.25% notes due 2024
Debt Instrument [Line Items]
Debt instrument, face amount	$ 225,000,000	$ 225,000,000
Debt term		10 years
Issuance price percentage		10000.00%
Debt	450,000,000
Promissory Notes | 6.25% notes due 2024 | Redemption Period, Equity Clawback
Debt Instrument [Line Items]
Principal amount redeemable				$ 79,000,000
Redemption, principal amount outstanding, minimum				$ 146,000,000
Redemption, written notice period				90 days
Convertible Notes | 7.875% convertible notes due 2026
Debt Instrument [Line Items]
Debt instrument, face amount								$ 250,000,000
Repurchased amount of debt	110,000,000				110,000,000
Stated interest rate				7.875%
Repayments of convertible debt	$ 179,000,000				179,000,000
Debt				$ 129,000,000	$ 127,000,000

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LONG-TERM DEBT - Repurchase of Debt Securities (Details) - USD ($) $ in Millions						3 Months Ended			12 Months Ended
	Apr. 15, 2016	Mar. 01, 2016	Jun. 11, 2015	Sep. 20, 2014	Mar. 15, 2014	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2016	Dec. 31, 2012
7.875% convertible notes due 2026
Debt Instrument [Line Items]
Stated interest rate						7.875%			7.875%		7.875%
4.00% convertible notes due 2027
Debt Instrument [Line Items]
Stated interest rate						4.00%			4.00%		4.00%
4.625% convertible notes due 2026
Debt Instrument [Line Items]
Stated interest rate						4.625%			4.625%		4.625%
Repurchase price percentage	100.00%	100.00%
Repurchased amount of debt		$ 55
8.125% Notes Due 2015
Debt Instrument [Line Items]
Extinguishment of debt, amount				$ 84
Stated interest rate				8.125%							8.125%
Repurchase price percentage				7.00%
Net loss on debt extinguishment				$ (5)
Unamortized discount and deferred issuance costs				1
Redemption premium				$ 6
10.625% Notes Due 2018
Debt Instrument [Line Items]
Extinguishment of debt, amount					$ 250
Stated interest rate											10.625%
Repurchase price percentage					5.00%
Net loss on debt extinguishment					$ (19)
Unamortized discount and deferred issuance costs					6
Redemption premium					$ 13
Convertible Notes | 7.875% convertible notes due 2026
Debt Instrument [Line Items]
Extinguishment of debt, amount						$ 25	$ 85		$ 110
Stated interest rate											7.875%
Repurchase price percentage						58.00%	64.00%
Repayments of convertible debt			$ 179						179
Carrying amount of liability component						$ 121			121
Carrying amount of equity component						58			58
Net loss on debt extinguishment									(24)
Unamortized discount and deferred issuance costs						14			14
Redemption premium						10			10
Repurchased amount of debt			$ 110			$ 110			110
Convertible Notes | 4.00% convertible notes due 2027
Debt Instrument [Line Items]
Extinguishment of debt, amount							$ 4	$ 15	$ 19	$ 38
Stated interest rate						4.00%			4.00%	4.00%	4.00%
Repurchase price percentage							5.00%	6.00%		7.00%
Net loss on debt extinguishment										$ (5)
Convertible Notes | 4.625% convertible notes due 2026
Debt Instrument [Line Items]
Stated interest rate											4.625%
Repurchased amount of debt											$ 55	$ 245

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LONG-TERM DEBT - Convertible Notes (Details)	1 Months Ended	12 Months Ended
	Dec. 31, 2012 USD ($) $ / shares shares	Sep. 30, 2016 USD ($) d $ / shares shares	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Mar. 01, 2016 USD ($)	Jun. 11, 2015 USD ($)	Feb. 27, 2007 USD ($)
Debt Instrument [Line Items]
Loss on debt extinguishment		$ 0	$ 25,000,000	$ 31,000,000
7.875% convertible notes due 2026
Debt Instrument [Line Items]
Stated interest rate		7.875%	7.875%
4.625% convertible notes due 2026
Debt Instrument [Line Items]
Stated interest rate		4.625%	4.625%
Repurchased amount of debt					$ 55,000,000
4.00% convertible notes due 2027
Debt Instrument [Line Items]
Stated interest rate		4.00%	4.00%
Convertible Notes
Debt Instrument [Line Items]
Threshold trading days | d		20
Threshold consecutive trading days		30 days
Threshold percentage of stock price trigger		120.00%
Loss on debt extinguishment		$ 0	$ 24,000,000	$ 5,000,000
Convertible Notes | 7.875% convertible notes due 2026
Debt Instrument [Line Items]
Debt instrument, face amount	$ 250,000,000
Stated interest rate		7.875%
Initial principal amount per note	900
Face principal amount per note	$ 1,000
Effective interest rates on convertible notes:	10.90%
Proceeds from convertible debt	$ 220,000,000
Equivalent shares of common stock per 1000 principal amount of convertible notes | shares	83.3333
Conversion price | $ / shares	$ 12.00
Repurchased amount of debt			110,000,000			$ 110,000,000
Long-term debt		$ 129,000,000	127,000,000
Carrying amount of equity component			58,000,000
Convertible Notes | 4.625% convertible notes due 2026
Debt Instrument [Line Items]
Stated interest rate		4.625%
Repurchased amount of debt	$ 245,000,000	$ 55,000,000
Long-term debt	300,000,000	$ 0	$ 55,000,000
Convertible note repurchase price	$ 236,000,000
Convertible Notes | 4.00% convertible notes due 2027
Debt Instrument [Line Items]
Debt instrument, face amount							$ 200,000,000
Stated interest rate		4.00%	4.00%	4.00%
Redemption price		100.00%
Long-term debt		$ 142,000,000	$ 142,000,000
Redemption option price		100.00%
Convertible Notes | Convertible Notes 2007
Debt Instrument [Line Items]
Equivalent shares of common stock per 1000 principal amount of convertible notes | shares		37.4111
Conversion price | $ / shares		$ 26.73
Maximum number of shares of common stock convertible notes are convertible into | shares		5,000,000
Convertible Notes | Convertible Notes 2013
Debt Instrument [Line Items]
Effective interest rates on convertible notes:		10.90%
Redemption price		100.00%
Maximum number of shares of common stock convertible notes are convertible into | shares		11,000,000
Triggering Event One | Convertible Notes
Debt Instrument [Line Items]
Threshold trading days | d		5
Threshold consecutive trading days		5 days
Threshold percentage of stock price trigger		97.00%
Triggering Event One | Convertible Notes | Convertible Notes 2013
Debt Instrument [Line Items]
Threshold trading days | d		20
Threshold consecutive trading days		30 days
Threshold percentage of stock price trigger		120.00%
Triggering Event Two | Convertible Notes | Convertible Notes 2013
Debt Instrument [Line Items]
Threshold trading days | d		5
Threshold consecutive trading days		5 days
Threshold percentage of stock price trigger		97.00%

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LONG-TERM DEBT - Summaries of Convertible Notes (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Debt Instrument [Line Items]
Principal amount of convertible notes	$ 283	$ 338
Unamortized discount on convertible notes	(23)	(30)
Net carrying value	260	308
Repurchase of convertible notes	0	25	$ 31
Convertible Notes
Debt Instrument [Line Items]
Unamortized discount on convertible notes	(14)
Contractual interest coupon	18	26	30
Amortization of debt discount	8	8	9
Repurchase of convertible notes	0	24	5
Total	$ 26	$ 58	$ 44
2027 | Convertible Notes
Debt Instrument [Line Items]
Total amortization period for debt discount (in years):	12 years
Remaining amortization period for debt discount (in years):	3 years
Effective interest rates on convertible notes:	7.70%
2013 | Convertible Notes
Debt Instrument [Line Items]
Total amortization period for debt discount (in years):	8 years
Remaining amortization period for debt discount (in years):	4 years
Effective interest rates on convertible notes:	10.90%

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LONG-TERM DEBT - Debt Maturities (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Debt Instrument [Line Items]
Unamortized discount on convertible notes	$ 23	$ 30
Unamortized issuance costs	7	10
4.00% convertible notes due 2027
Debt Instrument [Line Items]
Unamortized issuance costs	$ 1	$ 1
Stated interest rate	4.00%	4.00%
7.875% convertible notes due 2026
Debt Instrument [Line Items]
Unamortized discount on convertible notes	$ 9	$ 10
Unamortized issuance costs	$ 2	$ 3
Stated interest rate	7.875%	7.875%
Convertible Notes
Debt Instrument [Line Items]
Unamortized discount on convertible notes	$ 14
Unamortized issuance costs	15
Original issuance discount	9
Convertible Notes | Debt maturities at Principal Amount
Long-term debt by fiscal year maturity [Abstract]
Long-term debt, total	1,034
2017	14
2018	4
2019	2
2020	1
2021	277
Thereafter	$ 736
Convertible Notes | 4.00% convertible notes due 2027
Debt Instrument [Line Items]
Stated interest rate	4.00%	4.00%	4.00%
Long-term debt by fiscal year maturity [Abstract]
Long-term debt, total	$ 142	$ 142
Convertible Notes | 7.875% convertible notes due 2026
Debt Instrument [Line Items]
Stated interest rate	7.875%
Long-term debt by fiscal year maturity [Abstract]
Long-term debt, total	$ 129	$ 127

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LONG-TERM DEBT - Capital Leases (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Future Minimum Payments Due by Fiscal Year Maturity
Capital lease obligation, total	$ 20
Capital lease obligation, 2016	6
Capital lease obligation, 2017	4
Capital lease obligation, 2018	3
Capital lease obligation, 2019	2
Capital lease obligation, 2020	2
Capital lease obligation, Thereafter	3
Less amounts representing interest, total	(4)
Amounts representing interest, 2016	(1)
Amounts representing interest, 2017	(1)
Amounts representing interest, 2018	(1)
Amounts representing interest, 2019	(1)
Amounts representing interest, 2020	0
Amounts representing interest, Thereafter	0
Principal on capital lease, total	16
Principal on capital lease, 2016	5
Principal on capital lease, 2017	3
Principal on capital lease, 2018	2
Principal on capital lease, 2019	1
Principal on capital lease, 2020	2
Principal on capital lease, Thereafter	3
Financing Arrangements For Capital Leases
Capital Leased Assets [Line Items]
Maximum amount of financing for progress payments for equipment under construction	$ 10
Financing Arrangements For Capital Leases | Thirty-Day LIBOR
Capital Leased Assets [Line Items]
Basis spread on variable rate	4.75%
Capital Lease Arrangements
Capital Leased Assets [Line Items]
Capital lease term	60 months
Amount outstanding under capital leases	$ 7	$ 10
Capital Lease Arrangements | Five-Year Swap Rate
Capital Leased Assets [Line Items]
Basis spread on variable rate	5.64%
Other Capital Lease Arrangements
Capital Leased Assets [Line Items]
Amount outstanding under capital leases	$ 9	$ 7

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LONG-TERM DEBT - Letter of Credit Facilities (Details) - USD ($) $ in Millions	Mar. 19, 2019	Sep. 30, 2016	Sep. 30, 2015	Feb. 21, 2014
Standby Letters of Credit
Debt Instrument [Line Items]
Maximum limit on issuance of letters of credit				$ 30
Amount outstanding, letters of credit		$ 23	$ 24
Other Letters of Credit Arrangements
Debt Instrument [Line Items]
Amount outstanding, letters of credit		$ 5	$ 6
Forecasted | Standby Letters of Credit
Debt Instrument [Line Items]
Maximum limit on issuance of letters of credit	$ 25

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LONG-TERM DEBT - Export Financing Arrangements and Other (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
Export financing arrangements and other
Debt Instrument [Line Items]
Long-term debt	$ 10	$ 18
Promissory Notes | Export financing arrangements and other
Debt Instrument [Line Items]
Stated interest rate	5.50%
Brazil | Promissory Notes | Export financing arrangements and other
Debt Instrument [Line Items]
Long-term debt	$ 9	18
China | Notes Payable to Banks | Other Export Financing Arrangements
Debt Instrument [Line Items]
Long-term debt	10	$ 13
Debt default, amount	$ 35

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LONG-TERM DEBT - Operating Leases (Details) $ in Millions	Sep. 30, 2016 USD ($)
Future Minimum Lease Payments Under Operating Leases
2017	$ 16
2018	15
2019	15
2020	14
2021	11
Thereafter	$ 26

