10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT

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

For the Quarterly Period Ended July 2, 2017

Commission File No. 1-15983

MERITOR, INC.

(Exact name of registrant as specified in its charter)

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

(248) 435-1000

(Registrant’s telephone number, including area code)

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

Yes X No

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

Yes X No

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

Large accelerated filer	X		Accelerated filer
Non-accelerated filer		(Do not check if a smaller reporting company)	Smaller reporting company
Emerging growth company

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

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

Yes No X

88,565,934 shares of Common Stock, $1.00 par value, of Meritor, Inc. were outstanding on July 31, 2017.

INDEX

			Page No.
PART I.	FINANCIAL INFORMATION:
	Item 1.	Financial Statements:
		Condensed Consolidated Statement of Operations - - Three and Nine Months Ended June 30, 2017 and 2016	3
		Condensed Consolidated Statement Of Comprehensive Income (Loss) - - Three and Nine Months Ended June 30, 2017 and 2016	4
		Condensed Consolidated Balance Sheet - - June 30, 2017 and September 30, 2016	5
		Condensed Consolidated Statement of Cash Flows - - Nine Months Ended June 30, 2017 and 2016	6
		Condensed Consolidated Statement of Equity (Deficit) - - Nine Months Ended June 30, 2017 and 2016	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	51
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	70
	Item 4.	Controls and Procedures	72
PART II.	OTHER INFORMATION:
	Item 1.	Legal Proceedings	73
	Item 1A.	Risk Factors	73
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	74
	Item 5.	Other Information	75
	Item 6.	Exhibits	76
Signatures			77

2

MERITOR, INC.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(in millions, except per share amounts)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2017			2016			2017			2016
	(Unaudited)
Sales	$	920		$	841		$	2,425		$	2,471
Cost of sales	(778		)	(714		)	(2,073		)	(2,119		)
GROSS MARGIN	142			127			352			352
Selling, general and administrative	(73		)	(59		)	(192		)	(175		)
Restructuring costs	—			(6		)	(4		)	(9		)
Other operating expense, net	—			—			(5		)	(3		)
OPERATING INCOME	69			62			151			165
Other income (expense), net	1			—			1			(1		)
Equity in earnings of affiliates	14			9			32			26
Interest expense, net	(21		)	(20		)	(63		)	(63		)
INCOME BEFORE INCOME TAXES	63			51			121			127
Provision for income taxes	(11		)	(8		)	(30		)	(22		)
INCOME FROM CONTINUING OPERATIONS	52			43			91			105
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	(1		)	(1		)	(4		)
NET INCOME	51			42			90			101
Less: Net income attributable to noncontrolling interests	(3		)	(1		)	(5		)	(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	48		$	41		$	85		$	99
NET INCOME ATTRIBUTABLE TO MERITOR, INC.
Net income from continuing operations	$	49		$	42		$	86		$	103
Loss from discontinued operations	(1		)	(1		)	(1		)	(4		)
Net income	$	48		$	41		$	85		$	99
BASIC EARNINGS (LOSS) PER SHARE
Continuing operations	$	0.55		$	0.47		$	0.98		$	1.13
Discontinued operations	(0.01		)	(0.01		)	(0.01		)	(0.04		)
Basic earnings per share	$	0.54		$	0.46		$	0.97		$	1.09
DILUTED EARNINGS (LOSS) PER SHARE
Continuing operations	$	0.52		$	0.46		$	0.94		$	1.10
Discontinued operations	(0.01		)	(0.01		)	(0.01		)	(0.04		)
Diluted earnings per share	$	0.51		$	0.45		$	0.93		$	1.06
Basic average common shares outstanding	88.4			89.8			87.9			91.2
Diluted average common shares outstanding	93.3			92.0			91.4			93.1

See notes to condensed consolidated financial statements.

3

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(in millions)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2017			2016			2017			2016
	(Unaudited)
Net income	$	51		$	42		$	90		$	101
Other comprehensive income (loss):
Foreign currency translation adjustments:
Attributable to Meritor, Inc.	17			(10		)	8			(6		)
Attributable to noncontrolling interest	—			—			(1		)	—
Pension and other postretirement benefit related adjustments	11			7			33			25
Unrealized gain (loss) on investments and foreign exchange contracts	(2		)	3			—			5
Other comprehensive income, net of tax	26			—			40			24
Total comprehensive income	77			42			130			125
Less: Comprehensive income attributable to noncontrolling interest	(3		)	(1		)	(4		)	(2		)
Comprehensive income attributable to Meritor, Inc.	$	74		$	41		$	126		$	123

See notes to condensed consolidated financial statements.

4

MERITOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions)

	June 30, 2017			September 30, 2016
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (1)	$	231		$	160
Receivables, trade and other, net (1)	500			396
Inventories (1)	360			316
Other current assets	37			33
TOTAL CURRENT ASSETS	1,128			905
NET PROPERTY (1)	430			439
GOODWILL (1)	391			390
OTHER ASSETS	763			760
TOTAL ASSETS	$	2,712		$	2,494
LIABILITIES, MEZZANINE EQUITY AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Short-term debt	$	132		$	14
Accounts and notes payable (1)	602			475
Other current liabilities	277			268
TOTAL CURRENT LIABILITIES	1,011			757
LONG-TERM DEBT	858			982
RETIREMENT BENEFITS	667			703
OTHER LIABILITIES	220			238
TOTAL LIABILITIES	2,756			2,680
COMMITMENTS AND CONTINGENCIES (See Note 20)
MEZZANINE EQUITY:
Convertible debt with cash settlement	12			—
EQUITY (DEFICIT):
Common stock (June 30, 2017 and September 30, 2016, 101.4 and 99.6 shares issued and 88.6 and 86.8 shares outstanding, respectively)	101			99
Additional paid-in capital	875			876
Accumulated deficit	(156		)	(241		)
Treasury stock, at cost (at both June 30, 2017 and September 30, 2016, 12.8 shares)	(136		)	(136		)
Accumulated other comprehensive loss	(768		)	(809		)
Total deficit attributable to Meritor, Inc.	(84		)	(211		)
Noncontrolling interests (1)	28			25
TOTAL DEFICIT	(56		)	(186		)
TOTAL LIABILITIES, MEZZANINE EQUITY AND DEFICIT	$	2,712		$	2,494

⁽¹⁾As of June 30, 2017, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $11 million Receivables, trade and other, net; (iii) $2 million Inventories; (iv) $3 million Net property; (v) $1 million Goodwill; (vi) $10 million Accounts and notes payable; and (vii) $2 million Noncontrolling interests. As of September 30, 2016, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $8 million Receivables, trade and other, net; (iii) $1 million Inventories; (iv) $5 million Net property; (v) $5 million Accounts and notes payable; and (vi) $3 million Noncontrolling interests.

See notes to condensed consolidated financial statements.

5

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)

	Nine Months Ended June 30,
	2017			2016
	(Unaudited)
OPERATING ACTIVITIES
CASH PROVIDED BY OPERATING ACTIVITIES (See Note 10)	$	136		$	144
INVESTING ACTIVITIES
Capital expenditures	(52		)	(66		)
Other investing activities	—			3
Net investing cash flows provided by discontinued operations	2			4
CASH USED FOR INVESTING ACTIVITIES	(50		)	(59		)
FINANCING ACTIVITIES
Repayment of notes	—			(55		)
Debt issuance costs	(4		)	—
Other financing activities	(12		)	(15		)
Net change in debt	(16		)	(70		)
Repurchase of common stock	—			(81		)
CASH USED FOR FINANCING ACTIVITIES	(16		)	(151		)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1			2
CHANGE IN CASH AND CASH EQUIVALENTS	71			(64		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	160			193
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	231		$	129

See notes to condensed consolidated financial statements.

6

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY (DEFICIT)

(In millions)

(Unaudited)

	Common Stock		Additional Paid-in Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Loss			Total Deficit Attributable to Meritor, Inc.			Noncontrolling Interests			Total
Beginning balance at September 30, 2016	$	99	$	876		$	(241	)	$	(136	)	$	(809	)	$	(211	)	$	25		$	(186	)
Comprehensive income	—		—			85			—			41			126			4			130
Equity based compensation expense	—		12			—			—			—			12			—			12
Vesting of equity based awards	2		(2		)	—			—			—			—			—			—
Stock option exercises	—		2			—			—			—			2			—			2
Convertible debt with cash settlement	—		(12		)	—			—			—			(12		)	—			(12		)
Noncontrolling interest dividend	—		—			—			—			—			—			(1		)	(1		)
Other equity adjustments	—		(1		)	—			—			—			(1		)	—			(1		)
Ending Balance at June 30, 2017	$	101	$	875		$	(156	)	$	(136	)	$	(768	)	$	(84	)	$	28		$	(56	)
Beginning balance at September 30, 2015	$	99	$	865		$	(814	)	$	(55	)	$	(766	)	$	(671	)	$	25		$	(646	)
Comprehensive income	—		—			99			—			24			123			2			125
Equity based compensation expense	—		8			—			—			—			8			—			8
Repurchase of common stock	—		—			—			(81		)	—			(81		)	—			(81		)
Noncontrolling interest dividends	—		—			—			—			—			—			(2		)	(2		)
Ending Balance at June 30, 2016	$	99	$	873		$	(715	)	$	(136	)	$	(742	)	$	(621	)	$	25		$	(596	)

See notes to condensed consolidated financial statements.

7

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

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

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

In the opinion of the company, the unaudited condensed consolidated financial statements contain all adjustments, consisting solely of adjustments of a normal, recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. These statements should be read in conjunction with the company’s audited consolidated financial statements and notes thereto included in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2016, as amended. The condensed consolidated balance sheet data as of September 30, 2016 was derived from audited financial statements but does not include all annual disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the three and nine months ended June 30, 2017 are not necessarily indicative of the results for the full year.

The company’s fiscal year ends on the Sunday nearest September 30, and its fiscal quarters generally end on the Sundays nearest December 31, March 31 and June 30. The third quarter of fiscal years 2017 and 2016 ended on July 2, 2017 and July 3, 2016, respectively. All year and quarter references relate to the company’s fiscal year and fiscal quarters, unless otherwise stated. For ease of presentation, September 30 and June 30 are used consistently throughout this report to represent the fiscal year end and third fiscal quarter end, respectively.

2. Earnings per Share

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

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

	Three Months Ended June 30,		Nine Months Ended June 30,
	2017	2016	2017	2016
Basic average common shares outstanding	88.4	89.8	87.9	91.2
Impact of restricted shares, restricted share units and performance share units	1.8	2.2	1.4	1.9
Impact of convertible notes	3.1	—	2.1	—
Diluted average common shares outstanding	93.3	92.0	91.4	93.1

In November 2016, 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 $12.77, which was the company’s share price on the grant date of December 1, 2016. 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 $12.77, which was the company's share price on the grant date of December 1, 2016.

The actual number of performance share units that will vest depends upon the company’s performance relative to the established M2019 goals for the three-year performance period of October 1, 2016 to September 30, 2019, measured at the end of the performance period. The number of performance share units will depend on meeting the established M2019 goals at the following

8

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

weights: 50% associated with achieving an Adjusted diluted earnings per share from continuing operations target, 25% associated with achieving revenue growth above market and 25% associated with achieving a Net debt to Adjusted EBITDA target. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.6 million performance share units.

In November 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 that vest will depend on Adjusted EBITDA margin and Adjusted diluted earnings per share from continuing operations at the following weights: 50% associated with achieving an Adjusted EBITDA margin target and 50% associated with achieving an Adjusted diluted earnings per share from continuing operations target. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.7 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 that vest will depend on Adjusted EBITDA margin and Adjusted diluted earnings per share from continuing operations at the following weights: 75% associated with achieving an Adjusted EBITDA margin target and 25% associated with achieving an Adjusted diluted earnings per share from continuing operations target. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.6 million performance share units.

In November 2013, the Board of Directors approved a grant of performance share units to all executives eligible to participate in the long-term incentive plan. Each performance share unit represented 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 vested on December 1, 2016 depended 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, which was measured after the end of the performance period. The company's performance resulted in the vesting of the performance share units at 112% of the grant date amounts. There were 0.1 million and 0.4 million shares related to these performance share units included in the diluted earnings per share calculation for the three and nine months ended June 30, 2017, respectively, as certain payout thresholds were achieved relative to the established M2016 goals. There were 1.9 million and 1.4 million shares related to these performance share units included in the diluted earnings per share calculation for the three and nine months ended June 30, 2016, respectively, as certain payout thresholds were achieved relative to the established M2016 goals.

For the three months ended June 30, 2017, the dilutive impact of previously issued restricted shares, restricted share units and performance share units was 1.8 million shares, compared to 2.2 million shares for the same period in the prior fiscal year. For the nine months ended June 30, 2017, the dilutive impact of previously issued restricted shares, restricted share units and performance share units was 1.4 million shares, compared to 1.9 million shares for the same period in the prior fiscal year. For the three and nine months ended June 30, 2017, compensation cost related to restricted shares, restricted share units and performance

9

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

share units was $5 million and $12 million, respectively. For the three and nine months ended June 30, 2016, compensation cost related to restricted shares, restricted share units and performance share units was $2 million and $8 million, respectively.

For each of the three and nine months ended June 30, 2016, 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 periods and thus their inclusion would be anti-dilutive.

For the three and nine months ended June 30, 2017, 3.1 million and 2.1 million shares, respectively, were included in the computation of diluted earnings per share, as the company's average stock price during these periods exceeded the conversion price for the 7.875 percent convertible notes due 2026. For the three and nine months ended June 30, 2016, the company’s 7.875 percent convertible notes due 2026 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 notes.

3. New Accounting Standards

Accounting standards to be implemented

In May 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 amends the scope of modification accounting for share-based payment arrangements and provides guidance on when an entity would be required to apply modification accounting. This standard is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The amendments in this update should be applied prospectively. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In March 2017, the FASB issued ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. ASU 2017-08 affects entities who own investments in callable debt securities and aligns the amortization period of premiums on callable debt securities to expectations incorporated in market pricing on the underlying securities. This standard is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The amendments in this update should be applied on a modified retrospective basis through a cumulative-effective adjustment directly to retained earnings at the beginning of the adoption period. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The new guidance requires entities to only include the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses (together with other employee compensation costs). The other components of net benefit cost, including amortization of prior service cost/credit, are to be included in a separate line item(s) outside of any sub-total of operating income. ASU 2017-07 also provides guidance that only the service cost component of net benefit cost is eligible for capitalization. This standard is effective for public business entities for interim and annual periods beginning after December 15, 2017. The revisions in this amendment are to be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. ASU 2017-05 provides guidance which defines an “in substance nonfinancial asset”; unifies guidance related to partial sales of nonfinancial assets; eliminates rules specifically addressing sales of real estate; removes exceptions to the financial asset derecognition model; and clarifies the accounting for contributions of nonfinancial assets to joint ventures. The effective date and the transition requirements for the amendments in ASU 2017-05 are the same as the effective date and transition requirements in Topic 606, described below. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new guidance eliminates the need to determine the fair value of individual assets and liabilities of a

10

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

reporting unit to measure a goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value. The revised guidance will be applied prospectively, and is effective for calendar year-end SEC filers in 2020. Early adoption is permitted for any impairment tests performed after January 1, 2017. The new guidance is not expected to have a material impact on the company's consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The ASU provides clarification on the definition of a business and adds guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. To be considered a business under the new guidance, it must include an input and a substantive process that together significantly contribute to the ability to create output. The amendment removes the evaluation of whether a market participant could replace missing elements. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and will be applied prospectively. The potential impact of this new guidance will be assessed for future acquisitions or dispositions, but it is not expected to have a material impact on the company's consolidated financial statements.

In October 2016, the FASB issued 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 but 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 FASB 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 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 accounting policies and 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

11

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 accounting policies and 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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 on its accounting policies and 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 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 on its accounting policies and its consolidated financial statements.

Accounting standards implemented during fiscal year 2017

In January 2017, the FASB issued ASU 2017-03 which amended Accounting Changes and Error Corrections (Topic 250) to state that registrants should consider additional qualitative disclosures if the impact of an issued but not yet adopted ASU is unknown or cannot be reasonably estimated and to include a description of the effect of the accounting policies that the registrant expects to apply, if determined. Transition guidance included in certain issued but not yet adopted ASUs was also updated to reflect this amendment.

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 adopted this standard prospectively in the first quarter of fiscal year 2017. This guidance did not have a material impact on its consolidated financial statements.

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MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. Discontinued Operations

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

	Three Months Ended June 30,						Nine Months Ended June 30,
	2017			2016			2017			2016
Sales	$	—		$	—		$	—		$	—
Loss before income taxes	$	(1	)	$	(1	)	$	(1	)	$	(5	)
Benefit from income taxes	—			—			—			1
Loss from discontinued operations attributable to Meritor, Inc.	$	(1	)	$	(1	)	$	(1	)	$	(4	)

Loss from discontinued operations attributable to the company for the three and nine months ended June 30, 2017 and June 30, 2016 was primarily related to changes in estimates related to legal costs incurred in connection with a previously divested business.

Total discontinued operations assets as of both June 30, 2017 and September 30, 2016 were $1 million and total discontinued operations liabilities as of June 30, 2017 and September 30, 2016 were $6 million.

5. Assets and Liabilities Held for Sale

During the first quarter of fiscal year 2017, management approved a plan to sell a business within the Commercial Truck & Industrial reporting segment. The company expects to sell the business within one year from management's approval of the plan. The business and its associated assets and liabilities met the criteria for presentation as held for sale as of June 30, 2017.

Assets and liabilities held for sale are measured at the lower of the carrying value or fair value less costs to sell. Upon meeting the held for sale criteria, the company determined the carrying value of the business exceeded the fair value less costs to sell. As a result, an impairment charge of $3 million was recorded within other operating expense, net in the company’s condensed consolidated statement of operations during the first quarter of fiscal year 2017.

Assets and liabilities held for sale, when measured in subsequent periods, are permitted to be written-up for increases in the fair value, less cost to sell, not in excess of the cumulative loss previously recognized. During the third quarter of fiscal year 2017, the fair value less costs to sell of the business increased relative to the carrying value. As a result, a $1 million adjustment, which reduced the previously recognized loss, was recorded in the company's condensed consolidated statement of operations within other operating expense, net.

During the third quarter of fiscal year 2017, an additional $2 million of assets met the criteria for presentation as assets held for sale within the Aftermarket & Trailer segment related to the Aftermarket restructuring actions (see Note 7).

6. 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.

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MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

	Commercial Truck & Industrial			Aftermarket & Trailer		Total
Goodwill	$	245		$	160	$	405
Accumulated impairment losses	(15		)	—		(15		)
Beginning balance at September 30, 2016	230			160		390
Foreign currency translation	—			1		1
Balance at June 30, 2017	$	230		$	161	$	391

7. Restructuring Costs

Restructuring reserves, primarily related to unpaid employee termination benefits, were $8 million at June 30, 2017 and $16 million at September 30, 2016. The changes in restructuring reserves for the nine months ended June 30, 2017 and 2016 are as follows (in millions):

	Employee Termination Benefits			Plant Shutdown & Other			Total
Beginning balance at September 30, 2016	$	15		$	1		$	16
Activity during the period:
Charges to continuing operations	4			—			4
Cash payments – continuing operations	(10		)	(1		)	(11		)
Other	(1		)	—			(1		)
Total restructuring reserves at June 30, 2017	8			—			8
Less: non-current restructuring reserves	(1		)	—			(1		)
Restructuring reserves – current, at June 30, 2017	$	7		$	—		$	7
Balance at September 30, 2015	$	10		$	—		$	10
Activity during the period:
Charges to continuing operations	8			1			9
Cash payments – continuing operations	(8		)	—			(8		)
Total restructuring reserves at June 30, 2016	10			1			11
Less: non-current restructuring reserves	(2		)	—			(2		)
Restructuring reserves – current, at June 30, 2016	$	8		$	1		$	9

Ongoing 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 recorded $5 million of restructuring costs during the third quarter of fiscal year 2016. The company recorded $4 million of restructuring costs during the second quarter of fiscal year 2017. 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 & Trailer segment. Restructuring actions with these plans were substantially complete as of September 30, 2016.

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MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

8. Income Taxes

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

Income tax expense (benefit) is allocated among continuing operations, discontinued operations and other comprehensive income (“OCI”). Such allocation is applied by tax jurisdiction, and in periods in which there is a pre-tax loss from continuing operations and pre-tax income in another category, such as discontinued operations or OCI, income tax expense is allocated to the other sources of income, with a related benefit recorded in continuing operations.

In prior years, the company established valuation allowances against its U.S. net deferred tax assets and the net deferred tax assets of its 100-percent-owned subsidiaries in France, the United Kingdom, Brazil and certain other countries. In evaluating its ability to recover these net deferred tax assets, the company utilizes a consistent approach which considers its historical operating results, including an assessment of the degree to which any gains or losses are driven by items that are unusual in nature, and tax planning strategies. In addition, the company reviews changes in near-term market conditions and other factors that impact future operating results. Continued improvement in the company’s operating results could lead to reversal of some or all of these valuation allowances in the future.

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 that 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. Also in the fourth quarter of fiscal year 2016, due to a three-year cumulative loss and future economic uncertainty, the company established a tax valuation allowance in Brazil because the company determined it was not more likely than not that it would realize its deferred tax assets in Brazil.

The company continues to maintain valuation allowances in France, the United Kingdom, Brazil 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.

For the three months ended June 30, 2017, the company had approximately $3 million of net pre-tax income compared to $19 million of net pre-tax income in the same period in fiscal year 2016 in tax jurisdictions in which tax expense (benefit) is not recorded.

For the nine months ended June 30, 2017, the company had an insignificant net pre-tax loss compared to $47 million of net pre-tax income in the same period in fiscal year 2016 in tax jurisdictions in which tax expense (benefit) is not recorded.

9. Accounts Receivable Factoring and Securitization

Off-balance sheet arrangements 

Swedish Factoring Facility: The company has an arrangement to sell trade receivables due from AB Volvo through one of its European subsidiaries. Under this arrangement with Nordea Bank, which expires in March 2020, the company can sell up to, at any point in time, €155 million ($177 million) of eligible trade receivables. 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 €162 million ($186 million) and €121 million ($135 million) of this accounts receivable factoring facility as of June 30, 2017 and September 30, 2016, respectively.

The facility is backed by a 364-day liquidity commitment from Nordea Bank which extends through April 23, 2018. The commitment is subject to standard terms and conditions for this type of arrangement.

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MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

U.S. Factoring Facility: The company has an arrangement to sell trade receivables due from AB Volvo and its U.S. subsidiaries through one of its U.S. subsidiaries. Under this arrangement with Nordea Bank, which expires in February 2019, the company can sell up to, at any point in time, €80 million ($91 million) of eligible trade receivables. 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 €38 million ($43 million) and €39 million ($44 million) of this accounts receivable factoring facility as of June 30, 2017 and September 30, 2016, respectively.

United Kingdom Factoring Facility: The company has an arrangement to sell trade receivables due from AB Volvo and its European subsidiaries through one of its United Kingdom subsidiaries. Under this arrangement with Nordea Bank, which expires in February 2018, the company can sell up to, at any point in time, €25 million ($29 million) of eligible trade receivables. The receivables under this program are sold at face value and are excluded from the condensed consolidated balance sheet. The company had utilized €4 million ($5 million) and €6 million ($6 million) of this accounts receivable factoring facility as of June 30, 2017 and September 30, 2016, 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 due from AB Volvo and its European subsidiaries through one of its Italian subsidiaries. On June 13, 2017, Meritor extended this Italy factoring facility with Nordea Bank until June 18, 2022, with all other terms of the agreement remaining unchanged. Under this arrangement, the company can sell up to, at any point in time, €30 million ($34 million) of eligible trade receivables. The receivables under this program are sold at face value and are excluded from the condensed consolidated balance sheet. The company had utilized €29 million ($33 million) and €22 million ($24 million) of this accounts receivable factoring facility as of June 30, 2017 and September 30, 2016, 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 $21 million and $10 million at June 30, 2017 and September 30, 2016, respectively.

Total costs associated with all of the off-balance sheet arrangements described above were $2 million in the three months ended June 30, 2017 and 2016, and $4 million and $6 million in the nine months ended June 30, 2017 and 2016, respectively, and are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

On-balance sheet arrangements

The company has a $100 million U.S. accounts receivables securitization facility, which expires December 2019. The maximum permitted priority debt-to-EBITDA ratio as of the last day of each fiscal quarter under the facility is 2.25 to 1.00. This program is provided by PNC Bank, National Association, as Administrator and Purchaser, and the other Purchasers and Purchaser Agents from time to time (participating lenders), which are party to the agreement. Under this program, the company has the ability to sell an undivided percentage ownership interest in substantially all of its trade receivables (excluding the receivables due from AB Volvo and subsidiaries eligible for sale under the U.S. accounts receivable factoring facility) of certain U.S. subsidiaries to ArvinMeritor Receivables Corporation (“ARC”), a wholly-owned, special purpose subsidiary. ARC funds these purchases with borrowings from participating lenders under a loan agreement. This program also includes a letter of credit facility pursuant to which ARC may request the issuance of letters of credit issued for the company’s U.S. subsidiaries (originators) or their designees, which when issued will constitute a utilization of the facility for the amount of letters of credit issued. Amounts outstanding under this agreement are collateralized by eligible receivables purchased by ARC and are reported as short-term debt in the condensed consolidated balance sheet. At June 30, 2017 and September 30, 2016, no amounts, including letters of credit, were outstanding under this program. This securitization program contains a cross default to the revolving credit facility. At certain times during any given month, the company may sell eligible accounts receivable under this program to fund intra-month working capital needs. In such months, the company would then typically utilize the cash received from customers throughout the month to repay the borrowings under the program. Accordingly, during any given month, the company may borrow under this program amounts exceeding the amounts shown as outstanding at fiscal quarter ends.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

10. Operating Cash Flows

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

	Nine Months Ended June 30,
	2017			2016
OPERATING ACTIVITIES
Net income	$	90		$	101
Less: Loss from discontinued operations, net of tax	(1		)	(4		)
Income from continuing operations	91			105
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization	55			48
Deferred income tax expense	19			2
Restructuring costs	4			9
Asset impairment charges	2			—
Gain on sale of property	—			(2		)
Equity in earnings of affiliates	(32		)	(26		)
Pension and retiree medical expense	11			15
Other adjustments to income from continuing operations	12			5
Dividends received from equity method investments	25			29
Pension and retiree medical contributions	(28		)	(32		)
Restructuring payments	(11		)	(8		)
Changes in off-balance sheet accounts receivable factoring	62			(30		)
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, foreign currency adjustments and discontinued operations	(73		)	31
Operating cash flows provided by continuing operations	137			146
Operating cash flows used for discontinued operations	(1		)	(2		)
CASH PROVIDED BY OPERATING ACTIVITIES	$	136		$	144

11. Inventories

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

	June 30, 2017		September 30, 2016
Finished goods	$	142	$	125
Work in process	33		26
Raw materials, parts and supplies	185		165
Total	$	360	$	316

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

12. Other Current Assets

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

	June 30, 2017		September 30, 2016
Asbestos-related recoveries (see Note 20)	$	10	$	10
Prepaid and other	27		23
Other current assets	$	37	$	33

13. Net Property

Net property is summarized as follows (in millions):

	June 30, 2017			September 30, 2016
Property at cost:
Land and land improvements	$	29		$	30
Buildings	234			231
Machinery and equipment	867			839
Company-owned tooling	122			113
Construction in progress	38			56
Total	1,290			1,269
Less: accumulated depreciation	(860		)	(830		)
Net property	$	430		$	439

14. Other Assets

Other assets are summarized as follows (in millions):

	June 30, 2017		September 30, 2016
Investments in non-consolidated joint ventures	$	108	$	100
Asbestos-related recoveries (see Note 20)	44		49
Unamortized revolver debt issuance costs	8		7
Capitalized software costs, net	28		29
Non-current deferred income tax assets, net	395		413
Assets for uncertain tax positions	37		35
Prepaid pension costs	138		123
Other	5		4
Other assets	$	763	$	760

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

The company holds a variable interest in a joint venture accounted for under the equity method of accounting. The joint venture manufactures components for commercial vehicle applications primarily on behalf of the company. The variable interest relates to a supply arrangement between the company and the joint venture whereby the company supplies certain components to the joint venture on a cost-plus basis. The company is not the primary beneficiary of the joint venture, as the joint venture partner has shared or absolute control over key manufacturing operations, labor relationships, financing activities and certain other functions of the joint venture. Therefore, the company does not consolidate the joint venture. At June 30, 2017 and September 30, 2016, the company’s investment in the joint venture was $48 million and $45 million, respectively.

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MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

15. Other Current Liabilities

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

	June 30, 2017		September 30, 2016
Compensation and benefits	$	121	$	115
Income taxes	4		8
Taxes other than income taxes	24		21
Accrued interest	15		14
Product warranties	18		18
Environmental reserves (see Note 20)	5		7
Restructuring (see Note 7)	7		14
Asbestos-related liabilities (see Note 20)	18		18
Indemnity obligations (see Note 20)	2		2
Other	63		51
Other current liabilities	$	277	$	268

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

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

	Nine Months Ended June 30,
	2017			2016
Total product warranties – beginning of period	$	44		$	48
Accruals for product warranties	8			11
Payments	(10		)	(13		)
Change in estimates and other	1			(1		)
Total product warranties – end of period	43			45
Less: Non-current product warranties	(25		)	(27		)
Product warranties – current	$	18		$	18

16. Other Liabilities

Other liabilities are summarized as follows (in millions):

	June 30, 2017		September 30, 2016
Asbestos-related liabilities (see Note 20)	$	122	$	136
Restructuring (see Note 7)	1		2
Non-current deferred income tax liabilities	13		12
Liabilities for uncertain tax positions	15		16
Product warranties (see Note 15)	25		26
Environmental (see Note 20)	6		6
Indemnity obligations (see Note 20)	11		11
Other	27		29
Other liabilities	$	220	$	238

20

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

17. Long-Term Debt

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

	June 30, 2017			September 30, 2016
4.0 percent convertible notes due 2027(1)(3)	$	142		$	142
7.875 percent convertible notes due 2026(1)(4)	131			129
6.75 percent notes due 2021(2)(5)	271			271
6.25 percent notes due 2024(2)(6)	443			442
Capital lease obligation	13			16
Export financing arrangements and other	—			10
Unamortized discount on convertible notes (7)	(10		)	(14		)
Subtotal	990			996
Less: current maturities	(132		)	(14		)
Long-term debt	$	858		$	982

⁽¹⁾ The 4.0 percent convertible notes due 2027 and 7.875 percent convertible notes due 2026 contain a put and call feature, which allows for earlier redemption beginning in 2019 and 2020, respectively.

⁽²⁾ The 6.75 percent notes and 6.25 percent notes contain a call option, which allows for early redemption.

⁽³⁾ The 4.0 percent convertible notes due 2027 are presented net of $1 million unamortized issuance costs as of June 30, 2017 and September 30, 2016.

⁽⁴⁾ The 7.875 percent convertible notes due 2026 are presented net of $2 million unamortized issuance costs as of June 30, 2017 and September 30, 2016, and $7 million and $9 million original issuance discount as of June 30, 2017 and September 30, 2016, respectively.

⁽⁵⁾ The 6.75 percent notes due 2021 are presented net of $4 millionunamortized issuance costs as of June 30, 2017 and September 30, 2016.

⁽⁶⁾ The 6.25 percent notes due 2024 are presented net of $7 million and $8 million unamortized issuance costs as of June 30, 2017 and September 30, 2016, respectively.