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FINANCIAL INSTRUMENTS - Additional Information (Details) - USD ($)	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015	Sep. 30, 2015	Sep. 30, 2014
Designated as Hedging Instrument | Cash Flow Hedging
Derivative [Line Items]
Notional amount of foreign exchange contracts outstanding	$ 190,000,000		$ 137,000,000	$ 47,000,000
Maximum | Foreign Exchange Forward
Derivative [Line Items]
Term of derivative contract	16 years
India, Rupees | Foreign Currency Option Contracts
Derivative [Line Items]
Notional amount of foreign exchange contracts outstanding	$ 174,000,000
Brazil, Brazil Real | Foreign Currency Option Contracts
Derivative [Line Items]
Notional amount of foreign exchange contracts outstanding			48,000,000
Sweden, Kronor | Foreign Currency Option Contracts | Not Designated as Hedging Instrument
Derivative [Line Items]
Notional amount of foreign exchange contracts outstanding		$ 19,000,000	30,000,000
Euro Member Countries, Euro | Foreign Currency Option Contracts | Not Designated as Hedging Instrument
Derivative [Line Items]
Notional amount of foreign exchange contracts outstanding		$ 21,000,000	$ 27,000,000

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FINANCIAL INSTRUMENTS - The Impact of Derivatives on Comprehensive Income (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Designated as Hedging Instrument
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in AOCL (effective portion)	$ (3)	$ 3	$ 3
Designated as Hedging Instrument | Cost of Sales
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) reclassified from AOCL into income (effective portion)	(4)	6	1
Not Designated as Hedging Instrument | Cost of Sales
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain recognized in income	(1)	2	0
Not Designated as Hedging Instrument | Other Income (expense)
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain recognized in income	$ (1)	$ 2	$ 0

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FINANCIAL INSTRUMENTS - Fair Value of Financial Instruments (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
Carrying Value
Fair Value
Cash and cash equivalents	$ 160	$ 193
Short-term debt	14	15
Long-term debt	982	1,036
Fair Value
Fair Value
Cash and cash equivalents	160	193
Short-term debt	14	15
Long-term debt	1,051	1,123
Foreign Exchange Forward | Carrying Value
Fair Value
Foreign exchange forward contracts (other assets)	1	1
Foreign exchange forward contracts (other liabilities)	2	3
Foreign Exchange Forward | Fair Value
Fair Value
Foreign exchange forward contracts (other assets)	1	1
Foreign exchange forward contracts (other liabilities)	2	3
Foreign Currency Option Contracts | Carrying Value
Fair Value
Short-term foreign currency option contracts (other assets)	0	1
Long-term foreign currency option contracts (other assets)	2	1
Foreign Currency Option Contracts | Fair Value
Fair Value
Short-term foreign currency option contracts (other assets)	0	1
Long-term foreign currency option contracts (other assets)	$ 2	$ 1

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FINANCIAL INSTRUMENTS - Offsetting of Derivative Assets and Liabilities (Details) - Foreign Exchange Forward - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
Offsetting Derivative Asset
Gross Amounts Recognized	$ 1	$ 1
Gross Amounts Offset	0	0
Net Amounts Reported	1	1
Offsetting 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 the Valuation Hierarchy (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
Level 1
Derivatives, Fair Value [Line Items]
Cash and cash equivalents	$ 160	$ 193
Short-term debt	0	0
Long-term debt	0	0
Level 2
Derivatives, Fair Value [Line Items]
Cash and cash equivalents	0	0
Short-term debt	0	0
Long-term debt	1,040	1,102
Level 3
Derivatives, Fair Value [Line Items]
Cash and cash equivalents	0	0
Short-term debt	14	15
Long-term debt	11	21
Foreign Exchange Forward | Level 1
Derivatives, Fair Value [Line Items]
Foreign exchange forward contracts (other assets)	0	0
Foreign exchange forward contracts (other liabilities)	0	0
Foreign Exchange Forward | Level 2
Derivatives, Fair Value [Line Items]
Foreign exchange forward contracts (other assets)	1	1
Foreign exchange forward contracts (other liabilities)	2	3
Foreign Exchange Forward | Level 3
Derivatives, Fair Value [Line Items]
Foreign exchange forward contracts (other assets)	0	0
Foreign exchange forward contracts (other liabilities)	0	0
Foreign Currency Option Contracts | Level 1
Derivatives, Fair Value [Line Items]
Short-term foreign currency option contracts (asset)	0	0
Long-term foreign currency option contracts (asset)	0	0
Foreign Currency Option Contracts | Level 2
Derivatives, Fair Value [Line Items]
Short-term foreign currency option contracts (asset)	0	0
Long-term foreign currency option contracts (asset)	0	0
Foreign Currency Option Contracts | Level 3
Derivatives, Fair Value [Line Items]
Short-term foreign currency option contracts (asset)	0	1
Long-term foreign currency option contracts (asset)	$ 2	$ 1

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FINANCIAL INSTRUMENTS - Changes in Fair Value of Level 3 Financial Assets and Liabilities (Details) - Level 3 - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Fair Value, beginning balance	$ 2	$ 3
Purchases, issuances, sales and settlements:
Purchases	1	6
Settlements	2	(11)
Transfer in and / or out of Level 3	0	0
Reclass between short-term and long-term	0	1
Fair Value, ending balance	2	2
Foreign Currency Option Contracts | Other Current Assets
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Fair Value, beginning balance	1	2
Purchases, issuances, sales and settlements:
Purchases	1	6
Settlements	0	(10)
Transfer in and / or out of Level 3	0	0
Reclass between short-term and long-term	0	0
Fair Value, ending balance	0	1
Foreign Currency Option Contracts | Other Noncurrent Assets
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Fair Value, beginning balance	1	1
Purchases, issuances, sales and settlements:
Purchases	0	0
Settlements	2	(1)
Transfer in and / or out of Level 3	0	0
Reclass between short-term and long-term	0	1
Fair Value, ending balance	2	1
Other Income
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)	(2)	(1)
Total realized gains (losses)	0	2
Other Income | Foreign Currency Option Contracts | Other Current Assets
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)	(2)	(1)
Total realized gains (losses)	0	2
Other Income | Foreign Currency Option Contracts | Other Noncurrent Assets
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)	0	0
Total realized gains (losses)	0	0
Cost of Sales
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)	(1)	(1)
Total realized gains (losses)	0	3
Cost of Sales | Foreign Currency Option Contracts | Other Current Assets
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)	0	(1)
Total realized gains (losses)	0	3
Cost of Sales | Foreign Currency Option Contracts | Other Noncurrent Assets
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)	(1)	0
Total realized gains (losses)	$ 0	$ 0

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SHAREHOLDERS' EQUITY - Additional Information (Details) - USD ($)		12 Months Ended
	Jun. 11, 2015	Sep. 30, 2016	Sep. 30, 2015	Jul. 21, 2016	Mar. 01, 2016	May 31, 2015	Jan. 31, 2015	Sep. 30, 2014	Jun. 30, 2014	Dec. 31, 2012
Class of Stock [Line Items]
Common stock authorized (in shares)		500,000,000
Common stock par value		$ 1
Preferred stock authorized (in shares)		30,000,000
Common stock reserved for issuance under long-term incentive plan (in shares)		10,000,000
Common stock available for future grants under long-term incentive plan (in shares)		2,900,000
Treasury stock acquired during period (in shares)		8,700,000
Repurchase of common stock		$ 81,000,000	$ 55,000,000
Treasury stock acquired to date, at cost (in shares)		12,800,000	4,200,000
Treasury stock, at cost including commission		$ 136,000,000	$ 55,000,000
M2016 Strategy | Equity And Equity-Linked Securities, Including Convertible Debt Securities
Class of Stock [Line Items]
Stock repurchase, authorized amount									$ 210,000,000
Debt Securities
Class of Stock [Line Items]
Principal amount repurchased		$ 0
Repurchase program, authorized amount				$ 150,000,000			$ 150,000,000
4.00% convertible notes due 2027
Class of Stock [Line Items]
Stated interest rate		4.00%	4.00%
4.00% convertible notes due 2027 | Convertible Notes
Class of Stock [Line Items]
Principal amount repurchased		$ 19,000,000
Stated interest rate		4.00%	4.00%					4.00%
4.625% convertible notes due 2026
Class of Stock [Line Items]
Stated interest rate		4.625%	4.625%
Repurchased amount of debt					$ 55,000,000
4.625% convertible notes due 2026 | Convertible Notes
Class of Stock [Line Items]
Stated interest rate		4.625%
Repurchased amount of debt		$ 55,000,000								$ 245,000,000
7.875% convertible notes due 2026
Class of Stock [Line Items]
Stated interest rate		7.875%	7.875%
7.875% convertible notes due 2026 | Convertible Notes
Class of Stock [Line Items]
Stated interest rate		7.875%
Repurchase program, authorized amount						$ 175,000,000
Repurchased amount of debt	$ 110,000,000		$ 110,000,000
Repayments of convertible debt	$ 179,000,000		$ 179,000,000
Series A Junior Preferred Stock
Class of Stock [Line Items]
Preferred stock authorized (in shares)		2,000,000
Preferred stock issued (in shares)		0
Common Stock
Class of Stock [Line Items]
Stock repurchase, authorized amount				$ 100,000,000
Repurchase of common stock		$ 0

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SHAREHOLDERS' EQUITY - Components of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	$ (766)	$ (749)	$ (734)
Other comprehensive income (loss) before reclassification	(78)	(120)	(39)
Amounts reclassified from accumulated other comprehensive loss - net of tax	35	103	24
Net current-period other comprehensive income (loss)	(43)	(17)	(15)
Ending balance	(809)	(766)	(749)
Foreign Currency Translation
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(54)	41	61
Other comprehensive income (loss) before reclassification	(12)	(96)	(20)
Amounts reclassified from accumulated other comprehensive loss - net of tax	0	1	0
Net current-period other comprehensive income (loss)	(12)	(95)	(20)
Ending balance	(66)	(54)	41
Employee Benefit Related Adjustments
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(705)	(789)	(792)
Other comprehensive income (loss) before reclassification	(70)	(18)	(21)
Amounts reclassified from accumulated other comprehensive loss - net of tax	35	102	24
Net current-period other comprehensive income (loss)	(35)	84	3
Ending balance	(740)	(705)	(789)
Unrealized Loss, net of tax
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(7)	(1)	(3)
Other comprehensive income (loss) before reclassification	4	(6)	2
Amounts reclassified from accumulated other comprehensive loss - net of tax	0	0	0
Net current-period other comprehensive income (loss)	4	(6)	2
Ending balance	$ (3)	$ (7)	$ (1)

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SHAREHOLDERS' EQUITY - Changes in Accumulated Other Comprehensive Income (Details) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Accumulated Other Comprehensive Income (Loss) [Line Items]
Net income (loss) before tax									$ 579	$ 66	$ 284
Tax (benefit) expense	$ 446	$ (8)	$ (7)	$ (7)	$ 18	$ (6)	$ (6)	$ (7)	424	(1)	(31)
Net income (loss) after tax	$ (474)	$ (42)	$ (32)	$ (27)	$ 22	$ (14)	$ (43)	$ (30)	(575)	(65)	(254)
Amount Reclassified from Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Income (Loss) [Line Items]
Net income (loss) after tax									(35)	(103)	(24)
Amount Reclassified from Accumulated Other Comprehensive Loss | Employee Benefit Related Adjustments
Accumulated Other Comprehensive Income (Loss) [Line Items]
Amortization of prior service costs									(1)	(1)	(7)
Amortization of actuarial losses									36	47	46
Recognized prior service costs due to settlement										56	(15)
Net income (loss) before tax									35	102	24
Tax (benefit) expense									0	0	0
Net income (loss) after tax									$ (35)	(102)	$ (24)
Amount Reclassified from Accumulated Other Comprehensive Loss | Accumulated Defined Benefit Plan Adjustment, Other
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other reclassification adjustment										1
Net income (loss) before tax										1
Tax (benefit) expense										0
Net income (loss) after tax										$ (1)

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EQUITY BASED COMPENSATION - Additional Information (Details) - USD ($)				12 Months Ended
	Dec. 01, 2015	Dec. 01, 2014	Dec. 02, 2013	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014	Nov. 30, 2015	Nov. 30, 2014	Dec. 01, 2013	Nov. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense recognized for share based payments				$ 9,000,000	$ 10,000,000	$ 8,000,000
Weighted average fair value (usd per share)				$ 9.88
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options expiration period				10 years
Vesting term				3 years
Options granted (in shares)				0	0	0
Compensation expense recognized for share based payments				$ 0	$ 0	$ 1,200,000
Stock options exercised (in shares)				0	0	0
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting term				3 years
Shares granted in period (in shares)				700,000	500,000	200,000
Weighted average grant-date fair value non-vested restricted shares and share units granted during period (usd per share)				$ 9.72	$ 13.91	$ 9.23
Equity instruments other than options outstanding (in shares)				1,200,000
Weighted average fair value (usd per share)				$ 11.00
Restricted Stock Units (RSUs) | Executive Officer
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting term	3 years	3 years
Shares granted in period (in shares)	500,000	400,000
Exercise price (usd per share)	$ 10.51	$ 13.74
Restricted Stock and Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense recognized for share based payments				$ 5,000,000	$ 4,000,000	$ 4,000,000
Weighted average grant-date fair value non-vested restricted shares and share units granted during period (usd per share)				$ 9.72
Equity instruments other than options outstanding (in shares)				1,232,000	1,447,000
Weighted average fair value (usd per share)				$ 11.00	$ 8.23
Total unrecognized compensation costs related to non-vested equity compensation arrangements				$ 8,000,000
Weighted average period for compensation cost recognition				1 year 5 months 27 days
Granted (in shares)				713,000
Performance Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense recognized for share based payments				$ 6,000,000	$ 8,000,000	$ 4,000,000
Weighted average grant-date fair value non-vested restricted shares and share units granted during period (usd per share)				$ 10.31
Equity instruments other than options outstanding (in shares)				2,660,000	2,310,000
Weighted average fair value (usd per share)				$ 9.88	$ 10.01
Total unrecognized compensation costs related to non-vested equity compensation arrangements				$ 15,900,000
Weighted average period for compensation cost recognition				3 years 8 months 27 days
Granted (in shares)				810,000
Performance Shares | Executive Officer
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares issuable per performance share unit (in shares)							1	1		1
Exercise price (usd per share)	$ 10.51	$ 13.74	$ 7.97
Shares authorized for grant (in shares)	700,000	600,000
Performance period	3 years	3 years	3 years
Performance Shares | Executive Officer | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance-based vesting percentage	0.00%	0.00%	0.00%
Performance Shares | Executive Officer | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance-based vesting percentage	200.00%	200.00%	200.00%
Performance Shares | Executive Officer | Performance Objective One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting rights percentage	50.00%	75.00%
Performance Shares | Executive Officer | Performance Objective Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting rights percentage	50.00%	25.00%	25.00%
Performance Shares | Executive Officer | Performance Objective Three
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting rights percentage			25.00%
M2016 Strategy | Performance Shares | Executive Officer
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized for grant (in shares)									1,800,000
M2016 Strategy | Performance Shares | Executive Officer | Performance Objective One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting rights percentage			50.00%

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EQUITY BASED COMPENSATION - Rollforward of Stock Options (Details) $ / shares in Units, shares in Thousands, $ in Millions	12 Months Ended
	Sep. 30, 2016 USD ($) $ / shares shares
Options Outstanding [Roll Forward]
Outstanding - beginning of year (in shares) | shares	650
Cancelled or expired (in shares) | shares	(417)
Outstanding - end of year (in shares) | shares	233
Exercisable - end of year (in shares) | shares	233
Options Outstanding, Weighted Average Exercise Price [Roll Forward]
Exercise Price - outstanding options - beginning of year (usd per share) | $ / shares	$ 10.32
Exercise Price - cancelled or expired (usd per share) | $ / shares	11.50
Exercise Price - outstanding options - end of year (usd per share) | $ / shares	8.22
Exercise Price - exercisable options (usd per share) | $ / shares	$ 8.22
Remaining Contractual Life (years) - outstanding	1 year 10 months 25 days
Remaining Contractual Life (years) - exercisable	1 year 10 months 25 days
Aggregate Intrinsic Value - outstanding options | $	$ 0
Aggregate Intrinsic Value - exercisable options | $	$ 0

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EQUITY BASED COMPENSATION - Rollforward of Restricted Stock, Restricted Share, and Performance Share Units and Activity (Details) shares in Thousands	12 Months Ended
	Sep. 30, 2016 $ / shares shares
Weighted-Average Grant-Date Fair Value
Non-vested - end of year, weighted-average grant-day fair value (usd per share)	$ 9.88
Restricted Stock and Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Non-vested - beginning of year (in shares) | shares	1,447
Granted (in shares) | shares	713
Vested (in shares) | shares	(744)
Forfeited (in shares) | shares	(184)
Non-vested - end of year (in shares) | shares	1,232
Weighted-Average Grant-Date Fair Value
Non-vested - beginning of year, weighted-average grant-day fair value (usd per share)	$ 8.23
Granted, weighted-average grant-day fair value (usd per share)	9.72
Vested, weighted-average grant-day fair value (usd per share)	4.44
Forfeited, weighted-average grant-day fair value (usd per share)	12.14
Non-vested - end of year, weighted-average grant-day fair value (usd per share)	$ 11.00
Performance Shares
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Non-vested - beginning of year (in shares) | shares	2,310
Granted (in shares) | shares	810
Vested (in shares) | shares	0
Forfeited (in shares) | shares	(460)
Non-vested - end of year (in shares) | shares	2,660
Weighted-Average Grant-Date Fair Value
Non-vested - beginning of year, weighted-average grant-day fair value (usd per share)	$ 10.01
Granted, weighted-average grant-day fair value (usd per share)	10.31
Vested, weighted-average grant-day fair value (usd per share)	0.00
Forfeited, weighted-average grant-day fair value (usd per share)	11.31
Non-vested - end of year, weighted-average grant-day fair value (usd per share)	$ 9.88

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RETIREMENT MEDICAL PLANS - Retiree Medical Liability Expense Assumptions (Details)	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Assumptions Used In Measurement of Retiree Medical Liability and Expense
Health care cost trend rate (weighted average)	7.10%
U.S. Retiree Medical Plan
Assumptions Used In Measurement of Retiree Medical Liability and Expense
Discount Rate	3.45%	4.20%	4.20%
Health care cost trend rate (weighted average)	7.10%	7.00%	7.40%
Ultimate health care trend rate	4.75%	5.00%	5.00%
Year ultimate rate is reached	2024	2022	2022

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RETIREMENT MEDICAL PLANS - Retiree Medical Liability Components As of Balance Sheet Date (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefit obligation	$ 1,728	$ 1,656
U.S. Retiree Medical Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefit obligation	445	436	$ 477
U.S. Retiree Medical Plan | Retirees
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefit obligation	444	433
U.S. Retiree Medical Plan | Employees eligible to retire
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefit obligation	$ 1	$ 3

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RETIREMENT MEDICAL PLANS - Rollforward Of Retiree Medical Liability (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
Beginning of year	$ 1,656
Actuarial loss (gain)	30
End of year	1,728	$ 1,656
U.S. Retiree Medical Plan
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
Beginning of year	436	477
Service cost	0	0	$ 0
Interest cost	18	19	23
Participant contributions	0	2
Actuarial loss (gain)	27	(19)
Foreign currency rate changes	0	(3)
Benefit payments	(36)	(40)
End of year	445	436	$ 477
Other	2	2
Retiree medical liability	$ 447	$ 438

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RETIREMENT MEDICAL PLANS - Retiree Medical Liability Current and Long Term Components (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
Retiree Medical Liability Current And Long Term Components
Long-term — included in retirement benefits	$ 703	$ 632
U.S. Retiree Medical Plan
Retiree Medical Liability Current And Long Term Components
Current — included in compensation and benefits	33	33
Long-term — included in retirement benefits	414	405
Retiree medical liability	$ 447	$ 438

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RETIREMENT MEDICAL PLANS - Amount Of Retiree Medical Obligations Recorded In Accumulated Other Comprehensive Loss Net Of Tax (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Pension and other postretirement benefit, tax	$ 33	$ 5	$ 2
U.S. Retiree Medical Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Balance, beginning	89	129
Net actuarial loss for the year	27	(19)
Amortization for the year	(12)	(21)
Pension and other postretirement benefit, tax	(8)
Balance, ending	96	89	129
U.S. Retiree Medical Plan | Net Actuarial Loss
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Balance, beginning	101	142
Net actuarial loss for the year	27	(19)
Amortization for the year	(13)	(22)
Pension and other postretirement benefit, tax	(8)
Balance, ending	107	101	142
U.S. Retiree Medical Plan | Prior Service Cost (Benefit)
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Balance, beginning	(12)	(13)
Net actuarial loss for the year	0	0
Amortization for the year	1	1
Pension and other postretirement benefit, tax	0
Balance, ending	$ (11)	$ (12)	$ (13)

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RETIREMENT MEDICAL PLANS - Components Of Retiree Medical Expense (Details) - U.S. Retiree Medical Plan - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Sep. 30, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Service cost		$ 0	$ 0	$ 0
Interest cost		18	19	23
Amortization of - Prior service cost (benefit)		(1)	(1)	(7)
Actuarial losses		13	22	23
Recognized prior service costs due to curtailment	$ (15)	0	0	(15)
Retiree medical expense - total company		$ 30	$ 40	$ 24

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RETIREMENT MEDICAL PLANS - Retiree Medical Plan Effect Of One Percentage Point Change In Assumed Health Care Cost Trend Rates (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Retiree Medical Plan Effect Of One Percentage Point Change In Assumed Health Care Cost Trend Rates [Abstract]
Effect on total service and interest cost 1% increase	$ 1	$ 2
Effect on total service and interest cost 1% decrease	(1)	(1)
Effect on APBO 1% increase	40	39
Effect on APBO 1% decrease	$ (35)	$ (34)

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RETIREMENT MEDICAL PLANS - Retiree Medical Plan Estimated Future Benefit Payments (Details) - U.S. Retiree Medical Plan $ in Millions	Sep. 30, 2016 USD ($)
Gross Benefit Payments
Fiscal 2017	$ 40
Fiscal 2018	40
Fiscal 2019	40
Fiscal 2020	40
Fiscal 2021	40
Fiscal 2022 – 2026	184
Gross Receipts
Fiscal 2017	7
Fiscal 2018	7
Fiscal 2019	7
Fiscal 2020	7
Fiscal 2021	7
Fiscal 2022 – 2026	$ 34

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RETIREMENT MEDICAL PLANS - Additional Information (Details) - USD ($)	3 Months Ended		12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014	Sep. 26, 2014	Sep. 30, 2013	Sep. 30, 2012
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Health care cost trend rate (weighted average)			7.10%
Reduction in APBO from subsidy							$ 35,000,000	$ 25,000,000
Net actuarial loss estimated to be amortized from accumulated other comprehensive loss			$ 15,000,000
The prior service benefit estimated to be amortized from accumulated other comprehensive loss to periodic benefits cost			(3,000,000)
U.S. Retiree Medical Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Liability for retroactive benefits	$ 2,000,000		$ 2,000,000	$ 2,000,000
Average period of amortization, inactive plan participants			10 years
Decrease in benefit obligations	$ 18,000,000
Curtailment gain		$ 16,000,000
Decrease in retiree medical expense		$ 15,000,000	$ 0	$ 0	$ 15,000,000
Health care cost trend rate (weighted average)			7.10%	7.00%	7.40%
Average remaining service period of active participants			10 years
U.S. Retiree Medical Plan | Minimum
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Face amount of employee life insurance coverage per employee						$ 3,750
U.S. Retiree Medical Plan | Maximum
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Face amount of employee life insurance coverage per employee						$ 15,000

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RETIREMENT PENSION PLANS - Additional Information (Details)		3 Months Ended	12 Months Ended
	Jan. 02, 2008 employee	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Jun. 30, 2013 USD ($)
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Pension settlement losses			$ 0	$ 59,000,000	$ 0
Net actuarial loss (gain) for the year			30,000,000
Defined contribution savings plan expense			$ 16,000,000	15,000,000	$ 14,000,000
U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Average period of amortization, inactive plan participants			21 years
Number of employees earning service for an additional transition period (ending June 30, 2011) | employee	3,800
Settlements			$ 0	0
Lump sum distribution - maximum						$ 5,000
Lump sum distribution - minimum						$ 1,000
Settlements, plan assets			0	0
Net actuarial loss (gain) for the year			105,000,000	$ 10,000,000
Unfunded investment commitments			20,000,000
Non-U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Rate of compensation increase		2.00%		2.00%
Pension settlement losses		$ 59,000,000
Settlements			0	$ 111,000,000
Settlements, plan assets			0	20,000,000
Net actuarial loss (gain) for the year			$ 115,000,000	48,000,000
Non-U.S. Plans | UNITED KINGDOM
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Average period of amortization, inactive plan participants			27 years
Non-U.S. Plans | CANADA
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Pension settlement losses				16,000,000
Settlements				16,000,000
Settlements, plan assets				20,000,000
Non-U.S. Plans | GERMANY
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Pension settlement losses				$ 43,000,000
Settlements		91,000,000
Equity Investments | U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Target asset allocation, minimum			30.00%
Target asset allocation, maximum			50.00%
Fixed Income Investments | U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Target asset allocation, minimum			30.00%
Target asset allocation, maximum			50.00%
Fixed Income Investments | Non-U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Target asset allocation, minimum			30.00%
Target asset allocation, maximum			60.00%
Alternative investments measured at net asset value | U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Target asset allocation, minimum			10.00%
Target asset allocation, maximum			30.00%
Alternative investments measured at net asset value | Non-U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Target asset allocation, minimum			10.00%
Target asset allocation, maximum			30.00%
Equity Securities | Non-U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Target asset allocation, minimum			15.00%
Target asset allocation, maximum			35.00%
Real estate measured at net asset value | Non-U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Target asset allocation, minimum			0.00%
Target asset allocation, maximum			10.00%
Change in Assumptions for Pension Plans | U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Pension obligations increase		$ 24,000,000