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

Convertible Notes Due 2026

The 7.875 percent convertible notes due 2026 (the “2026 Notes”) were classified as current as of June 30, 2017 and noncurrent as of September 30, 2016 as the holders of the company's 2026 Notes are entitled to convert all or a portion of their 2026 Notes at any time beginning July 1, 2017 and prior to the close of business on September 29, 2017 at a rate of 83.3333 shares of common stock per $1,000 principal amount at maturity of the 2026 Notes (representing a conversion price of approximately $12.00 per share). The 2026 Notes are convertible as the closing price of shares of the company's common stock for at least 20 trading days during the 30 consecutive trading-day period ending on June 30, 2017 was greater than 120% of the $12.00 conversion price associated with the 2026 Notes.

The 2026 Notes surrendered for conversion, if any, would be settled in cash up to the principal amount at maturity of the 2026 Notes and cash, stock or a combination of cash and stock, at the company’s election, for the remainder of the conversion value of the 2026 Notes in excess of the principal amount at maturity and cash in lieu of any fractional shares, subject to and in accordance with the provisions of the indenture that governs the 2026 Notes.

As a result of the 2026 Notes becoming currently convertible for cash up to the principal amount of $140 million at the holder's option, $12 million of permanent equity was reclassified as mezzanine equity.

Revolving Credit Facility

On March 31, 2017, the company amended and restated its revolving credit facility. Pursuant to the revolving credit agreement as amended, the company has a $525 million revolving credit facility that matures in March 2022. Additionally, $4 million was capitalized as deferred issuance costs and will be amortized over the term of the agreement. The availability under this facility is dependent upon various factors, including performance against certain financial covenants as highlighted below.

21

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 June 30, 2017, the revolving credit facility was collateralized by approximately $774 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 June 30, 2017, the margin over LIBOR rate was 300 basis points and the commitment fee was 45 basis points. Overnight revolving credit loans are at the prime rate plus a margin of 200 basis points.

Certain of the company’s subsidiaries, as defined in the revolving credit agreement, irrevocably and unconditionally guarantee amounts outstanding under the revolving credit facility. Similar subsidiary guarantees are provided for the benefit of the holders of the publicly held notes outstanding under the company’s indentures (see Note 23).

No borrowings were outstanding under the revolving credit facility at June 30, 2017 and September 30, 2016. The amended and extended revolving credit facility includes $100 million of availability for the issuance of letters of credit. At June 30, 2017 and September 30, 2016, there were no letters of credit outstanding under the revolving credit facility.

Debt Securities

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

Repurchase of Debt Securities

On March 1, 2016, substantially all of the $55 million principal amount of 4.625 percent convertible notes were repurchased at 100 percent of their face value. On April 15, 2016, the remaining 4.625 percent convertible notes were redeemed at 100 percent of their 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 21). The repurchase program under these authorizations was complete as of September 30, 2016.

Capital Leases

On March 20, 2012, the company entered into an arrangement to finance equipment acquisitions for various U.S. locations. Under this arrangement, the company can request financing from Wells Fargo Equipment Finance (“Wells Fargo”) 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 $3 million and $7 million outstanding under this capital lease arrangement as of June 30, 2017 and September 30, 2016, respectively. In addition, the company had another $10 million and $9 million outstanding through other capital lease arrangements at June 30, 2017 and September 30, 2016, respectively.

22

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Letter of Credit Facilities

On February 21, 2014, the company entered into an arrangement to amend and restate the letter of credit facility with Citicorp USA, Inc., as administrative agent and issuing bank, and the other lenders party thereto. Under the terms of this amended credit agreement, which expires in March 2019, the company has the right to obtain the issuance, renewal, extension and increase of letters of credit up to an aggregate availability of $25 million. This facility contains covenants and events of default generally similar to those existing in the company’s public debt indentures. There were $18 million and $23 million of letters of credit outstanding under this facility at June 30, 2017 and September 30, 2016, respectively. The company had another $5 million of letters of credit outstanding through other letter of credit facilities at June 30, 2017 and September 30, 2016.

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 were issued under an incentive program of the Brazilian government to fund working capital for Brazilian companies in exportation programs. The arrangements bore interest at 5.5 percent and had maturity dates in 2017. These financing arrangements were paid off at maturity, as of March 31, 2017. There was $9 million outstanding under these arrangements at September 30, 2016.

Other

One of the company's consolidated joint ventures in China participates in a bills of exchange program to settle its obligations with its trade suppliers. These programs are common in China and generally require the participation of local banks. Under these programs, the company's joint venture issues notes payable through the participating banks to its trade suppliers. If the issued notes payable remain unpaid on their respective due dates, this could constitute an event of default under the company’s revolving credit facility if the defaulted amount exceeds $35 million per bank. As of June 30, 2017 and September 30, 2016, the company had $16 million and $10 million, respectively, outstanding under this program at more than one bank.

18. Financial Instruments

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

	June 30, 2017				September 30, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	231	$	231	$	160	$	160
Short-term debt	132		245		14		14
Long-term debt	858		912		982		1,051
Foreign exchange forward contracts (other assets)	—		—		1		1
Foreign exchange forward contracts (other liabilities)	—		—		2		2
Short-term foreign currency option contracts (other assets)	1		1		—		—
Long-term foreign currency option contracts (other assets)	1		1		2		2

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

	June 30, 2017				September 30, 2016
	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	1	(1	)	—	2	—	2

23

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 June 30, 2017 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	231	$	—	$	—
Short-term debt	—		241		4
Long-term debt	—		903		9
Foreign exchange forward contracts (asset)	—		—		—
Foreign exchange forward contracts (liability)	—		—		—
Short-term foreign currency option contracts (asset)	—		—		1
Long-term foreign currency option contracts (asset)	—		—		1

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 and 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

The tables below provide a reconciliation of changes in fair value of the Level 3 financial assets and liabilities measured at fair value in the condensed consolidated balance sheet for the three and nine months ended June 30, 2017 and 2016, respectively. No transfers of assets between any of the Levels occurred during these periods.

24

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Three months ended June 30, 2017 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)			Total
Fair Value as of March 31, 2017	$	3		$	2		$	5
Total unrealized gains (losses):
Included in other income	—			—			—
Included in cost of sales	(1		)	—			(1		)
Total realized gains (losses):
Included in other income	—			—			—
Included in cost of sales	—			—			—
Purchases, issuances, sales and settlements:
Purchases	—			1			1
Settlements	(2		)	(1		)	(3		)
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	1			(1		)	—
Fair Value as of June 30, 2017	$	1		$	1		$	2

Three months ended June 30, 2016 (in millions)	Short-term foreign currency option contracts (asset)		Long-term foreign currency option contracts (asset)		Total
Fair Value as of March 31, 2016	$	—	$	—	$	—
Total unrealized gains (losses):
Included in other income	—		—		—
Included in cost of sales	—		—		—
Total realized gains (losses):
Included in other income	—		—		—
Included in cost of sales	—		—		—
Purchases, issuances, sales and settlements:
Purchases	—		—		—
Settlements	—		—		—
Transfer in and / or out of Level 3 (1)	—		—		—
Reclass between short-term and long-term	—		—		—
Fair Value as of June 30, 2016	$	—	$	—	$	—

25

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Nine months ended June 30, 2017 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)			Total
Fair Value as of September 30, 2016	$	—		$	2		$	2
Total unrealized gains (losses):
Included in other income	—			—			—
Included in cost of sales	—			2			2
Total realized gains (losses):
Included in other income	—			—			—
Included in cost of sales	—			—			—
Purchases, issuances, sales and settlements:
Purchases	—			1			1
Settlements	(2		)	(1		)	(3		)
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	3			(3		)	—
Fair Value as of June 30, 2017	$	1		$	1		$	2

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

⁽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 as of June 30, 2017 or September 30, 2016.

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

Foreign exchange forward contracts — The company uses foreign exchange forward purchase and sale contracts with terms of one year or less to hedge its exposure to changes in foreign currency exchange rates. As of June 30, 2017 and September 30, 2016, the notional amount of the company's foreign exchange forward contracts outstanding was $125 million and $190 million, respectively. The fair value of foreign exchange forward contracts is based on a model which incorporates observable inputs including quoted spot rates, forward exchange rates and discounted future expected cash flows utilizing market interest rates with similar quality and maturity characteristics. For derivative instruments that are designated and qualify as a cash flow hedge, the

26

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 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. In the third quarter of fiscal year 2017, the company monetized certain foreign currency options maturing in fiscal year 2018 and entered into a new series of foreign currency option contracts with effective dates from the start of the first quarter of fiscal year 2018 through the end of fiscal year 2019. As of June 30, 2017 and September 30, 2016, the notional amount of the company's Indian rupee foreign exchange contracts outstanding was $141 million and $174 million, respectively. 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.

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, respectively. During the third quarter of fiscal year 2017, the company entered into additional foreign currency contracts with a total notional amount of $35 million to mitigate the risk of volatility in the translation of euro earnings to U.S. dollars. These foreign currency option contracts did not qualify for a hedge accounting election. As of June 30, 2017 and September 30, 2016, there were no Swedish krona foreign currency option contracts outstanding. As of June 30, 2017, the notional amount of the company's euro foreign currency option contracts outstanding was $20 million. Changes in fair value associated with these contracts were recorded in other income, net, in the consolidated statement of operations.

27

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

19. Retirement Benefit Liabilities

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

	June 30, 2017			September 30, 2016
Retiree medical liability	$	432		$	447
Pension liability	261			283
Other	13			13
Subtotal	706			743
Less: current portion (included in compensation and benefits, Note 15)	(39		)	(40		)
Retirement benefits	$	667		$	703

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

	2017						2016
	Pension			Retiree Medical			Pension			Retiree Medical
Interest cost	$	13		$	4		$	16		$	4
Assumed return on plan assets	(24		)	—			(24		)	—
Amortization of prior service costs	—			(1		)	—			—
Recognized actuarial loss	8			4			6			3
Total expense (income)	$	(3	)	$	7		$	(2	)	$	7

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

	2017						2016
	Pension			Retiree Medical			Pension			Retiree Medical
Interest cost	$	39		$	11		$	49		$	13
Assumed return on plan assets	(71		)	—			(74		)	—
Amortization of prior service costs	—			(2		)	—			—
Recognized actuarial loss	23			11			18			9
Total expense (income)	$	(9	)	$	20		$	(7	)	$	22

20. Contingencies

Environmental

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

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

28

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

     The company has been designated as a potentially responsible party at nine Superfund sites, excluding sites as to which the company’s records disclose no involvement or as to which the company’s liability has been finally determined. Management estimates the total reasonably possible costs the company could incur for the remediation of Superfund sites at June 30, 2017 to be approximately $8 million, of which $2 million is probable and recorded as a liability. Included in reasonably possible amounts are estimates for certain remediation actions that may be required if current actions are deemed inadequate by the regulators.

     In addition to the Superfund sites, various other lawsuits, claims and proceedings have been asserted against the company, alleging violations of federal, state and local environmental protection requirements, or seeking remediation of alleged environmental impairments, principally at previously disposed-of properties. For these matters, management has estimated the total reasonably possible costs the company could incur at June 30, 2017 to be approximately $27 million, of which $9 million is probable and recorded as a liability.

     Included in the company’s environmental liabilities are costs for on-going operation, maintenance and monitoring at environmental sites in which remediation has been put into place. This liability is discounted using discount rates in the range of 1.0 to 3.0 percent and is approximately $7 million at June 30, 2017. The undiscounted estimate of these costs is approximately $8 million.

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

	Superfund Sites		Non-Superfund Sites			Total
Beginning balance at September 30, 2016	$	2	$	11		$	13
Payments and other	—		(4		)	(4		)
Accruals	—		2			2
Balance at June 30, 2017	$	2	$	9		$	11

Environmental reserves are included in Other Current Liabilities (see Note 15) and Other Liabilities (see Note 16) in the condensed consolidated balance sheet.

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

In April 2016, the company was served with several complaints filed against the company and other defendants in the United States District Court for the Northern District of Mississippi. The complaints were amended in July 2016.  These complaints allege damages, including diminution of property value, concealment/fraud and emotional distress resulting from alleged environmental pollution in and around a neighborhood in Grenada, Mississippi. Rockwell owned and operated a facility near the neighborhood from 1965 to 1985. The company filed answers to the complaints in July 2016. In May 2017, the company was served with a complaint filed against the company and other defendants by the Mississippi Attorney General in the Chancery Court of Grenada County, Mississippi.  The complaint alleges that operations at the above-referenced Grenada facility caused contamination of off-site groundwater and surface waters. Subsequently, the company removed this action to the United States District Court for the Northern District of Mississippi.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 estimable, and therefore has not recorded any accrual for them as of June 30, 2017. Further, a reasonably possible range of loss cannot be estimated at this time.

29

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Asbestos

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

Maremont had approximately 4,200 and 5,800 pending asbestos-related claims at June 30, 2017 and September 30, 2016, 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):

	June 30, 2017		September 30, 2016
Pending and future claims	$	70	$	70
Billed but unpaid claims	3		2
Asbestos-related liabilities	$	73	$	72
Asbestos-related insurance recoveries	$	27	$	32

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 Note 12, Note 14, Note 15 and Note 16).

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, management recognized a liability of $70 million as of each of June 30, 2017 and September 30, 2016 for pending and future claims over the next ten years. The ultimate cost of resolving pending and future claims is estimated based on the history of claims and expenses for plaintiffs represented by law firms in jurisdictions with an established history with Maremont. 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.

30

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 $27 million and $32 million as of June 30, 2017 and September 30, 2016, 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.

Maremont maintained insurance coverage with other insurance carriers that management believes also covers indemnity and defense costs. During fiscal year 2013, Maremont re-initiated lawsuits against these carriers, seeking a declaration of its rights to coverage for asbestos claims and to facilitate an orderly and timely collection of insurance proceeds. During the first quarter of fiscal year 2016, the dispute related to these insurance policies was settled. As a part of this settlement, on December 12, 2015, Maremont received $17 million in cash, of which $5 million was recognized as a 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. During the first quarter of fiscal year 2017, the company recognized the remaining $3 million of the cash settlement proceeds as a reduction in asbestos expense. 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 firms, jurisdictions and diseases; legislative or regulatory developments; Maremont’s approach to defending claims; or payments to plaintiffs from other defendants. Estimated recoveries are influenced by coverage issues among insurers and the continuing solvency of various insurance companies. If the assumptions with respect to the estimation period, the nature of pending and future claims, the cost to resolve claims and the amount of available insurance prove to be incorrect, the actual amount of liability for Maremont’s asbestos-related claims, and the effect on the company, could differ materially from current estimates and, therefore, could have a material impact on the company’s financial condition and results of operations.

Rockwell International (“Rockwell”) — ArvinMeritor, Inc. (“AM”), a subsidiary of Meritor, along with many other companies, has also been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos used in certain components of Rockwell products many years ago. Liability for these claims was transferred at the time of the spin-off of the automotive business from Rockwell in 1997. Rockwell had approximately 1,600 and 3,200 pending active asbestos claims in lawsuits that name AM, together with many other companies, as defendants at June 30, 2017 and September 30, 2016, 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):

	June 30, 2017		September 30, 2016
Pending and future claims	$	60	$	60
Billed but unpaid claims	4		1
Asbestos-related liabilities	$	64	$	61
Asbestos-related insurance recoveries	$	27	$	27

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

31

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

ten years of $60 million to $75 million. After consultation with Bates White, management recognized a liability for the pending and future claims over the next ten years of $60 million as of each of June 30, 2017 and September 30, 2016. The ultimate cost of resolving pending and future claims is estimated based on the history of claims and expenses for plaintiffs represented by law firms in jurisdictions with an established history with Rockwell.

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

• Pending and future claims were estimated for a ten-year period ending in fiscal year 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 will decline for each year further in the future. As a result, estimating a probable liability beyond ten years is difficult and uncertain;

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

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

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

Recoveries: 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 third quarter of fiscal year 2016, the company reached a settlement, relating to certain proofs of claim filed by the company under certain insurance policies, with an insolvent insurer for $5.5 million (the "allowed claim"). On June 17, 2016, the company entered into an assignment of claim (the "Assignment”) with Macquarie Bank to assign the allowed claim the company had against the insolvent insurer. The Assignment was approved by the liquidator, which resulted in the company receiving $3 million in the third quarter of fiscal year 2016. 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, in the fourth quarter of fiscal year 2016 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. During the first nine months of fiscal year 2017, Rockwell recognized an additional $12 million of the cash settlement proceeds as a reduction in asbestos expense. Pursuant to the terms of a second settlement agreement, in the fourth quarter of fiscal year 2016 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 settlement agreements 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 receivable for Rockwell's asbestos-related liabilities totaled $27 million as of each of June 30, 2017 and September 30, 2016. Included in these amounts are insurance receivables of $9 million as of each of June 30, 2017 and September 30, 2016, which are associated with policies in dispute and have been fully reserved.

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 firms, jurisdictions and diseases; 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.

32

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 each of June 30, 2017 and September 30, 2016, the remaining estimated liability for this matter was approximately $11 million.

   In connection with the sale of its interest in MSSC in October 2009, the company provided certain indemnities to the buyer for its share of potential obligations related to pension funding shortfall, environmental and other contingencies, and valuation of certain accounts receivable and inventories. At June 30, 2017 and September 30, 2016, the company's remaining exposure was approximately $1 million, which is included in other liabilities in the condensed consolidated balance sheet.

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

Other

The company identified certain sales transactions for which value-added tax was potentially required to be remitted to certain tax jurisdictions for tax years 2009 through 2016. At June 30, 2017 and September 30, 2016, the company’s estimate of the probable liability was $11 million and $10 million, respectively.

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 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.

On July 5, 2017, the company's subsidiary Meritor Heavy Vehicle Systems, LLC fully and finally resolved all claims with respect to its various legal proceedings with Sistemas Automotrices de Mexico, S.A. de C.V. (“Sisamex”), its Mexican joint venture with Quimmco, S.A. de C.V. ("Quimmco"), that were originally filed in 2014 in the District Court for the Northern District of Illinois regarding Sisamex’s rights to manufacture certain products and the components thereof for sale in Mexico.  The parties entered into a confidential settlement agreement and release pursuant to which the parties agreed to dismiss, with prejudice, all of the legal proceedings between them and Meritor agreed to pay Quimmco a settlement of $10 million, consistent with the reserve recorded as of June 30, 2017.

In addition, various lawsuits, claims and proceedings, other than those specifically disclosed in the condensed consolidated financial statements, have been or may be instituted or asserted against the company, relating to the conduct of the company’s business, including those pertaining to product liability, warranty or recall claims, intellectual property, safety and health, contract and employment matters. Although the outcome of other litigation cannot be predicted with certainty, and some lawsuits, claims or proceedings may be disposed of unfavorably to the company, management believes the disposition of matters that are pending will not have a material effect on the company’s business, financial condition, results of operations or cash flows. 

33

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

21. Shareholders' Equity

Common Stock and Debt 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 the company's debt covenants. As of June 30, 2017, an insignificant amount of repurchases had been made under these authorizations.

Accumulated Other Comprehensive Loss (“AOCL”)

The components of AOCL and the changes in AOCL by components, net of tax, for three months ended June 30, 2017 and 2016 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at March 31, 2017	$	(75	)	$	(718	)	$	(1	)	$	(794	)
Other comprehensive income (loss) before reclassification	17			—			(2		)	15
Amounts reclassified from accumulated other comprehensive loss	—			11			—			11
Net current-period other comprehensive income (loss)	$	17		$	11		$	(2	)	$	26
Balance at June 30, 2017	$	(58	)	$	(707	)	$	(3	)	$	(768	)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(1	)	(a)
Actuarial losses	$	12		(a)
	11			Total before tax
	(3		)	Tax benefit
Total reclassifications for the period	$	8		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 19 for additional details), which is recorded in cost of sales and selling, general and administrative expenses.

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at March 31, 2016	$	(50	)	$	(687	)	$	(5	)	$	(742	)
Other comprehensive income (loss) before reclassification	(10		)	(2		)	3			(9		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			9			—			9
Net current-period other comprehensive income (loss)	$	(10	)	$	7		$	3		$	—
Balance at June 30, 2016	$	(60	)	$	(680	)	$	(2	)	$	(742	)

34

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Actuarial losses	$	9	(b)
	9		Total before tax
	—		Tax expense
Total reclassifications for the period	$	9	Net of tax
(b)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 19 for additional details).

The components of AOCL and the changes in AOCL by components, net of tax, for nine months ended June 30, 2017 and 2016 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at September 30, 2016	$	(66	)	$	(740	)	$	(3	)	$	(809	)
Other comprehensive income (loss) before reclassification	8			1			—			9
Amounts reclassified from accumulated other comprehensive loss	—			32			—			32
Net current-period other comprehensive income (loss)	$	8		$	33		$	—		$	41
Balance at June 30, 2017	$	(58	)	$	(707	)	$	(3	)	$	(768	)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(2	)	(a)
Actuarial losses	34			(a)
	32			Total before tax
	(10		)	Tax benefit
Total reclassifications for the period	$	22		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 19 for additional details), which is recorded in 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, 2015	$	(54	)	$	(705	)	$	(7	)	$	(766	)
Other comprehensive income (loss) before reclassification	(6		)	(2		)	5			(3		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			27			—			27
Net current-period other comprehensive income (loss)	$	(6	)	$	25		$	5		$	24
Balance at June 30, 2016	$	(60	)	$	(680	)	$	(2	)	$	(742	)

35

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Actuarial losses	$	27	(b)
	27		Total before tax
	—		Tax expense
Total reclassifications for the period	$	27	Net of tax
(b)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 19 for additional details).

22. Business Segment Information

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

      The company has two reportable segments at June 30, 2017, 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, primarily in North America and Europe. This segment also supplies a wide variety of undercarriage products and systems for trailer applications in North America.

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

     The accounting policies of the segments are the same as those applied in the condensed consolidated financial statements, except for the use of Segment adjusted EBITDA. The company may allocate certain common costs, primarily corporate functions, between the segments differently than the company would for stand alone financial information prepared in accordance with GAAP. These allocated costs include expenses for shared services such as information technology, finance, communications, legal and human resources. The company does not allocate interest expense and certain legacy and other corporate costs not directly associated with the segment.

36

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

     Segment information is summarized as follows (in millions):

	Commercial Truck & Industrial		Aftermarket & Trailer		Eliminations			Total
Three Months Ended June 30, 2017
External Sales	$	704	$	216	$	—		$	920
Intersegment Sales	24		12		(36		)	—
Total Sales	$	728	$	228	$	(36	)	$	920
Three Months Ended June 30, 2016
External Sales	$	623	$	218	$	—		$	841
Intersegment Sales	17		9		(26		)	—
Total Sales	$	640	$	227	$	(26	)	$	841
	Commercial Truck & Industrial		Aftermarket & Trailer		Eliminations			Total
Nine Months Ended June 30, 2017
External Sales	$	1,826	$	599	$	—		$	2,425
Intersegment Sales	61		28		(89		)	—
Total Sales	$	1,887	$	627	$	(89	)	$	2,425
Nine Months Ended June 30, 2016
External Sales	$	1,846	$	625	$	—		$	2,471
Intersegment Sales	58		23		(81		)	—
Total Sales	$	1,904	$	648	$	(81	)	$	2,471

37

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2017			2016			2017			2016
Segment adjusted EBITDA:
Commercial Truck & Industrial	$	75		$	61		$	171		$	169
Aftermarket & Trailer	26			38			78			86
Segment adjusted EBITDA	101			99			249			255
Unallocated legacy and corporate income (expense), net (1)	2			(3		)	—			(2		)
Interest expense, net	(21		)	(20		)	(63		)	(63		)
Provision for income taxes	(11		)	(8		)	(30		)	(22		)
Depreciation and amortization	(18		)	(17		)	(55		)	(48		)
Noncontrolling interests	(3		)	(1		)	(5		)	(2		)
Loss on sale of receivables	(2		)	(2		)	(4		)	(6		)
Asset impairment charges	1			—			(2		)	—
Restructuring costs	—			(6		)	(4		)	(9		)
Income from continuing operations attributable to Meritor, Inc.	$	49		$	42		$	86		$	103

⁽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.

	June 30, 2017			September 30, 2016
Segment Assets:
Commercial Truck & Industrial	$	1,618		$	1,433
Aftermarket & Trailer	466			436
Total segment assets	2,084			1,869
Corporate (1)	916			845
Less: Accounts receivable sold under off-balance sheet factoring programs(2)	(288		)	(220		)
Total assets	$	2,712		$	2,494

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

⁽²⁾  At June 30, 2017 and September 30, 2016, segment assets include $288 million and $220 million, respectively, of accounts receivable sold under off-balance sheet accounts receivable factoring programs (see Note 9). These sold receivables are included in segment assets as the CODM reviews segment assets inclusive of these balances.

23. Supplemental Guarantor Condensed Consolidating Financial Statements

Rule 3-10 of Regulation S-X requires that separate financial information for issuers and guarantors of registered securities be filed in certain circumstances. Certain of the company's 100-percent-owned subsidiaries, as defined in the credit agreement (the “Guarantors”), irrevocably and unconditionally guarantee amounts outstanding under the senior secured revolving credit facility on a joint and several basis. Similar subsidiary guarantees were provided for the benefit of the holders of the notes outstanding under the company's indentures (see Note 17).

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

38

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In millions)

(Unaudited)

	Three Months Ended June 30, 2017
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	528		$	392		$	—		$	920
Subsidiaries	—			33			77			(110		)	—
Total sales	—			561			469			(110		)	920
Cost of sales	(13		)	(480		)	(395		)	110			(778		)
GROSS MARGIN	(13		)	81			74			—			142
Selling, general and administrative	(34		)	(14		)	(25		)	—			(73		)
Restructuring costs	—			1			(1		)	—			—
Other operating income (expense), net	(1		)	—			1			—			—
OPERATING INCOME (LOSS)	(48		)	68			49			—			69
Other income (expense), net	12			(7		)	(4		)	—			1
Equity in earnings of affiliates	—			12			2			—			14
Interest income (expense), net	(32		)	8			3			—			(21		)
INCOME (LOSS) BEFORE INCOME TAXES	(68		)	81			50			—			63
Benefit (provision) for income taxes	19			(21		)	(9		)	—			(11		)
Equity income from continuing operations of subsidiaries	98			34			—			(132		)	—
INCOME FROM CONTINUING OPERATIONS	49			94			41			(132		)	52
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	—			—			—			(1		)
NET INCOME	48			94			41			(132		)	51
Less: Net income attributable to noncontrolling interests	—			—			(3		)	—			(3		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	48		$	94		$	38		$	(132	)	$	48

39

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Three Months Ended June 30, 2017
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	48	$	94	$	41		$	(132	)	$	51
Other comprehensive income, net of tax	26		—		18			(18		)	26
Total comprehensive income	74		94		59			(150		)	77
Less: Comprehensive loss (income) attributable to noncontrolling interests	1		—		(4		)	—			(3		)
Comprehensive income attributable to Meritor, Inc.	$	75	$	94	$	55		$	(150	)	$	74

40

MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In millions)

(Unaudited)

	Three Months Ended June 30, 2016
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	410		$	431		$	—		$	841
Subsidiaries	—			30			14			(44		)	—
Total sales	—			440			445			(44		)	841
Cost of sales	(14		)	(361		)	(383		)	44			(714		)
GROSS MARGIN	(14		)	79			62			—			127
Selling, general and administrative	(23		)	(20		)	(16		)	—			(59		)
Restructuring costs	—			(3		)	(3		)	—			(6		)
Other operating income, net	—			—			—			—			—
OPERATING INCOME (LOSS)	(37		)	56			43			—			62
Other income (expense), net	8			(48		)	40			—			—
Equity in earnings of affiliates	—			8			1			—			9
Interest income (expense), net	(29		)	8			1			—			(20		)
INCOME (LOSS) BEFORE INCOME TAXES	(58		)	24			85			—			51
Provision for income taxes	(1		)	—			(7		)	—			(8		)
Equity income from continuing operations of subsidiaries	101			74			—			(175		)	—
INCOME FROM CONTINUING OPERATIONS	42			98			78			(175		)	43
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	—			—			—			(1		)
NET INCOME	41			98			78			(175		)	42
Less: Net income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	41		$	98		$	77		$	(175	)	$	41

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MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Three Months Ended June 30, 2016
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	41	$	98	$	78		$	(175	)	$	42
Other comprehensive income (loss)	—		44		(50		)	6			—
Total comprehensive income	41		142		28			(169		)	42
Less: Comprehensive income attributable to noncontrolling interests	—		—		(1		)	—			(1		)
Comprehensive income attributable to Meritor, Inc.	$	41	$	142	$	27		$	(169	)	$	41

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MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In millions)

(Unaudited)

	Nine Months Ended June 30, 2017
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,244		$	1,181		$	—		$	2,425
Subsidiaries	—			89			103			(192		)	—
Total sales	—			1,333			1,284			(192		)	2,425
Cost of sales	(42		)	(1,122		)	(1,101		)	192			(2,073		)
GROSS MARGIN	(42		)	211			183			—			352
Selling, general and administrative	(77		)	(67		)	(48		)	—			(192		)
Restructuring costs	2			(1		)	(5		)	—			(4		)
Other operating expense, net	(3		)	—			(2		)	—			(5		)
OPERATING INCOME (LOSS)	(120		)	143			128			—			151
Other income (expense), net	36			(12		)	(23		)	—			1
Equity in earnings of affiliates	—			27			5			—			32
Interest income (expense), net	(99		)	27			9			—			(63		)
INCOME (LOSS) BEFORE INCOME TAXES	(183		)	185			119			—			121
Benefit (provision) for income taxes	54			(56		)	(28		)	—			(30		)
Equity income from continuing operations of subsidiaries	215			75			—			(290		)	—
INCOME FROM CONTINUING OPERATIONS	86			204			91			(290		)	91
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	—			—			—			(1		)
NET INCOME	85			204			91			(290		)	90
Less: Net income attributable to noncontrolling interests	—			—			(5		)	—			(5		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	85		$	204		$	86		$	(290	)	$	85

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MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Nine Months Ended June 30, 2017
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	85	$	204	$	91		$	(290	)	$	90
Other comprehensive income, net of tax	40		2		12			(14		)	40
Total comprehensive income	125		206		103			(304		)	130
Less: Comprehensive loss (income) attributable to noncontrolling interests	1		—		(5		)	—			(4		)
Comprehensive income attributable to Meritor, Inc.	$	126	$	206	$	98		$	(304	)	$	126

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MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In millions)

(Unaudited)

	Nine Months Ended June 30, 2016
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,247		$	1,224		$	—		$	2,471
Subsidiaries	—			85			46			(131		)	—
Total sales	—			1,332			1,270			(131		)	2,471
Cost of sales	(40		)	(1,107		)	(1,103		)	131			(2,119		)
GROSS MARGIN	(40		)	225			167			—			352
Selling, general and administrative	(62		)	(62		)	(51		)	—			(175		)
Restructuring costs	—			(4		)	(5		)	—			(9		)
Other operating expense, net	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(105		)	159			111			—			165
Other income (expense), net	42			(57		)	14			—			(1		)
Equity in earnings of affiliates	—			24			2			—			26
Interest income (expense), net	(88		)	23			2			—			(63		)
INCOME (LOSS) BEFORE INCOME TAXES	(151		)	149			129			—			127
Provision for income taxes	(1		)	—			(21		)	—			(22		)
Equity income from continuing operations of subsidiaries	255			95			—			(350		)	—
INCOME FROM CONTINUING OPERATIONS	103			244			108			(350		)	105
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(4		)	(5		)	(4		)	9			(4		)
NET INCOME	99			239			104			(341		)	101
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	99		$	239		$	102		$	(341	)	$	99

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MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Nine Months Ended June 30, 2016
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	99	$	239	$	104		$	(341	)	$	101
Other comprehensive income (loss), net of tax	24		56		(52		)	(4		)	24
Total comprehensive income	123		295		52			(345		)	125
Less: Comprehensive income attributable to noncontrolling interests	—		—		(2		)	—			(2		)
Comprehensive income attributable to Meritor, Inc.	$	123	$	295	$	50		$	(345	)	$	123

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MERITOR, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

(In millions)

(Unaudited)

	June 30, 2017
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents (1)	$	150		$	4		$	77	$	—		$	231
Receivables trade and other, net (1)	1			43			456		—			500
Inventories (1)	—			165			195		—			360
Other current assets	5			14			18		—			37
TOTAL CURRENT ASSETS	156			226			746		—			1,128
NET PROPERTY (1)	21			201			208		—			430
GOODWILL (1)	—			219			172		—			391
OTHER ASSETS	437			129			197		—			763
INVESTMENTS IN SUBSIDIARIES	2,866			769			—		(3,635		)	—
TOTAL ASSETS	$	3,480		$	1,544		$	1,323	$	(3,635	)	$	2,712
CURRENT LIABILITIES:
Short-term debt	$	128		$	3		$	1	$	—		$	132
Accounts and notes payable (1)	51			230			321		—			602
Other current liabilities	103			70			104		—			277
TOTAL CURRENT LIABILITIES	282			303			426		—			1,011
LONG-TERM DEBT	850			1			7		—			858
RETIREMENT BENEFITS	645			—			22		—			667
INTERCOMPANY PAYABLE (RECEIVABLE)	1,744			(1,966		)	222		—			—
OTHER LIABILITIES	31			146			43		—			220
MEZZANINE EQUITY	12			—			—		—			12
EQUITY (DEFICIT) ATTRIBUTABLE TO        MERITOR, INC.	(84		)	3,060			575		(3,635		)	(84		)
NONCONTROLLING INTERESTS (1)	—			—			28		—			28
TOTAL LIABILITIES, MEZZANINE EQUITY AND DEFICIT	$	3,480		$	1,544		$	1,323	$	(3,635	)	$	2,712

⁽¹⁾As of June 30, 2017, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $11 million Receivables, trade and other, net; (iii) $2 million Inventories; (iv) $3 million Net property; (v) $1 million Goodwill; (vi) $10 million Accounts and notes payable; and (vii) $2 million Noncontrolling interests. These assets and liabilities held for sale are included in the Non-Guarantors column.