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RETIREMENT PENSION PLANS - Schedule of US Pension Benefit Obligation Expense and Net Expense Assumptions (Details) - U.S. Plans	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Assumed return on plan assets (beginning of the year)	7.75%	8.00%	8.00%
Minimum
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Discount Rate	3.50%	4.25%	4.20%
Maximum
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Discount Rate	3.55%	4.35%	4.30%

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RETIREMENT PENSION PLANS - Schedule of Non-US Pension Benefit Obligation Expense and Net Expense Assumptions (Details) - Non-U.S. Plans	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Assumed return on plan assets (beginning of the year)	6.00%
Rate of compensation increase		2.00%
Minimum
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Discount Rate		1.00%	1.90%
Assumed return on plan assets (beginning of the year)		2.25%	2.25%
Rate of compensation increase			2.00%
Maximum
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Discount Rate	2.50%	3.80%	4.10%
Assumed return on plan assets (beginning of the year)		7.25%	7.25%
Rate of compensation increase			3.00%
UNITED KINGDOM
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Discount Rate	2.50%	3.80%	4.10%
Assumed return on plan assets (beginning of the year)	6.00%	7.25%	7.25%

XML

RETIREMENT PENSION PLANS - Rollforward of Pension Liability and Pension Plan Assets (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Change in PBO
Beginning of year	$ 1,656
Actuarial loss (gain)	30
End of year	1,728	$ 1,656
Change in plan assets
Fair value of assets - beginning of year	1,547
Fair value of assets - end of year	1,568	1,547
U.S. Plans
Change in PBO
Beginning of year	1,042	1,059
Service cost	0	1
Interest cost	45	44
Actuarial loss (gain)	105	10
Settlements	0	0
Benefit payments	(80)	(72)
Foreign currency rate changes	0	0
End of year	1,112	1,042	$ 1,059
Change in plan assets
Fair value of assets - beginning of year	830	832
Actual return on plan assets	79	65
Employer contributions	5	5
Settlements	0	0
Benefit payments	(80)	(72)
Foreign currency rate changes	0	0
Fair value of assets - end of year	834	830	832
Funded status	(278)	(212)
Non-U.S. Plans
Change in PBO
Beginning of year	614	735
Service cost	1	1
Interest cost	20	26
Actuarial loss (gain)	115	48
Settlements	0	(111)
Benefit payments	(35)	(29)
Foreign currency rate changes	(99)	(56)
End of year	616	614	735
Change in plan assets
Fair value of assets - beginning of year	717	743
Actual return on plan assets	169	67
Employer contributions	1	7
Settlements	0	(20)
Benefit payments	(35)	(29)
Foreign currency rate changes	(118)	(51)
Fair value of assets - end of year	734	717	743
Funded status	118	103
Total Pension Plans
Change in PBO
Beginning of year	1,656	1,794
Service cost	1	2	2
Interest cost	65	70	80
Actuarial loss (gain)	220	58
Settlements	0	(111)
Benefit payments	(115)	(101)
Foreign currency rate changes	(99)	(56)
End of year	1,728	1,656	1,794
Change in plan assets
Fair value of assets - beginning of year	1,547	1,575
Actual return on plan assets	248	132
Employer contributions	6	12
Settlements	0	(20)
Benefit payments	(115)	(101)
Foreign currency rate changes	(118)	(51)
Fair value of assets - end of year	1,568	1,547	$ 1,575
Funded status	$ (160)	$ (109)

XML

RETIREMENT PENSION PLANS - Schedule of Balance Sheet Classification of Net Pension Liability (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Retirement benefits-non-current	$ (703)	$ (632)
U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Non-current assets	0	0
Current liabilities	(6)	(5)
Retirement benefits-non-current	(272)	(207)
Net amount recognized	(278)	(212)
Non-U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Non-current assets	123	110
Current liabilities	0	0
Retirement benefits-non-current	(5)	(7)
Net amount recognized	118	103
Total Pension Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Non-current assets	123	110
Current liabilities	(6)	(5)
Retirement benefits-non-current	(277)	(214)
Net amount recognized	$ (160)	$ (109)

XML

RETIREMENT PENSION PLANS - Schedule of Pension Costs Recognized in Other Comprehensive Loss (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Pension and other postretirement benefit, tax	$ 33	$ 5	$ 2
U.S. Plans
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Settlements	0	0
U.S. Plans | Net Actuarial Loss
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Balance, beginning	410	419
Net actuarial loss for the year	87	8
Amortization for the year	(18)	(17)
Pension and other postretirement benefit, tax	(25)	0
Settlements		0
Balance, ending	454	410	419
Non-U.S. Plans
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Settlements	0	111
Non-U.S. Plans | Net Actuarial Loss
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Balance, beginning	206	241
Net actuarial loss for the year	(11)	24
Amortization for the year	(5)	(8)
Pension and other postretirement benefit, tax	0	5
Settlements		(56)
Balance, ending	190	206	241
Total Pension Plans
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Settlements	0	111
Total Pension Plans | Net Actuarial Loss
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Balance, beginning	616	660
Net actuarial loss for the year	76	32
Amortization for the year	(23)	(25)
Pension and other postretirement benefit, tax	(25)	5
Settlements		(56)
Balance, ending	$ 644	$ 616	$ 660

XML

RETIREMENT PENSION PLANS - Pension and Other Postretirement Benefits (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
Compensation and Retirement Disclosure [Abstract]
Pension liability	$ 277	$ 214
Retiree medical liability — long term (see Note 20)	414	405
Other	12	13
Total retirement benefits	$ 703	$ 632

XML

RETIREMENT PENSION PLANS - Schedule of Projected Benefit Obligation Accumulated Benefit Obligation and Plan Assets (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
Compensation and Retirement Disclosure [Abstract]
ABO Exceeds Assets, PBO	$ 1,116	$ 1,057
ABO Exceeds Assets, ABO	1,116	1,057
ABO Exceeds Assets, Plan Assets	834	838
Assets Exceed ABO, PBO	612	599
Assets Exceed ABO, ABO	612	598
Assets Exceed ABO, Plan Assets	734	709
PBO	1,728	1,656
ABO	1,728	1,655
Total assets at fair value	$ 1,568	$ 1,547

XML

RETIREMENT PENSION PLANS - Schedule of Net Periodic Pension Benefit Costs (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Settlement loss	$ 0	$ 59	$ 0
Total Pension Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Service cost	1	2	2
Interest cost	65	70	80
Assumed rate of return on plan assets	(99)	(111)	(104)
Amortization of - Actuarial losses	23	26	23
Settlement loss	0	59	0
Retiree medical expense - total company	$ (10)	$ 46	$ 1

XML

RETIREMENT PENSION PLANS - Pension Plan Investments Measured at Fair Value by Level Within Fair Value Hierarchy (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Total assets at fair value	$ 1,568	$ 1,547
U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Total assets at fair value	834	830	$ 832
U.S. Plans | U.S. – Large cap
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	71	88
U.S. Plans | U.S. – Small cap
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	22	21
U.S. Plans | Private equity
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	11	15
U.S. Plans | International equity
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	41	53
U.S. Plans | Equity investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	152	160
U.S. Plans | Total equity investments
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	297	337
U.S. Plans | U.S. fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	275	271
U.S. Plans | Emerging fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	20	20
U.S. Plans | Partnerships fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	1	1
U.S. Plans | Fixed income investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	45	45
U.S. Plans | Total fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	341	337
U.S. Plans | Alternatives – Partnerships
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Alternative investments	77	84
U.S. Plans | Alternatives – Partnerships measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Alternative investments	84	65
U.S. Plans | Cash and cash equivalents
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Cash and cash equivalents	35	7
U.S. Plans | Total assets at fair value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Total assets at fair value	834	830
Non-U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	143	161
Total assets at fair value	734	717	$ 743
Non-U.S. Plans | International equity
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	61	55
Non-U.S. Plans | Equity investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	82	106
Non-U.S. Plans | Fixed income investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	198	158
Non-U.S. Plans | Total fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	420	344
Non-U.S. Plans | Cash and cash equivalents
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Cash and cash equivalents	14	28
Non-U.S. Plans | Other fixed income investments
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	222	186
Non-U.S. Plans | Commingled funds
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Comingled funds	6	8
Non-U.S. Plans | Alternative investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Alternative investments	114
Non-U.S. Plans | Alternative investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Alternative investments		133
Non-U.S. Plans | Real estate measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Real estate	37	43
Non-U.S. Plans | Total assets at fair value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Total assets at fair value	734	717
Level 1 | U.S. Plans | U.S. – Large cap
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	71	88
Level 1 | U.S. Plans | U.S. – Small cap
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	22	21
Level 1 | U.S. Plans | Private equity
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 1 | U.S. Plans | International equity
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	41	53
Level 1 | U.S. Plans | Equity investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 1 | U.S. Plans | Total equity investments
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	134	162
Level 1 | U.S. Plans | U.S. fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	10	8
Level 1 | U.S. Plans | Emerging fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	0	0
Level 1 | U.S. Plans | Partnerships fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	0	0
Level 1 | U.S. Plans | Fixed income investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	0	0
Level 1 | U.S. Plans | Total fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	10	8
Level 1 | U.S. Plans | Alternatives – Partnerships
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Alternative investments	0	0
Level 1 | U.S. Plans | Alternatives – Partnerships measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Alternative investments	0	0
Level 1 | U.S. Plans | Cash and cash equivalents
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Cash and cash equivalents	0	0
Level 1 | U.S. Plans | Total assets at fair value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Total assets at fair value	144	170
Level 1 | Non-U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	61	55
Level 1 | Non-U.S. Plans | International equity
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	61	55
Level 1 | Non-U.S. Plans | Equity investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 1 | Non-U.S. Plans | Fixed income investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	0	0
Level 1 | Non-U.S. Plans | Total fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	0	0
Level 1 | Non-U.S. Plans | Cash and cash equivalents
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Cash and cash equivalents	0	0
Level 1 | Non-U.S. Plans | Other fixed income investments
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	0	0
Level 1 | Non-U.S. Plans | Commingled funds
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Comingled funds	0	0
Level 1 | Non-U.S. Plans | Alternative investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Alternative investments	0
Level 1 | Non-U.S. Plans | Alternative investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Alternative investments		0
Level 1 | Non-U.S. Plans | Real estate measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Real estate	0	0
Level 1 | Non-U.S. Plans | Total assets at fair value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Total assets at fair value	61	55
Level 2 | U.S. Plans | U.S. – Large cap
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 2 | U.S. Plans | U.S. – Small cap
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 2 | U.S. Plans | Private equity
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 2 | U.S. Plans | International equity
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 2 | U.S. Plans | Equity investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 2 | U.S. Plans | Total equity investments
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 2 | U.S. Plans | U.S. fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	265	263
Level 2 | U.S. Plans | Emerging fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	20	20
Level 2 | U.S. Plans | Partnerships fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	0	0
Level 2 | U.S. Plans | Fixed income investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	0	0
Level 2 | U.S. Plans | Total fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	285	283
Level 2 | U.S. Plans | Alternatives – Partnerships
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Alternative investments	0	0
Level 2 | U.S. Plans | Alternatives – Partnerships measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Alternative investments	0	0
Level 2 | U.S. Plans | Cash and cash equivalents
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Cash and cash equivalents	35	7
Level 2 | U.S. Plans | Total assets at fair value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Total assets at fair value	320	290
Level 2 | Non-U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 2 | Non-U.S. Plans | International equity
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 2 | Non-U.S. Plans | Equity investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 2 | Non-U.S. Plans | Fixed income investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	0	0
Level 2 | Non-U.S. Plans | Total fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	222	186
Level 2 | Non-U.S. Plans | Cash and cash equivalents
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Cash and cash equivalents	14	28
Level 2 | Non-U.S. Plans | Other fixed income investments
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	222	186
Level 2 | Non-U.S. Plans | Commingled funds
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Comingled funds	6	8
Level 2 | Non-U.S. Plans | Alternative investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Alternative investments	0
Level 2 | Non-U.S. Plans | Alternative investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Alternative investments		0
Level 2 | Non-U.S. Plans | Real estate measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Real estate	0	0
Level 2 | Non-U.S. Plans | Total assets at fair value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Total assets at fair value	242	222
Level 3 | U.S. Plans | U.S. – Large cap
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 3 | U.S. Plans | U.S. – Small cap
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 3 | U.S. Plans | Private equity
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	11	15
Level 3 | U.S. Plans | International equity
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 3 | U.S. Plans | Equity investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 3 | U.S. Plans | Total equity investments
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	11	15
Level 3 | U.S. Plans | U.S. fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	0	0
Level 3 | U.S. Plans | Emerging fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	0	0
Level 3 | U.S. Plans | Partnerships fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	1	1
Level 3 | U.S. Plans | Fixed income investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	0	0
Level 3 | U.S. Plans | Total fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	1	1
Level 3 | U.S. Plans | Alternatives – Partnerships
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Alternative investments	77	84
Level 3 | U.S. Plans | Alternatives – Partnerships measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Alternative investments	0	0
Level 3 | U.S. Plans | Cash and cash equivalents
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Cash and cash equivalents	0	0
Level 3 | U.S. Plans | Total assets at fair value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Total assets at fair value	89	100
Level 3 | Non-U.S. Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 3 | Non-U.S. Plans | International equity
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 3 | Non-U.S. Plans | Equity investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Equity investments	0	0
Level 3 | Non-U.S. Plans | Fixed income investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	0	0
Level 3 | Non-U.S. Plans | Total fixed income
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	0	0
Level 3 | Non-U.S. Plans | Cash and cash equivalents
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Cash and cash equivalents	0	0
Level 3 | Non-U.S. Plans | Other fixed income investments
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fixed income investments	0	0
Level 3 | Non-U.S. Plans | Commingled funds
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Comingled funds	0	0
Level 3 | Non-U.S. Plans | Alternative investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Alternative investments	0
Level 3 | Non-U.S. Plans | Alternative investments measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Alternative investments		0
Level 3 | Non-U.S. Plans | Real estate measured at net asset value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Real estate	0	0
Level 3 | Non-U.S. Plans | Total assets at fair value
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Total assets at fair value	$ 0	$ 0