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MERITOR, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

(In millions)

(Unaudited)

	September 30, 2016
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents (1)	$	90		$	4		$	66	$	—		$	160
Receivables trade and other, net (1)	1			39			356		—			396
Inventories (1)	—			143			173		—			316
Other current assets	5			12			16		—			33
TOTAL CURRENT ASSETS	96			198			611		—			905
NET PROPERTY (1)	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 (1)	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 (1)	—			—			25		—			25
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	3,140		$	1,426		$	1,182	$	(3,254	)	$	2,494

⁽¹⁾As of September 30, 2016, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $8 million Receivables, trade and other, net; (iii) $1 million Inventories; (iv) $5 million Net property; (v) $5 million Accounts and notes payable; and (vi) $3 million Noncontrolling interests. These assets and liabilities held for sale are included in the Non-Guarantors column.

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MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In millions)

(Unaudited)

	Nine Months Ended June 30, 2017
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	(24	)	$	28		$	132		$	—	$	136
INVESTING ACTIVITIES
Capital expenditures	(8		)	(27		)	(17		)	—		(52		)
Net investing cash flows provided by discontinued operations	—			2			—			—		2
CASH USED FOR INVESTING ACTIVITIES	(8		)	(25		)	(17		)	—		(50		)
FINANCING ACTIVITIES
Debt issuance costs	(4		)	—			—			—		(4		)
Intercompany advances	96			—			(96		)	—		—
Other financing activities	—			(3		)	(9		)	—		(12		)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	92			(3		)	(105		)	—		(16		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	60			—			11			—		71
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	90			4			66			—		160
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	150		$	4		$	77		$	—	$	231

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MERITOR, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In millions)

(Unaudited)

	Nine Months Ended June 30, 2016
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR)        OPERATING ACTIVITIES	$	124		$	25		$	(5	)	$	—	$	144
INVESTING ACTIVITIES
Capital expenditures	(16		)	(29		)	(21		)	—		(66		)
Other investing activities	—			4			(1		)	—		3
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(16		)	(24		)	(19		)	—		(59		)
FINANCING ACTIVITIES
Repayment of notes	(55		)	—			—			—		(55		)
Repurchase of common stock	(81		)	—			—			—		(81		)
Intercompany advances	(10		)	—			10			—		—
Other financing activities	—			(4		)	(11		)	—		(15		)
CASH USED FOR FINANCING ACTIVITIES	(146		)	(4		)	(1		)	—		(151		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			2			—		2
CHANGE IN CASH AND CASH EQUIVALENTS	(38		)	(3		)	(23		)	—		(64		)
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	73			6			114			—		193
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	35		$	3		$	91		$	—	$	129

Basis of Presentation

Certain information and footnote disclosures normally included in financial statements prepared in conformity with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. As of June 30, 2017 and September 30, 2016, Parent-only obligations included $672 million and $708 million of pension and retiree medical benefits, respectively (see Note 19). All debt is debt of the Parent other than $12 million and $24 million at June 30, 2017 and September 30, 2016, respectively (see Note 17), and is primarily related to capital lease obligations and lines of credit. There were $1 million and $18 million of cash dividends paid to the Parent by subsidiaries and investments accounted for by the equity method for the nine months ended June 30, 2017 and June 30, 2016, respectively.

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MERITOR, INC.

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

OVERVIEW

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

3rd Quarter Fiscal Year 2017 Results

Our sales for the third quarter of fiscal year 2017 were $920 million, an increase compared to $841 million in the same period in the prior fiscal year. The increase in sales was primarily driven by increased production in North America, Europe and China and new business wins.

Net income attributable to Meritor for the third quarter of fiscal year 2017 was $48 million compared to $41 million in the same period in the prior fiscal year. Higher net income year over year was driven primarily by increased revenue and continued material performance.

Adjusted EBITDA (see Non-GAAP Financial Measures below) for the third quarter of fiscal year 2017 was $103 million compared to $96 million in the same period in the prior fiscal year. Our Adjusted EBITDA margin (see Non-GAAP Financial Measures below) in the third quarter of fiscal year 2017 was 11.2 percent compared to 11.4 percent in the same period a year ago.Adjusted EBITDA increased year over year as higher revenue and continued material performance more than offset higher variable compensation accruals. Also in the prior year, we recognized approximately $6 million related to a favorable supplier litigation settlement (see Note 20 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report).

Net income from continuing operations attributable to the company for the third quarter of fiscal year 2017 was $49 million compared to $42 million in the same period in the prior fiscal year. Adjusted income from continuing operations attributable to the company (see Non-GAAP Financial Measures below) for the third quarter of fiscal year 2017 was$60 million compared to $52 million in the same period in the prior fiscal year.

Cash provided by operating activities was $106 million in the third quarter of fiscal year 2017 compared to cash flows provided by operating activities of $105 million in the third quarter of fiscal year 2016.

Trends and Uncertainties

   Industry Production Volumes

     The following table reflects estimated on-highway commercial truck production volumes for selected original equipment (OE) markets for the three and nine months ended June 30, 2017 and 2016 based on available sources and management’s estimates.

	Three Months Ended June 30,		Percent		Nine Months Ended June 30,		Percent
	2017	2016	Change		2017	2016	Change
Estimated Commercial Truck production (in thousands):
North America, Heavy-Duty Trucks	66	63	5	%	164	199	(18	)%
North America, Medium-Duty Trucks	67	63	6	%	184	187	(2	)%
North America, Trailers	73	74	(1	)%	205	219	(6	)%
Western Europe, Heavy- and Medium-Duty Trucks	117	114	3	%	352	335	5	%
South America, Heavy- and Medium-Duty Trucks	20	16	25	%	50	46	9	%
India, Heavy- and Medium-Duty Trucks	67	87	(23	)%	240	257	(7	)%

North America:

In the third quarter of fiscal year 2017, Class 8 production volumes in North America increased significantly from the second quarter of fiscal year 2017. We expect similar production levels to continue through the end of fiscal year 2017.

Western Europe:

Continuing through the end of fiscal year 2017, we expect production volumes to increase slightly compared to the levels experienced in fiscal year 2016.

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MERITOR, INC.

South America:

Continuing through the end of fiscal year 2017, we expect production volumes in South America to increase slightly compared to the levels experienced in fiscal year 2016.

China:

Continuing through the end of fiscal year 2017, we expect production volumes in China to increase from the levels experienced in fiscal year 2016 due to improvements in the construction market.

India:

Continuing through the end of fiscal year 2017, we expect production volumes in India to remain strong, but decrease 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

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MERITOR, INC.

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

NON-GAAP FINANCIAL MEASURES

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

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

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

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

Management uses the aforementioned non-GAAP financial measures for planning and forecasting purposes, and Segment adjusted EBITDA is also used as the primary basis for the CODM to evaluate the performance of each of our reportable segments.

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

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

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MERITOR, INC.

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

	Three Months Ended June 30,					Nine Months Ended June 30,
	2017		2016			2017		2016
Income from continuing operations attributable to the company	$	49	$	42		$	86	$	103
Restructuring costs	—		6			4		9
Asset impairment charges, net of noncontrolling interests	—		—			2		—
Non-cash tax expense (1)	11		5			22		10
Income tax benefits	—		(1		)	—		(1		)
Adjusted income from continuing operations attributable to the company	$	60	$	52		$	114	$	121
Diluted earnings per share from continuing operations	$	0.52	$	0.46		$	0.94	$	1.10
Impact of adjustments on diluted earnings per share	0.12		0.11			0.31		0.20
Adjusted diluted earnings per share from continuing operations	$	0.64	$	0.57		$	1.25	$	1.30

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

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

	Three Months Ended June 30,						Nine Months Ended June 30,
	2017			2016			2017			2016
Cash provided by operating activities	$	106		$	105		$	136		$	144
Capital expenditures	(12		)	(19		)	(52		)	(66		)
Free cash flow	$	94		$	86		$	84		$	78

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MERITOR, INC.

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

	Three Months Ended June 30,						Nine Months Ended June 30,
	2017			2016			2017			2016
Net income attributable to Meritor, Inc.	$	48		$	41		$	85		$	99
Loss from discontinued operations, net of tax, attributable to Meritor, Inc.	1			1			1			4
Income from continuing operations, net of tax, attributable to Meritor, Inc.	$	49		$	42		$	86		$	103
Interest expense, net	21			20			63			63
Provision for income taxes	11			8			30			22
Depreciation and amortization	18			17			55			48
Noncontrolling interests	3			1			5			2
Loss on sale of receivables	2			2			4			6
Asset impairment charges	(1		)	—			2			—
Restructuring costs	—			6			4			9
Adjusted EBITDA	$	103		$	96		$	249		$	253
Adjusted EBITDA margin (1)	11.2		%	11.4		%	10.3		%	10.2		%
Unallocated legacy and corporate expense (income), net (2)	(2		)	3			—			2
Segment adjusted EBITDA	$	101		$	99		$	249		$	255
Commercial Truck & Industrial
Segment adjusted EBITDA	$	75		$	61		$	171		$	169
Segment adjusted EBITDA margin (3)	10.3		%	9.5		%	9.1		%	8.9		%
Aftermarket & Trailer
Segment adjusted EBITDA	$	26		$	38		$	78		$	86
Segment adjusted EBITDA margin (3)	11.4		%	16.7		%	12.4		%	13.3		%

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

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

⁽³⁾ Segment adjusted EBITDA margin equals Segment adjusted EBITDA divided by consolidated sales from continuing operations, either in the aggregate or by segment as applicable.

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MERITOR, INC.

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

	June 30, 2017			September 30, 2016
Short-term debt	$	132		$	14
Long-term debt	858			982
Total debt	990			996
Less: Cash and cash equivalents	(231		)	(160		)
Net debt	$	759		$	836

	Twelve Months Ended (1)			Twelve Months Ended
	June 30, 2017			September 30, 2016
Net income attributable to Meritor, inc.	$	559		$	573
Loss from discontinued operations, net of tax, attributable to Meritor, Inc.	1			4
Income from continuing operations, net of tax, attributable to Meritor, inc.	$	560		$	577
Interest expense, net	84			84
Benefit for income taxes	(416		)	(424		)
Depreciation and amortization	74			67
Noncontrolling interests	5			2
Loss on sale of receivables	3			5
Asset impairment charges	2			—
Restructuring costs	11			16
Adjusted EBITDA	$	323		$	327
Net debt over Adjusted EBITDA	2.3			2.6

⁽¹⁾ Trailing-twelve-month period ended June 30, 2017 is used to measure the company's leverage in order to assist management in its assessment of appropriate allocation of capital as part of our current M2019 plan and is also used to assess management's performance under one of our performance-based compensation plans.

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MERITOR, INC.

Results of Operations

Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016

Sales

The following table reflects total company and business segment sales for the three months ended June 30, 2017 and 2016 (dollars in millions). The reconciliation is intended to reflect the trend in business segment sales and to illustrate the impact that changes in foreign currency exchange rates, volumes and other factors had on sales. Business segment sales include intersegment sales.

	Three Months Ended June 30,									Dollar Change Due To
	2017		2016		Dollar Change			% Change		Currency			Volume/ Other
Sales:
Commercial Truck & Industrial
North America	$	384	$	335	$	49		15	%	$	—		$	49
Europe	175		160		15			9	%	(5		)	20
South America	46		38		8			21	%	4			4
China	38		24		14			58	%	(2		)	16
India	44		43		1			2	%	2			(1		)
Other	17		23		(6		)	(26	)%	1			(7		)
Total External Sales	$	704	$	623	$	81		13	%	$	—		$	81
Intersegment Sales	24		17		7			41	%	(1		)	8
Total Sales	$	728	$	640	$	88		14	%	$	(1	)	$	89
Aftermarket & Trailer
North America	$	185	$	188	$	(3	)	(2	)%	$	(1	)	$	(2	)
Europe	31		30		1			3	%	(1		)	2
Total External Sales	$	216	$	218	$	(2	)	(1	)%	$	(2	)	$	—
Intersegment Sales	12		9		3			33	%	—			3
Total Sales	$	228	$	227	$	1		—	%	$	(2	)	$	3
Total External Sales	$	920	$	841	$	79		9	%	$	(2	)	$	81

Commercial Truck & Industrial sales were $728 million in the third quarter of fiscal year 2017, up 14 percent compared to the third quarter of fiscal year 2016. The increase in sales was primarily driven by higher Class 8 truck production in North America, increased production in Europe and China and new business wins.

Aftermarket & Trailer sales were $228 million in the third quarter of fiscal year 2017, up slightly from the same period a year ago.

Cost of Sales and Gross Profit

     Cost of sales primarily represents materials, labor and overhead production costs associated with the company’s products and production facilities. Cost of sales for the three months ended June 30, 2017 was $778 million compared to $714 million in the same period in the prior fiscal year, representing an increase of 9 percent, primarily driven by increased volumes. Total cost of sales was 84.6 and 84.9 percent of sales for the three-month periods ended June 30, 2017 and 2016, respectively.

     The following table summarizes significant factors contributing to the changes in costs of sales during the third quarter of fiscal year 2017 compared to the same quarter in the prior year (in millions):

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MERITOR, INC.

	Cost of Sales
Three Months Ended June 30, 2016	$	714
Volume, mix and other, net	70
Foreign exchange	(6		)
Three Months Ended June 30, 2017	$	778

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

	Change in Cost of Sales
Higher material costs	$	45
Higher labor and overhead costs	20
Other, net	(1		)
Total change in costs of sales	$	64

Material costs represent the majority of our cost of sales and include raw materials, composed primarily of steel and purchased components. Material costs for the three months ended June 30, 2017 increased $45 million compared to the same period in the prior fiscal year primarily due to higher volumes and higher steel prices, partially offset by material performance programs.

Labor and overhead costsincreased $20 million compared to the same period in the prior fiscal year primarily due to higher volumes.

Gross margin was $142 million and $127 million for the three-month periods ended June 30, 2017 and 2016, respectively. Gross margin, as a percentage of sales, was 15.4 and 15.1 percent for the three-month periods ended June 30, 2017 and 2016, respectively. Gross margin as a percentage of sales increased due to the impacts of higher sales and continued material performance.

Other Income Statement Items

Selling, general and administrative expenses (“SG&A”) for the three months ended June 30, 2017 and 2016 are summarized as follows (dollars in millions):

	Three Months Ended
	June 30, 2017					June 30, 2016					Increase (Decrease)
SG&A	Amount			% of sales		Amount			% of sales		Amount			% of sales
Loss on sale of receivables	$	(2	)	(0.2	)%	$	(2	)	(0.2	)%	$	—		0.0 pts
Short and long-term variable      compensation	(18		)	(2.0	)%	(9		)	(1.1	)%	9			0.9 pts
Asbestos-related expense, net of asbestos-related insurance recoveries	(2		)	(0.2	)%	(4		)	(0.5	)%	(2		)	(0.3) pts
Supplier litigation settlement	—			—	%	6			0.7	%	6			0.7 pts
All other SG&A	(51		)	(5.5	)%	(50		)	(5.9	)%	1			(0.4) pts
Total SG&A	$	(73	)	(7.9	)%	$	(59	)	(7.0	)%	$	14		0.9 pts

In the prior year, we recognized approximately $6 million related to a favorable supplier litigation settlement (see Note 20 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report). The increase in SG&A was also attributable to higher variable compensation recognized in the current year, which is based on year-to-date and expected full-year company performance. We recognized $4 million and $3 million related to previous cash settlements with insurance companies for recoveries of defense and indemnity costs associated with asbestos liabilities in the third quarter of fiscal years 2017 and 2016, respectively, which are included in Asbestos-related expense, net of asbestos-related insurance recoveries (seeNote 20 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report).

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

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MERITOR, INC.

Restructuring costs decreased by $6 million from $6 million in the third quarter of fiscal year 2016 to an insignificant amount in the same period in fiscal year 2017. During the three months ended June 30, 2016, these costs primarily related to employee severance costs stemming from Aftermarket restructuring programs in North America and Europe.

Operating income increased by $7 million from $62 million in the third quarter of fiscal year 2016 to $69 million in the same period in fiscal year 2017. Key items affecting operating income are discussed above.

Equity in earnings of affiliates increased by $5 million from $9 million in the third quarter of fiscal year 2016 to $14 million in the same period in fiscal year 2017. The increase was primarily attributable to higher production in our affiliates' respective markets.

Interest expense, net increased by $1 million from $20 million in the third quarter of fiscal year 2016 to $21 million in the same period in fiscal year 2017.

Provision for income taxes was $11 million in the third quarter of fiscal year 2017 compared to $8 million in the same period in the prior fiscal year. In the third quarter of fiscal year 2017, our effective tax rate was 17 percent compared to 16 percent in the prior year. The increase in tax expense was primarily driven by stronger earnings.

Income from continuing operations (before noncontrolling interests) increased by $9 million from $43 million in the third quarter of fiscal year 2016 to $52 million in the same period in fiscal year 2017. The reasons for the increase are discussed above.

Loss from discontinued operations, net of tax was $1 million in the third quarter of fiscal years 2017 and 2016.

Net income attributable to Meritor, Inc. increased by $7 million from $41 million in the third quarter of fiscal year 2016 to $48 million in the same period in fiscal year 2017. The various factors affecting net income are discussed above.

Segment adjusted EBITDA and Segment adjusted EBITDA margins

Segment adjusted EBITDA is defined as income (loss) from continuing operations before interest expense, income taxes, depreciation and amortization, noncontrolling interests in consolidated joint ventures, loss on sale of receivables, restructuring expense, asset impairment charges and other special items as determined by management. Segment adjusted EBITDA excludes unallocated legacy and corporate expense (income), net. We use Segment adjusted EBITDA as the primary basis for the CODM to evaluate the performance of each of our reportable segments. Segment adjusted EBITDA margin is defined as Segment adjusted EBITDA divided by consolidated sales from continuing operations, either in the aggregate or by segment as applicable. Segment adjusted EBITDA and Segment adjusted EBITDA margin are non-GAAP measures (see Non-GAAP Financial Measures above).

     The following table reflects Segment adjusted EBITDA and Segment adjusted EBITDA margins for the three months ended June 30, 2017 and 2016 (in millions).

	Segment adjusted EBITDA							Segment adjusted EBITDA margins
	Three Months Ended June 30,							Three Months Ended June 30,
	2017		2016		Change			2017		2016		Change
Commercial Truck & Industrial	$	75	$	61	$	14		10.3	%	9.5	%	0.8 pts
Aftermarket & Trailer	26		38		(12		)	11.4	%	16.7	%	(5.3) pts
Segment adjusted EBITDA	$	101	$	99	$	2		11.0	%	11.8	%	(0.8) pts

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MERITOR, INC.

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

	Commercial Truck & Industrial				Aftermarket & Trailer			TOTAL
Segment adjusted EBITDA– Quarter ended June 30, 2016	$	61			$	38		$	99
Higher earnings from unconsolidated affiliates	5				—			5
Short-and long-term variable compensation	(8		)	—	(4		)	(12		)
Impact of foreign currency exchange rates	(1		)		—			(1		)
2016 Supplier litigation settlement	—				(6		)	(6		)
Allocated asbestos-related expense, net of allocated asbestos-related insurance recoveries	1				—			1
Volume, mix, pricing and other	17				(2		)	15
Segment adjusted EBITDA – Quarter ended June 30, 2017	$	75			$	26		$	101

Commercial Truck & Industrial Segment adjusted EBITDA was $75 million in the third quarter of fiscal year 2017, up $14 million from the same period in the prior fiscal year. Segment adjusted EBITDA margin increased to 10.3 percent compared to 9.5 percent in the same period in the prior fiscal year. The increases in Segment adjusted EBITDA and Segment adjusted EBITDA margin were driven by higher revenue and continued material performance. These increases were partially offset by higher allocated variable compensation accruals based on overall company performance.

  Aftermarket & Trailer Segment adjusted EBITDA was $26 million in the third quarter of fiscal year 2017, down $12 million from the same period in the prior fiscal year. Segment adjusted EBITDA margin decreased to 11.4 percent compared to 16.7 percent in the third quarter of fiscal year 2016. The decreases in Segment adjusted EBITDA and Segment adjusted EBITDA margin were primarily driven by a favorable supplier litigation settlement recognized in the third quarter of fiscal year 2016 (seeNote 20 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report), as well as higher allocated variable compensation accruals based on overall company performance and net steel costs in the third quarter of fiscal year 2017.

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MERITOR, INC.

Nine Months Ended June 30, 2017 Compared to Nine Months Ended June 30, 2016

Sales

The following table reflects total company and business segment sales for the nine months ended June 30, 2017 and 2016 (dollars in millions). The reconciliation is intended to reflect the trend in business segment sales and to illustrate the impact that changes in foreign currency exchange rates, volumes and other factors had on sales. Business segment sales include intersegment sales.

	Nine Months Ended June 30,									Dollar Change Due To
	2017		2016		Dollar Change			% Change		Currency			Volume/ Other
Sales:
Commercial Truck & Industrial
North America	$	960	$	1,057	$	(97	)	(9	)%	$	—		$	(97	)
Europe	464		446		18			4	%	(19		)	37
South America	113		94		19			20	%	15			4
China	90		63		27			43	%	(5		)	32
India	139		121		18			15	%	1			17
Other	60		65		(5		)	(8	)%	2			(7		)
Total External Sales	$	1,826	$	1,846	$	(20	)	(1	)%	$	(6	)	$	(14	)
Intersegment Sales	61		58		3			5	%	(4		)	7
Total Sales	$	1,887	$	1,904	$	(17	)	(1	)%	$	(10	)	$	(7	)
Aftermarket & Trailer
North America	$	521	$	538	$	(17	)	(3	)%	$	(2	)	$	(15	)
Europe	78		87		(9		)	(10	)%	(2		)	(7		)
Total External Sales	$	599	$	625	$	(26	)	(4	)%	$	(4	)	$	(22	)
Intersegment Sales	28		23		5			22	%	(1		)	6
Total Sales	$	627	$	648	$	(21	)	(3	)%	$	(5	)	$	(16	)
Total External Sales	$	2,425	$	2,471	$	(46	)	(2	)%	$	(10	)	$	(36	)

Commercial Truck & Industrial sales were $1,887 million in the first nine months of fiscal year 2017, down 1 percent compared to the first nine months of fiscal year 2016. The decrease in sales was driven primarily by lower Class 8 truck production in North America, partially offset by increased volumes in the rest of the world and new business wins.

Aftermarket & Trailer sales were $627 million in the first nine months of fiscal year 2017, down 3 percent compared to the first nine months of fiscal year 2016. The decrease in sales was primarily due to lower trailer production.

Cost of Sales and Gross Profit

     Cost of sales primarily represents materials, labor and overhead production costs associated with the company’s products and production facilities. Cost of sales for the nine months ended June 30, 2017 was $2,073 million compared to $2,119 million in the same period in the prior fiscal year, representing a decrease of 2 percent. Total cost of sales was 85.5 and 85.8 percent of sales for the nine-month periods ended June 30, 2017 and 2016, respectively.

     The following table summarizes significant factors contributing to the changes in costs of sales during the first nine months of fiscal year 2017 compared to the same period in the prior year (in millions):

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MERITOR, INC.

	Cost of Sales
Nine Months Ended June 30, 2016	$	2,119
Volume, mix and other, net	(28		)
Foreign exchange	(18		)
Nine Months Ended June 30, 2017	$	2,073

     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	$	(48	)
Higher labor and overhead costs	7
Other, net	(5		)
Total change in costs of sales	$	(46	)

Material costs represent the majority of our cost of sales and include raw materials, composed primarily of steel and purchased components. Material costs for the nine months ended June 30, 2017 decreased $48 million compared to the same period in the prior fiscal year primarily due to lower volumes and material performance programs, which were partially offset by higher year-over-year steel prices.

Labor and overhead costsincreased $7 million compared to the same period in the prior fiscal year.

Gross margin was $352 million for the nine-month periods ended June 30, 2017 and 2016. Gross margin, as a percentage of sales, was 14.5 and 14.2 percent for the nine-month periods ended June 30, 2017 and 2016, respectively. Gross margin as a percentage of sales increased as continued material performance more than offset the impact of lower sales.

Other Income Statement Items

Selling, general and administrative expenses for the nine months ended June 30, 2017 and 2016 are summarized as follows (dollars in millions):

	Nine Months Ended
	June 30, 2017					June 30, 2016					Increase (Decrease)
SG&A	Amount			% of sales		Amount			% of sales		Amount			% of sales
Loss on sale of receivables	$	(4	)	(0.2	)%	$	(6	)	(0.2	)%	$	(2	)	0.0 pts
Short-and long-term variable      compensation	(35		)	(1.4	)%	(24		)	(1.0	)%	11			0.4 pts
Asbestos-related expense, net of asbestos-related insurance recoveries	(3		)	(0.1	)%	(10		)	(0.4	)%	(7		)	(0.3) pts
2016 Supplier litigation settlement	—			—	%	6			0.2	%	6			0.2 pts
Legal settlement charge	(10		)	(0.4	)%	—			—	%	10			0.4 pts
All other SG&A	(140		)	(5.8	)%	(141		)	(5.7	)%	(1		)	0.1 pts
Total SG&A	$	(192	)	(7.9	)%	$	(175	)	(7.1	)%	$	17		0.8 pts

We recognized a $10 million charge for a legal settlement related to a dispute with a joint venture in the second quarter of fiscal year 2017 (seeNote 20 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report). In the prior year, we recognized approximately $6 million related to a favorable supplier litigation settlement (see Note 20 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report). The increase in SG&A was also attributable to higher variable compensation recognized in the current year, which is based on year-to-date and expected full-year company performance. We recognized $15 million and $8 million related to previous cash settlements with insurance companies for recoveries of defense and indemnity costs associated with asbestos liabilities in the nine months ended June 30, 2017 and 2016, respectively, which are included in Asbestos-related expense, net of asbestos-related insurance recoveries (seeNote 20 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report).

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

Restructuring costs decreased by $5 million from $9 million in the first nine months of fiscal year 2016 to $4 million in the same period in fiscal year 2017. During the nine months ended June 30, 2017, these costs primarily related to employee severance costs recognized by our Aftermarket & Trailer segment. During the nine months ended June 30, 2016, $2 million of restructuring costs were recognized by our Commercial Truck & Industrial segment and $7 million by our Aftermarket & Trailer segment, primarily related to employee severance.

Other operating expense, net increased by $2 million from $3 million in the first nine months of fiscal year 2016 to $5 million in the first nine months of 2017 primarily because of an impairment charge as the result of the carrying value of a business, classified as held for sale, exceeding its fair value less costs to sell in the first nine months of 2017.

Operating income decreased by $14 million from $165 million in the first nine months of fiscal year 2016 to $151 million in the same period in fiscal year 2017. Key items affecting operating income are discussed above.

Equity in earnings of affiliates increased by $6 million from $26 million in the first nine months of fiscal year 2016 to $32 million in the same period in fiscal year 2017. The increase was primarily attributable to higher production in our affiliates' respective markets.

Interest expense, net was $63 million in the first nine months of fiscal years 2017 and 2016.

Provision for income taxes was $30 million in the first nine months of fiscal year 2017 compared to $22 million in the same period in the prior fiscal year. In the first nine months of fiscal year 2017, our effective tax rate was 25 percent compared to 17 percent in the prior year. This increase in tax expense was primarily driven by stronger earnings.

Income from continuing operations (before noncontrolling interests) decreased by $14 million from $105 million in the first nine months of fiscal year 2016 to $91 million in the same period in fiscal year 2017. The reasons for the decrease are discussed above.

Loss from discontinued operations, net of tax was $1 million in the first nine months of fiscal year 2017 and $4 million in the first nine months of fiscal year 2016. In the first nine months of fiscal year 2016, loss from discontinued operations, net of tax, was primarily attributable to changes in estimates related to legal costs incurred in connection with previously divested businesses.

Net income attributable to Meritor, Inc. decreased by $14 million from $99 million in the first nine months of fiscal year 2016 to $85 million in the same period in fiscal year 2017. The various factors affecting net income are discussed above.

Segment adjusted EBITDA and Segment adjusted EBITDA margins

     The following table reflects Segment adjusted EBITDA and Segment adjusted EBITDA margins for the nine months ended June 30, 2017 and 2016 (in millions).

	Segment adjusted EBITDA							Segment adjusted EBITDA margins
	Nine Months Ended June 30,							Nine Months Ended June 30,
	2017		2016		Change			2017		2016		Change
Commercial Truck & Industrial	$	171	$	169	$	2		9.1	%	8.9	%	0.2 pts
Aftermarket & Trailer	78		86		(8		)	12.4	%	13.3	%	(0.9) pts
Segment adjusted EBITDA	$	249	$	255	$	(6	)	10.3	%	10.3	%	0.0 pts

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MERITOR, INC.

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

	Commercial Truck & Industrial				Aftermarket & Trailer			TOTAL
Segment adjusted EBITDA– Nine months ended June 30, 2016	$	169			$	86		$	255
Higher earnings from unconsolidated affiliates	6				—			6
Short-and long-term variable compensation	(10		)	—	(4		)	(14		)
Impact of foreign currency exchange rates	6				1			7
2016 Supplier litigation settlement	—				(6		)	(6		)
Allocated asbestos-related expense, net of allocated asbestos-related insurance recoveries	7				2			9
Legal settlement charge	(10		)		—			(10		)
Volume, mix, pricing and other	3				(1		)	2
Segment adjusted EBITDA – Nine months ended June 30, 2017	$	171			$	78		$	249

Commercial Truck & Industrial Segment adjusted EBITDA was $171 million in the first nine months of fiscal year 2017, up $2 million from the same period in the prior fiscal year. Segment adjusted EBITDA margin was 9.1 percent compared to 8.9 percent in the first nine months of fiscal 2016. The increase in Segment adjusted EBITDA and Segment adjusted EBITDA margin was primarily driven by strong material, labor and burden performance, the impact of foreign exchange rates and higher affiliate earnings, which more than offset the legal settlement charge recognized in the first nine months of fiscal year 2017 (seeNote 20 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report) and higher allocated variable compensation accruals based on overall company performance.

  Aftermarket & Trailer Segment adjusted EBITDA was $78 million for the first nine months of fiscal year 2017, down $8 million from the same period in the prior fiscal year. Segment adjusted EBITDA margin was 12.4 percent compared to 13.3 percent in the first nine months of fiscal year 2016. The decrease in Segment adjusted EBITDA and Segment adjusted EBITDA margin was primarily driven by a favorable supplier litigation settlement recognized in the third quarter of fiscal year 2016 (seeNote 20 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report) and higher allocated variable compensation accruals based on overall company performance. These unfavorable impacts were partially offset by strong material, labor and burden performance.

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Financial Condition

Cash Flows (in millions)

	Nine Months Ended June 30,
	2017			2016
OPERATING CASH FLOWS
Income from continuing operations	$	91		$	105
Depreciation and amortization	55			48
Deferred income tax expense	19			2
Restructuring costs	4			9
Gain from sale of property	—			(2		)
Asset impairment charges	2			—
Equity in earnings of affiliates	(32		)	(26		)
Pension and retiree medical expense	11			15
Dividends received from equity method investments	25			29
Pension and retiree medical contributions	(28		)	(32		)
Restructuring payments	(11		)	(8		)
Decrease (increase) in working capital	(75		)	20
Changes in off-balance sheet accounts receivable factoring	62			(30		)
Other, net	14			16
Cash flows provided by continuing operations	137			146
Cash flows used for discontinued operations	(1		)	(2		)
CASH PROVIDED BY OPERATING ACTIVITIES	$	136		$	144

Cash provided by operating activities in the first nine months of fiscal year 2017 was $136 million compared to $144 million in the same period of fiscal year 2016. The decrease in cash provided is due in part to $17 million received related to an insurance settlement for recoveries for defense and indemnity costs associated with Maremont asbestos liabilities and $6 million received related to a supplier litigation settlement, both of which occurred in the first nine months of fiscal year 2016 and did not recur in the first nine months of fiscal year 2017 (see Note 20 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report).

	Nine Months Ended June 30,
	2017			2016
INVESTING CASH FLOWS
Capital expenditures	$	(52	)	$	(66	)
Other investing activities	—			3
Net investing cash flows provided by discontinued operations	2			4
CASH USED FOR INVESTING ACTIVITIES	$	(50	)	$	(59	)

Cash used forinvesting activitieswas$50 millionin the first nine months of fiscal year 2017compared to$59 million in the same period in fiscal year 2016, primarily due to reduced capital expenditures.

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	Nine Months Ended June 30,
	2017			2016
FINANCING CASH FLOWS
Repayment of notes	$	—		$	(55	)
Debt issuance costs	(4		)	—
Other financing activities	(12		)	(15		)
Net change in debt	(16		)	(70		)
Repurchase of common stock	—			(81		)
CASH USED FOR FINANCING ACTIVITIES	$	(16	)	$	(151	)

Cash used for financing activities was $16 million in the first nine months of fiscal year 2017 compared to $151 million in the same period of fiscal year 2016. The decrease in cash used for financing activities is primarily related to the repurchase of substantially all of the $55 million of principal amount 4.625 percent convertible notes and the $81 million (including commission costs) cash used to repurchase 8.6 million shares of our common stock in the first nine months of fiscal year 2016.

Liquidity

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

	June 30,			September 30,
	2017			2016
Fixed-rate debt securities	$	714		$	713
Fixed-rate convertible notes	273			271
Unamortized discount on convertible notes	(10		)	(14		)
Other borrowings	13			26
Total debt	$	990		$	996

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 for our business segments to be approximately $85 million.

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

In December 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 March 2022.

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     Sources of liquidity as of June 30, 2017, in addition to cash on hand, are as follows (in millions):

	Total Facility Size		Utilized as of 6/30/17		Readily Available as of 6/30/17		Current Expiration
On-balance sheet arrangements:
Revolving credit facility (1)	$	525	$	—	$	525	March 2022 (1)
Committed U.S. accounts receivable securitization (2)	100		—		88		December 2019
Total on-balance sheet arrangements	$	625	$	—	$	613
Off-balance sheet arrangements: (2)
Committed Swedish factoring facility (3)	$	177	$	186	$	—	March 2020
Committed U.S. factoring facility	91		43		—		February 2019
Uncommitted U.K. factoring facility	29		5		—		February 2018
Uncommitted Italy factoring facility	34		33		—		June 2022
Other uncommitted factoring facilities	23		21		—		None
Letter of credit facility	25		18		7		March 2019
Total off-balance sheet arrangements	379		306		7
Total available sources	$	1,004	$	306	$	620

(1)The availability under the revolving credit facility is subject to a collateral test and a priority debt-to-EBITDA ratio covenant.

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

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

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 June 30, 2017, we had $231 million in cash and cash equivalents.

At June 30, 2017, we had approximately $22 million of our cash and cash equivalents held in jurisdictions outside of the U.S. that, if repatriated, could result in withholding taxes. It is our intent to reinvest those cash balances in our foreign operations, and we will continue to meet our liquidity needs in the U.S. through ongoing cash flows from operations in the U.S., external borrowings or both.

Our availability under the revolving credit facility is subject to a collateral test and a priority debt-to-EBITDA ratio covenant, as defined in the credit agreement, which may limit our borrowings under such agreement as of each quarter end. As long as we are in compliance with those covenants as of the quarter end, we have full availability (up to the amount of collateral under the collateral test) under the revolving credit facility every other day during the quarter. Our future liquidity is subject to a number of factors, including access to adequate funding under our revolving credit facility, access to other borrowing arrangements such as factoring or securitization facilities, vehicle production schedules and customer demand. Even taking into account these and other factors, management expects to have sufficient liquidity to fund our operating requirements through the term of our revolving credit facility. At June 30, 2017, we were in compliance with all covenants under our credit agreement.

Common Stock Repurchase Authorization – On July 21, 2016, our Board of Directors authorized the repurchase of up to $100 million of our common stock from time to time through open market purchases, privately negotiated transactions or otherwise, until September 30, 2019, subject to compliance with legal and regulatory requirements and our debt covenants. As of June 30, 2017, an insignificant amount of repurchases had been made under this authorization.

Debt Repurchase Authorization – On July 21, 2016, our Board of Directors authorized the repurchase of up to $150 million aggregate principal amount of any of our debt securities (including convertible debt securities) from time to time through open market purchases, privately negotiated transactions or otherwise, until September 30, 2019, subject to compliance with legal and regulatory requirements and our debt covenants. No repurchases had been made under this authorization as of June 30, 2017.

Repurchase of 2026 Notes – On March 1, 2016, substantially all of the $55 million principal amount of 4.625 percent convertible notes due 2026 were repurchased at 100 percent of their face value. On April 15, 2016, the remaining 4.625 percent convertible

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notes due 2026 were redeemed at 100 percent of their face value. As of September 30, 2016, none of the 4.625 percent convertible notes due 2026 were outstanding.

Revolving Credit Facility – On March 31, 2017, we amended and restated our revolving credit facility. Pursuant to the revolving credit agreement as amended, we have a $525 million revolving credit facility that matures in March 2022. Additionally, $4 million was capitalized as deferred issuance costs and will be amortized over the term of the agreement. The availability under this facility is dependent upon various factors, including performance against certain financial covenants as highlighted below.

 The availability under the revolving credit facility is subject to certain financial covenants based on (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 June 30, 2017, 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 June 30, 2017, the revolving credit facility was collateralized by approximately $774 million of our assets, primarily consisting of eligible domestic U.S. accounts receivable, inventory, plant, property and equipment, intellectual property and our investment in all or a portion of certain of its wholly-owned subsidiaries.

Borrowings under the revolving credit facility are subject to interest based on quoted LIBOR rates plus a margin and a commitment fee on undrawn amounts, both of which are based upon our current corporate credit rating. At June 30, 2017, the margin over LIBOR rate was 300 basis points and the commitment fee was 45 basis points. Overnight revolving credit loans are at the prime rate plus a margin of 200 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 (seeNote 23 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report).

No borrowings were outstanding under the revolving credit facility at June 30, 2017 and September 30, 2016. The amended and extended revolving credit facility includes $100 million of availability for the issuance of letters of credit. At June 30, 2017 and September 30, 2016, 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 5, 2016, the company entered into an amendment which extended the facility expiration date to December 2019. 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 June 30, 2017 and September 30, 2016, no amounts, including letters of credit, were outstanding under this program. This securitization program contains a cross default to our revolving credit facility. At June 30, 2017, we were in compliance with all covenants under our credit agreement (seeNote 17 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report). At certain times during any given month, we may sell eligible accounts receivable under this program to fund intra-month working capital needs. In such months, we would then typically utilize the cash received from our customers throughout the month to repay the borrowings under the program. Accordingly, during any given month, we may borrow under this program in amounts exceeding the amounts shown as outstanding at fiscal quarter ends.

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Capital Leases – On March 20, 2012, we entered into an arrangement to finance equipment acquisitions for various U.S. locations. Under this arrangement, we can request financing from Wells Fargo Equipment Finance ("Wells Fargo") 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. We had $3 million and $7 million outstanding under this capital lease arrangement as of June 30, 2017 and September 30, 2016, respectively. In addition, we had another $10 million and $9 million outstanding through other capital lease arrangements at June 30, 2017 and September 30, 2016, respectively.

Export financing arrangements – Our 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 bore interest at 5.5 percent and had maturity dates in 2017. These financing arrangements were paid off at maturity, as of March 31, 2017. There was $9 million outstanding under these arrangements at September 30, 2016.

Other – One of our consolidated joint ventures in China participates in a bills of exchange program to settle its obligations with its trade suppliers. These programs are common in China and generally require the participation of local banks. Under these programs, our joint venture issues notes payable through the participating banks to its trade suppliers. If the issued notes payable remain unpaid on their respective due dates, this could constitute an event of default under our revolving credit facility if the defaulted amount exceeds $35 million per bank. As of June 30, 2017 and September 30, 2016, we had $16 million and $10 million, respectively, outstanding under this program at more than one bank.

Credit Ratings – At June 30, 2017, our Standard & Poor’s corporate credit rating, senior secured credit rating, and senior unsecured credit rating were B+, BB and B, respectively. Our Moody’s Investors Service corporate credit rating, senior secured credit rating, and senior unsecured credit rating were B1, Ba1 and B2, respectively. Any lowering of our credit ratings could increase our cost of future borrowings and could reduce our access to capital markets and result in lower trading prices for our securities.

Off-Balance Sheet Arrangements

Accounts Receivable Factoring Arrangements – We participate in accounts receivable factoring programs with a total amount utilized at June 30, 2017 of $288 million, of which $229 million was attributable to committed factoring facilities involving the sale of AB Volvo accounts receivables. The remaining amount of $59 million was related to factoring by certain of our European subsidiaries under uncommitted factoring facilities with financial institutions. The receivables under all of these programs are sold at face value and are excluded from the consolidated balance sheet. Total facility size, utilized amounts, readily available amounts and expiration dates for each of these programs are shown in the table above under Liquidity.

The Swedish facility is backed by a 364-day liquidity commitment from Nordea Bank which was renewed through April 23, 2018. Commitments under all of our factoring facilities are subject to standard terms and conditions for these types of arrangements (including, in the case of the U.K. and Italy commitments, a sole discretion clause whereby the bank retains the right to not purchase receivables, which has not been invoked since the inception of the respective programs).

Letter of Credit Facilities – On February 21, 2014, we 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, which expires in March 2019, we have the right to obtain the issuance, renewal, extension and increase of letters of credit up to an aggregate availability of $25 million. This facility contains covenants and events of default generally similar to those existing in our public debt indentures. We had $18 million and $23 million of letters of credit outstanding under this facility at June 30, 2017 and September 30, 2016, respectively. In addition, we had another $5 million of letters of credit outstanding through other letter of credit facilities at June 30, 2017 and September 30, 2016.

Contingencies

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

Critical Accounting Policies

Our significant accounting policies are consistent with those described in Note 2 to our consolidated financial statements in Item 8 of our 2016 Form 10-K. Our critical accounting estimates are consistent with those described in Item 7 of our 2016 Form 10-K.

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New Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

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

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 shareholder's 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. In the third quarter of fiscal year 2017, we monetized certain foreign currency options maturing in fiscal year 2018 and entered into a new series of foreign currency option contracts with effective dates from the start of the first quarter of fiscal year 2018 through the end of fiscal year 2019. Changes in fair value associated with these contracts are recorded in cost of sales in the consolidated statements of operations.

In the fourth quarter of fiscal year 2015 and the first quarter of fiscal year 2016, due to the risk of volatility of the Swedish krona and euro as compared to the U.S. dollar, we entered into a series of foreign currency option contracts that do not qualify for hedge accounting but were expected to mitigate foreign currency translation exposure of Swedish krona and euro earnings to U.S. dollars. As of June 30, 2017 and September 30, 2016, there were no Swedish krona foreign currency option contracts outstanding. During the third quarter of fiscal year 2017, we entered into additional foreign currency option contracts to mitigate the risk of volatility in the translation of euro earnings to U.S. dollars. As of June 30, 2017, the notional amount of our euro foreign currency option contracts outstanding was $20 million. Changes in fair value associated with these contracts were recorded in other income, net, in the consolidated statement of operations.

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

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

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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)	$	5.2		$	(5.2	)	Fair Value
Forward contracts in Euro (1)	(5.3		)	5.3			Fair Value
Foreign currency denominated debt (2)	0.8			(0.8		)	Fair Value
Foreign currency option contracts in USD	4.8			0.1			Fair Value
Foreign currency option contracts in Euro	4.5			(0.8		)	Fair Value
	Assuming a 50 BPS Increase in Rates			Assuming a 50  BPS Decrease in Rates			Increase (Decrease) in
Interest Rate Sensitivity:
Debt – fixed rate (3)	$	(31.5	)	$	32.6		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 June 30, 2017, the fair value of outstanding foreign currency denominated debt was $8 million. A 10% decrease in quoted currency exchange rates would result in a decrease of $1 million in foreign currency denominated debt. At June 30, 2017, a 10% increase in quoted currency exchange rates would result in an increase of $1 million in foreign currency denominated debt.

(3) At June 30, 2017, the fair value of outstanding debt was $1,157 million. A 50 basis points decrease in quoted interest rates would result in an increase of $33 million in the fair value of fixed rate debt. A 50 basis points increase in quoted interest rates would result in a decrease of $32 million in the fair value of fixed rate debt.

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Item 4. Controls and Procedures

Evaluation of Internal Controls over Financial Reporting

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2017. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2017 as a result of material weaknesses that exist in our internal control over financial reporting (ICFR) as previously described in our Annual Report on Form 10-K for the year ended September 30, 2016, as amended.

Previously Identified Material Weakness

As of September 30, 2016, our management concluded that our internal control over financial reporting was not effective due to material weaknesses identified with respect to the design and operating effectiveness of our controls over the assessment of uncertain tax positions (UTPs) 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 disclosures 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.

Management’s Remediation Plan

The principal factors contributing to the material weaknesses were the design and operating effectiveness over the assessment of UTPs and the deferred tax asset valuation allowance. The following plans are being implemented:

Process Level Control Remediation: The company has begun improving the precision of existing controls or implementing new preventive and detective controls associated with the tax accounting of UTPs and deferred tax asset valuation allowance. Such controls include:

• ensuring completeness and accuracy of the global list of UTPs

• enhanced communication through formal periodic meetings attended by accounting, tax, finance, business and strategy leaders

• updates to control design to incorporate detailed steps related to the preparation, detailed review, and overriding review of UTPs and income tax calculations, including inputs and assumptions

Enhanced Tax and Accounting Policies and Procedures: The company intends to review and update its tax policies and procedures. Trainings will be developed to ensure full understanding and compliance with the policies and procedures.

We believe the measures described above will remediate the material weaknesses we have identified and strengthen our overall internal control over financial reporting.  We are currently in the process of completing our remediation efforts and have begun testing the operating effectiveness of the actions discussed above.  The actions that we are taking are subject to ongoing senior management review, as well as audit committee oversight. We will continue to monitor the effectiveness of these and other processes, procedures and controls and will make any further changes that management determines are appropriate.  The identified material weaknesses will not be considered remediated until the controls are in operation for a sufficient period of time for management to conclude that the control environment is operating effectively.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Except as set forth below and under Note 20 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report on Form 10-Q, there have been no material developments in legal proceedings involving the company or its subsidiaries since those reported in the company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016, as amended.

In fiscal years 2002 and 2004, the company approved amendments to certain retiree medical plans, including health benefits for retirees (and their surviving spouses) who were formerly United Auto Workers (“UAW”) members at ten former Rockwell International (“Rockwell”) plants. 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 (“CBAs”) entered into by Rockwell and the UAW for facilities that have either been closed or sold and alleging a companion claim under the Employee Retirement Income Security Act of 1974 (“ERISA”). The two class actions lawsuits that were filed in 2004 (Cole v. ArvinMeritor, et al. and Faust v. ArvinMeritor, et al.) by the UAW and retirees and surviving spouses claimed that the health benefits were vested for life through the negotiated CBAs. These actions were subsequently consolidated. 

 On December 22, 2005, the District Court issued a preliminary injunction enjoining the company from implementing 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. In 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. In 2007, the company appealed the District Court’s order to the U.S. Court of Appeals for the Sixth Circuit ("Sixth Circuit"). The Sixth Circuit ruled to affirm the District Court’s ruling and the company moved for an en banc rehearing. This motion was held in abeyance while the parties attempted to settle the case.  In July 2016 the company moved for re-hearing based on a January 2015 U.S. Supreme Court decision on the subject matter and a subsequent Sixth Circuit ruling in a separate case on the same subject matter. The court granted the re-hearing and in April 2017, the Sixth Circuit reversed the District Court’s decision, finding that the retiree medical benefits were not vested for life through the CBAs.

The plaintiffs’ appeal to the Sixth Circuit for a rehearing en banc was denied in June 2017. The plaintiffs subsequently filed a motion to stay the Sixth Circuit's mandate pending appeal to the U.S. Supreme Court. The Sixth Circuit denied that motion on July 10, 2017 and issued the mandate the same day. Through the Sixth Circuit's mandate, the case has been remanded to the District Court to carry out further proceedings as necessary to comply with the mandate. On July 19, 2017 the company filed a motion with the District Court to dissolve the injunction and enter the judgment in favor of the Defendants. A hearing date has been set for August 30, 2017. We also expect the plaintiffs to file a petition for certiorari with the U.S. Supreme Court in the next few months. We cannot predict when the District court may dissolve the injunction or whether or not the U.S. Supreme Court will grant the plaintiffs' petition for certiorari. 

Item 1A. Risk Factors

There have been no material changes in risk factors involving the company or its subsidiaries from those previously disclosed in the company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016, as amended.

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

Issuer repurchases

The table below sets forth information with respect to purchases made by or on behalf of us of shares of our common stock during the three months ended June 30, 2017:

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
April 1- 30, 2017	—	$	—	—	$	—
May 1- 31, 2017	—	$	—	—	$	—
June 1- 30, 2017	7,933	$	15.00	7,933	$	99,881,011
Total	7,933			7,933

(1) On July 21, 2016, the Board of Directors authorized the repurchase of up to $100 million of the company’s common stock and up to $150 million aggregate principal amount of any of the company’s debt securities (including convertible debt securities), in each case from time to time through open market purchases, privately negotiated transactions or otherwise, until September 30, 2019, subject to compliance with legal and regulatory requirements and the company's debt covenants. As part of the equity and equity-linked repurchase authorization, we entered into a 10b5-1 common stock repurchase plan.

     The independent trustee of our 401(k) plans purchases shares in the open market to fund investments by employees in our common stock, one of the investment options available under such plans, and any matching contributions in company stock we provide under certain of such plans. In addition, our stock incentive plans permit payment of an option exercise price by means of cashless exercise through a broker and permit the satisfaction of the minimum statutory tax obligations upon exercise of options and the vesting of restricted stock units through stock withholding. There were no shares withheld in the third quarter of fiscal 2017 to satisfy tax obligations for exercise of options. In addition, our stock incentive plans also permit the satisfaction of tax obligations upon the vesting of restricted stock through stock withholding. There were no shares withheld in the third quarter of fiscal 2017 to satisfy tax obligations upon the vesting of restricted shares. The company does not believe such purchases or transactions described above are issuer repurchases for the purposes of this Item 2 of Part II of this Quarterly Report on Form 10-Q.

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Item 5. Other Information

Cautionary Statement

This Quarterly Report on Form 10-Q contains statements relating to future results of the company (including certain projections and business trends) that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words or phrases such as “believe,” “expect,” “anticipate,” “estimate,” “should,” “are likely to be,” “will” and similar expressions. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to reliance on major OEM customers and possible negative outcomes from contract negotiations with our major customers, including failure to negotiate acceptable terms in contract renewal negotiations and our ability to obtain new customers; the outcome of actual and potential product liability, warranty and recall claims; our ability to successfully manage rapidly changing volumes in the commercial truck markets and work with our customers to manage demand expectations in view of rapid changes in production levels; global economic and market cycles and conditions; availability and sharply rising costs of raw materials, including steel, and our ability to manage or recover such costs; our ability to manage possible adverse effects on 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 our Annual Report on Form 10-K for the year ended September 30, 2016, as amended: Item 1. Business, “Customers; Sales and Marketing”; “Competition”; “Raw Materials and Supplies”; “Employees”; “Environmental Matters”; “International Operations”; and “Seasonality; Cyclicality”; Item 1A. Risk Factors; Item 3. Legal Proceedings; and Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. These forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law.

75

MERITOR, INC.

Item 6. Exhibits

3-a	Amended and Restated Articles of Incorporation of Meritor, filed as Exhibit 3-a to Meritor’s Annual Report on Form 10-K for the fiscal year ended September 27, 2015, is incorporated herein by reference.
3-b	Amended and Restated By-laws of Meritor, filed as Exhibit 3-b to Meritor’s Annual Report on Form 10-K for the fiscal year ended October 2, 2016, is incorporated herein by reference.
10-a**	Extension Letter dated June 8, 2017, from Meritor Heavy Vehicle Systems Cameri S.P.A. to Nordea Bank AB (pbl).
10-b**	Seventh Amendment to the Receivables Purchase Agreement dated as of June 22, 2017, 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.
12**	Computation of ratio of earnings to fixed charges
23**	Consent of Bates White LLC
31-a**	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act
31-b**	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act
32-a**	Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350
32-b**	Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350
101.INS	XBRL INSTANCE DOCUMENT
101.SCH	XBRL TAXONOMY EXTENSION SCHEMA
101.PRE	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
101.LAB	XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.CAL	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF	XBRL TAXONOMY EXTENSION DEFINITION LINKBASE

** Filed herewith.

76

MERITOR, INC.

SIGNATURES

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

		MERITOR, INC.
Date:	August 3, 2017	By:	/s/	April Miller Boise
				April Miller Boise
				Senior Vice President, General Counsel and Corporate Secretary
				(For the registrant)
Date:	August 3, 2017	By:	/s/	Paul D. Bialy
				Paul D. Bialy
				Vice President, Controller and Principal Accounting Officer
Date:	August 3, 2017	By:	/s/	Kevin A. Nowlan
				Kevin A. Nowlan
				Senior Vice President and Chief Financial Officer

77

EX-10.A

Exhibit 10-a

To: Nordea Bank AB (publ) (the “Purchaser”)

8 June 2017

Dear Sirs,

Extension of a receivables purchase agreement between the Purchaser and ourselves as Seller dated 18 June 2012 as amended and extended from time to time, (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 “five (5) years “ shall be replaced by “ten (10) years”, which, for the avoidance of doubt, means that the Receivables Purchase Agreement will terminate on 18 June 2022.

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 HEAVY VEHICLES SYSTEMS CAMERI S.P.A.

By: /s/ Gian Luca Alberti    
Name: Gian Luca Alberti
Title: Managing Director

By: /s/ Marco Signini        
Name: Marco Signini
Title: Controller

We accept the terms and conditions set out in the Letter of Agreement of which the foregoing is the duplicate.

for and on behalf of Nordea Bank AB (publ)

By: /s/ Rasmus Nissen Hald    
Name: Rasmus Nissen Hald
Title: Director

By: /s/ Peter Brink Jensen    
Name: Peter Brink Jensen
Title: Director

for and on behalf of
Citicorp Trustee Company Limited

By: /s/ Michael Lombardi    
Name: Michael Lombardi
Title: Director

EX-10.B

Exhibit 10-b

EXECUTION VERSION

SEVENTH AMENDMENT TO THE
RECEIVABLES PURCHASE AGREEMENT

This SEVENTH AMENDMENT TO THE RECEIVABLES PURCHASE AGREEMENT (this “Amendment”), dated as of June 22, 2017 (the “Amendment Date”), is entered into by and among the following parties:

(i) ARVINMERITOR RECEIVABLES CORPORATION, a Delaware corporation, as Seller;

(ii) MERITOR, INC., an Indiana corporation, as Servicer; and

(iii) PNC BANK, NATIONAL ASSOCIATION (“PNC”), as a Related Committed Purchaser, as an LC Participant, as a Purchaser Agent, as LC Bank and as Administrator.

Capitalized terms used but not otherwise defined herein (including such terms used above) have the respective meanings assigned thereto in the Receivables Purchase Agreement described below.

BACKGROUND

A.    The parties hereto have entered into a Receivables Purchase Agreement, dated as of June 18, 2012 (as amended, restated, supplemented or otherwise modified through the date hereof, the “Receivables Purchase Agreement”).

B.    The parties hereto desire to amend the Receivables Purchase Agreement as set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1.Amendments to the Receivables Purchase Agreement. Effective as of the Amendment Date, the Receivables Purchase Agreement is hereby amended as follows:

(a)The definition of “Concentration Percentage” set forth inExhibit I to the Receivables Purchase Agreement is hereby amended by replacing the table set forth therein with the following table:

Special Obligor	Special Concentration Limit
Oshkosh Corporation	20.00%
Daimler Trucks North America LLC	30.00%
Navistar Companies (collectively)	25.00%

724581379 12403015

(b)The definition of “Obligor Percentage” set forth inExhibit I to the Receivables Purchase Agreement is hereby amended by replacing the percentage “10.00%” where it appears therein with the percentage “22.50%”.

SECTION 2.Representations and Warranties of the Seller and Servicer. Each of the Seller and the Servicer hereby represents and warrants, as to itself, to the Administrator, each Purchaser and each Purchaser Agent, as follows:

(a)Representations and Warranties. As of the date hereof and immediately after giving effect to this Amendment, the representations and warranties made by such Person in the Transaction Documents to which it is a party are true and correct as of the date hereof (unless stated to relate solely to an earlier date, in which case such representations or warranties were true and correct as of such earlier date).

(b)Enforceability. This Amendment and each other Transaction Document to which it is a party, as amended hereby, constitute the legal, valid and binding obligation of such Person enforceable against such Person in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity, regardless of whether enforceability is considered in a proceeding in equity or at law.

(c)No Termination Event. No event has occurred and is continuing, or would result from the transactions contemplated hereby, that constitutes a Purchase and Sale Termination Event, an Unmatured Purchase and Sale Termination Event, a Termination Event or an Unmatured Termination Event.

SECTION 3.Effect of Amendment. All provisions of the Receivables Purchase Agreement and the other Transaction Documents, as expressly amended and modified by this Amendment, shall remain in full force and effect. After this Amendment becomes effective, all references in the Receivables Purchase Agreement (or in any other Transaction Document) to “this Receivables Purchase Agreement”, “this Agreement”, “hereof”, “herein” or words of similar effect referring to the Receivables Purchase Agreement shall be deemed to be references to the Receivables Purchase Agreement as amended by this Amendment. This Amendment shall not be deemed, either expressly or impliedly, to waive, amend or supplement any provision of the Receivables Purchase Agreement other than as set forth herein.

SECTION 4.Effectiveness. This Amendment shall become effective as of the Amendment Date upon the Administrator’s receipt of counterparts hereto duly executed by each of the parties hereto.

SECTION 5.Severability. Each provision of this Amendment shall be severable from every other provision of this Amendment for the purpose of determining the legal enforceability of any provision hereof, and the unenforceability of any provision hereof, and the unenforceability of one or more provisions of this Amendment in one jurisdiction shall not have the effect of rendering such provision or provisions unenforceable in any other jurisdiction.

2

724581379 12403015

SECTION 6.Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by facsimile or e-mail transmission shall be effective as delivery of a manually executed counterpart hereof.

SECTION 7.GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5‑1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

SECTION 8.Section Headings. The various headings of this Amendment are included for convenience only and shall not affect the meaning or interpretation of this Amendment, the Receivables Purchase Agreement or any provision hereof or thereof.

[SIGNATURE PAGES FOLLOW]

3

724581379 12403015

IN WITNESS WHEREOF, the parties hereto have executed this Amendment by their duly authorized officers as of the date first above written.

ARVINMERITOR RECEIVABLES CORPORATION,
as Seller
By: /s/ Carl D. Anderson II    Name:    Carl D. Anderson IITitle:    President and Treasurer

MERITOR, INC.,
as Initial Servicer
By: /s/ Carl D. Anderson II    
Name:    Carl D. Anderson IITitle:     Treasurer

S-1

724581379 12403015

Seventh Amendment to the

Receivables Purchase Agreement

(ArvinMeritor Receivables Corporation)

PNC BANK, NATIONAL ASSOCIATION,

as a Related Committed Purchaser,
as an LC Participant, as a Purchaser Agent,
as LC Bank and as Administrator

By: /s/ Michal Brown    

Name: Michael Brown

Title: Senior Vice President

S-2

724581379 12403015

Seventh Amendment to the

Receivables Purchase Agreement

(ArvinMeritor Receivables Corporation)

EX-12

Exhibit 12

Meritor, Inc.