XML

RETIREMENT PENSION PLANS - Changes in Level 3, Pension Plan Investments (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
U.S. Plans
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Return on Plan Assets: Attributable to Assets Held at Period End	$ 79	$ 65
Non-U.S. Plans
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Return on Plan Assets: Attributable to Assets Held at Period End	169	67
Level 3 | U.S. Plans | Private equity
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Fair Value, beginning of period	15	15
Return on Plan Assets: Attributable to Assets Held at Period End	(4)	0
Purchases	0	0
Settlements	0	0
Net Transfers Into (Out of) Level 3	0	0
Fair Value, end of period	11	15
Level 3 | U.S. Plans | Partnerships Fixed Income
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Fair Value, beginning of period	1	1
Return on Plan Assets: Attributable to Assets Held at Period End	0	0
Purchases	0	0
Settlements	0	0
Net Transfers Into (Out of) Level 3	0	0
Fair Value, end of period	1	1
Level 3 | U.S. Plans | Alternatives – Partnerships
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Fair Value, beginning of period	84	58
Return on Plan Assets: Attributable to Assets Held at Period End	(5)	19
Purchases	0	8
Settlements	(2)	(1)
Net Transfers Into (Out of) Level 3	0	0
Fair Value, end of period	77	84
Level 3 | U.S. Plans | Total Level 3 fair value
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Fair Value, beginning of period	100	74
Return on Plan Assets: Attributable to Assets Held at Period End	(9)	19
Purchases	0	8
Settlements	(2)	(1)
Net Transfers Into (Out of) Level 3	0	0
Fair Value, end of period	$ 89	$ 100

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RETIREMENT PENSION PLANS - Pension Plan Estimated Future Contributions and Benefit Payments (Details) $ in Millions	12 Months Ended
	Sep. 30, 2016 USD ($)
U.S. Plans
Expected employer contributions:
Expected employer contributions, year one	$ 5
Expected benefit payments:
Fiscal 2017	78
Fiscal 2018	76
Fiscal 2019	74
Fiscal 2020	73
Fiscal 2021	71
Fiscal 2022 – 2026	336
Non-U.S. Plans
Expected employer contributions:
Expected employer contributions, year one	1
Expected benefit payments:
Fiscal 2017	20
Fiscal 2018	20
Fiscal 2019	21
Fiscal 2020	22
Fiscal 2021	22
Fiscal 2022 – 2026	121
Total Pension Plans
Expected employer contributions:
Expected employer contributions, year one	6
Expected benefit payments:
Fiscal 2017	98
Fiscal 2018	96
Fiscal 2019	95
Fiscal 2020	95
Fiscal 2021	93
Fiscal 2022 – 2026	$ 457

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INCOME TAXES - Components of Income Before Income Tax (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Income Tax Disclosure [Abstract]
U.S. income	$ 71	$ 24	$ 204
Foreign income	84	43	111
INCOME BEFORE INCOME TAXES	$ 155	$ 67	$ 315

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INCOME TAXES - Components of the Benefit (Provision) for Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Current tax benefit (expense):
U.S.									$ (1)	$ (4)	$ (1)
Foreign									11	(20)	(32)
State and local									(1)	(1)	0
Total current tax benefit (expense)									9	(25)	(33)
Deferred tax benefit (expense):
U.S.									394	3	(1)
Foreign									(22)	21	3
State and local									43	0	0
Total deferred tax benefit									415	24	2
Income tax benefit (expense)	$ 446	$ (8)	$ (7)	$ (7)	$ 18	$ (6)	$ (6)	$ (7)	$ 424	$ (1)	$ (31)

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INCOME TAXES - Summary of the Tax Effects of Temporary Differences (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Accrued compensation and benefits	$ 21	$ 27
Accrued product warranties	13	19
Inventory costs	8	20
Receivables	15	16
Accrued retiree healthcare benefits	169	175
Retirement pension plans	119	95
Property	7	9
Loss and credit carryforwards	455	487
Other	67	77
Sub-total	874	925
Less: Valuation allowances	(379)	(834)
Deferred income taxes - asset	495	91
Taxes on undistributed income	(7)	(51)
Intangible assets	(82)	(85)
Debt basis difference	(5)	(8)
Deferred income taxes - liability	(94)	(144)
Net deferred income tax assets	$ 401
Net deferred income tax liabilities		(53)
Restatement Adjustment
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Loss and credit carryforwards		(121)
Less: Valuation allowances		(127)
Taxes on undistributed income		$ (6)

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INCOME TAXES - Schedule of Net Current and Non-Current Deferred Income Tax Assets (Liabilities) (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015
Income Tax Disclosure [Abstract]
Other current assets (see Note 10)	$ 0	$ 20
Other current liabilities	0	(2)
Net current deferred income taxes — asset	0	18
Other assets (see Note 12)	413	28
Other liabilities (see Note 15)	(12)	(99)
Net non-current deferred income taxes — asset (liability)	$ 401
Net non-current deferred income taxes — asset (liability)		$ (71)

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INCOME TAXES - Tax Credit Carryforwards and Deferred Tax Assets (Details) $ in Millions	Sep. 30, 2016 USD ($)
Operating Loss Carryforwards [Line Items]
Net Operating Losses and Tax Credit Carryforwards	$ 455
Valuation Allowances on these Deferred Tax Assets	341
2017-2021
Operating Loss Carryforwards [Line Items]
Net Operating Losses and Tax Credit Carryforwards	25
Valuation Allowances on these Deferred Tax Assets	24
2022-2031
Operating Loss Carryforwards [Line Items]
Net Operating Losses and Tax Credit Carryforwards	160
Valuation Allowances on these Deferred Tax Assets	56
2032-2036
Operating Loss Carryforwards [Line Items]
Net Operating Losses and Tax Credit Carryforwards	10
Valuation Allowances on these Deferred Tax Assets	8
Indefinite
Operating Loss Carryforwards [Line Items]
Net Operating Losses and Tax Credit Carryforwards	260
Valuation Allowances on these Deferred Tax Assets	$ 253

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INCOME TAXES - Income Tax (Benefit) Provision at the U.S Statutory Rate (Details) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Statutory tax rate									35.00%	35.00%	35.00%
Foreign tax rate									35.00%	35.00%	35.00%
Expense for income taxes at statutory tax rate of 35%									$ (54)	$ (23)	$ (110)
State and local income taxes									(7)	(1)	0
Foreign income taxed at rates other than 35%									5	7	13
Joint venture equity income									3	3	5
Tax effect of nonfunctional currency transaction									(30)	0	(4)
Correlated tax relief									51	0	0
U.S. tax impact on distributions from subsidiaries and joint ventures									14	(11)	(26)
Nondeductible expenses									(12)	(9)	(10)
Tax credits									61	0	0
Valuation allowances									418	49	113
Tax rate change									(14)	0	0
Other									(11)	(16)	(12)
Income tax benefit (expense)	$ 446	$ (8)	$ (7)	$ (7)	$ 18	$ (6)	$ (6)	$ (7)	424	(1)	(31)
Restatement Adjustment
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Tax effect of nonfunctional currency transaction											(4)
U.S. tax impact on distributions from subsidiaries and joint ventures										7	(8)
Valuation allowances										2	(24)
Other										$ (9)	$ (12)
Income tax benefit (expense)									$ 61

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INCOME TAXES - Reconciliation of Unrecognized Tax Benefits (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Unrecognized tax benefits, beginning balance	$ 207	$ 209	$ 190
Additions to tax positions recorded during the current year	39	15	28
Reductions to tax position recorded in prior years	0	(2)	(2)
Reductions to tax positions due to lapse of statutory limits	(3)	(11)	(7)
Translation, other	0	(4)	0
Unrecognized tax benefits, ending balance	243	207	209
Restatement Adjustment
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Unrecognized tax benefits, beginning balance	$ 131	121
Unrecognized tax benefits, ending balance		$ 131	$ 121

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INCOME TAXES - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2013
Income Tax [Line Items]
Subsidiary, ownership percentage			100.00%
Undistributed earnings in foreign subsidiaries on which income taxes have not been provided			$ 687	$ 686
Correlated tax relief			51	0	$ 0
Non-cash benefit related to certain judicial decisions, reinvestment assertions					210
Gross unrecognized tax benefits	$ 243	$ 207	243	207	$ 209	$ 190
Unrecognized tax benefits that would impact effective tax rate	215		215
Interest on uncertain tax positions accrued	4	3	4	3
Penalties on uncertain tax positions accrued	2	2	2	2
Income tax penalties and interest expense			8
U.S.
Income Tax [Line Items]
Non-cash expense (benefit) for the reversal of valuation allowances	$ (438)		(438)
Italy, Mexico, Sweden and Germany
Income Tax [Line Items]
Non-cash expense (benefit) for the reversal of valuation allowances		$ (16)		$ (16)
Brazil
Income Tax [Line Items]
Non-cash expense (benefit) for the reversal of valuation allowances			$ 9

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CONTINGENCIES - Environmental Loss Contingencies by Site (Details) $ in Millions	12 Months Ended
	Sep. 30, 2016 USD ($)
Accrual for Environmental Loss Contingencies [Roll Forward]
Environmental Contingencies, beginning balance	$ 16
Payments and other	(6)
Accruals	3
Environmental Contingencies, ending balance	13
Superfund Sites
Accrual for Environmental Loss Contingencies [Roll Forward]
Environmental Contingencies, beginning balance	2
Payments and other	0
Accruals	0
Environmental Contingencies, ending balance	2
Non-Superfund Sites
Accrual for Environmental Loss Contingencies [Roll Forward]
Environmental Contingencies, beginning balance	14
Payments and other	(6)
Accruals	3
Environmental Contingencies, ending balance	$ 11

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CONTINGENCIES - Asbestos Related Reserves and Recoveries (Details) - USD ($)	Sep. 30, 2016	Sep. 30, 2015
Loss Contingencies [Line Items]
Asbestos-related liabilities	$ 13,000,000	$ 16,000,000
Maremont Asbestos
Loss Contingencies [Line Items]
Pending and future claims	70,000,000	71,000,000
Billed but unpaid claims	2,000,000	3,000,000
Asbestos-related liabilities	72,000,000	74,000,000
Asbestos-related insurance recoveries	32,000,000	41,000,000
Rockwell Asbestos
Loss Contingencies [Line Items]
Pending and future claims	60,000,000	55,000,000
Billed but unpaid claims	1,000,000	3,000,000
Asbestos-related liabilities	61,000,000	58,000,000
Asbestos-related insurance recoveries	$ 27,000,000	$ 14,000,000