Computation of Ratio of Earnings to Fixed Charges

Nine Months Ended June 30, 2017

(Amounts in millions, except the ratio)

Earnings Available for Fixed Charges (A):
Pre-tax income from continuing operations	$	121
Add:
Distributed income of affiliates		25
Less:
Equity in earnings of affiliates		(32	)
		114
Add: fixed charges included in earnings:
Interest expense		65
Interest element of rentals		4
Total		69
Total earnings available for fixed charges:	$	183
Fixed Charges (B):
Fixed charges included in earnings	$	69
Capitalized interest		—
Total fixed charges	$	69
Ratio of Earnings to Fixed Charges		2.65

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

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

EX-23

Exhibit 23

CONSENT OF EXPERT

We consent to the references to our firm and to our reports with respect to estimation of the liability for pending and reasonably estimable unasserted future asbestos-related claims, which are included or incorporated by reference in Note 20 of the Notes to Condensed Consolidated Financial Statements in the Quarterly Report on Form 10-Q of Meritor, Inc. (“Meritor”) for the fiscal quarter ended July 2, 2017 and to the incorporation by reference of such reference into the following Registration Statements of Meritor:

Form	Registrations No.	Purpose
S-3	333-200858	Registration of common stock, preferred stock, warrants, debt securities and guarantees
S-8	333-215874	Amended and Restated 2010 Long-Term Incentive Plan
S-8	333-192458	Amended and Restated 2010 Long-Term Incentive Plan
S-8	333-171713	Amended 2010 Long-Term Incentive Plan
S-8	333-164333	2010 Long-Term Incentive Plan
S-8	333-141186	2007 Long-Term Incentive Plan
S-8	333-107913	Meritor, Inc. Savings Plan
S-8	333-123103	Meritor, Inc. Hourly Employees Savings Plan
S-8	333-49610	1997 Long-Term Incentives Plan
S-8	333-42012	Employee Stock Benefit Plan, 1988 Stock Benefit Plan and 1998 Employee Stock Benefit Plan

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

Date: August 3, 2017

EX-31.A

Exhibit 31-a

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO

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

I, Jeffrey A. Craig, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Meritor, Inc. for the quarterly period ended July 2, 2017;

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: August 3, 2017

/s/ Jeffrey A. Craig

Jeffrey A. Craig

Chief Executive Officer and President

EX-31.B

Exhibit 31-b

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO

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

I, Kevin A. Nowlan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Meritor, Inc. for the quarterly period ended July 2, 2017;

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: August 3, 2017

/s/ Kevin A. Nowlan

Kevin A. Nowlan

Senior Vice President and Chief Financial Officer

EX-32.A

Exhibit 32-a

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO RULE

13a-14(b) UNDER THE EXCHANGE ACT AND 18 U.S.C. SECTION 1350

(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

As required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, I, Jeffrey A. Craig, hereby certify that:

1. The Quarterly Report of Meritor, Inc. on Form 10-Q for the quarterly period ended July 2, 2017 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: August 3, 2017

EX-32.B

Exhibit 32-b

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

RULE 13a-14(b) UNDER THE EXCHANGE ACT AND 18 U.S.C. SECTION 1350

(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

As required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, I, Kevin A. Nowlan, hereby certify that:

1. The Quarterly Report of Meritor, Inc. on Form 10-Q for the quarterly period ended July 2, 2017 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: August 3, 2017

XML

DOCUMENT AND ENTITY INFORMATION - shares	9 Months Ended
	Jun. 30, 2017	Jul. 31, 2017
Document and Entity Information [Abstract]
Entity registrant name	MERITOR INC
Entity central index key	0001113256
Current fiscal year end date	--09-30
Entity filer category	Large Accelerated Filer
Trading symbol	MTOR
Entity common stock, shares outstanding		88,565,934
Document period end date	Jun. 30, 2017
Document fiscal year focus	2017
Document type	10-Q
Document fiscal period focus	Q3
Amendment flag	false

XML

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Statement [Abstract]
Sales	$ 920	$ 841	$ 2,425	$ 2,471
Cost of sales	(778)	(714)	(2,073)	(2,119)
GROSS MARGIN	142	127	352	352
Selling, general and administrative	(73)	(59)	(192)	(175)
Restructuring costs	0	(6)	(4)	(9)
Other operating expense, net	0	0	(5)	(3)
OPERATING INCOME (LOSS)	69	62	151	165
Other income (expense), net	1	0	1	(1)
Equity in earnings of affiliates	14	9	32	26
Interest expense, net	(21)	(20)	(63)	(63)
INCOME (LOSS) BEFORE INCOME TAXES	63	51	121	127
Provision for income taxes	(11)	(8)	(30)	(22)
INCOME FROM CONTINUING OPERATIONS	52	43	91	105
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1)	(1)	(1)	(4)
NET INCOME	51	42	90	101
Less: Net income attributable to noncontrolling interests	(3)	(1)	(5)	(2)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	48	41	85	99
NET INCOME ATTRIBUTABLE TO MERITOR, INC.
Net income from continuing operations	49	42	86	103
Loss from discontinued operations	(1)	(1)	(1)	(4)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$ 48	$ 41	$ 85	$ 99
BASIC EARNINGS (LOSS) PER SHARE
Continuing operations (in usd per share)	$ 0.55	$ 0.47	$ 0.98	$ 1.13
Discontinued operations (in usd per share)	(0.01)	(0.01)	(0.01)	(0.04)
Basic earnings per share (in usd per share)	0.54	0.46	0.97	1.09
DILUTED EARNINGS (LOSS) PER SHARE
Continuing operations (in usd per share)	0.52	0.46	0.94	1.10
Discontinued operations (in usd per share)	(0.01)	(0.01)	(0.01)	(0.04)
Diluted earnings per share (in usd per share)	$ 0.51	$ 0.45	$ 0.93	$ 1.06
Basic average common shares outstanding (in shares)	88.4	89.8	87.9	91.2
Diluted average common shares outstanding (in shares)	93.3	92.0	91.4	93.1

XML

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Statement of Comprehensive Income [Abstract]
Net income	$ 51	$ 42	$ 90	$ 101
Foreign currency translation adjustments:
Attributable to Meritor, Inc.	17	(10)	8	(6)
Attributable to noncontrolling interest	0	0	(1)	0
Pension and other postretirement benefit related adjustments	11	7	33	25
Unrealized gain (loss) on investments and foreign exchange contracts	(2)	3	0	5
Other comprehensive income, net of tax	26	0	40	24
Total comprehensive income	77	42	130	125
Less: Comprehensive income attributable to noncontrolling interest	(3)	(1)	(4)	(2)
Comprehensive income attributable to Meritor, Inc.	$ 74	$ 41	$ 126	$ 123

XML

CONDENSED CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions		Jun. 30, 2017	Sep. 30, 2016
CURRENT ASSETS:
Cash and cash equivalents	[1]	$ 231	$ 160
Receivables trade and other, net	[1]	500	396
Inventories	[1]	360	316
Other current assets		37	33
TOTAL CURRENT ASSETS		1,128	905
NET PROPERTY	[1]	430	439
GOODWILL	[1]	391	390
OTHER ASSETS		763	760
TOTAL ASSETS		2,712	2,494
CURRENT LIABILITIES:
Short-term debt		132	14
Accounts and notes payable	[1]	602	475
Other current liabilities		277	268
TOTAL CURRENT LIABILITIES		1,011	757
LONG-TERM DEBT		858	982
RETIREMENT BENEFITS		667	703
OTHER LIABILITIES		220	238
TOTAL LIABILITIES		2,756	2,680
COMMITMENTS AND CONTINGENCIES (See Note 20)
MEZZANINE EQUITY:
Convertible debt with cash settlement		12	0
EQUITY (DEFICIT):
Common stock (June 30, 2017 and September 30, 2016, 101.4 and 99.6 shares issued and 88.6 and 86.8 shares outstanding, respectively)		101	99
Additional paid-in capital		875	876
Accumulated deficit		(156)	(241)
Treasury stock, at cost (at both June 30, 2017 and September 30, 2016, 12.8 shares)		(136)	(136)
Accumulated other comprehensive loss		(768)	(809)
Total deficit attributable to Meritor, Inc.		(84)	(211)
Noncontrolling interests	[1]	28	25
TOTAL DEFICIT		(56)	(186)
TOTAL LIABILITIES, MEZZANINE EQUITY AND DEFICIT		2,712	2,494
ASSETS, LIABILITIES, AND EQUITY HELD-FOR-SALE
Cash and cash equivalents		1	1
Receivables, trade and other, net		11	8
Inventories		2	1
Net property		3	5
Goodwill		1
Accounts and notes payable		10	5
Noncontrolling interests		$ 2	$ 3

[1] As of June 30, 2017, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $11 million Receivables, trade and other, net; (iii) $2 million Inventories; (iv) $3 million Net property; (v) $1 million Goodwill; (vi) $10 million Accounts and notes payable; and (vii) $2 million Noncontrolling interests. As of September 30, 2016, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $8 million Receivables, trade and other, net; (iii) $1 million Inventories; (iv) $5 million Net property; (v) $5 million Accounts and notes payable; and (vi) $3 million Noncontrolling interests.

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CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) - shares shares in Millions	Jun. 30, 2017	Sep. 30, 2016
Statement of Financial Position [Abstract]
Common shares issued (in shares)	101.4	99.6
Common shares outstanding (in shares)	88.6	86.8
Treasury stock (in shares)	12.8	12.8

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions	9 Months Ended
	Jun. 30, 2017		Jun. 30, 2016
OPERATING ACTIVITIES
CASH PROVIDED BY OPERATING ACTIVITIES (See Note 10)	$ 136		$ 144
INVESTING ACTIVITIES
Capital expenditures	(52)		(66)
Other investing activities	0		3
Net investing cash flows provided by discontinued operations	2		4
CASH USED FOR INVESTING ACTIVITIES	(50)		(59)
FINANCING ACTIVITIES
Repayment of notes	0		(55)
Debt issuance costs	(4)		0
Other financing activities	(12)		(15)
Net change in debt	(16)		(70)
Repurchase of common stock	0		(81)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(16)		(151)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1		2
CHANGE IN CASH AND CASH EQUIVALENTS	71		(64)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	160	[1]	193
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$ 231	[1]	$ 129

[1] As of June 30, 2017, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $11 million Receivables, trade and other, net; (iii) $2 million Inventories; (iv) $3 million Net property; (v) $1 million Goodwill; (vi) $10 million Accounts and notes payable; and (vii) $2 million Noncontrolling interests. As of September 30, 2016, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $8 million Receivables, trade and other, net; (iii) $1 million Inventories; (iv) $5 million Net property; (v) $5 million Accounts and notes payable; and (vi) $3 million Noncontrolling interests.

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CONDENSED CONSOLIDATED STATEMENT OF EQUITY (DEFICIT) - USD ($) $ in Millions	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Treasury Stock	Accumulated Other Comprehensive Loss	Total Deficit Attributable to Meritor, Inc.	Noncontrolling Interests
Beginning balance at Sep. 30, 2015	$ (646)	$ 99	$ 865	$ (814)	$ (55)	$ (766)	$ (671)	$ 25
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income	125			99		24	123	2
Equity based compensation expense	8		8				8
Repurchase of common stock	(81)				(81)		(81)
Noncontrolling interest dividends	(2)							(2)
Ending Balance at Jun. 30, 2016	(596)	99	873	(715)	(136)	(742)	(621)	25
Beginning balance at Sep. 30, 2016	(186)	99	876	(241)	(136)	(809)	(211)	25
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income	130			85		41	126	4
Equity based compensation expense	12		12				12
Vesting of equity based awards	0	2	(2)
Stock option exercises	2		2				2
Convertible debt with cash settlement	(12)		(12)				(12)
Noncontrolling interest dividends	(1)							(1)
Other equity adjustments	(1)		(1)				(1)
Ending Balance at Jun. 30, 2017	$ (56)	$ 101	$ 875	$ (156)	$ (136)	$ (768)	$ (84)	$ 28

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Basis of Presentation

9 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

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

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

In the opinion of the company, the unaudited condensed consolidated financial statements contain all adjustments, consisting solely of adjustments of a normal, recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. These statements should be read in conjunction with the company’s audited consolidated financial statements and notes thereto included in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2016, as amended. The condensed consolidated balance sheet data as of September 30, 2016 was derived from audited financial statements but does not include all annual disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the three and nine months ended June 30, 2017 are not necessarily indicative of the results for the full year.

The company’s fiscal year ends on the Sunday nearest September 30, and its fiscal quarters generally end on the Sundays nearest December 31, March 31 and June 30. The third quarter of fiscal years 2017 and 2016 ended on July 2, 2017 and July 3, 2016, respectively. All year and quarter references relate to the company’s fiscal year and fiscal quarters, unless otherwise stated. For ease of presentation, September 30 and June 30 are used consistently throughout this report to represent the fiscal year end and third fiscal quarter end, respectively.

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Earnings per Share

9 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Earnings per Share

Earnings per Share

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

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

	Three Months Ended June 30,		Nine Months Ended June 30,
	2017	2016	2017	2016
Basic average common shares outstanding	88.4	89.8	87.9	91.2
Impact of restricted shares, restricted share units and performance share units	1.8	2.2	1.4	1.9
Impact of convertible notes	3.1	—	2.1	—
Diluted average common shares outstanding	93.3	92.0	91.4	93.1

In November 2016, 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 $12.77, which was the company’s share price on the grant date of December 1, 2016. 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 $12.77, which was the company's share price on the grant date of December 1, 2016.

The actual number of performance share units that will vest depends upon the company’s performance relative to the established M2019 goals for the three-year performance period of October 1, 2016 to September 30, 2019, measured at the end of the performance period. The number of performance share units will depend on meeting the established M2019 goals at the following weights: 50% associated with achieving an Adjusted diluted earnings per share from continuing operations target, 25% associated with achieving revenue growth above market and 25% associated with achieving a Net debt to Adjusted EBITDA target. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.6 million performance share units.

In November 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 that vest will depend on Adjusted EBITDA margin and Adjusted diluted earnings per share from continuing operations at the following weights: 50% associated with achieving an Adjusted EBITDA margin target and 50% associated with achieving an Adjusted diluted earnings per share from continuing operations target. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.7 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 that vest will depend on Adjusted EBITDA margin and Adjusted diluted earnings per share from continuing operations at the following weights: 75% associated with achieving an Adjusted EBITDA margin target and 25% associated with achieving an Adjusted diluted earnings per share from continuing operations target. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.6 million performance share units.

In November 2013, the Board of Directors approved a grant of performance share units to all executives eligible to participate in the long-term incentive plan. Each performance share unit represented 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 vested on December 1, 2016 depended 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, which was measured after the end of the performance period. The company's performance resulted in the vesting of the performance share units at 112% of the grant date amounts. There were 0.1 million and 0.4 million shares related to these performance share units included in the diluted earnings per share calculation for the three and nine months ended June 30, 2017, respectively, as certain payout thresholds were achieved relative to the established M2016 goals. There were 1.9 million and 1.4 million shares related to these performance share units included in the diluted earnings per share calculation for the three and nine months ended June 30, 2016, respectively, as certain payout thresholds were achieved relative to the established M2016 goals.

For the three months ended June 30, 2017, the dilutive impact of previously issued restricted shares, restricted share units and performance share units was 1.8 million shares, compared to 2.2 million shares for the same period in the prior fiscal year. For the nine months ended June 30, 2017, the dilutive impact of previously issued restricted shares, restricted share units and performance share units was 1.4 million shares, compared to 1.9 million shares for the same period in the prior fiscal year. For the three and nine months ended June 30, 2017, compensation cost related to restricted shares, restricted share units and performance share units was $5 million and $12 million, respectively. For the three and nine months ended June 30, 2016, compensation cost related to restricted shares, restricted share units and performance share units was $2 million and $8 million, respectively.

For each of the three and nine months ended June 30, 2016, 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 periods and thus their inclusion would be anti-dilutive.

For the three and nine months ended June 30, 2017, 3.1 million and 2.1 million shares, respectively, were included in the computation of diluted earnings per share, as the company's average stock price during these periods exceeded the conversion price for the 7.875 percent convertible notes due 2026. For the three and nine months ended June 30, 2016, the company’s 7.875 percent convertible notes due 2026 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 notes.

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New Accounting Standards

9 Months Ended

Jun. 30, 2017

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Standards

New Accounting Standards

Accounting standards to be implemented

In May 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 amends the scope of modification accounting for share-based payment arrangements and provides guidance on when an entity would be required to apply modification accounting. This standard is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The amendments in this update should be applied prospectively. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In March 2017, the FASB issued ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. ASU 2017-08 affects entities who own investments in callable debt securities and aligns the amortization period of premiums on callable debt securities to expectations incorporated in market pricing on the underlying securities. This standard is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The amendments in this update should be applied on a modified retrospective basis through a cumulative-effective adjustment directly to retained earnings at the beginning of the adoption period. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The new guidance requires entities to only include the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses (together with other employee compensation costs). The other components of net benefit cost, including amortization of prior service cost/credit, are to be included in a separate line item(s) outside of any sub-total of operating income. ASU 2017-07 also provides guidance that only the service cost component of net benefit cost is eligible for capitalization. This standard is effective for public business entities for interim and annual periods beginning after December 15, 2017. The revisions in this amendment are to be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. ASU 2017-05 provides guidance which defines an “in substance nonfinancial asset”; unifies guidance related to partial sales of nonfinancial assets; eliminates rules specifically addressing sales of real estate; removes exceptions to the financial asset derecognition model; and clarifies the accounting for contributions of nonfinancial assets to joint ventures. The effective date and the transition requirements for the amendments in ASU 2017-05 are the same as the effective date and transition requirements in Topic 606, described below. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new guidance eliminates the need to determine the fair value of individual assets and liabilities of a reporting unit to measure a goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value. The revised guidance will be applied prospectively, and is effective for calendar year-end SEC filers in 2020. Early adoption is permitted for any impairment tests performed after January 1, 2017. The new guidance is not expected to have a material impact on the company's consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The ASU provides clarification on the definition of a business and adds guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. To be considered a business under the new guidance, it must include an input and a substantive process that together significantly contribute to the ability to create output. The amendment removes the evaluation of whether a market participant could replace missing elements. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and will be applied prospectively. The potential impact of this new guidance will be assessed for future acquisitions or dispositions, but it is not expected to have a material impact on the company's consolidated financial statements.

In October 2016, the FASB issued 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 but 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 FASB 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 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 accounting policies and 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 accounting policies and 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 on its accounting policies and 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 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 on its accounting policies and its consolidated financial statements.

Accounting standards implemented during fiscal year 2017

In January 2017, the FASB issued ASU 2017-03 which amended Accounting Changes and Error Corrections (Topic 250) to state that registrants should consider additional qualitative disclosures if the impact of an issued but not yet adopted ASU is unknown or cannot be reasonably estimated and to include a description of the effect of the accounting policies that the registrant expects to apply, if determined. Transition guidance included in certain issued but not yet adopted ASUs was also updated to reflect this amendment.

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 adopted this standard prospectively in the first quarter of fiscal year 2017. This guidance did not have a material impact on its consolidated financial statements.

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Discontinued Operations

9 Months Ended

Jun. 30, 2017

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

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

	Three Months Ended June 30,						Nine Months Ended June 30,
	2017			2016			2017			2016
Sales	$	—		$	—		$	—		$	—
Loss before income taxes	$	(1	)	$	(1	)	$	(1	)	$	(5	)
Benefit from income taxes	—			—			—			1
Loss from discontinued operations attributable to Meritor, Inc.	$	(1	)	$	(1	)	$	(1	)	$	(4	)

Loss from discontinued operations attributable to the company for the three and nine months ended June 30, 2017 and June 30, 2016 was primarily related to changes in estimates related to legal costs incurred in connection with a previously divested business.

Total discontinued operations assets as of both June 30, 2017 and September 30, 2016 were $1 million and total discontinued operations liabilities as of June 30, 2017 and September 30, 2016 were $6 million.

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Assets and Liabilities Held for Sale

9 Months Ended

Jun. 30, 2017

Assets And Liabilities Held-For-Sale [Abstract]

Assets and Liabilities Held for Sale

Assets and Liabilities Held for Sale

During the first quarter of fiscal year 2017, management approved a plan to sell a business within the Commercial Truck & Industrial reporting segment. The company expects to sell the business within one year from management's approval of the plan. The business and its associated assets and liabilities met the criteria for presentation as held for sale as of June 30, 2017.

Assets and liabilities held for sale are measured at the lower of the carrying value or fair value less costs to sell. Upon meeting the held for sale criteria, the company determined the carrying value of the business exceeded the fair value less costs to sell. As a result, an impairment charge of $3 million was recorded within other operating expense, net in the company’s condensed consolidated statement of operations during the first quarter of fiscal year 2017.

Assets and liabilities held for sale, when measured in subsequent periods, are permitted to be written-up for increases in the fair value, less cost to sell, not in excess of the cumulative loss previously recognized. During the third quarter of fiscal year 2017, the fair value less costs to sell of the business increased relative to the carrying value. As a result, a $1 million adjustment, which reduced the previously recognized loss, was recorded in the company's condensed consolidated statement of operations within other operating expense, net.

During the third quarter of fiscal year 2017, an additional $2 million of assets met the criteria for presentation as assets held for sale within the Aftermarket & Trailer segment related to the Aftermarket restructuring actions (see Note 7).

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Goodwill

9 Months Ended

Jun. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill

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

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

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

	Commercial Truck & Industrial			Aftermarket & Trailer		Total
Goodwill	$	245		$	160	$	405
Accumulated impairment losses	(15		)	—		(15		)
Beginning balance at September 30, 2016	230			160		390
Foreign currency translation	—			1		1
Balance at June 30, 2017	$	230		$	161	$	391

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Restructuring Costs

9 Months Ended

Jun. 30, 2017

Restructuring and Related Activities [Abstract]

Restructuring Costs

Restructuring Costs

Restructuring reserves, primarily related to unpaid employee termination benefits, were $8 million at June 30, 2017 and $16 million at September 30, 2016. The changes in restructuring reserves for the nine months ended June 30, 2017 and 2016 are as follows (in millions):

	Employee Termination Benefits			Plant Shutdown & Other			Total
Beginning balance at September 30, 2016	$	15		$	1		$	16
Activity during the period:
Charges to continuing operations	4			—			4
Cash payments – continuing operations	(10		)	(1		)	(11		)
Other	(1		)	—			(1		)
Total restructuring reserves at June 30, 2017	8			—			8
Less: non-current restructuring reserves	(1		)	—			(1		)
Restructuring reserves – current, at June 30, 2017	$	7		$	—		$	7
Balance at September 30, 2015	$	10		$	—		$	10
Activity during the period:
Charges to continuing operations	8			1			9
Cash payments – continuing operations	(8		)	—			(8		)
Total restructuring reserves at June 30, 2016	10			1			11
Less: non-current restructuring reserves	(2		)	—			(2		)
Restructuring reserves – current, at June 30, 2016	$	8		$	1		$	9

Ongoing 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 recorded $5 million of restructuring costs during the third quarter of fiscal year 2016. The company recorded $4 million of restructuring costs during the second quarter of fiscal year 2017. 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 & Trailer segment. Restructuring actions with these plans were substantially complete as of September 30, 2016.

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Income Taxes

9 Months Ended

Jun. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

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

Income tax expense (benefit) is allocated among continuing operations, discontinued operations and other comprehensive income (“OCI”). Such allocation is applied by tax jurisdiction, and in periods in which there is a pre-tax loss from continuing operations and pre-tax income in another category, such as discontinued operations or OCI, income tax expense is allocated to the other sources of income, with a related benefit recorded in continuing operations.

In prior years, the company established valuation allowances against its U.S. net deferred tax assets and the net deferred tax assets of its 100-percent-owned subsidiaries in France, the United Kingdom, Brazil and certain other countries. In evaluating its ability to recover these net deferred tax assets, the company utilizes a consistent approach which considers its historical operating results, including an assessment of the degree to which any gains or losses are driven by items that are unusual in nature, and tax planning strategies. In addition, the company reviews changes in near-term market conditions and other factors that impact future operating results. Continued improvement in the company’s operating results could lead to reversal of some or all of these valuation allowances in the future.

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 that 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. Also in the fourth quarter of fiscal year 2016, due to a three-year cumulative loss and future economic uncertainty, the company established a tax valuation allowance in Brazil because the company determined it was not more likely than not that it would realize its deferred tax assets in Brazil.

The company continues to maintain valuation allowances in France, the United Kingdom, Brazil 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.

For the three months ended June 30, 2017, the company had approximately $3 million of net pre-tax income compared to $19 million of net pre-tax income in the same period in fiscal year 2016 in tax jurisdictions in which tax expense (benefit) is not recorded.

For the nine months ended June 30, 2017, the company had an insignificant net pre-tax loss compared to $47 million of net pre-tax income in the same period in fiscal year 2016 in tax jurisdictions in which tax expense (benefit) is not recorded.

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Accounts Receivable Factoring and Securitization

9 Months Ended

Jun. 30, 2017

Accounts Receivable Factoring and Securitization [Abstract]

Accounts Receivable Factoring and Securitization

Accounts Receivable Factoring and Securitization

Off-balance sheet arrangements 

Swedish Factoring Facility: The company has an arrangement to sell trade receivables due from AB Volvo through one of its European subsidiaries. Under this arrangement with Nordea Bank, which expires in March 2020, the company can sell up to, at any point in time, €155 million ($177 million) of eligible trade receivables. 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 €162 million ($186 million) and €121 million ($135 million) of this accounts receivable factoring facility as of June 30, 2017 and September 30, 2016, respectively.

The facility is backed by a 364-day liquidity commitment from Nordea Bank which extends through April 23, 2018. The commitment is subject to standard terms and conditions for this type of arrangement.

U.S. Factoring Facility: The company has an arrangement to sell trade receivables due from AB Volvo and its U.S. subsidiaries through one of its U.S. subsidiaries. Under this arrangement with Nordea Bank, which expires in February 2019, the company can sell up to, at any point in time, €80 million ($91 million) of eligible trade receivables. 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 €38 million ($43 million) and €39 million ($44 million) of this accounts receivable factoring facility as of June 30, 2017 and September 30, 2016, respectively.

United Kingdom Factoring Facility: The company has an arrangement to sell trade receivables due from AB Volvo and its European subsidiaries through one of its United Kingdom subsidiaries. Under this arrangement with Nordea Bank, which expires in February 2018, the company can sell up to, at any point in time, €25 million ($29 million) of eligible trade receivables. The receivables under this program are sold at face value and are excluded from the condensed consolidated balance sheet. The company had utilized €4 million ($5 million) and €6 million ($6 million) of this accounts receivable factoring facility as of June 30, 2017 and September 30, 2016, 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 due from AB Volvo and its European subsidiaries through one of its Italian subsidiaries. On June 13, 2017, Meritor extended this Italy factoring facility with Nordea Bank until June 18, 2022, with all other terms of the agreement remaining unchanged. Under this arrangement, the company can sell up to, at any point in time, €30 million ($34 million) of eligible trade receivables. The receivables under this program are sold at face value and are excluded from the condensed consolidated balance sheet. The company had utilized €29 million ($33 million) and €22 million ($24 million) of this accounts receivable factoring facility as of June 30, 2017 and September 30, 2016, 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 $21 million and $10 million at June 30, 2017 and September 30, 2016, respectively.

Total costs associated with all of the off-balance sheet arrangements described above were $2 million in the three months ended June 30, 2017 and 2016, and $4 million and $6 million in the nine months ended June 30, 2017 and 2016, respectively, and are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

On-balance sheet arrangements

The company has a $100 million U.S. accounts receivables securitization facility, which expires December 2019. The maximum permitted priority debt-to-EBITDA ratio as of the last day of each fiscal quarter under the facility is 2.25 to 1.00. This program is provided by PNC Bank, National Association, as Administrator and Purchaser, and the other Purchasers and Purchaser Agents from time to time (participating lenders), which are party to the agreement. Under this program, the company has the ability to sell an undivided percentage ownership interest in substantially all of its trade receivables (excluding the receivables due from AB Volvo and subsidiaries eligible for sale under the U.S. accounts receivable factoring facility) of certain U.S. subsidiaries to ArvinMeritor Receivables Corporation (“ARC”), a wholly-owned, special purpose subsidiary. ARC funds these purchases with borrowings from participating lenders under a loan agreement. This program also includes a letter of credit facility pursuant to which ARC may request the issuance of letters of credit issued for the company’s U.S. subsidiaries (originators) or their designees, which when issued will constitute a utilization of the facility for the amount of letters of credit issued. Amounts outstanding under this agreement are collateralized by eligible receivables purchased by ARC and are reported as short-term debt in the condensed consolidated balance sheet. At June 30, 2017 and September 30, 2016, no amounts, including letters of credit, were outstanding under this program. This securitization program contains a cross default to the revolving credit facility. At certain times during any given month, the company may sell eligible accounts receivable under this program to fund intra-month working capital needs. In such months, the company would then typically utilize the cash received from customers throughout the month to repay the borrowings under the program. Accordingly, during any given month, the company may borrow under this program amounts exceeding the amounts shown as outstanding at fiscal quarter ends.

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Operating Cash Flows

9 Months Ended

Jun. 30, 2017

Operating Cash Flow Disclosure [Abstract]

Operating Cash Flows

Operating Cash Flows

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

	Nine Months Ended June 30,
	2017			2016
OPERATING ACTIVITIES
Net income	$	90		$	101
Less: Loss from discontinued operations, net of tax	(1		)	(4		)
Income from continuing operations	91			105
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization	55			48
Deferred income tax expense	19			2
Restructuring costs	4			9
Asset impairment charges	2			—
Gain on sale of property	—			(2		)
Equity in earnings of affiliates	(32		)	(26		)
Pension and retiree medical expense	11			15
Other adjustments to income from continuing operations	12			5
Dividends received from equity method investments	25			29
Pension and retiree medical contributions	(28		)	(32		)
Restructuring payments	(11		)	(8		)
Changes in off-balance sheet accounts receivable factoring	62			(30		)
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, foreign currency adjustments and discontinued operations	(73		)	31
Operating cash flows provided by continuing operations	137			146
Operating cash flows used for discontinued operations	(1		)	(2		)
CASH PROVIDED BY OPERATING ACTIVITIES	$	136		$	144

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Inventories

9 Months Ended

Jun. 30, 2017

Inventory Disclosure [Abstract]

Inventories

Inventories

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

	June 30, 2017		September 30, 2016
Finished goods	$	142	$	125
Work in process	33		26
Raw materials, parts and supplies	185		165
Total	$	360	$	316

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Other Current Assets

9 Months Ended

Jun. 30, 2017

Other Current Assets Disclosure [Abstract]

Other Current Assets

Other Current Assets

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

	June 30, 2017		September 30, 2016
Asbestos-related recoveries (see Note 20)	$	10	$	10
Prepaid and other	27		23
Other current assets	$	37	$	33

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Net Property

9 Months Ended

Jun. 30, 2017

Property, Plant and Equipment [Abstract]

Net Property

Net Property

Net property is summarized as follows (in millions):

	June 30, 2017			September 30, 2016
Property at cost:
Land and land improvements	$	29		$	30
Buildings	234			231
Machinery and equipment	867			839
Company-owned tooling	122			113
Construction in progress	38			56
Total	1,290			1,269
Less: accumulated depreciation	(860		)	(830		)
Net property	$	430		$	439

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Other Assets

9 Months Ended

Jun. 30, 2017

Other Assets, Noncurrent [Abstract]

Other Assets

Other Assets

Other assets are summarized as follows (in millions):

	June 30, 2017		September 30, 2016
Investments in non-consolidated joint ventures	$	108	$	100
Asbestos-related recoveries (see Note 20)	44		49
Unamortized revolver debt issuance costs	8		7
Capitalized software costs, net	28		29
Non-current deferred income tax assets, net	395		413
Assets for uncertain tax positions	37		35
Prepaid pension costs	138		123
Other	5		4
Other assets	$	763	$	760

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

The company holds a variable interest in a joint venture accounted for under the equity method of accounting. The joint venture manufactures components for commercial vehicle applications primarily on behalf of the company. The variable interest relates to a supply arrangement between the company and the joint venture whereby the company supplies certain components to the joint venture on a cost-plus basis. The company is not the primary beneficiary of the joint venture, as the joint venture partner has shared or absolute control over key manufacturing operations, labor relationships, financing activities and certain other functions of the joint venture. Therefore, the company does not consolidate the joint venture. At June 30, 2017 and September 30, 2016, the company’s investment in the joint venture was $48 million and $45 million, respectively.