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CONTINGENCIES - Additional Information (Details)		1 Months Ended	3 Months Ended				12 Months Ended
	Dec. 12, 2015 USD ($)	Sep. 30, 2016 USD ($) claim	Sep. 30, 2016 USD ($) claim	Jun. 30, 2016 USD ($)	Sep. 30, 2015 USD ($) claim	Mar. 31, 2015 USD ($)	Sep. 30, 2016 USD ($) site claim	Sep. 30, 2015 USD ($) claim	Sep. 30, 2014 USD ($)	Sep. 30, 2009 USD ($)
Loss Contingencies [Line Items]
Environmental contingencies accrued		$ 13,000,000	$ 13,000,000		$ 16,000,000		$ 13,000,000	$ 16,000,000
Estimated environmental liabilities for ongoing operations, maintenance and monitoring discounted amount		7,000,000	7,000,000				7,000,000
Estimated environmental liabilities for ongoing operations, maintenance and monitoring undiscounted amount		8,000,000	8,000,000				8,000,000
Litigation settlement							(3,000,000)	0	$ 0
Indemnity Obligations
Loss Contingencies [Line Items]
Guarantee obligations recorded		$ 11,000,000	$ 11,000,000		13,000,000		$ 11,000,000	13,000,000		$ 28,000,000
Body Systems
Loss Contingencies [Line Items]
Loss contingency accrual									6,000,000
Indemnity obligations liability									2,000,000
Gain (loss) related to litigation settlement						$ 6,000,000
Super Fund
Loss Contingencies [Line Items]
Number of superfund sites | site							9
Minimum
Loss Contingencies [Line Items]
Environmental liabilities discounted rate		1.00%	1.00%				1.00%
Maximum
Loss Contingencies [Line Items]
Environmental liabilities discounted rate		2.75%	2.75%				2.75%
Maremont Asbestos
Loss Contingencies [Line Items]
Environmental contingencies accrued		$ 72,000,000	$ 72,000,000		$ 74,000,000		$ 72,000,000	$ 74,000,000
Number of pending asbestos-related claims | claim		5,800	5,800		5,600		5,800	5,600
Period for incurring loss							10 years
Loss contingency accrual		$ 70,000,000	$ 70,000,000		$ 71,000,000		$ 70,000,000	$ 71,000,000
Charge based on annual valuation of asbestos							2,000,000	2,000,000
Insurance receivable		32,000,000	32,000,000		41,000,000		32,000,000	41,000,000
Asbestos-related insurance recoveries		32,000,000	32,000,000		41,000,000		32,000,000	41,000,000
Maremont Asbestos | Minimum
Loss Contingencies [Line Items]
Loss Contingency, Estimate of Possible Loss		70,000,000	70,000,000				70,000,000
Maremont Asbestos | Maximum
Loss Contingencies [Line Items]
Loss Contingency, Estimate of Possible Loss		83,000,000	83,000,000				83,000,000
Rockwell Asbestos
Loss Contingencies [Line Items]
Environmental contingencies accrued		$ 61,000,000	$ 61,000,000		$ 58,000,000		$ 61,000,000	$ 58,000,000
Number of pending asbestos-related claims | claim		3,200	3,200		3,000		3,200	3,000
Loss Contingency, Estimate of Possible Loss		$ 60,000,000	$ 60,000,000		$ 55,000,000		$ 60,000,000	$ 55,000,000
Charge based on annual valuation of asbestos		9,000,000	2,000,000		4,000,000
Insurance receivable		9,000,000	9,000,000		9,000,000		$ 9,000,000	9,000,000
Period for settlement							10 years
Asbestos-related insurance recoveries		27,000,000	27,000,000		14,000,000		$ 27,000,000	14,000,000
Rockwell Asbestos | Minimum
Loss Contingencies [Line Items]
Loss Contingency, Estimate of Possible Loss		60,000,000	60,000,000				60,000,000
Rockwell Asbestos | Maximum
Loss Contingencies [Line Items]
Loss Contingency, Estimate of Possible Loss		75,000,000	75,000,000				75,000,000
Home Insurance Company
Loss Contingencies [Line Items]
Litigation settlement				$ 3,000,000
Asbestos-related insurance recoveries				6,000,000
TL Trailer Axles
Loss Contingencies [Line Items]
Litigation settlement				$ 6,000,000
Superfund Sites
Loss Contingencies [Line Items]
Environmental costs reasonably possible		9,000,000	9,000,000				9,000,000
Environmental contingencies accrued		2,000,000	2,000,000		2,000,000		2,000,000	2,000,000
Environmental remediation costs									1,000,000
Non-Superfund Sites
Loss Contingencies [Line Items]
Environmental costs reasonably possible		28,000,000	28,000,000				28,000,000
Environmental contingencies accrued		11,000,000	11,000,000		14,000,000		11,000,000	14,000,000
Environmental remediation costs							3,000,000	3,000,000	5,000,000
Other Income (expense)
Loss Contingencies [Line Items]
Environmental remediation costs							3,000,000	2,000,000	2,000,000
Discontinued Operations
Loss Contingencies [Line Items]
Environmental remediation costs									$ 4,000,000
Tax Years 2008 Through 2015 | Value Added Tax
Loss Contingencies [Line Items]
Loss contingency accrual		10,000,000	10,000,000		10,000,000		10,000,000	10,000,000
Insurance Settlement
Loss Contingencies [Line Items]
Litigation settlement expense			31,000,000
Insurance Settlement | Maremont Asbestos
Loss Contingencies [Line Items]
Loss contingency accrual	$ 12,000,000	3,000,000	3,000,000				3,000,000
Litigation settlement	17,000,000
Litigation settlement expense	$ 5,000,000		9,000,000
Insurance Settlement | Rockwell Asbestos
Loss Contingencies [Line Items]
Loss contingency accrual		22,000,000	22,000,000				22,000,000
Insurance receivable		12,000,000	12,000,000				12,000,000
Litigation settlement							32,000,000
Litigation settlement expense							10,000,000
Coverage-in-place arrangement with other insurers | Rockwell Asbestos
Loss Contingencies [Line Items]
Insurance receivable		6,000,000	6,000,000				6,000,000
MSSC
Loss Contingencies [Line Items]
Exposure under Indemnity		$ 1,000,000	$ 1,000,000		$ 2,000,000		$ 1,000,000	$ 2,000,000

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BUSINESS SEGMENT INFORMATION - Summary of Segment Information (Details) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Segment Reporting Information [Line Items]
Total sales	$ 728	$ 841	$ 821	$ 809	$ 853	$ 909	$ 864	$ 879	$ 3,199	$ 3,505	$ 3,766
Commercial Truck & Industrial
Segment Reporting Information [Line Items]
Total sales									2,369	2,649	2,876
Aftermarket & Trailer
Segment Reporting Information [Line Items]
Total sales									830	856	890
Operating Segments
Segment Reporting Information [Line Items]
Total sales									3,199	3,505	3,766
Operating Segments | Commercial Truck & Industrial
Segment Reporting Information [Line Items]
Total sales									2,445	2,739	2,980
Operating Segments | Aftermarket & Trailer
Segment Reporting Information [Line Items]
Total sales									860	884	920
Eliminations
Segment Reporting Information [Line Items]
Total sales									(106)	(118)	(134)
Eliminations | Commercial Truck & Industrial
Segment Reporting Information [Line Items]
Total sales									76	90	104
Eliminations | Aftermarket & Trailer
Segment Reporting Information [Line Items]
Total sales									$ 30	$ 28	$ 30

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BUSINESS SEGMENT INFORMATION - Segment Income Attributable to Parent (Details) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Segment Reporting Information [Line Items]
Interest expense, net									$ (84)	$ (105)	$ (130)
Benefit (provision) for income taxes	$ 446	$ (8)	$ (7)	$ (7)	$ 18	$ (6)	$ (6)	$ (7)	424	(1)	(31)
Depreciation and amortization									(67)	(65)	(67)
Restructuring costs	(7)	(6)	(2)	(1)	(1)	(9)	(3)	(3)	(16)	(16)	(10)
Pension settlement losses									0	(59)	0
Goodwill and asset impairment charges									0	(17)	0
Noncontrolling interests									(2)	(1)	(5)
Income from continuing operations attributable to Meritor, Inc.	$ 474	$ 42	$ 33	$ 28	$ (21)	$ 15	$ 39	$ 32	577	65	279
Commercial Truck & Industrial
Segment Reporting Information [Line Items]
Depreciation and amortization									(59)	(59)	(61)
Restructuring costs									(6)	(14)	(8)
Aftermarket & Trailer
Segment Reporting Information [Line Items]
Depreciation and amortization									(8)	(6)	(6)
Restructuring costs									(8)	0	(1)
Operating Segments
Segment Reporting Information [Line Items]
Segment EBITDA									323	339	324
Operating Segments | Commercial Truck & Industrial
Segment Reporting Information [Line Items]
Segment EBITDA									208	216	218
Operating Segments | Aftermarket & Trailer
Segment Reporting Information [Line Items]
Segment EBITDA									115	123	106
Segment Reconciling Items
Segment Reporting Information [Line Items]
Unallocated legacy and corporate income (expense), net									4	(5)	(10)
Interest expense, net									(84)	(105)	(130)
Benefit (provision) for income taxes									424	(1)	(31)
Depreciation and amortization									(67)	(65)	(67)
Loss on sale of receivables									(5)	(5)	(8)
Restructuring costs									(16)	(16)	(10)
Antitrust settlement with Eaton, net of tax									0	0	208
Reduction of specific warranty contingency, net of supplier recovery									0	0	8
Pension settlement losses									0	(59)	0
Goodwill and asset impairment charges									0	(17)	0
Noncontrolling interests									$ (2)	$ (1)	$ (5)

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BUSINESS SEGMENT INFORMATION - Schedule of Segment Assets (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Segment Reporting Information [Line Items]
Total depreciation and amortization	$ 67	$ 65	$ 67
Total capital expenditures	93	79	77
TOTAL ASSETS	2,494	2,195
Commercial Truck & Industrial
Segment Reporting Information [Line Items]
Total depreciation and amortization	59	59	61
Total capital expenditures	83	71	71
Aftermarket & Trailer
Segment Reporting Information [Line Items]
Total depreciation and amortization	8	6	6
Total capital expenditures	10	8	6
Operating Segments
Segment Reporting Information [Line Items]
TOTAL ASSETS	1,869	2,017
Operating Segments | Commercial Truck & Industrial
Segment Reporting Information [Line Items]
TOTAL ASSETS	1,433	1,569
Operating Segments | Aftermarket & Trailer
Segment Reporting Information [Line Items]
TOTAL ASSETS	436	448
Corporate
Segment Reporting Information [Line Items]
TOTAL ASSETS	845	434
Segment Reconciling Items
Segment Reporting Information [Line Items]
Total depreciation and amortization	67	65	$ 67
Less: Accounts receivable sold under off-balance sheet factoring programs	$ (220)	$ (256)

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BUSINESS SEGMENT INFORMATION - Schedule of Revenues and Assets by Geographical Areas (Details) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Total sales	$ 728	$ 841	$ 821	$ 809	$ 853	$ 909	$ 864	$ 879	$ 3,199	$ 3,505	$ 3,766
Total assets excluding discontinued operations	2,494				2,195				2,494	2,195
U.S.
Revenues from External Customers and Long-Lived Assets [Line Items]
Total sales									1,617	1,733	1,466
Total assets excluding discontinued operations	1,359				995				1,359	995
Canada
Revenues from External Customers and Long-Lived Assets [Line Items]
Total sales									67	70	68
Total assets excluding discontinued operations	33				30				33	30
Mexico
Revenues from External Customers and Long-Lived Assets [Line Items]
Total sales									390	491	652
Total assets excluding discontinued operations	202				236				202	236
Total North America
Revenues from External Customers and Long-Lived Assets [Line Items]
Total sales									2,074	2,294	2,186
Total assets excluding discontinued operations	1,594				1,261				1,594	1,261
Sweden
Revenues from External Customers and Long-Lived Assets [Line Items]
Total sales									250	325	369
Total assets excluding discontinued operations	104				108				104	108
Italy
Revenues from External Customers and Long-Lived Assets [Line Items]
Total sales									201	204	234
Total assets excluding discontinued operations	65				77				65	77
United Kingdom
Revenues from External Customers and Long-Lived Assets [Line Items]
Total sales									136	76	82
Total assets excluding discontinued operations	212				211				212	211
Other Europe
Revenues from External Customers and Long-Lived Assets [Line Items]
Total sales									86	90	111
Total assets excluding discontinued operations	164				176				164	176
Total Europe
Revenues from External Customers and Long-Lived Assets [Line Items]
Total sales									673	695	796
Total assets excluding discontinued operations	545				572				545	572
Brazil
Revenues from External Customers and Long-Lived Assets [Line Items]
Total sales									130	198	408
Total assets excluding discontinued operations	146				136				146	136
China
Revenues from External Customers and Long-Lived Assets [Line Items]
Total sales									84	90	146
Total assets excluding discontinued operations	97				118				97	118
India
Revenues from External Customers and Long-Lived Assets [Line Items]
Total sales									152	140	114
Other Asia-Pacific
Revenues from External Customers and Long-Lived Assets [Line Items]
Total sales									86	88	$ 116
Total assets excluding discontinued operations	$ 112				$ 108				$ 112	$ 108

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BUSINESS SEGMENT INFORMATION - Additional Information (Details) - segment	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Number of reportable segments	2
Percentage of sales to major customers	10.00%
AB Volvo
Revenues from External Customers and Long-Lived Assets [Line Items]
Percentage of sales to major customers	23.00%	24.00%	27.00%
Daimler AG
Revenues from External Customers and Long-Lived Assets [Line Items]
Percentage of sales to major customers	18.00%	20.00%	18.00%
Navistar
Revenues from External Customers and Long-Lived Assets [Line Items]
Percentage of sales to major customers	9.00%	11.00%	12.00%

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QUARTERLY FINANCIAL INFORMATION (UNAUDITED) - Summary of Unaudited Quarterly Results (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended								12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Quarterly Financial Information Disclosure [Abstract]
Sales	$ 728	$ 841	$ 821	$ 809	$ 853	$ 909	$ 864	$ 879	$ 3,199	$ 3,505	$ 3,766
Cost of sales	(644)	(714)	(700)	(705)	(745)	(785)	(749)	(764)	(2,763)	(3,043)	(3,279)
Gross margin	84	127	121	104	108	124	115	115	436	462	487
Benefit (provision) for income taxes	446	(8)	(7)	(7)	18	(6)	(6)	(7)	424	(1)	(31)
Net income	474	42	32	27	(22)	14	43	30	575	65	254
Income from continuing operations attributable to Meritor, Inc.	474	42	33	28	(21)	15	39	32	577	65	279
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$ 474	$ 41	$ 32	$ 26	$ (21)	$ 13	$ 43	$ 29	$ 573	$ 64	$ 249
Basic earnings (loss) per share from continuing operations (in dollars per share)	$ 5.47	$ 0.47	$ 0.36	$ 0.30	$ (0.22)	$ 0.15	$ 0.40	$ 0.33	$ 6.40	$ 0.67	$ 2.86
Diluted earnings (loss) per share from continuing operations (in dollars per share)	$ 5.34	$ 0.46	$ 0.36	$ 0.30	$ (0.22)	$ 0.15	$ 0.38	$ 0.32	$ 6.27	$ 0.65	$ 2.81

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QUARTERLY FINANCIAL INFORMATION (UNAUDITED) - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended									12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Quarterly Financial Information [Line Items]
Restructuring costs	$ 7	$ 6	$ 2	$ 1	$ 1	$ 9	$ 3	$ 3		$ 16	$ 16	$ 10
Income tax expense (benefit)	(446)	8	7	7	(18)	6	6	7		(424)	1	31
Net income (loss)	474	$ 41	$ 32	$ 26	(21)	$ 13	$ 43	$ 29		573	64	249
Pension settlement losses										0	59	0
Goodwill impairment					15					0	15	0
Impairment of long-lived assets					2
Non-U.S. Plans
Quarterly Financial Information [Line Items]
Pension settlement losses					59
U.S. Retiree Medical Plan
Quarterly Financial Information [Line Items]
Recognized prior service costs due to curtailment									$ 15	0	0	$ 15
U.S.
Quarterly Financial Information [Line Items]
Non-cash expense (benefit) for the reversal of valuation allowances	(438)									(438)
Income tax expense (benefit)	(25)
Brazil
Quarterly Financial Information [Line Items]
Non-cash expense (benefit) for the reversal of valuation allowances										$ 9
Income tax expense (benefit)	9
Italy, Mexico, Sweden and Germany
Quarterly Financial Information [Line Items]
Non-cash expense (benefit) for the reversal of valuation allowances					$ (16)						$ (16)
Insurance Settlement
Quarterly Financial Information [Line Items]
Litigation settlement expense	$ 31

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OPERATING CASH FLOWS AND OTHER SUPPLEMENTAL FINANCIAL INFORMATION - Schedule of Operating Cash Flows (Details) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Operating Cash Flow Disclosure [Abstract]
Net income	$ 474	$ 42	$ 32	$ 27	$ (22)	$ 14	$ 43	$ 30	$ 575	$ 65	$ 254
Less: Loss from discontinued operations, net of tax									(4)	(1)	(30)
Income from continuing operations									579	66	284
Adjustments to income from continuing operations to arrive at cash provided by (used for) operating activities:
Depreciation and amortization									67	65	67
Deferred income tax benefit									(415)	(24)	(2)
Restructuring costs									16	16	10
Loss on debt extinguishment									0	25	31
Goodwill and asset impairment									0	17	0
Equity in earnings of ZF Meritor									0	0	(190)
Equity in earnings of other affiliates									(36)	(39)	(38)
Stock compensation expense									9	10	8
Provision for doubtful accounts									2	2	0
Pension and retiree medical expense									20	82	25
Gain on sale of property									(2)	(3)	0
Dividends received from ZF Meritor									0	0	190
Dividends received from other equity method investments									37	32	36
Pension and retiree medical contributions									(42)	(141)	(177)
Restructuring payments									(11)	(16)	(10)
Changes in off-balance sheet receivable securitization and factoring programs									(31)	39	(46)
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, foreign currency adjustments and discontinued operations:
Receivables									89	54	34
Inventories									28	4	(9)
Accounts payable									(89)	(70)	(5)
Other current assets and liabilities									(18)	(52)	19
Other assets and liabilities									6	40	0
Operating cash flows provided by continuing operations									209	107	227
Operating cash flows used for discontinued operations									(5)	(10)	(12)
CASH PROVIDED BY OPERATING ACTIVITIES									$ 204	$ 97	$ 215

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OPERATING CASH FLOWS AND OTHER SUPPLEMENTAL FINANCIAL INFORMATION - Schedule of Supplemental Disclosures (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Balance sheet data:
Allowance for doubtful accounts	$ 6	$ 9	$ 6
Statement of operations data:
Maintenance and repairs expense	45	52	59
Research, development and engineering expense	68	69	71
Depreciation expense	61	60	62
Rental expense	15	11	16
Interest income	3	9	2
Interest expense	(87)	(114)	(132)
Statement of cash flows data:
Interest payments	71	64	84
Income tax payments, net of refunds	24	14	26
Non-cash investing activities - capital asset additions from capital leases	$ 0	$ 9	$ 5

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SUPPLEMENTAL PARENT AND GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - Statement of Operations (Details) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Sales
External									$ 3,199	$ 3,505	$ 3,766
Subsidiaries									0	0	0
Total sales	$ 728	$ 841	$ 821	$ 809	$ 853	$ 909	$ 864	$ 879	3,199	3,505	3,766
Cost of sales	(644)	(714)	(700)	(705)	(745)	(785)	(749)	(764)	(2,763)	(3,043)	(3,279)
Gross margin	84	127	121	104	108	124	115	115	436	462	487
Selling, general and administrative									(213)	(243)	(258)
Pension settlement losses									0	(59)	0
Restructuring costs	(7)	(6)	(2)	(1)	(1)	(9)	(3)	(3)	(16)	(16)	(10)
Goodwill impairment					(15)				0	(15)	0
Other operating expense, net									(3)	(1)	(2)
OPERATING INCOME									204	128	217
Other income, net									(1)	5	0
Equity in earnings of ZF Meritor									0	0	190
Equity in earnings of affiliates									36	39	38
Interest income (expense), net									(84)	(105)	(130)
INCOME (LOSS) BEFORE INCOME TAXES									155	67	315
Benefit (provision) for income taxes	446	(8)	(7)	(7)	18	(6)	(6)	(7)	424	(1)	(31)
Equity income from continuing operations of subsidiaries									0	0	0
Net income (loss) before tax									579	66	284
LOSS FROM DISCONTINUED OPERATIONS, net of tax									(4)	(1)	(30)
Net income	474	42	32	27	(22)	14	43	30	575	65	254
Less: Net income attributable to noncontrolling interests									(2)	(1)	(5)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$ 474	$ 41	$ 32	$ 26	$ (21)	$ 13	$ 43	$ 29	573	64	249
Other equity method investments
Sales
Equity in earnings of affiliates									36
Reportable Legal Entities | Parent
Sales
External									0	0	0
Subsidiaries									0	0	0
Total sales									0	0	0
Cost of sales									(57)	(52)	(56)
Gross margin									(57)	(52)	(56)
Selling, general and administrative									(64)	(53)	(65)
Pension settlement losses										0
Restructuring costs									(7)	(2)	0
Goodwill impairment										0
Other operating expense, net									(3)	(2)	(1)
OPERATING INCOME									(131)	(109)	(122)
Other income, net									34	36	35
Equity in earnings of ZF Meritor											0
Equity in earnings of affiliates										0	0
Interest income (expense), net									(117)	(138)	(159)
INCOME (LOSS) BEFORE INCOME TAXES									(214)	(211)	(246)
Benefit (provision) for income taxes									526	(2)	0
Equity income from continuing operations of subsidiaries									265	278	525
Net income (loss) before tax									577	65	279
LOSS FROM DISCONTINUED OPERATIONS, net of tax									(4)	(1)	(30)
Net income									573	64	249
Less: Net income attributable to noncontrolling interests									0	0	0
NET INCOME ATTRIBUTABLE TO MERITOR, INC.									573	64	249
Reportable Legal Entities | Parent | Other equity method investments
Sales
Equity in earnings of affiliates									0
Reportable Legal Entities | Guarantors
Sales
External									1,616	1,734	1,467
Subsidiaries									112	129	142
Total sales									1,728	1,863	1,609
Cost of sales									(1,439)	(1,579)	(1,343)
Gross margin									289	284	266
Selling, general and administrative									(75)	(118)	(102)
Pension settlement losses										0
Restructuring costs									(4)	(5)	(1)
Goodwill impairment										(15)
Other operating expense, net									0	(2)	(1)
OPERATING INCOME									210	144	162
Other income, net									(35)	18	23
Equity in earnings of ZF Meritor											190
Equity in earnings of affiliates										36	30
Interest income (expense), net									27	26	35
INCOME (LOSS) BEFORE INCOME TAXES									234	224	440
Benefit (provision) for income taxes									(88)	2	(1)
Equity income from continuing operations of subsidiaries									106	38	71
Net income (loss) before tax									252	264	510
LOSS FROM DISCONTINUED OPERATIONS, net of tax									(4)	(2)	(31)
Net income									248	262	479
Less: Net income attributable to noncontrolling interests									0	0	0
NET INCOME ATTRIBUTABLE TO MERITOR, INC.									248	262	479
Reportable Legal Entities | Guarantors | Other equity method investments
Sales
Equity in earnings of affiliates									32
Reportable Legal Entities | Non- Guarantors
Sales
External									1,583	1,771	2,299
Subsidiaries									61	71	62
Total sales									1,644	1,842	2,361
Cost of sales									(1,440)	(1,612)	(2,084)
Gross margin									204	230	277
Selling, general and administrative									(74)	(72)	(91)
Pension settlement losses										(59)
Restructuring costs									(5)	(9)	(9)
Goodwill impairment										0
Other operating expense, net									0	3	0
OPERATING INCOME									125	93	177
Other income, net									0	(49)	(58)
Equity in earnings of ZF Meritor											0
Equity in earnings of affiliates										3	8
Interest income (expense), net									6	7	(6)
INCOME (LOSS) BEFORE INCOME TAXES									135	54	121
Benefit (provision) for income taxes									(14)	(1)	(30)
Equity income from continuing operations of subsidiaries									0	0	0
Net income (loss) before tax									121	53	91
LOSS FROM DISCONTINUED OPERATIONS, net of tax									(2)	(3)	(12)
Net income									119	50	79
Less: Net income attributable to noncontrolling interests									(2)	(1)	(5)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.									117	49	74
Reportable Legal Entities | Non- Guarantors | Other equity method investments
Sales
Equity in earnings of affiliates									4
Elims
Sales
External									0	0	0
Subsidiaries									(173)	(200)	(204)
Total sales									(173)	(200)	(204)
Cost of sales									173	200	204
Gross margin									0	0	0
Selling, general and administrative									0	0	0
Pension settlement losses										0
Restructuring costs									0	0	0
Goodwill impairment										0
Other operating expense, net									0	0	0
OPERATING INCOME									0	0	0
Other income, net									0	0	0
Equity in earnings of ZF Meritor											0
Equity in earnings of affiliates										0	0
Interest income (expense), net									0	0	0
INCOME (LOSS) BEFORE INCOME TAXES									0	0	0
Benefit (provision) for income taxes									0	0	0
Equity income from continuing operations of subsidiaries									(371)	(316)	(596)
Net income (loss) before tax									(371)	(316)	(596)
LOSS FROM DISCONTINUED OPERATIONS, net of tax									6	5	43
Net income									(365)	(311)	(553)
Less: Net income attributable to noncontrolling interests									0	0	0
NET INCOME ATTRIBUTABLE TO MERITOR, INC.									(365)	$ (311)	$ (553)
Elims | Other equity method investments
Sales
Equity in earnings of affiliates									$ 0