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Other Current Liabilities

9 Months Ended

Jun. 30, 2017

Other Current Liabilities Disclosure [Abstract]

Other Current Liabilities

Other Current Liabilities

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

	June 30, 2017		September 30, 2016
Compensation and benefits	$	121	$	115
Income taxes	4		8
Taxes other than income taxes	24		21
Accrued interest	15		14
Product warranties	18		18
Environmental reserves (see Note 20)	5		7
Restructuring (see Note 7)	7		14
Asbestos-related liabilities (see Note 20)	18		18
Indemnity obligations (see Note 20)	2		2
Other	63		51
Other current liabilities	$	277	$	268

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

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

	Nine Months Ended June 30,
	2017			2016
Total product warranties – beginning of period	$	44		$	48
Accruals for product warranties	8			11
Payments	(10		)	(13		)
Change in estimates and other	1			(1		)
Total product warranties – end of period	43			45
Less: Non-current product warranties	(25		)	(27		)
Product warranties – current	$	18		$	18

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Other Liabilities

9 Months Ended

Jun. 30, 2017

Other Liabilities Disclosure [Abstract]

Other Liabilities

Other Liabilities

Other liabilities are summarized as follows (in millions):

	June 30, 2017		September 30, 2016
Asbestos-related liabilities (see Note 20)	$	122	$	136
Restructuring (see Note 7)	1		2
Non-current deferred income tax liabilities	13		12
Liabilities for uncertain tax positions	15		16
Product warranties (see Note 15)	25		26
Environmental (see Note 20)	6		6
Indemnity obligations (see Note 20)	11		11
Other	27		29
Other liabilities	$	220	$	238

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Long-Term Debt

9 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

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

	June 30, 2017			September 30, 2016
4.0 percent convertible notes due 2027(1)(3)	$	142		$	142
7.875 percent convertible notes due 2026(1)(4)	131			129
6.75 percent notes due 2021(2)(5)	271			271
6.25 percent notes due 2024(2)(6)	443			442
Capital lease obligation	13			16
Export financing arrangements and other	—			10
Unamortized discount on convertible notes (7)	(10		)	(14		)
Subtotal	990			996
Less: current maturities	(132		)	(14		)
Long-term debt	$	858		$	982

⁽¹⁾ The 4.0 percent convertible notes due 2027 and 7.875 percent convertible notes due 2026 contain a put and call feature, which allows for earlier redemption beginning in 2019 and 2020, respectively.

⁽²⁾ The 6.75 percent notes and 6.25 percent notes contain a call option, which allows for early redemption.

⁽³⁾ The 4.0 percent convertible notes due 2027 are presented net of $1 million unamortized issuance costs as of June 30, 2017 and September 30, 2016.

⁽⁴⁾ The 7.875 percent convertible notes due 2026 are presented net of $2 million unamortized issuance costs as of June 30, 2017 and September 30, 2016, and $7 million and $9 million original issuance discount as of June 30, 2017 and September 30, 2016, respectively.

⁽⁵⁾ The 6.75 percent notes due 2021 are presented net of $4 millionunamortized issuance costs as of June 30, 2017 and September 30, 2016.

⁽⁶⁾ The 6.25 percent notes due 2024 are presented net of $7 million and $8 million unamortized issuance costs as of June 30, 2017 and September 30, 2016, respectively.

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

Convertible Notes Due 2026

The 7.875 percent convertible notes due 2026 (the “2026 Notes”) were classified as current as of June 30, 2017 and noncurrent as of September 30, 2016 as the holders of the company's 2026 Notes are entitled to convert all or a portion of their 2026 Notes at any time beginning July 1, 2017 and prior to the close of business on September 29, 2017 at a rate of 83.3333 shares of common stock per $1,000 principal amount at maturity of the 2026 Notes (representing a conversion price of approximately $12.00 per share). The 2026 Notes are convertible as the closing price of shares of the company's common stock for at least 20 trading days during the 30 consecutive trading-day period ending on June 30, 2017 was greater than 120% of the $12.00 conversion price associated with the 2026 Notes.

The 2026 Notes surrendered for conversion, if any, would be settled in cash up to the principal amount at maturity of the 2026 Notes and cash, stock or a combination of cash and stock, at the company’s election, for the remainder of the conversion value of the 2026 Notes in excess of the principal amount at maturity and cash in lieu of any fractional shares, subject to and in accordance with the provisions of the indenture that governs the 2026 Notes.

As a result of the 2026 Notes becoming currently convertible for cash up to the principal amount of $140 million at the holder's option, $12 million of permanent equity was reclassified as mezzanine equity.

Revolving Credit Facility

On March 31, 2017, the company amended and restated its revolving credit facility. Pursuant to the revolving credit agreement as amended, the company has a $525 million revolving credit facility that matures in March 2022. Additionally, $4 million was capitalized as deferred issuance costs and will be amortized over the term of the agreement. The availability under this facility is dependent upon various factors, including performance against certain financial covenants as highlighted below.

The availability under the revolving credit facility is subject to certain financial covenants based on (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 June 30, 2017, the revolving credit facility was collateralized by approximately $774 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 June 30, 2017, the margin over LIBOR rate was 300 basis points and the commitment fee was 45 basis points. Overnight revolving credit loans are at the prime rate plus a margin of 200 basis points.

Certain of the company’s subsidiaries, as defined in the revolving credit agreement, irrevocably and unconditionally guarantee amounts outstanding under the revolving credit facility. Similar subsidiary guarantees are provided for the benefit of the holders of the publicly held notes outstanding under the company’s indentures (see Note 23).

No borrowings were outstanding under the revolving credit facility at June 30, 2017 and September 30, 2016. The amended and extended revolving credit facility includes $100 million of availability for the issuance of letters of credit. At June 30, 2017 and September 30, 2016, there were no letters of credit outstanding under the revolving credit facility.

Debt Securities

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

Repurchase of Debt Securities

On March 1, 2016, substantially all of the $55 million principal amount of 4.625 percent convertible notes were repurchased at 100 percent of their face value. On April 15, 2016, the remaining 4.625 percent convertible notes were redeemed at 100 percent of their 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 21). The repurchase program under these authorizations was complete as of September 30, 2016.

Capital Leases

On March 20, 2012, the company entered into an arrangement to finance equipment acquisitions for various U.S. locations. Under this arrangement, the company can request financing from Wells Fargo Equipment Finance (“Wells Fargo”) 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 $3 million and $7 million outstanding under this capital lease arrangement as of June 30, 2017 and September 30, 2016, respectively. In addition, the company had another $10 million and $9 million outstanding through other capital lease arrangements at June 30, 2017 and September 30, 2016, respectively.

Letter of Credit Facilities

On February 21, 2014, the company entered into an arrangement to amend and restate the letter of credit facility with Citicorp USA, Inc., as administrative agent and issuing bank, and the other lenders party thereto. Under the terms of this amended credit agreement, which expires in March 2019, the company has the right to obtain the issuance, renewal, extension and increase of letters of credit up to an aggregate availability of $25 million. This facility contains covenants and events of default generally similar to those existing in the company’s public debt indentures. There were $18 million and $23 million of letters of credit outstanding under this facility at June 30, 2017 and September 30, 2016, respectively. The company had another $5 million of letters of credit outstanding through other letter of credit facilities at June 30, 2017 and September 30, 2016.

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 were issued under an incentive program of the Brazilian government to fund working capital for Brazilian companies in exportation programs. The arrangements bore interest at 5.5 percent and had maturity dates in 2017. These financing arrangements were paid off at maturity, as of March 31, 2017. There was $9 million outstanding under these arrangements at September 30, 2016.

Other

One of the company's consolidated joint ventures in China participates in a bills of exchange program to settle its obligations with its trade suppliers. These programs are common in China and generally require the participation of local banks. Under these programs, the company's joint venture issues notes payable through the participating banks to its trade suppliers. If the issued notes payable remain unpaid on their respective due dates, this could constitute an event of default under the company’s revolving credit facility if the defaulted amount exceeds $35 million per bank. As of June 30, 2017 and September 30, 2016, the company had $16 million and $10 million, respectively, outstanding under this program at more than one bank.

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Financial Instruments

9 Months Ended

Jun. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

Financial Instruments

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

	June 30, 2017				September 30, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	231	$	231	$	160	$	160
Short-term debt	132		245		14		14
Long-term debt	858		912		982		1,051
Foreign exchange forward contracts (other assets)	—		—		1		1
Foreign exchange forward contracts (other liabilities)	—		—		2		2
Short-term foreign currency option contracts (other assets)	1		1		—		—
Long-term foreign currency option contracts (other assets)	1		1		2		2

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

	June 30, 2017				September 30, 2016
	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	1	(1	)	—	2	—	2

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 June 30, 2017 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	231	$	—	$	—
Short-term debt	—		241		4
Long-term debt	—		903		9
Foreign exchange forward contracts (asset)	—		—		—
Foreign exchange forward contracts (liability)	—		—		—
Short-term foreign currency option contracts (asset)	—		—		1
Long-term foreign currency option contracts (asset)	—		—		1

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 and 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

The tables below provide a reconciliation of changes in fair value of the Level 3 financial assets and liabilities measured at fair value in the condensed consolidated balance sheet for the three and nine months ended June 30, 2017 and 2016, respectively. No transfers of assets between any of the Levels occurred during these periods.

Three months ended June 30, 2017 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)			Total
Fair Value as of March 31, 2017	$	3		$	2		$	5
Total unrealized gains (losses):
Included in other income	—			—			—
Included in cost of sales	(1		)	—			(1		)
Total realized gains (losses):
Included in other income	—			—			—
Included in cost of sales	—			—			—
Purchases, issuances, sales and settlements:
Purchases	—			1			1
Settlements	(2		)	(1		)	(3		)
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	1			(1		)	—
Fair Value as of June 30, 2017	$	1		$	1		$	2

Three months ended June 30, 2016 (in millions)	Short-term foreign currency option contracts (asset)		Long-term foreign currency option contracts (asset)		Total
Fair Value as of March 31, 2016	$	—	$	—	$	—
Total unrealized gains (losses):
Included in other income	—		—		—
Included in cost of sales	—		—		—
Total realized gains (losses):
Included in other income	—		—		—
Included in cost of sales	—		—		—
Purchases, issuances, sales and settlements:
Purchases	—		—		—
Settlements	—		—		—
Transfer in and / or out of Level 3 (1)	—		—		—
Reclass between short-term and long-term	—		—		—
Fair Value as of June 30, 2016	$	—	$	—	$	—

Nine months ended June 30, 2017 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)			Total
Fair Value as of September 30, 2016	$	—		$	2		$	2
Total unrealized gains (losses):
Included in other income	—			—			—
Included in cost of sales	—			2			2
Total realized gains (losses):
Included in other income	—			—			—
Included in cost of sales	—			—			—
Purchases, issuances, sales and settlements:
Purchases	—			1			1
Settlements	(2		)	(1		)	(3		)
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	3			(3		)	—
Fair Value as of June 30, 2017	$	1		$	1		$	2

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

⁽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 as of June 30, 2017 or September 30, 2016.

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

Foreign exchange forward contracts — The company uses foreign exchange forward purchase and sale contracts with terms of one year or less to hedge its exposure to changes in foreign currency exchange rates. As of June 30, 2017 and September 30, 2016, the notional amount of the company's foreign exchange forward contracts outstanding was $125 million and $190 million, respectively. The fair value of foreign exchange forward contracts is based on a model which incorporates observable inputs including quoted spot rates, forward exchange rates and discounted future expected cash flows utilizing market interest rates with similar quality and maturity characteristics. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of changes in the fair value of the contracts is recorded in Accumulated Other Comprehensive Loss in the statement of 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 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. In the third quarter of fiscal year 2017, the company monetized certain foreign currency options maturing in fiscal year 2018 and entered into a new series of foreign currency option contracts with effective dates from the start of the first quarter of fiscal year 2018 through the end of fiscal year 2019. As of June 30, 2017 and September 30, 2016, the notional amount of the company's Indian rupee foreign exchange contracts outstanding was $141 million and $174 million, respectively. 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.

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, respectively. During the third quarter of fiscal year 2017, the company entered into additional foreign currency contracts with a total notional amount of $35 million to mitigate the risk of volatility in the translation of euro earnings to U.S. dollars. These foreign currency option contracts did not qualify for a hedge accounting election. As of June 30, 2017 and September 30, 2016, there were no Swedish krona foreign currency option contracts outstanding. As of June 30, 2017, the notional amount of the company's euro foreign currency option contracts outstanding was $20 million. Changes in fair value associated with these contracts were recorded in other income, net, in the consolidated statement of operations.

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Retirement Benefit Liabilities

9 Months Ended

Jun. 30, 2017

Retirement Benefits [Abstract]

Retirement Benefit Liabilities

Retirement Benefit Liabilities

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

	June 30, 2017			September 30, 2016
Retiree medical liability	$	432		$	447
Pension liability	261			283
Other	13			13
Subtotal	706			743
Less: current portion (included in compensation and benefits, Note 15)	(39		)	(40		)
Retirement benefits	$	667		$	703

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

	2017						2016
	Pension			Retiree Medical			Pension			Retiree Medical
Interest cost	$	13		$	4		$	16		$	4
Assumed return on plan assets	(24		)	—			(24		)	—
Amortization of prior service costs	—			(1		)	—			—
Recognized actuarial loss	8			4			6			3
Total expense (income)	$	(3	)	$	7		$	(2	)	$	7

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

	2017						2016
	Pension			Retiree Medical			Pension			Retiree Medical
Interest cost	$	39		$	11		$	49		$	13
Assumed return on plan assets	(71		)	—			(74		)	—
Amortization of prior service costs	—			(2		)	—			—
Recognized actuarial loss	23			11			18			9
Total expense (income)	$	(9	)	$	20		$	(7	)	$	22

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Contingencies

9 Months Ended

Jun. 30, 2017

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 June 30, 2017 to be approximately $8 million, of which $2 million is probable and recorded as a liability. Included in reasonably possible amounts are estimates for certain remediation actions that may be required if current actions are deemed inadequate by the regulators.

     In addition to the Superfund sites, various other lawsuits, claims and proceedings have been asserted against the company, alleging violations of federal, state and local environmental protection requirements, or seeking remediation of alleged environmental impairments, principally at previously disposed-of properties. For these matters, management has estimated the total reasonably possible costs the company could incur at June 30, 2017 to be approximately $27 million, of which $9 million is probable and recorded as a liability.

     Included in the company’s environmental liabilities are costs for on-going operation, maintenance and monitoring at environmental sites in which remediation has been put into place. This liability is discounted using discount rates in the range of 1.0 to 3.0 percent and is approximately $7 million at June 30, 2017. The undiscounted estimate of these costs is approximately $8 million.

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

	Superfund Sites		Non-Superfund Sites			Total
Beginning balance at September 30, 2016	$	2	$	11		$	13
Payments and other	—		(4		)	(4		)
Accruals	—		2			2
Balance at June 30, 2017	$	2	$	9		$	11

Environmental reserves are included in Other Current Liabilities (see Note 15) and Other Liabilities (see Note 16) in the condensed consolidated balance sheet.

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

In April 2016, the company was served with several complaints filed against the company and other defendants in the United States District Court for the Northern District of Mississippi. The complaints were amended in July 2016.  These complaints allege damages, including diminution of property value, concealment/fraud and emotional distress resulting from alleged environmental pollution in and around a neighborhood in Grenada, Mississippi. Rockwell owned and operated a facility near the neighborhood from 1965 to 1985. The company filed answers to the complaints in July 2016. In May 2017, the company was served with a complaint filed against the company and other defendants by the Mississippi Attorney General in the Chancery Court of Grenada County, Mississippi.  The complaint alleges that operations at the above-referenced Grenada facility caused contamination of off-site groundwater and surface waters. Subsequently, the company removed this action to the United States District Court for the Northern District of Mississippi.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 estimable, and therefore has not recorded any accrual for them as of June 30, 2017. Further, a reasonably possible range of loss cannot be estimated at this time.

Asbestos

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

Maremont had approximately 4,200 and 5,800 pending asbestos-related claims at June 30, 2017 and September 30, 2016, 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):

	June 30, 2017		September 30, 2016
Pending and future claims	$	70	$	70
Billed but unpaid claims	3		2
Asbestos-related liabilities	$	73	$	72
Asbestos-related insurance recoveries	$	27	$	32

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 Note 12, Note 14, Note 15 and Note 16).

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, management recognized a liability of $70 million as of each of June 30, 2017 and September 30, 2016 for pending and future claims over the next ten years. The ultimate cost of resolving pending and future claims is estimated based on the history of claims and expenses for plaintiffs represented by law firms in jurisdictions with an established history with Maremont. 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 $27 million and $32 million as of June 30, 2017 and September 30, 2016, 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.

Maremont maintained insurance coverage with other insurance carriers that management believes also covers indemnity and defense costs. During fiscal year 2013, Maremont re-initiated lawsuits against these carriers, seeking a declaration of its rights to coverage for asbestos claims and to facilitate an orderly and timely collection of insurance proceeds. During the first quarter of fiscal year 2016, the dispute related to these insurance policies was settled. As a part of this settlement, on December 12, 2015, Maremont received $17 million in cash, of which $5 million was recognized as a 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. During the first quarter of fiscal year 2017, the company recognized the remaining $3 million of the cash settlement proceeds as a reduction in asbestos expense. 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 firms, jurisdictions and diseases; legislative or regulatory developments; Maremont’s approach to defending claims; or payments to plaintiffs from other defendants. Estimated recoveries are influenced by coverage issues among insurers and the continuing solvency of various insurance companies. If the assumptions with respect to the estimation period, the nature of pending and future claims, the cost to resolve claims and the amount of available insurance prove to be incorrect, the actual amount of liability for Maremont’s asbestos-related claims, and the effect on the company, could differ materially from current estimates and, therefore, could have a material impact on the company’s financial condition and results of operations.

Rockwell International (“Rockwell”) — ArvinMeritor, Inc. (“AM”), a subsidiary of Meritor, along with many other companies, has also been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos used in certain components of Rockwell products many years ago. Liability for these claims was transferred at the time of the spin-off of the automotive business from Rockwell in 1997. Rockwell had approximately 1,600 and 3,200 pending active asbestos claims in lawsuits that name AM, together with many other companies, as defendants at June 30, 2017 and September 30, 2016, 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):

	June 30, 2017		September 30, 2016
Pending and future claims	$	60	$	60
Billed but unpaid claims	4		1
Asbestos-related liabilities	$	64	$	61
Asbestos-related insurance recoveries	$	27	$	27

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 the pending and future claims over the next ten years of $60 million as of each of June 30, 2017 and September 30, 2016. The ultimate cost of resolving pending and future claims is estimated based on the history of claims and expenses for plaintiffs represented by law firms in jurisdictions with an established history with Rockwell.

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

• Pending and future claims were estimated for a ten-year period ending in fiscal year 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 will decline for each year further in the future. As a result, estimating a probable liability beyond ten years is difficult and uncertain;

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

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

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

Recoveries: 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 third quarter of fiscal year 2016, the company reached a settlement, relating to certain proofs of claim filed by the company under certain insurance policies, with an insolvent insurer for $5.5 million (the "allowed claim"). On June 17, 2016, the company entered into an assignment of claim (the "Assignment”) with Macquarie Bank to assign the allowed claim the company had against the insolvent insurer. The Assignment was approved by the liquidator, which resulted in the company receiving $3 million in the third quarter of fiscal year 2016. 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, in the fourth quarter of fiscal year 2016 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. During the first nine months of fiscal year 2017, Rockwell recognized an additional $12 million of the cash settlement proceeds as a reduction in asbestos expense. Pursuant to the terms of a second settlement agreement, in the fourth quarter of fiscal year 2016 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 settlement agreements 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 receivable for Rockwell's asbestos-related liabilities totaled $27 million as of each of June 30, 2017 and September 30, 2016. Included in these amounts are insurance receivables of $9 million as of each of June 30, 2017 and September 30, 2016, which are associated with policies in dispute and have been fully reserved.

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 firms, jurisdictions and diseases; 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 each of June 30, 2017 and September 30, 2016, the remaining estimated liability for this matter was approximately $11 million.

   In connection with the sale of its interest in MSSC in October 2009, the company provided certain indemnities to the buyer for its share of potential obligations related to pension funding shortfall, environmental and other contingencies, and valuation of certain accounts receivable and inventories. At June 30, 2017 and September 30, 2016, the company's remaining exposure was approximately $1 million, which is included in other liabilities in the condensed consolidated balance sheet.

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

Other

The company identified certain sales transactions for which value-added tax was potentially required to be remitted to certain tax jurisdictions for tax years 2009 through 2016. At June 30, 2017 and September 30, 2016, the company’s estimate of the probable liability was $11 million and $10 million, respectively.

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 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.

On July 5, 2017, the company's subsidiary Meritor Heavy Vehicle Systems, LLC fully and finally resolved all claims with respect to its various legal proceedings with Sistemas Automotrices de Mexico, S.A. de C.V. (“Sisamex”), its Mexican joint venture with Quimmco, S.A. de C.V. ("Quimmco"), that were originally filed in 2014 in the District Court for the Northern District of Illinois regarding Sisamex’s rights to manufacture certain products and the components thereof for sale in Mexico.  The parties entered into a confidential settlement agreement and release pursuant to which the parties agreed to dismiss, with prejudice, all of the legal proceedings between them and Meritor agreed to pay Quimmco a settlement of $10 million, consistent with the reserve recorded as of June 30, 2017.

In addition, various lawsuits, claims and proceedings, other than those specifically disclosed in the condensed consolidated financial statements, have been or may be instituted or asserted against the company, relating to the conduct of the company’s business, including those pertaining to product liability, warranty or recall claims, intellectual property, safety and health, contract and employment matters. Although the outcome of other litigation cannot be predicted with certainty, and some lawsuits, claims or proceedings may be disposed of unfavorably to the company, management believes the disposition of matters that are pending will not have a material effect on the company’s business, financial condition, results of operations or cash flows.

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Shareholders' Equity

9 Months Ended

Jun. 30, 2017

Equity [Abstract]

Shareholders' Equity

Shareholders' Equity

Common Stock and Debt 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 the company's debt covenants. As of June 30, 2017, an insignificant amount of repurchases had been made under these authorizations.

Accumulated Other Comprehensive Loss (“AOCL”)

The components of AOCL and the changes in AOCL by components, net of tax, for three months ended June 30, 2017 and 2016 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at March 31, 2017	$	(75	)	$	(718	)	$	(1	)	$	(794	)
Other comprehensive income (loss) before reclassification	17			—			(2		)	15
Amounts reclassified from accumulated other comprehensive loss	—			11			—			11
Net current-period other comprehensive income (loss)	$	17		$	11		$	(2	)	$	26
Balance at June 30, 2017	$	(58	)	$	(707	)	$	(3	)	$	(768	)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(1	)	(a)
Actuarial losses	$	12		(a)
	11			Total before tax
	(3		)	Tax benefit
Total reclassifications for the period	$	8		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 19 for additional details), which is recorded in cost of sales and selling, general and administrative expenses.

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at March 31, 2016	$	(50	)	$	(687	)	$	(5	)	$	(742	)
Other comprehensive income (loss) before reclassification	(10		)	(2		)	3			(9		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			9			—			9
Net current-period other comprehensive income (loss)	$	(10	)	$	7		$	3		$	—
Balance at June 30, 2016	$	(60	)	$	(680	)	$	(2	)	$	(742	)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Actuarial losses	$	9	(b)
	9		Total before tax
	—		Tax expense
Total reclassifications for the period	$	9	Net of tax
(b)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 19 for additional details).

The components of AOCL and the changes in AOCL by components, net of tax, for nine months ended June 30, 2017 and 2016 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at September 30, 2016	$	(66	)	$	(740	)	$	(3	)	$	(809	)
Other comprehensive income (loss) before reclassification	8			1			—			9
Amounts reclassified from accumulated other comprehensive loss	—			32			—			32
Net current-period other comprehensive income (loss)	$	8		$	33		$	—		$	41
Balance at June 30, 2017	$	(58	)	$	(707	)	$	(3	)	$	(768	)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(2	)	(a)
Actuarial losses	34			(a)
	32			Total before tax
	(10		)	Tax benefit
Total reclassifications for the period	$	22		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 19 for additional details), which is recorded in 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, 2015	$	(54	)	$	(705	)	$	(7	)	$	(766	)
Other comprehensive income (loss) before reclassification	(6		)	(2		)	5			(3		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			27			—			27
Net current-period other comprehensive income (loss)	$	(6	)	$	25		$	5		$	24
Balance at June 30, 2016	$	(60	)	$	(680	)	$	(2	)	$	(742	)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Actuarial losses	$	27	(b)
	27		Total before tax
	—		Tax expense
Total reclassifications for the period	$	27	Net of tax
(b)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 19 for additional details).

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Business Segment Information

9 Months Ended

Jun. 30, 2017

Segment Reporting [Abstract]

Business Segment Information

Business Segment Information

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

      The company has two reportable segments at June 30, 2017, 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, primarily in North America and Europe. This segment also supplies a wide variety of undercarriage products and systems for trailer applications in North America.

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

     The accounting policies of the segments are the same as those applied in the condensed consolidated financial statements, except for the use of Segment adjusted EBITDA. The company may allocate certain common costs, primarily corporate functions, between the segments differently than the company would for stand alone financial information prepared in accordance with GAAP. These allocated costs include expenses for shared services such as information technology, finance, communications, legal and human resources. The company does not allocate interest expense and certain legacy and other corporate costs not directly associated with the segment.

     Segment information is summarized as follows (in millions):

	Commercial Truck & Industrial		Aftermarket & Trailer		Eliminations			Total
Three Months Ended June 30, 2017
External Sales	$	704	$	216	$	—		$	920
Intersegment Sales	24		12		(36		)	—
Total Sales	$	728	$	228	$	(36	)	$	920
Three Months Ended June 30, 2016
External Sales	$	623	$	218	$	—		$	841
Intersegment Sales	17		9		(26		)	—
Total Sales	$	640	$	227	$	(26	)	$	841
	Commercial Truck & Industrial		Aftermarket & Trailer		Eliminations			Total
Nine Months Ended June 30, 2017
External Sales	$	1,826	$	599	$	—		$	2,425
Intersegment Sales	61		28		(89		)	—
Total Sales	$	1,887	$	627	$	(89	)	$	2,425
Nine Months Ended June 30, 2016
External Sales	$	1,846	$	625	$	—		$	2,471
Intersegment Sales	58		23		(81		)	—
Total Sales	$	1,904	$	648	$	(81	)	$	2,471

	Three Months Ended June 30,						Nine Months Ended June 30,
	2017			2016			2017			2016
Segment adjusted EBITDA:
Commercial Truck & Industrial	$	75		$	61		$	171		$	169
Aftermarket & Trailer	26			38			78			86
Segment adjusted EBITDA	101			99			249			255
Unallocated legacy and corporate income (expense), net (1)	2			(3		)	—			(2		)
Interest expense, net	(21		)	(20		)	(63		)	(63		)
Provision for income taxes	(11		)	(8		)	(30		)	(22		)
Depreciation and amortization	(18		)	(17		)	(55		)	(48		)
Noncontrolling interests	(3		)	(1		)	(5		)	(2		)
Loss on sale of receivables	(2		)	(2		)	(4		)	(6		)
Asset impairment charges	1			—			(2		)	—
Restructuring costs	—			(6		)	(4		)	(9		)
Income from continuing operations attributable to Meritor, Inc.	$	49		$	42		$	86		$	103

⁽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.

	June 30, 2017			September 30, 2016
Segment Assets:
Commercial Truck & Industrial	$	1,618		$	1,433
Aftermarket & Trailer	466			436
Total segment assets	2,084			1,869
Corporate (1)	916			845
Less: Accounts receivable sold under off-balance sheet factoring programs(2)	(288		)	(220		)
Total assets	$	2,712		$	2,494

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

⁽²⁾  At June 30, 2017 and September 30, 2016, segment assets include $288 million and $220 million, respectively, of accounts receivable sold under off-balance sheet accounts receivable factoring programs (see Note 9). These sold receivables are included in segment assets as the CODM reviews segment assets inclusive of these balances.

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Supplemental Guarantor Condensed Consolidating Financial Statements

9 Months Ended

Jun. 30, 2017

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Supplemental Guarantor Condensed Consolidating Financial Statements

Supplemental Guarantor Condensed Consolidating Financial Statements

Rule 3-10 of Regulation S-X requires that separate financial information for issuers and guarantors of registered securities be filed in certain circumstances. Certain of the company's 100-percent-owned subsidiaries, as defined in the credit agreement (the “Guarantors”), irrevocably and unconditionally guarantee amounts outstanding under the senior secured revolving credit facility on a joint and several basis. Similar subsidiary guarantees were provided for the benefit of the holders of the notes outstanding under the company's indentures (see Note 17).

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

	Three Months Ended June 30, 2017
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	528		$	392		$	—		$	920
Subsidiaries	—			33			77			(110		)	—
Total sales	—			561			469			(110		)	920
Cost of sales	(13		)	(480		)	(395		)	110			(778		)
GROSS MARGIN	(13		)	81			74			—			142
Selling, general and administrative	(34		)	(14		)	(25		)	—			(73		)
Restructuring costs	—			1			(1		)	—			—
Other operating income (expense), net	(1		)	—			1			—			—
OPERATING INCOME (LOSS)	(48		)	68			49			—			69
Other income (expense), net	12			(7		)	(4		)	—			1
Equity in earnings of affiliates	—			12			2			—			14
Interest income (expense), net	(32		)	8			3			—			(21		)
INCOME (LOSS) BEFORE INCOME TAXES	(68		)	81			50			—			63
Benefit (provision) for income taxes	19			(21		)	(9		)	—			(11		)
Equity income from continuing operations of subsidiaries	98			34			—			(132		)	—
INCOME FROM CONTINUING OPERATIONS	49			94			41			(132		)	52
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	—			—			—			(1		)
NET INCOME	48			94			41			(132		)	51
Less: Net income attributable to noncontrolling interests	—			—			(3		)	—			(3		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	48		$	94		$	38		$	(132	)	$	48

	Three Months Ended June 30, 2017
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	48	$	94	$	41		$	(132	)	$	51
Other comprehensive income, net of tax	26		—		18			(18		)	26
Total comprehensive income	74		94		59			(150		)	77
Less: Comprehensive loss (income) attributable to noncontrolling interests	1		—		(4		)	—			(3		)
Comprehensive income attributable to Meritor, Inc.	$	75	$	94	$	55		$	(150	)	$	74

	Three Months Ended June 30, 2016
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	410		$	431		$	—		$	841
Subsidiaries	—			30			14			(44		)	—
Total sales	—			440			445			(44		)	841
Cost of sales	(14		)	(361		)	(383		)	44			(714		)
GROSS MARGIN	(14		)	79			62			—			127
Selling, general and administrative	(23		)	(20		)	(16		)	—			(59		)
Restructuring costs	—			(3		)	(3		)	—			(6		)
Other operating income, net	—			—			—			—			—
OPERATING INCOME (LOSS)	(37		)	56			43			—			62
Other income (expense), net	8			(48		)	40			—			—
Equity in earnings of affiliates	—			8			1			—			9
Interest income (expense), net	(29		)	8			1			—			(20		)
INCOME (LOSS) BEFORE INCOME TAXES	(58		)	24			85			—			51
Provision for income taxes	(1		)	—			(7		)	—			(8		)
Equity income from continuing operations of subsidiaries	101			74			—			(175		)	—
INCOME FROM CONTINUING OPERATIONS	42			98			78			(175		)	43
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	—			—			—			(1		)
NET INCOME	41			98			78			(175		)	42
Less: Net income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	41		$	98		$	77		$	(175	)	$	41

	Three Months Ended June 30, 2016
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	41	$	98	$	78		$	(175	)	$	42
Other comprehensive income (loss)	—		44		(50		)	6			—
Total comprehensive income	41		142		28			(169		)	42
Less: Comprehensive income attributable to noncontrolling interests	—		—		(1		)	—			(1		)
Comprehensive income attributable to Meritor, Inc.	$	41	$	142	$	27		$	(169	)	$	41

	Nine Months Ended June 30, 2017
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,244		$	1,181		$	—		$	2,425
Subsidiaries	—			89			103			(192		)	—
Total sales	—			1,333			1,284			(192		)	2,425
Cost of sales	(42		)	(1,122		)	(1,101		)	192			(2,073		)
GROSS MARGIN	(42		)	211			183			—			352
Selling, general and administrative	(77		)	(67		)	(48		)	—			(192		)
Restructuring costs	2			(1		)	(5		)	—			(4		)
Other operating expense, net	(3		)	—			(2		)	—			(5		)
OPERATING INCOME (LOSS)	(120		)	143			128			—			151
Other income (expense), net	36			(12		)	(23		)	—			1
Equity in earnings of affiliates	—			27			5			—			32
Interest income (expense), net	(99		)	27			9			—			(63		)
INCOME (LOSS) BEFORE INCOME TAXES	(183		)	185			119			—			121
Benefit (provision) for income taxes	54			(56		)	(28		)	—			(30		)
Equity income from continuing operations of subsidiaries	215			75			—			(290		)	—
INCOME FROM CONTINUING OPERATIONS	86			204			91			(290		)	91
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	—			—			—			(1		)
NET INCOME	85			204			91			(290		)	90
Less: Net income attributable to noncontrolling interests	—			—			(5		)	—			(5		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	85		$	204		$	86		$	(290	)	$	85

	Nine Months Ended June 30, 2017
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	85	$	204	$	91		$	(290	)	$	90
Other comprehensive income, net of tax	40		2		12			(14		)	40
Total comprehensive income	125		206		103			(304		)	130
Less: Comprehensive loss (income) attributable to noncontrolling interests	1		—		(5		)	—			(4		)
Comprehensive income attributable to Meritor, Inc.	$	126	$	206	$	98		$	(304	)	$	126

	Nine Months Ended June 30, 2016
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,247		$	1,224		$	—		$	2,471
Subsidiaries	—			85			46			(131		)	—
Total sales	—			1,332			1,270			(131		)	2,471
Cost of sales	(40		)	(1,107		)	(1,103		)	131			(2,119		)
GROSS MARGIN	(40		)	225			167			—			352
Selling, general and administrative	(62		)	(62		)	(51		)	—			(175		)
Restructuring costs	—			(4		)	(5		)	—			(9		)
Other operating expense, net	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(105		)	159			111			—			165
Other income (expense), net	42			(57		)	14			—			(1		)
Equity in earnings of affiliates	—			24			2			—			26
Interest income (expense), net	(88		)	23			2			—			(63		)
INCOME (LOSS) BEFORE INCOME TAXES	(151		)	149			129			—			127
Provision for income taxes	(1		)	—			(21		)	—			(22		)
Equity income from continuing operations of subsidiaries	255			95			—			(350		)	—
INCOME FROM CONTINUING OPERATIONS	103			244			108			(350		)	105
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(4		)	(5		)	(4		)	9			(4		)
NET INCOME	99			239			104			(341		)	101
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	99		$	239		$	102		$	(341	)	$	99

	Nine Months Ended June 30, 2016
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	99	$	239	$	104		$	(341	)	$	101
Other comprehensive income (loss), net of tax	24		56		(52		)	(4		)	24
Total comprehensive income	123		295		52			(345		)	125
Less: Comprehensive income attributable to noncontrolling interests	—		—		(2		)	—			(2		)
Comprehensive income attributable to Meritor, Inc.	$	123	$	295	$	50		$	(345	)	$	123

	June 30, 2017
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents (1)	$	150		$	4		$	77	$	—		$	231
Receivables trade and other, net (1)	1			43			456		—			500
Inventories (1)	—			165			195		—			360
Other current assets	5			14			18		—			37
TOTAL CURRENT ASSETS	156			226			746		—			1,128
NET PROPERTY (1)	21			201			208		—			430
GOODWILL (1)	—			219			172		—			391
OTHER ASSETS	437			129			197		—			763
INVESTMENTS IN SUBSIDIARIES	2,866			769			—		(3,635		)	—
TOTAL ASSETS	$	3,480		$	1,544		$	1,323	$	(3,635	)	$	2,712
CURRENT LIABILITIES:
Short-term debt	$	128		$	3		$	1	$	—		$	132
Accounts and notes payable (1)	51			230			321		—			602
Other current liabilities	103			70			104		—			277
TOTAL CURRENT LIABILITIES	282			303			426		—			1,011
LONG-TERM DEBT	850			1			7		—			858
RETIREMENT BENEFITS	645			—			22		—			667
INTERCOMPANY PAYABLE (RECEIVABLE)	1,744			(1,966		)	222		—			—
OTHER LIABILITIES	31			146			43		—			220
MEZZANINE EQUITY	12			—			—		—			12
EQUITY (DEFICIT) ATTRIBUTABLE TO        MERITOR, INC.	(84		)	3,060			575		(3,635		)	(84		)
NONCONTROLLING INTERESTS (1)	—			—			28		—			28
TOTAL LIABILITIES, MEZZANINE EQUITY AND DEFICIT	$	3,480		$	1,544		$	1,323	$	(3,635	)	$	2,712

⁽¹⁾As of June 30, 2017, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $11 million Receivables, trade and other, net; (iii) $2 million Inventories; (iv) $3 million Net property; (v) $1 million Goodwill; (vi) $10 million Accounts and notes payable; and (vii) $2 million Noncontrolling interests. These assets and liabilities held for sale are included in the Non-Guarantors column.

	September 30, 2016
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents (1)	$	90		$	4		$	66	$	—		$	160
Receivables trade and other, net (1)	1			39			356		—			396
Inventories (1)	—			143			173		—			316
Other current assets	5			12			16		—			33
TOTAL CURRENT ASSETS	96			198			611		—			905
NET PROPERTY (1)	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 (1)	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 (1)	—			—			25		—			25
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	3,140		$	1,426		$	1,182	$	(3,254	)	$	2,494

⁽¹⁾As of September 30, 2016, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $8 million Receivables, trade and other, net; (iii) $1 million Inventories; (iv) $5 million Net property; (v) $5 million Accounts and notes payable; and (vi) $3 million Noncontrolling interests. These assets and liabilities held for sale are included in the Non-Guarantors column.

	Nine Months Ended June 30, 2017
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	(24	)	$	28		$	132		$	—	$	136
INVESTING ACTIVITIES
Capital expenditures	(8		)	(27		)	(17		)	—		(52		)
Net investing cash flows provided by discontinued operations	—			2			—			—		2
CASH USED FOR INVESTING ACTIVITIES	(8		)	(25		)	(17		)	—		(50		)
FINANCING ACTIVITIES
Debt issuance costs	(4		)	—			—			—		(4		)
Intercompany advances	96			—			(96		)	—		—
Other financing activities	—			(3		)	(9		)	—		(12		)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	92			(3		)	(105		)	—		(16		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	60			—			11			—		71
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	90			4			66			—		160
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	150		$	4		$	77		$	—	$	231

	Nine Months Ended June 30, 2016
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR)        OPERATING ACTIVITIES	$	124		$	25		$	(5	)	$	—	$	144
INVESTING ACTIVITIES
Capital expenditures	(16		)	(29		)	(21		)	—		(66		)
Other investing activities	—			4			(1		)	—		3
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(16		)	(24		)	(19		)	—		(59		)
FINANCING ACTIVITIES
Repayment of notes	(55		)	—			—			—		(55		)
Repurchase of common stock	(81		)	—			—			—		(81		)
Intercompany advances	(10		)	—			10			—		—
Other financing activities	—			(4		)	(11		)	—		(15		)
CASH USED FOR FINANCING ACTIVITIES	(146		)	(4		)	(1		)	—		(151		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			2			—		2
CHANGE IN CASH AND CASH EQUIVALENTS	(38		)	(3		)	(23		)	—		(64		)
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	73			6			114			—		193
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	35		$	3		$	91		$	—	$	129

Basis of Presentation

Certain information and footnote disclosures normally included in financial statements prepared in conformity with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. As of June 30, 2017 and September 30, 2016, Parent-only obligations included $672 million and $708 million of pension and retiree medical benefits, respectively (see Note 19). All debt is debt of the Parent other than $12 million and $24 million at June 30, 2017 and September 30, 2016, respectively (see Note 17), and is primarily related to capital lease obligations and lines of credit. There were $1 million and $18 million of cash dividends paid to the Parent by subsidiaries and investments accounted for by the equity method for the nine months ended June 30, 2017 and June 30, 2016, respectively.

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Basis of Presentation (Policies)

9 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

New Accounting Standards

Accounting standards to be implemented

In May 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 amends the scope of modification accounting for share-based payment arrangements and provides guidance on when an entity would be required to apply modification accounting. This standard is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The amendments in this update should be applied prospectively. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In March 2017, the FASB issued ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. ASU 2017-08 affects entities who own investments in callable debt securities and aligns the amortization period of premiums on callable debt securities to expectations incorporated in market pricing on the underlying securities. This standard is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The amendments in this update should be applied on a modified retrospective basis through a cumulative-effective adjustment directly to retained earnings at the beginning of the adoption period. The company does not expect a material impact on its consolidated financial statements from adoption of this guidance.

In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The new guidance requires entities to only include the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses (together with other employee compensation costs). The other components of net benefit cost, including amortization of prior service cost/credit, are to be included in a separate line item(s) outside of any sub-total of operating income. ASU 2017-07 also provides guidance that only the service cost component of net benefit cost is eligible for capitalization. This standard is effective for public business entities for interim and annual periods beginning after December 15, 2017. The revisions in this amendment are to be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. ASU 2017-05 provides guidance which defines an “in substance nonfinancial asset”; unifies guidance related to partial sales of nonfinancial assets; eliminates rules specifically addressing sales of real estate; removes exceptions to the financial asset derecognition model; and clarifies the accounting for contributions of nonfinancial assets to joint ventures. The effective date and the transition requirements for the amendments in ASU 2017-05 are the same as the effective date and transition requirements in Topic 606, described below. The company is currently evaluating the potential impact of this new guidance on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new guidance eliminates the need to determine the fair value of individual assets and liabilities of a reporting unit to measure a goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value. The revised guidance will be applied prospectively, and is effective for calendar year-end SEC filers in 2020. Early adoption is permitted for any impairment tests performed after January 1, 2017. The new guidance is not expected to have a material impact on the company's consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The ASU provides clarification on the definition of a business and adds guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. To be considered a business under the new guidance, it must include an input and a substantive process that together significantly contribute to the ability to create output. The amendment removes the evaluation of whether a market participant could replace missing elements. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and will be applied prospectively. The potential impact of this new guidance will be assessed for future acquisitions or dispositions, but it is not expected to have a material impact on the company's consolidated financial statements.

In October 2016, the FASB issued 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 but 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 FASB 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 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 accounting policies and 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 accounting policies and 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 on its accounting policies and 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 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 on its accounting policies and its consolidated financial statements.

Accounting standards implemented during fiscal year 2017

In January 2017, the FASB issued ASU 2017-03 which amended Accounting Changes and Error Corrections (Topic 250) to state that registrants should consider additional qualitative disclosures if the impact of an issued but not yet adopted ASU is unknown or cannot be reasonably estimated and to include a description of the effect of the accounting policies that the registrant expects to apply, if determined. Transition guidance included in certain issued but not yet adopted ASUs was also updated to reflect this amendment.

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 adopted this standard prospectively in the first quarter of fiscal year 2017. This guidance did not have a material impact on its consolidated financial statements.

Inventories

Inventories are stated at the lower of cost (using FIFO or average methods) or market (determined on the basis of estimated realizable values)

Environmental

Environmental

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

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

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Earnings per Share (Tables)

9 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Reconciliation of basic average common shares outstanding

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

	Three Months Ended June 30,		Nine Months Ended June 30,
	2017	2016	2017	2016
Basic average common shares outstanding	88.4	89.8	87.9	91.2
Impact of restricted shares, restricted share units and performance share units	1.8	2.2	1.4	1.9
Impact of convertible notes	3.1	—	2.1	—
Diluted average common shares outstanding	93.3	92.0	91.4	93.1

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Discontinued Operations (Tables)

9 Months Ended

Jun. 30, 2017

Discontinued Operations and Disposal Groups [Abstract]

Summary of Discontinued Operations

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

	Three Months Ended June 30,						Nine Months Ended June 30,
	2017			2016			2017			2016
Sales	$	—		$	—		$	—		$	—
Loss before income taxes	$	(1	)	$	(1	)	$	(1	)	$	(5	)
Benefit from income taxes	—			—			—			1
Loss from discontinued operations attributable to Meritor, Inc.	$	(1	)	$	(1	)	$	(1	)	$	(4	)

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Goodwill (Tables)

9 Months Ended

Jun. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of the changes in carrying value of goodwill

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

	Commercial Truck & Industrial			Aftermarket & Trailer		Total
Goodwill	$	245		$	160	$	405
Accumulated impairment losses	(15		)	—		(15		)
Beginning balance at September 30, 2016	230			160		390
Foreign currency translation	—			1		1
Balance at June 30, 2017	$	230		$	161	$	391

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Restructuring Costs (Tables)

9 Months Ended

Jun. 30, 2017

Restructuring and Related Activities [Abstract]

Schedule of changes in restructuring reserves

The changes in restructuring reserves for the nine months ended June 30, 2017 and 2016 are as follows (in millions):

	Employee Termination Benefits			Plant Shutdown & Other			Total
Beginning balance at September 30, 2016	$	15		$	1		$	16
Activity during the period:
Charges to continuing operations	4			—			4
Cash payments – continuing operations	(10		)	(1		)	(11		)
Other	(1		)	—			(1		)
Total restructuring reserves at June 30, 2017	8			—			8
Less: non-current restructuring reserves	(1		)	—			(1		)
Restructuring reserves – current, at June 30, 2017	$	7		$	—		$	7
Balance at September 30, 2015	$	10		$	—		$	10
Activity during the period:
Charges to continuing operations	8			1			9
Cash payments – continuing operations	(8		)	—			(8		)
Total restructuring reserves at June 30, 2016	10			1			11
Less: non-current restructuring reserves	(2		)	—			(2		)
Restructuring reserves – current, at June 30, 2016	$	8		$	1		$	9

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Operating Cash Flows (Tables)

9 Months Ended

Jun. 30, 2017

Operating Cash Flow Disclosure [Abstract]

Schedule of Operating Cash Flows

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

	Nine Months Ended June 30,
	2017			2016
OPERATING ACTIVITIES
Net income	$	90		$	101
Less: Loss from discontinued operations, net of tax	(1		)	(4		)
Income from continuing operations	91			105
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization	55			48
Deferred income tax expense	19			2
Restructuring costs	4			9
Asset impairment charges	2			—
Gain on sale of property	—			(2		)
Equity in earnings of affiliates	(32		)	(26		)
Pension and retiree medical expense	11			15
Other adjustments to income from continuing operations	12			5
Dividends received from equity method investments	25			29
Pension and retiree medical contributions	(28		)	(32		)
Restructuring payments	(11		)	(8		)
Changes in off-balance sheet accounts receivable factoring	62			(30		)
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, foreign currency adjustments and discontinued operations	(73		)	31
Operating cash flows provided by continuing operations	137			146
Operating cash flows used for discontinued operations	(1		)	(2		)
CASH PROVIDED BY OPERATING ACTIVITIES	$	136		$	144

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Inventories (Tables)

9 Months Ended

Jun. 30, 2017

Inventory Disclosure [Abstract]

Summary of Inventories

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

	June 30, 2017		September 30, 2016
Finished goods	$	142	$	125
Work in process	33		26
Raw materials, parts and supplies	185		165
Total	$	360	$	316

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Other Current Assets (Tables)

9 Months Ended

Jun. 30, 2017

Other Current Assets Disclosure [Abstract]

Summary of other current assets

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

	June 30, 2017		September 30, 2016
Asbestos-related recoveries (see Note 20)	$	10	$	10
Prepaid and other	27		23
Other current assets	$	37	$	33

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Net Property (Tables)

9 Months Ended

Jun. 30, 2017

Property, Plant and Equipment [Abstract]

Summary of net property

Net property is summarized as follows (in millions):

	June 30, 2017			September 30, 2016
Property at cost:
Land and land improvements	$	29		$	30
Buildings	234			231
Machinery and equipment	867			839
Company-owned tooling	122			113
Construction in progress	38			56
Total	1,290			1,269
Less: accumulated depreciation	(860		)	(830		)
Net property	$	430		$	439

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Other Assets (Tables)

9 Months Ended

Jun. 30, 2017

Other Assets, Noncurrent [Abstract]

Summary of other assets

Other assets are summarized as follows (in millions):

	June 30, 2017		September 30, 2016
Investments in non-consolidated joint ventures	$	108	$	100
Asbestos-related recoveries (see Note 20)	44		49
Unamortized revolver debt issuance costs	8		7
Capitalized software costs, net	28		29
Non-current deferred income tax assets, net	395		413
Assets for uncertain tax positions	37		35
Prepaid pension costs	138		123
Other	5		4
Other assets	$	763	$	760

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Other Current Liabilities (Tables)

9 Months Ended

Jun. 30, 2017

Other Current Liabilities Disclosure [Abstract]

Summary of other current liabilities

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

	June 30, 2017		September 30, 2016
Compensation and benefits	$	121	$	115
Income taxes	4		8
Taxes other than income taxes	24		21
Accrued interest	15		14
Product warranties	18		18
Environmental reserves (see Note 20)	5		7
Restructuring (see Note 7)	7		14
Asbestos-related liabilities (see Note 20)	18		18
Indemnity obligations (see Note 20)	2		2
Other	63		51
Other current liabilities	$	277	$	268

Summary of the changes in product warranties

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

	Nine Months Ended June 30,
	2017			2016
Total product warranties – beginning of period	$	44		$	48
Accruals for product warranties	8			11
Payments	(10		)	(13		)
Change in estimates and other	1			(1		)
Total product warranties – end of period	43			45
Less: Non-current product warranties	(25		)	(27		)
Product warranties – current	$	18		$	18

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Other Liabilities (Tables)

9 Months Ended

Jun. 30, 2017

Other Liabilities Disclosure [Abstract]

Summary of other liabilities

Other liabilities are summarized as follows (in millions):

	June 30, 2017		September 30, 2016
Asbestos-related liabilities (see Note 20)	$	122	$	136
Restructuring (see Note 7)	1		2
Non-current deferred income tax liabilities	13		12
Liabilities for uncertain tax positions	15		16
Product warranties (see Note 15)	25		26
Environmental (see Note 20)	6		6
Indemnity obligations (see Note 20)	11		11
Other	27		29
Other liabilities	$	220	$	238

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Long-Term Debt (Tables)

9 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Summary of long-term debt

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

	June 30, 2017			September 30, 2016
4.0 percent convertible notes due 2027(1)(3)	$	142		$	142
7.875 percent convertible notes due 2026(1)(4)	131			129
6.75 percent notes due 2021(2)(5)	271			271
6.25 percent notes due 2024(2)(6)	443			442
Capital lease obligation	13			16
Export financing arrangements and other	—			10
Unamortized discount on convertible notes (7)	(10		)	(14		)
Subtotal	990			996
Less: current maturities	(132		)	(14		)
Long-term debt	$	858		$	982

⁽¹⁾ The 4.0 percent convertible notes due 2027 and 7.875 percent convertible notes due 2026 contain a put and call feature, which allows for earlier redemption beginning in 2019 and 2020, respectively.

⁽²⁾ The 6.75 percent notes and 6.25 percent notes contain a call option, which allows for early redemption.

⁽³⁾ The 4.0 percent convertible notes due 2027 are presented net of $1 million unamortized issuance costs as of June 30, 2017 and September 30, 2016.

⁽⁴⁾ The 7.875 percent convertible notes due 2026 are presented net of $2 million unamortized issuance costs as of June 30, 2017 and September 30, 2016, and $7 million and $9 million original issuance discount as of June 30, 2017 and September 30, 2016, respectively.

⁽⁵⁾ The 6.75 percent notes due 2021 are presented net of $4 millionunamortized issuance costs as of June 30, 2017 and September 30, 2016.

⁽⁶⁾ The 6.25 percent notes due 2024 are presented net of $7 million and $8 million unamortized issuance costs as of June 30, 2017 and September 30, 2016, respectively.

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

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Financial Instruments (Tables)

9 Months Ended

Jun. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair value of financial instruments

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

	June 30, 2017				September 30, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	231	$	231	$	160	$	160
Short-term debt	132		245		14		14
Long-term debt	858		912		982		1,051
Foreign exchange forward contracts (other assets)	—		—		1		1
Foreign exchange forward contracts (other liabilities)	—		—		2		2
Short-term foreign currency option contracts (other assets)	1		1		—		—
Long-term foreign currency option contracts (other assets)	1		1		2		2

Offsetting of derivative assets and liabilities

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

	June 30, 2017				September 30, 2016
	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	1	(1	)	—	2	—	2

Fair value of financial instruments by valuation hierarchy

Fair value of financial instruments by the valuation hierarchy at June 30, 2017 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	231	$	—	$	—
Short-term debt	—		241		4
Long-term debt	—		903		9
Foreign exchange forward contracts (asset)	—		—		—
Foreign exchange forward contracts (liability)	—		—		—
Short-term foreign currency option contracts (asset)	—		—		1
Long-term foreign currency option contracts (asset)	—		—		1

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 and 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

Reconciliation of changes in fair value

The tables below provide a reconciliation of changes in fair value of the Level 3 financial assets and liabilities measured at fair value in the condensed consolidated balance sheet for the three and nine months ended June 30, 2017 and 2016, respectively. No transfers of assets between any of the Levels occurred during these periods.

Three months ended June 30, 2017 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)			Total
Fair Value as of March 31, 2017	$	3		$	2		$	5
Total unrealized gains (losses):
Included in other income	—			—			—
Included in cost of sales	(1		)	—			(1		)
Total realized gains (losses):
Included in other income	—			—			—
Included in cost of sales	—			—			—
Purchases, issuances, sales and settlements:
Purchases	—			1			1
Settlements	(2		)	(1		)	(3		)
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	1			(1		)	—
Fair Value as of June 30, 2017	$	1		$	1		$	2

Three months ended June 30, 2016 (in millions)	Short-term foreign currency option contracts (asset)		Long-term foreign currency option contracts (asset)		Total
Fair Value as of March 31, 2016	$	—	$	—	$	—
Total unrealized gains (losses):
Included in other income	—		—		—
Included in cost of sales	—		—		—
Total realized gains (losses):
Included in other income	—		—		—
Included in cost of sales	—		—		—
Purchases, issuances, sales and settlements:
Purchases	—		—		—
Settlements	—		—		—
Transfer in and / or out of Level 3 (1)	—		—		—
Reclass between short-term and long-term	—		—		—
Fair Value as of June 30, 2016	$	—	$	—	$	—

Nine months ended June 30, 2017 (in millions)	Short-term foreign currency option contracts (asset)			Long-term foreign currency option contracts (asset)			Total
Fair Value as of September 30, 2016	$	—		$	2		$	2
Total unrealized gains (losses):
Included in other income	—			—			—
Included in cost of sales	—			2			2
Total realized gains (losses):
Included in other income	—			—			—
Included in cost of sales	—			—			—
Purchases, issuances, sales and settlements:
Purchases	—			1			1
Settlements	(2		)	(1		)	(3		)
Transfer in and / or out of Level 3 (1)	—			—			—
Reclass between short-term and long-term	3			(3		)	—
Fair Value as of June 30, 2017	$	1		$	1		$	2

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

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

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Retirement Benefit Liabilities (Tables)

9 Months Ended

Jun. 30, 2017

Retirement Benefits [Abstract]

Summary of retirement benefit liabilities

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

	June 30, 2017			September 30, 2016
Retiree medical liability	$	432		$	447
Pension liability	261			283
Other	13			13
Subtotal	706			743
Less: current portion (included in compensation and benefits, Note 15)	(39		)	(40		)
Retirement benefits	$	667		$	703

Components of net periodic pension and retiree medical expense

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

	2017						2016
	Pension			Retiree Medical			Pension			Retiree Medical
Interest cost	$	13		$	4		$	16		$	4
Assumed return on plan assets	(24		)	—			(24		)	—
Amortization of prior service costs	—			(1		)	—			—
Recognized actuarial loss	8			4			6			3
Total expense (income)	$	(3	)	$	7		$	(2	)	$	7

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

	2017						2016
	Pension			Retiree Medical			Pension			Retiree Medical
Interest cost	$	39		$	11		$	49		$	13
Assumed return on plan assets	(71		)	—			(74		)	—
Amortization of prior service costs	—			(2		)	—			—
Recognized actuarial loss	23			11			18			9
Total expense (income)	$	(9	)	$	20		$	(7	)	$	22

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Contingencies (Tables)

9 Months Ended

Jun. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Summary of environmental reserves

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

	Superfund Sites		Non-Superfund Sites			Total
Beginning balance at September 30, 2016	$	2	$	11		$	13
Payments and other	—		(4		)	(4		)
Accruals	—		2			2
Balance at June 30, 2017	$	2	$	9		$	11

Asbestos related reserves and recoveries

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

	June 30, 2017		September 30, 2016
Pending and future claims	$	70	$	70
Billed but unpaid claims	3		2
Asbestos-related liabilities	$	73	$	72
Asbestos-related insurance recoveries	$	27	$	32

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

	June 30, 2017		September 30, 2016
Pending and future claims	$	60	$	60
Billed but unpaid claims	4		1
Asbestos-related liabilities	$	64	$	61
Asbestos-related insurance recoveries	$	27	$	27

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Shareholders' Equity (Tables)

9 Months Ended

Jun. 30, 2017

Equity [Abstract]

Schedule of accumulated other comprehensive loss

The components of AOCL and the changes in AOCL by components, net of tax, for nine months ended June 30, 2017 and 2016 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at September 30, 2016	$	(66	)	$	(740	)	$	(3	)	$	(809	)
Other comprehensive income (loss) before reclassification	8			1			—			9
Amounts reclassified from accumulated other comprehensive loss	—			32			—			32
Net current-period other comprehensive income (loss)	$	8		$	33		$	—		$	41
Balance at June 30, 2017	$	(58	)	$	(707	)	$	(3	)	$	(768	)

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at March 31, 2016	$	(50	)	$	(687	)	$	(5	)	$	(742	)
Other comprehensive income (loss) before reclassification	(10		)	(2		)	3			(9		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			9			—			9
Net current-period other comprehensive income (loss)	$	(10	)	$	7		$	3		$	—
Balance at June 30, 2016	$	(60	)	$	(680	)	$	(2	)	$	(742	)

	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	(6		)	(2		)	5			(3		)
Amounts reclassified from accumulated other comprehensive loss - net of tax	—			27			—			27
Net current-period other comprehensive income (loss)	$	(6	)	$	25		$	5		$	24
Balance at June 30, 2016	$	(60	)	$	(680	)	$	(2	)	$	(742	)

The components of AOCL and the changes in AOCL by components, net of tax, for three months ended June 30, 2017 and 2016 are as follows (in millions):

	Foreign Currency Translation			Employee Benefit Related Adjustments			Unrealized Loss, net of tax			Total
Balance at March 31, 2017	$	(75	)	$	(718	)	$	(1	)	$	(794	)
Other comprehensive income (loss) before reclassification	17			—			(2		)	15
Amounts reclassified from accumulated other comprehensive loss	—			11			—			11
Net current-period other comprehensive income (loss)	$	17		$	11		$	(2	)	$	26
Balance at June 30, 2017	$	(58	)	$	(707	)	$	(3	)	$	(768	)

Reclassification out of accumulated other comprehensive income

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(2	)	(a)
Actuarial losses	34			(a)
	32			Total before tax
	(10		)	Tax benefit
Total reclassifications for the period	$	22		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 19 for additional details), which is recorded in cost of sales and selling, general and administrative expenses.

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Actuarial losses	$	9	(b)
	9		Total before tax
	—		Tax expense
Total reclassifications for the period	$	9	Net of tax
(b)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 19 for additional details).

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service costs	$	(1	)	(a)
Actuarial losses	$	12		(a)
	11			Total before tax
	(3		)	Tax benefit
Total reclassifications for the period	$	8		Net of tax
(a)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 19 for additional details), which is recorded in cost of sales and selling, general and administrative expenses.

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Actuarial losses	$	27	(b)
	27		Total before tax
	—		Tax expense
Total reclassifications for the period	$	27	Net of tax
(b)  These accumulated other comprehensive income components are included in the computation of net periodic pension and retiree medical expense (see Note 19 for additional details).

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Business Segment Information (Tables)

9 Months Ended

Jun. 30, 2017

Segment Reporting [Abstract]

Summary of segment information

Segment information is summarized as follows (in millions):

	Commercial Truck & Industrial		Aftermarket & Trailer		Eliminations			Total
Three Months Ended June 30, 2017
External Sales	$	704	$	216	$	—		$	920
Intersegment Sales	24		12		(36		)	—
Total Sales	$	728	$	228	$	(36	)	$	920
Three Months Ended June 30, 2016
External Sales	$	623	$	218	$	—		$	841
Intersegment Sales	17		9		(26		)	—
Total Sales	$	640	$	227	$	(26	)	$	841
	Commercial Truck & Industrial		Aftermarket & Trailer		Eliminations			Total
Nine Months Ended June 30, 2017
External Sales	$	1,826	$	599	$	—		$	2,425
Intersegment Sales	61		28		(89		)	—
Total Sales	$	1,887	$	627	$	(89	)	$	2,425
Nine Months Ended June 30, 2016
External Sales	$	1,846	$	625	$	—		$	2,471
Intersegment Sales	58		23		(81		)	—
Total Sales	$	1,904	$	648	$	(81	)	$	2,471

Segment income attributable to parent

	Three Months Ended June 30,						Nine Months Ended June 30,
	2017			2016			2017			2016
Segment adjusted EBITDA:
Commercial Truck & Industrial	$	75		$	61		$	171		$	169
Aftermarket & Trailer	26			38			78			86
Segment adjusted EBITDA	101			99			249			255
Unallocated legacy and corporate income (expense), net (1)	2			(3		)	—			(2		)
Interest expense, net	(21		)	(20		)	(63		)	(63		)
Provision for income taxes	(11		)	(8		)	(30		)	(22		)
Depreciation and amortization	(18		)	(17		)	(55		)	(48		)
Noncontrolling interests	(3		)	(1		)	(5		)	(2		)
Loss on sale of receivables	(2		)	(2		)	(4		)	(6		)
Asset impairment charges	1			—			(2		)	—
Restructuring costs	—			(6		)	(4		)	(9		)
Income from continuing operations attributable to Meritor, Inc.	$	49		$	42		$	86		$	103

⁽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.