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SUPPLEMENTAL PARENT AND GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - Comprehensive Income (Loss) (Details) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Condensed Financial Statements, Captions [Line Items]
Net income	$ 474	$ 42	$ 32	$ 27	$ (22)	$ 14	$ 43	$ 30	$ 575	$ 65	$ 254
Other comprehensive income (loss)									(43)	(19)	(15)
Total comprehensive income									532	46	239
Less: Comprehensive (income) loss attributable to noncontrolling interest									(2)	1	(5)
Comprehensive income (loss) attributable to Meritor, Inc.									530	47	234
Reportable Legal Entities | Parent
Condensed Financial Statements, Captions [Line Items]
Net income									573	64	249
Other comprehensive income (loss)									(43)	(19)	(15)
Total comprehensive income									530	45	234
Less: Comprehensive (income) loss attributable to noncontrolling interest									0	2	0
Comprehensive income (loss) attributable to Meritor, Inc.									530	47	234
Reportable Legal Entities | Guarantors
Condensed Financial Statements, Captions [Line Items]
Net income									248	262	479
Other comprehensive income (loss)									55	(61)	(54)
Total comprehensive income									303	201	425
Less: Comprehensive (income) loss attributable to noncontrolling interest									0	0	0
Comprehensive income (loss) attributable to Meritor, Inc.									303	201	425
Reportable Legal Entities | Non- Guarantors
Condensed Financial Statements, Captions [Line Items]
Net income									119	50	79
Other comprehensive income (loss)									(44)	(16)	25
Total comprehensive income									75	34	104
Less: Comprehensive (income) loss attributable to noncontrolling interest									(2)	(1)	(5)
Comprehensive income (loss) attributable to Meritor, Inc.									73	33	99
Elims
Condensed Financial Statements, Captions [Line Items]
Net income									(365)	(311)	(553)
Other comprehensive income (loss)									(11)	77	29
Total comprehensive income									(376)	(234)	(524)
Less: Comprehensive (income) loss attributable to noncontrolling interest									0	0	0
Comprehensive income (loss) attributable to Meritor, Inc.									$ (376)	$ (234)	$ (524)

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SUPPLEMENTAL PARENT AND GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - Balance Sheet (Details) - USD ($) $ in Millions	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2013
CURRENT ASSETS
Cash and cash equivalents	$ 160	$ 193	$ 247	$ 318
Receivables, trade and other, net	396	461
Inventories	316	338
Other current assets	33	50
TOTAL CURRENT ASSETS	905	1,042
NET PROPERTY	439	419
GOODWILL	390	402	431
OTHER ASSETS	760	332
INVESTMENTS IN SUBSIDIARIES	0	0
TOTAL ASSETS	2,494	2,195
CURRENT LIABILITIES
Short-term debt	14	15
Accounts and notes payable	475	574
Other current liabilities	268	279
TOTAL CURRENT LIABILITIES	757	868
LONG-TERM DEBT	982	1,036
RETIREMENT BENEFITS	703	632
INTERCOMPANY PAYABLE (RECEIVABLE)	0	0
OTHER LIABILITIES	238	305
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.	(211)	(671)
NONCONTROLLING INTERESTS	25	25
TOTAL LIABILITIES AND DEFICIT	2,494	2,195
Reportable Legal Entities | Parent
CURRENT ASSETS
Cash and cash equivalents	90	73	71	144
Receivables, trade and other, net	1	1
Inventories	0	0
Other current assets	5	4
TOTAL CURRENT ASSETS	96	78
NET PROPERTY	22	15
GOODWILL	0	0
OTHER ASSETS	447	61
INVESTMENTS IN SUBSIDIARIES	2,575	2,354
TOTAL ASSETS	3,140	2,508
CURRENT LIABILITIES
Short-term debt	1	1
Accounts and notes payable	42	55
Other current liabilities	90	93
TOTAL CURRENT LIABILITIES	133	149
LONG-TERM DEBT	971	1,017
RETIREMENT BENEFITS	680	603
INTERCOMPANY PAYABLE (RECEIVABLE)	1,534	1,365
OTHER LIABILITIES	34	45
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.	(212)	(671)
NONCONTROLLING INTERESTS	0	0
TOTAL LIABILITIES AND DEFICIT	3,140	2,508
Reportable Legal Entities | Guarantors
CURRENT ASSETS
Cash and cash equivalents	4	6	5	6
Receivables, trade and other, net	39	40
Inventories	143	159
Other current assets	12	20
TOTAL CURRENT ASSETS	198	225
NET PROPERTY	198	183
GOODWILL	219	219
OTHER ASSETS	132	129
INVESTMENTS IN SUBSIDIARIES	679	313
TOTAL ASSETS	1,426	1,069
CURRENT LIABILITIES
Short-term debt	4	4
Accounts and notes payable	172	213
Other current liabilities	74	83
TOTAL CURRENT LIABILITIES	250	300
LONG-TERM DEBT	3	6
RETIREMENT BENEFITS	0	0
INTERCOMPANY PAYABLE (RECEIVABLE)	(1,768)	(1,886)
OTHER LIABILITIES	162	217
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.	2,779	2,432
NONCONTROLLING INTERESTS	0	0
TOTAL LIABILITIES AND DEFICIT	1,426	1,069
Reportable Legal Entities | Non- Guarantors
CURRENT ASSETS
Cash and cash equivalents	66	114	171	168
Receivables, trade and other, net	356	420
Inventories	173	179
Other current assets	16	26
TOTAL CURRENT ASSETS	611	739
NET PROPERTY	219	221
GOODWILL	171	183
OTHER ASSETS	181	142
INVESTMENTS IN SUBSIDIARIES	0	0
TOTAL ASSETS	1,182	1,285
CURRENT LIABILITIES
Short-term debt	9	10
Accounts and notes payable	261	306
Other current liabilities	104	103
TOTAL CURRENT LIABILITIES	374	419
LONG-TERM DEBT	8	13
RETIREMENT BENEFITS	23	29
INTERCOMPANY PAYABLE (RECEIVABLE)	234	521
OTHER LIABILITIES	42	43
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.	476	235
NONCONTROLLING INTERESTS	25	25
TOTAL LIABILITIES AND DEFICIT	1,182	1,285
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	(3,254)	(2,667)
TOTAL ASSETS	(3,254)	(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.	(3,254)	(2,667)
NONCONTROLLING INTERESTS	0	0
TOTAL LIABILITIES AND DEFICIT	$ (3,254)	$ (2,667)

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SUPPLEMENTAL PARENT AND GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - Cash Flows (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Schedule of Statement of Cash Flows [Line Items]
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$ 204	$ 97	$ 215
INVESTING ACTIVITIES
Capital expenditures	(93)	(79)	(77)
Proceeds from sale of property	4	4	0
Cash paid for acquisition of Morganton	0	(16)	0
Other investing activities	(1)	0	0
Net cash flows provided by (used for) discontinued operations	4	4	7
CASH USED FOR INVESTING ACTIVITIES	(86)	(87)	(70)
FINANCING ACTIVITIES
Proceeds from debt issuances	0	225	225
Repayment of notes and term loan	(55)	(199)	(439)
Other financing activities	(16)	(9)	12
Repurchase of common stock	(81)	(55)	0
Debt issuance costs	0	4	10
Intercompany advances	0		0
CASH USED FOR FINANCING ACTIVITIES	(152)	(42)	(212)
EFFECT OF CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1	(22)	(4)
CHANGE IN CASH AND CASH EQUIVALENTS	(33)	(54)	(71)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	193	247	318
CASH AND CASH EQUIVALENTS AT END OF YEAR	160	193	247
Reportable Legal Entities | Parent
Schedule of Statement of Cash Flows [Line Items]
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	196	57	245
INVESTING ACTIVITIES
Capital expenditures	(19)	(4)	(4)
Proceeds from sale of property	0	0
Cash paid for acquisition of Morganton		0
Other investing activities	0
Net cash flows provided by (used for) discontinued operations	0	0	0
CASH USED FOR INVESTING ACTIVITIES	(19)	(4)	(4)
FINANCING ACTIVITIES
Proceeds from debt issuances		225	225
Repayment of notes and term loan	(55)	(199)	(439)
Other financing activities	(1)	0	0
Repurchase of common stock	(81)	(55)
Debt issuance costs		4	10
Intercompany advances	(23)		(90)
CASH USED FOR FINANCING ACTIVITIES	(160)	(33)	(314)
EFFECT OF CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	0	0	0
CHANGE IN CASH AND CASH EQUIVALENTS	17	2	(73)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	73	71	144
CASH AND CASH EQUIVALENTS AT END OF YEAR	90	73	71
Reportable Legal Entities | Guarantors
Schedule of Statement of Cash Flows [Line Items]
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	40	62	34
INVESTING ACTIVITIES
Capital expenditures	(43)	(41)	(37)
Proceeds from sale of property	4	0
Cash paid for acquisition of Morganton		(16)
Other investing activities	0
Net cash flows provided by (used for) discontinued operations	1	1	4
CASH USED FOR INVESTING ACTIVITIES	(38)	(56)	(33)
FINANCING ACTIVITIES
Proceeds from debt issuances		0	0
Repayment of notes and term loan	0	0	0
Other financing activities	(4)	(5)	(2)
Repurchase of common stock	0	0
Debt issuance costs		0	0
Intercompany advances	0		0
CASH USED FOR FINANCING ACTIVITIES	(4)	(5)	(2)
EFFECT OF CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	0	0	0
CHANGE IN CASH AND CASH EQUIVALENTS	(2)	1	(1)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	6	5	6
CASH AND CASH EQUIVALENTS AT END OF YEAR	4	6	5
Reportable Legal Entities | Non- Guarantors
Schedule of Statement of Cash Flows [Line Items]
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	(32)	(22)	(64)
INVESTING ACTIVITIES
Capital expenditures	(31)	(34)	(36)
Proceeds from sale of property	0	4
Cash paid for acquisition of Morganton		0
Other investing activities	(1)
Net cash flows provided by (used for) discontinued operations	3	3	3
CASH USED FOR INVESTING ACTIVITIES	(29)	(27)	(33)
FINANCING ACTIVITIES
Proceeds from debt issuances		0	0
Repayment of notes and term loan	0	0	0
Other financing activities	(11)	(4)	14
Repurchase of common stock	0	0
Debt issuance costs		0	0
Intercompany advances	23		90
CASH USED FOR FINANCING ACTIVITIES	12	(4)	104
EFFECT OF CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1	(22)	(4)
CHANGE IN CASH AND CASH EQUIVALENTS	(48)	(57)	3
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	114	171	168
CASH AND CASH EQUIVALENTS AT END OF YEAR	66	114	171
Elims
Schedule of Statement of Cash Flows [Line Items]
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES	0	0	0
INVESTING ACTIVITIES
Capital expenditures	0	0	0
Proceeds from sale of property	0	0
Cash paid for acquisition of Morganton		0
Other investing activities	0
Net cash flows provided by (used for) discontinued operations	0	0	0
CASH USED FOR INVESTING ACTIVITIES	0	0	0
FINANCING ACTIVITIES
Proceeds from debt issuances		0	0
Repayment of notes and term loan	0	0	0
Other financing activities	0	0	0
Repurchase of common stock	0	0
Debt issuance costs		0	0
Intercompany advances	0		0
CASH USED FOR FINANCING ACTIVITIES	0	0	0
EFFECT OF CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	0	0	0
CHANGE IN CASH AND CASH EQUIVALENTS	0	0	0
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	0	0	0
CASH AND CASH EQUIVALENTS AT END OF YEAR	$ 0	$ 0	$ 0

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SUPPLEMENTAL PARENT AND GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - Additional Information (Details) - USD ($) $ in Millions	12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2014
Supplemental Disclosures [Line Items]
Ownership percentage	100.00%
Threshold for reporting consolidating financial statements	25.00%
Minimum amount of subsidiary restricted assets that exceed consolidated net assets, as a percentage	25.00%
Amount of restricted net assets for consolidated and unconsolidated subsidiaries	$ 36
Parent
Supplemental Disclosures [Line Items]
Pension and Retiree Medical Liabilities	708	$ 631
Proceeds from consolidated subsidiaries and equity method investments	25	37	$ 5
Subsidiaries
Supplemental Disclosures [Line Items]
Debt and capital lease obligations	$ 24	$ 33