Schedule of segment assets

	June 30, 2017			September 30, 2016
Segment Assets:
Commercial Truck & Industrial	$	1,618		$	1,433
Aftermarket & Trailer	466			436
Total segment assets	2,084			1,869
Corporate (1)	916			845
Less: Accounts receivable sold under off-balance sheet factoring programs(2)	(288		)	(220		)
Total assets	$	2,712		$	2,494

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

⁽²⁾  At June 30, 2017 and September 30, 2016, segment assets include $288 million and $220 million, respectively, of accounts receivable sold under off-balance sheet accounts receivable factoring programs (see Note 9). These sold receivables are included in segment assets as the CODM reviews segment assets inclusive of these balances.

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Supplemental Guarantor Condensed Consolidating Financial Statements (Tables)

9 Months Ended

Jun. 30, 2017

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Schedule of condensed consolidating statement of operations

	Three Months Ended June 30, 2017
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	528		$	392		$	—		$	920
Subsidiaries	—			33			77			(110		)	—
Total sales	—			561			469			(110		)	920
Cost of sales	(13		)	(480		)	(395		)	110			(778		)
GROSS MARGIN	(13		)	81			74			—			142
Selling, general and administrative	(34		)	(14		)	(25		)	—			(73		)
Restructuring costs	—			1			(1		)	—			—
Other operating income (expense), net	(1		)	—			1			—			—
OPERATING INCOME (LOSS)	(48		)	68			49			—			69
Other income (expense), net	12			(7		)	(4		)	—			1
Equity in earnings of affiliates	—			12			2			—			14
Interest income (expense), net	(32		)	8			3			—			(21		)
INCOME (LOSS) BEFORE INCOME TAXES	(68		)	81			50			—			63
Benefit (provision) for income taxes	19			(21		)	(9		)	—			(11		)
Equity income from continuing operations of subsidiaries	98			34			—			(132		)	—
INCOME FROM CONTINUING OPERATIONS	49			94			41			(132		)	52
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	—			—			—			(1		)
NET INCOME	48			94			41			(132		)	51
Less: Net income attributable to noncontrolling interests	—			—			(3		)	—			(3		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	48		$	94		$	38		$	(132	)	$	48

	Three Months Ended June 30, 2016
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	410		$	431		$	—		$	841
Subsidiaries	—			30			14			(44		)	—
Total sales	—			440			445			(44		)	841
Cost of sales	(14		)	(361		)	(383		)	44			(714		)
GROSS MARGIN	(14		)	79			62			—			127
Selling, general and administrative	(23		)	(20		)	(16		)	—			(59		)
Restructuring costs	—			(3		)	(3		)	—			(6		)
Other operating income, net	—			—			—			—			—
OPERATING INCOME (LOSS)	(37		)	56			43			—			62
Other income (expense), net	8			(48		)	40			—			—
Equity in earnings of affiliates	—			8			1			—			9
Interest income (expense), net	(29		)	8			1			—			(20		)
INCOME (LOSS) BEFORE INCOME TAXES	(58		)	24			85			—			51
Provision for income taxes	(1		)	—			(7		)	—			(8		)
Equity income from continuing operations of subsidiaries	101			74			—			(175		)	—
INCOME FROM CONTINUING OPERATIONS	42			98			78			(175		)	43
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	—			—			—			(1		)
NET INCOME	41			98			78			(175		)	42
Less: Net income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	41		$	98		$	77		$	(175	)	$	41

	Nine Months Ended June 30, 2017
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,244		$	1,181		$	—		$	2,425
Subsidiaries	—			89			103			(192		)	—
Total sales	—			1,333			1,284			(192		)	2,425
Cost of sales	(42		)	(1,122		)	(1,101		)	192			(2,073		)
GROSS MARGIN	(42		)	211			183			—			352
Selling, general and administrative	(77		)	(67		)	(48		)	—			(192		)
Restructuring costs	2			(1		)	(5		)	—			(4		)
Other operating expense, net	(3		)	—			(2		)	—			(5		)
OPERATING INCOME (LOSS)	(120		)	143			128			—			151
Other income (expense), net	36			(12		)	(23		)	—			1
Equity in earnings of affiliates	—			27			5			—			32
Interest income (expense), net	(99		)	27			9			—			(63		)
INCOME (LOSS) BEFORE INCOME TAXES	(183		)	185			119			—			121
Benefit (provision) for income taxes	54			(56		)	(28		)	—			(30		)
Equity income from continuing operations of subsidiaries	215			75			—			(290		)	—
INCOME FROM CONTINUING OPERATIONS	86			204			91			(290		)	91
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1		)	—			—			—			(1		)
NET INCOME	85			204			91			(290		)	90
Less: Net income attributable to noncontrolling interests	—			—			(5		)	—			(5		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	85		$	204		$	86		$	(290	)	$	85

	Nine Months Ended June 30, 2016
	Parent			Guarantors			Non- Guarantors			Elims			Consolidated
Sales
External	$	—		$	1,247		$	1,224		$	—		$	2,471
Subsidiaries	—			85			46			(131		)	—
Total sales	—			1,332			1,270			(131		)	2,471
Cost of sales	(40		)	(1,107		)	(1,103		)	131			(2,119		)
GROSS MARGIN	(40		)	225			167			—			352
Selling, general and administrative	(62		)	(62		)	(51		)	—			(175		)
Restructuring costs	—			(4		)	(5		)	—			(9		)
Other operating expense, net	(3		)	—			—			—			(3		)
OPERATING INCOME (LOSS)	(105		)	159			111			—			165
Other income (expense), net	42			(57		)	14			—			(1		)
Equity in earnings of affiliates	—			24			2			—			26
Interest income (expense), net	(88		)	23			2			—			(63		)
INCOME (LOSS) BEFORE INCOME TAXES	(151		)	149			129			—			127
Provision for income taxes	(1		)	—			(21		)	—			(22		)
Equity income from continuing operations of subsidiaries	255			95			—			(350		)	—
INCOME FROM CONTINUING OPERATIONS	103			244			108			(350		)	105
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(4		)	(5		)	(4		)	9			(4		)
NET INCOME	99			239			104			(341		)	101
Less: Net income attributable to noncontrolling interests	—			—			(2		)	—			(2		)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	99		$	239		$	102		$	(341	)	$	99

Schedule of condensed consolidating statement of comprehensive income (loss)

	Three Months Ended June 30, 2017
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	48	$	94	$	41		$	(132	)	$	51
Other comprehensive income, net of tax	26		—		18			(18		)	26
Total comprehensive income	74		94		59			(150		)	77
Less: Comprehensive loss (income) attributable to noncontrolling interests	1		—		(4		)	—			(3		)
Comprehensive income attributable to Meritor, Inc.	$	75	$	94	$	55		$	(150	)	$	74

	Three Months Ended June 30, 2016
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	41	$	98	$	78		$	(175	)	$	42
Other comprehensive income (loss)	—		44		(50		)	6			—
Total comprehensive income	41		142		28			(169		)	42
Less: Comprehensive income attributable to noncontrolling interests	—		—		(1		)	—			(1		)
Comprehensive income attributable to Meritor, Inc.	$	41	$	142	$	27		$	(169	)	$	41

	Nine Months Ended June 30, 2017
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	85	$	204	$	91		$	(290	)	$	90
Other comprehensive income, net of tax	40		2		12			(14		)	40
Total comprehensive income	125		206		103			(304		)	130
Less: Comprehensive loss (income) attributable to noncontrolling interests	1		—		(5		)	—			(4		)
Comprehensive income attributable to Meritor, Inc.	$	126	$	206	$	98		$	(304	)	$	126

	Nine Months Ended June 30, 2016
	Parent		Guarantors		Non- Guarantors			Elims			Consolidated
Net income	$	99	$	239	$	104		$	(341	)	$	101
Other comprehensive income (loss), net of tax	24		56		(52		)	(4		)	24
Total comprehensive income	123		295		52			(345		)	125
Less: Comprehensive income attributable to noncontrolling interests	—		—		(2		)	—			(2		)
Comprehensive income attributable to Meritor, Inc.	$	123	$	295	$	50		$	(345	)	$	123

Schedule of condensed consolidating balance sheet

	June 30, 2017
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents (1)	$	150		$	4		$	77	$	—		$	231
Receivables trade and other, net (1)	1			43			456		—			500
Inventories (1)	—			165			195		—			360
Other current assets	5			14			18		—			37
TOTAL CURRENT ASSETS	156			226			746		—			1,128
NET PROPERTY (1)	21			201			208		—			430
GOODWILL (1)	—			219			172		—			391
OTHER ASSETS	437			129			197		—			763
INVESTMENTS IN SUBSIDIARIES	2,866			769			—		(3,635		)	—
TOTAL ASSETS	$	3,480		$	1,544		$	1,323	$	(3,635	)	$	2,712
CURRENT LIABILITIES:
Short-term debt	$	128		$	3		$	1	$	—		$	132
Accounts and notes payable (1)	51			230			321		—			602
Other current liabilities	103			70			104		—			277
TOTAL CURRENT LIABILITIES	282			303			426		—			1,011
LONG-TERM DEBT	850			1			7		—			858
RETIREMENT BENEFITS	645			—			22		—			667
INTERCOMPANY PAYABLE (RECEIVABLE)	1,744			(1,966		)	222		—			—
OTHER LIABILITIES	31			146			43		—			220
MEZZANINE EQUITY	12			—			—		—			12
EQUITY (DEFICIT) ATTRIBUTABLE TO        MERITOR, INC.	(84		)	3,060			575		(3,635		)	(84		)
NONCONTROLLING INTERESTS (1)	—			—			28		—			28
TOTAL LIABILITIES, MEZZANINE EQUITY AND DEFICIT	$	3,480		$	1,544		$	1,323	$	(3,635	)	$	2,712

⁽¹⁾As of June 30, 2017, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $11 million Receivables, trade and other, net; (iii) $2 million Inventories; (iv) $3 million Net property; (v) $1 million Goodwill; (vi) $10 million Accounts and notes payable; and (vii) $2 million Noncontrolling interests. These assets and liabilities held for sale are included in the Non-Guarantors column.

	September 30, 2016
	Parent			Guarantors			Non- Guarantors		Elims			Consolidated
CURRENT ASSETS:
Cash and cash equivalents (1)	$	90		$	4		$	66	$	—		$	160
Receivables trade and other, net (1)	1			39			356		—			396
Inventories (1)	—			143			173		—			316
Other current assets	5			12			16		—			33
TOTAL CURRENT ASSETS	96			198			611		—			905
NET PROPERTY (1)	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 (1)	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 (1)	—			—			25		—			25
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	3,140		$	1,426		$	1,182	$	(3,254	)	$	2,494

⁽¹⁾As of September 30, 2016, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $8 million Receivables, trade and other, net; (iii) $1 million Inventories; (iv) $5 million Net property; (v) $5 million Accounts and notes payable; and (vi) $3 million Noncontrolling interests. These assets and liabilities held for sale are included in the Non-Guarantors column.

Schedule of condensed consolidating statement of cash flows

	Nine Months Ended June 30, 2017
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$	(24	)	$	28		$	132		$	—	$	136
INVESTING ACTIVITIES
Capital expenditures	(8		)	(27		)	(17		)	—		(52		)
Net investing cash flows provided by discontinued operations	—			2			—			—		2
CASH USED FOR INVESTING ACTIVITIES	(8		)	(25		)	(17		)	—		(50		)
FINANCING ACTIVITIES
Debt issuance costs	(4		)	—			—			—		(4		)
Intercompany advances	96			—			(96		)	—		—
Other financing activities	—			(3		)	(9		)	—		(12		)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	92			(3		)	(105		)	—		(16		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			1			—		1
CHANGE IN CASH AND CASH EQUIVALENTS	60			—			11			—		71
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	90			4			66			—		160
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	150		$	4		$	77		$	—	$	231

	Nine Months Ended June 30, 2016
	Parent			Guarantors			Non- Guarantors			Elims		Consolidated
CASH PROVIDED BY (USED FOR)        OPERATING ACTIVITIES	$	124		$	25		$	(5	)	$	—	$	144
INVESTING ACTIVITIES
Capital expenditures	(16		)	(29		)	(21		)	—		(66		)
Other investing activities	—			4			(1		)	—		3
Net investing cash flows provided by discontinued operations	—			1			3			—		4
CASH USED FOR INVESTING ACTIVITIES	(16		)	(24		)	(19		)	—		(59		)
FINANCING ACTIVITIES
Repayment of notes	(55		)	—			—			—		(55		)
Repurchase of common stock	(81		)	—			—			—		(81		)
Intercompany advances	(10		)	—			10			—		—
Other financing activities	—			(4		)	(11		)	—		(15		)
CASH USED FOR FINANCING ACTIVITIES	(146		)	(4		)	(1		)	—		(151		)
EFFECT OF CHANGES IN FOREIGN CURRENCY        EXCHANGE RATES ON CASH AND CASH        EQUIVALENTS	—			—			2			—		2
CHANGE IN CASH AND CASH EQUIVALENTS	(38		)	(3		)	(23		)	—		(64		)
CASH AND CASH EQUIVALENTS AT BEGINNING        OF PERIOD	73			6			114			—		193
CASH AND CASH EQUIVALENTS AT END OF        PERIOD	$	35		$	3		$	91		$	—	$	129

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Earnings per Share - Reconciliation of common shares (Details) - shares shares in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Earnings Per Share [Abstract]
Basic average common shares outstanding (in shares)	88.4	89.8	87.9	91.2
Impact of restricted shares, restricted share units and performance share units (in shares)	1.8	2.2	1.4	1.9
Impact of convertible notes (in shares)	3.1	0.0	2.1	0.0
Diluted average common shares outstanding (in shares)	93.3	92.0	91.4	93.1

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Earnings per Share - Additional information (Details) - USD ($) $ / shares in Units, $ in Millions					1 Months Ended			3 Months Ended		9 Months Ended
	Dec. 01, 2016	Dec. 01, 2015	Dec. 01, 2014	Dec. 01, 2013	Nov. 30, 2016	Nov. 30, 2015	Nov. 30, 2014	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Nov. 30, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Impact of convertible notes (in shares)								3,100,000	0	2,100,000	0
Impact of restricted shares, restricted share units and performance share units (in shares)								1,800,000	2,200,000	1,400,000	1,900,000
Share-based compensation expense								$ 5	$ 2	$ 12	$ 8
Antidilutive shares excluded from computation of earnings per share (in shares)									300,000		300,000
Convertible Notes | 7.875% Convertible Notes Due 2026
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Interest rate								7.875%		7.875%
Executive Officer
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number or shares issuable per performance share unit (in shares)					1	1	1
Executive Officer | Performance Shares
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number or shares issuable per performance share unit (in shares)												1
Exercise price (in usd per share)	$ 12.77	$ 10.51	$ 13.74	$ 7.97
Executive Officer | Performance Shares | Performance period of October 1, 2015 to September 30, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance period					3 years	3 years
Shares authorized for grant (in shares)						700,000
Executive Officer | Performance Shares | Performance period of October 1, 2015 to September 30, 2018 | Minimum
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance-based vesting percentage										0.00%
Executive Officer | Performance Shares | Performance period of October 1, 2015 to September 30, 2018 | Maximum
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance-based vesting percentage										200.00%
Executive Officer | Performance Shares | Performance period of October 1, 2015 to September 30, 2018 | Performance Objective One
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Award vesting rights percentage										50.00%
Executive Officer | Performance Shares | Performance period of October 1, 2015 to September 30, 2018 | Performance Objective Two
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Award vesting rights percentage										50.00%
Executive Officer | Performance Shares | Performance period of October 1, 2016 to September 30, 2019
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares authorized for grant (in shares)					600,000
Executive Officer | Performance Shares | Performance period of October 1, 2016 to September 30, 2019 | Minimum
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance-based vesting percentage										0.00%
Executive Officer | Performance Shares | Performance period of October 1, 2016 to September 30, 2019 | Maximum
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance-based vesting percentage										200.00%
Executive Officer | Performance Shares | Performance period of October 1, 2016 to September 30, 2019 | Performance Objective One
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Award vesting rights percentage										50.00%
Executive Officer | Performance Shares | Performance period of October 1, 2016 to September 30, 2019 | Performance Objective Two
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Award vesting rights percentage										25.00%
Executive Officer | Performance Shares | Performance period of October 1, 2016 to September 30, 2019 | Performance Objective Three
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Award vesting rights percentage										25.00%
Executive Officer | Performance Shares | Performance period of October 1, 2014 to September 30, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance period										3 years
Shares authorized for grant (in shares)							600,000
Executive Officer | Performance Shares | Performance period of October 1, 2014 to September 30, 2017 | Minimum
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance-based vesting percentage										0.00%
Executive Officer | Performance Shares | Performance period of October 1, 2014 to September 30, 2017 | Maximum
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance-based vesting percentage										200.00%
Executive Officer | Performance Shares | Performance period of October 1, 2014 to September 30, 2017 | Performance Objective One
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Award vesting rights percentage										75.00%
Executive Officer | Performance Shares | Performance period of October 1, 2014 to September 30, 2017 | Performance Objective Two
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Award vesting rights percentage										25.00%
Executive Officer | Performance Shares | Performance period of October 1, 2013 to September 30, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Performance period	3 years
Performance share units vested or forfeited, percentage	112.00%
Impact of convertible notes (in shares)								100,000	1,900,000	400,000	1,400,000
Executive Officer | Restricted Share Units (RSUs)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Exercise price (in usd per share)	$ 12.77	$ 10.51	$ 13.74
Shares granted (in shares)					500,000	500,000	400,000
Vesting period	3 years	3 years	3 years

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Discontinued Operations (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Sep. 30, 2016
Discontinued Operations and Disposal Groups [Abstract]
Sales	$ 0	$ 0	$ 0	$ 0
Loss before income taxes	(1)	(1)	(1)	(5)
Benefit from income taxes	0	0	0	1
Loss from discontinued operations attributable to Meritor, Inc.	(1)	$ (1)	(1)	$ (4)
Discontinued operations, assets	1		1		$ 1
Discontinued operations, liabilities	$ 6		$ 6		$ 6

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Assets and Liabilities Held for Sale (Details) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Assets And Liabilities Held-For-Sale [Abstract]
Impairment charge for assets held for sale		$ 3
Increase of fair value write-up	$ 1
Aftermarket & Trailer
Long Lived Assets Held-for-sale [Line Items]
Addition in assets meeting held for sale criteria	$ 2

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Goodwill (Details) $ in Millions		9 Months Ended
		Jun. 30, 2017 USD ($) segment	Sep. 30, 2016 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Number of operating segments | segment		2
Number of reportable segments | segment		2
Goodwill [Line Items]
Goodwill gross			$ 405
Accumulated impairment losses, Beginning balance			(15)
Goodwill [Roll Forward]
Goodwill net, Beginning balance	[1]	$ 390
Foreign currency translation		1
Goodwill net, Ending balance	[1]	391
Commercial Truck & Industrial
Goodwill [Line Items]
Goodwill gross			245
Accumulated impairment losses, Beginning balance			(15)
Goodwill [Roll Forward]
Goodwill net, Beginning balance		230
Foreign currency translation		0
Goodwill net, Ending balance		230
Aftermarket & Trailer
Goodwill [Line Items]
Goodwill gross			160
Accumulated impairment losses, Beginning balance			$ 0
Goodwill [Roll Forward]
Goodwill net, Beginning balance		160
Foreign currency translation		1
Goodwill net, Ending balance		$ 161

[1] As of June 30, 2017, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $11 million Receivables, trade and other, net; (iii) $2 million Inventories; (iv) $3 million Net property; (v) $1 million Goodwill; (vi) $10 million Accounts and notes payable; and (vii) $2 million Noncontrolling interests. As of September 30, 2016, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $8 million Receivables, trade and other, net; (iii) $1 million Inventories; (iv) $5 million Net property; (v) $5 million Accounts and notes payable; and (vi) $3 million Noncontrolling interests.

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Restructuring Costs (Details) - USD ($) $ in Millions	3 Months Ended			6 Months Ended	9 Months Ended
	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2016	Mar. 31, 2016	Jun. 30, 2017	Jun. 30, 2016	Sep. 30, 2016
Restructuring Reserve [Roll Forward]
Beginning balance				$ 10	$ 16	$ 10
Charges to continuing operations	$ 0		$ 6		4	9
Cash payments – continuing operations					(11)	(8)
Other					(1)
Ending balance	8		11		8	11
Less: non-current restructuring reserves	(1)		(2)		(1)	(2)	$ (2)
Restructuring reserves – current	7		9		7	9	$ 14
Commercial Truck & Industrial, Aftermarket & Trailer
Restructuring Reserve [Roll Forward]
Charges to continuing operations		$ 4	5
Employee Termination Benefits
Restructuring Reserve [Roll Forward]
Beginning balance				10	15	10
Charges to continuing operations					4	8
Cash payments – continuing operations					(10)	(8)
Other					(1)
Ending balance	8		10		8	10
Less: non-current restructuring reserves	(1)		(2)		(1)	(2)
Restructuring reserves – current	7		8		7	8
Employee Termination Benefits | Commercial Truck & Industrial, Aftermarket & Trailer
Restructuring Reserve [Roll Forward]
Charges to continuing operations				3
Plant Shutdown & Other
Restructuring Reserve [Roll Forward]
Beginning balance				$ 0	1	0
Charges to continuing operations					0	1
Cash payments – continuing operations					(1)	0
Other					0
Ending balance	0		1		0	1
Less: non-current restructuring reserves	0		0		0	0
Restructuring reserves – current	$ 0		$ 1		$ 0	$ 1

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Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2016
Income Tax Disclosure [Abstract]
Net pre-tax income (loss) tax benefit not recorded	$ 3	$ 19	$ 47

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Accounts Receivable Factoring and Securitization (Details) € in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2017 EUR (€)	Jun. 30, 2017 USD ($)	Sep. 30, 2016 EUR (€)	Sep. 30, 2016 USD ($)
Accounts Receivable Factoring and Securitization [Line Items]
Costs associated with off balance sheet factoring arrangements	$ 2,000,000	$ 2,000,000	$ 4,000,000	$ 6,000,000
Swedish Factoring Facility
Accounts Receivable Factoring and Securitization [Line Items]
Maximum limit for sale of eligible trade receivables					€ 155	$ 177,000,000
Utilization of accounts receivable factoring facility under arrangement					162	186,000,000	€ 121	$ 135,000,000
Liquidity commitment			364 days
U.S Factoring Facility
Accounts Receivable Factoring and Securitization [Line Items]
Maximum limit for sale of eligible trade receivables					80	91,000,000
Utilization of accounts receivable factoring facility under arrangement					38	43,000,000	39	44,000,000
United Kingdom Factoring Facility
Accounts Receivable Factoring and Securitization [Line Items]
Maximum limit for sale of eligible trade receivables					25	29,000,000
Utilization of accounts receivable factoring facility under arrangement					4	5,000,000	6	6,000,000
Italy Factoring Facility
Accounts Receivable Factoring and Securitization [Line Items]
Maximum limit for sale of eligible trade receivables					30	34,000,000
Utilization of accounts receivable factoring facility under arrangement					€ 29	33,000,000	€ 22	24,000,000
Other Factoring Facility
Accounts Receivable Factoring and Securitization [Line Items]
Utilization of accounts receivable factoring facility under arrangement						21,000,000		10,000,000
U.S. Securitization Financing Facility
Accounts Receivable Factoring and Securitization [Line Items]
Maximum limit for securitization financing arrangement						100,000,000
Debt-to-EBITDA ratio			2.25
Outstanding balance under accounts receivable securitization program						$ 0		$ 0

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Operating Cash Flows (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
OPERATING ACTIVITIES
NET INCOME	$ 51	$ 42	$ 90	$ 101
Less: Loss from discontinued operations, net of tax	(1)	(1)	(1)	(4)
Income from continuing operations	52	43	91	105
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization			55	48
Deferred income tax expense			19	2
Restructuring costs	0	6	4	9
Asset impairment charges			2	0
Gain on sale of property			0	(2)
Equity in earnings of affiliates	$ (14)	$ (9)	(32)	(26)
Pension and retiree medical expense			11	15
Other adjustments to income from continuing operations			12	5
Dividends received from equity method investments			25	29
Pension and retiree medical contributions			(28)	(32)
Restructuring payments			(11)	(8)
Changes in off-balance sheet accounts receivable factoring			62	(30)
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, foreign currency adjustments and discontinued operations			(73)	31
Operating cash flows provided by continuing operations			137	146
Operating cash flows used for discontinued operations			(1)	(2)
CASH PROVIDED BY OPERATING ACTIVITIES			$ 136	$ 144

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Inventories (Details) - USD ($) $ in Millions		Jun. 30, 2017	Sep. 30, 2016
Inventory Disclosure [Abstract]
Finished goods		$ 142	$ 125
Work in process		33	26
Raw materials, parts and supplies		185	165
Total inventories	[1]	$ 360	$ 316

[1] As of June 30, 2017, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $11 million Receivables, trade and other, net; (iii) $2 million Inventories; (iv) $3 million Net property; (v) $1 million Goodwill; (vi) $10 million Accounts and notes payable; and (vii) $2 million Noncontrolling interests. As of September 30, 2016, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $8 million Receivables, trade and other, net; (iii) $1 million Inventories; (iv) $5 million Net property; (v) $5 million Accounts and notes payable; and (vi) $3 million Noncontrolling interests.

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Other Current Assets (Details) - USD ($) $ in Millions	Jun. 30, 2017	Sep. 30, 2016
Other Current Assets Disclosure [Abstract]
Asbestos-related recoveries (see Note 20)	$ 10	$ 10
Prepaid and other	27	23
Other current assets	$ 37	$ 33

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Net Property (Details) - USD ($) $ in Millions		Jun. 30, 2017	Sep. 30, 2016
Property, Plant and Equipment [Line Items]
Property at cost		$ 1,290	$ 1,269
Less: accumulated depreciation		(860)	(830)
Net property	[1]	430	439
Land and land improvements
Property, Plant and Equipment [Line Items]
Property at cost		29	30
Buildings
Property, Plant and Equipment [Line Items]
Property at cost		234	231
Machinery and equipment
Property, Plant and Equipment [Line Items]
Property at cost		867	839
Company-owned tooling
Property, Plant and Equipment [Line Items]
Property at cost		122	113
Construction in progress
Property, Plant and Equipment [Line Items]
Property at cost		$ 38	$ 56

[1] As of June 30, 2017, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $11 million Receivables, trade and other, net; (iii) $2 million Inventories; (iv) $3 million Net property; (v) $1 million Goodwill; (vi) $10 million Accounts and notes payable; and (vii) $2 million Noncontrolling interests. As of September 30, 2016, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $8 million Receivables, trade and other, net; (iii) $1 million Inventories; (iv) $5 million Net property; (v) $5 million Accounts and notes payable; and (vi) $3 million Noncontrolling interests.

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Other Assets - Summary of other assets (Details) - USD ($) $ in Millions	Jun. 30, 2017	Sep. 30, 2016
Other Assets, Noncurrent [Abstract]
Investments in non-consolidated joint ventures	$ 108	$ 100
Asbestos-related recoveries (see Note 20)	44	49
Unamortized revolver debt issuance costs	8	7
Capitalized software costs, net	28	29
Non-current deferred income tax assets, net	395	413
Assets for uncertain tax positions	37	35
Prepaid pension costs	138	123
Other	5	4
Other assets	$ 763	$ 760

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Other Assets - Additional information (Details) - USD ($) $ in Millions	Jun. 30, 2017	Sep. 30, 2016
Equity Method Joint Venture
Schedule of Equity Method Investments [Line Items]
Investments in joint venture	$ 48	$ 45

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Other Current Liabilities - Summary of other current liabilities (Details) - USD ($) $ in Millions	Jun. 30, 2017	Sep. 30, 2016	Jun. 30, 2016
Other Current Liabilities Disclosure [Abstract]
Compensation and benefits	$ 121	$ 115
Income taxes	4	8
Taxes other than income taxes	24	21
Accrued interest	15	14
Product warranties	18	18	$ 18
Environmental reserves (see Note 20)	5	7
Restructuring (see Note 7)	7	14	$ 9
Asbestos-related liabilities (see Note 20)	18	18
Indemnity obligations (see Note 20)	2	2
Other	63	51
Other current liabilities	$ 277	$ 268

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Other Current Liabilities - Summary of changes in product warranties (Details) - USD ($) $ in Millions	9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Sep. 30, 2016
Movement in Standard Product Warranty Accrual [Roll Forward]
Total product warranties – beginning of period	$ 44	$ 48
Accruals for product warranties	8	11
Payments	(10)	(13)
Change in estimates and other	1	(1)
Total product warranties – end of period	43	45
Less: Non-current product warranties	(25)	(27)	$ (26)
Product warranties – current	$ 18	$ 18	$ 18

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Other Liabilities (Details) - USD ($) $ in Millions	Jun. 30, 2017	Sep. 30, 2016	Jun. 30, 2016
Other Liabilities Disclosure [Abstract]
Asbestos-related liabilities (see Note 20)	$ 122	$ 136
Restructuring (see Note 7)	1	2	$ 2
Non-current deferred income tax liabilities	13	12
Liabilities for uncertain tax positions	15	16
Product warranties (see Note 15)	25	26	$ 27
Environmental (see Note 20)	6	6
Indemnity obligations (see Note 20)	11	11
Other	27	29
Other liabilities	$ 220	$ 238

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Long-Term Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Millions	Jun. 30, 2017	Sep. 30, 2016
Debt Instrument [Line Items]
Capital lease obligation	$ 13	$ 16
Subtotal	990	996
Less: current maturities	(132)	(14)
Long-term debt	858	982
Unamortized issuance cost	8	7
Convertible Notes Payable
Debt Instrument [Line Items]
Unamortized discount on convertible notes	(10)	(14)
4.0% convertible notes due 2027 | Convertible Notes Payable
Debt Instrument [Line Items]
Debt	$ 142	142
Interest rate	4.00%
Unamortized issuance cost	$ 1	1
7.875% Convertible Notes Due 2026 | Convertible Notes Payable
Debt Instrument [Line Items]
Debt	$ 131	129
Interest rate	7.875%
Unamortized issuance cost	$ 2	2
Original issuance discount	7	9
6.75% notes due 2021
Debt Instrument [Line Items]
Debt	$ 271	271
Interest rate	6.75%
Unamortized issuance cost	$ 4	4
6.25% notes due 2024
Debt Instrument [Line Items]
Debt	$ 443	442
Interest rate	6.25%
Unamortized issuance cost	$ 7	8
Export financing arrangements and other
Debt Instrument [Line Items]
Debt	$ 0	$ 10

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Long-Term Debt - Notes Due (Details) - Convertible Notes - 7.875% Convertible Notes Due 2026	9 Months Ended
	Jun. 30, 2017 USD ($) trading_day $ / shares
Debt Instrument [Line Items]
Interest rate	7.875%
Trading days | trading_day	20
Consecutive trading days | trading_day	30
Conversion price threshold percentage	120.00%
Principle amount of debt | $	$ 140,000,000
Permanent equity reclassified as mezzanine equity | $	$ 12,000,000
April 2017 - June 2017 Period
Debt Instrument [Line Items]
Conversion ratio of common stock per principal	83.3333
Conversion price (in usd per share) | $ / shares	$ 12.00

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Long-Term Debt - Revolving Credit Facility (Details) - Revolving Credit Facility	9 Months Ended
	Jun. 30, 2017 USD ($)	Mar. 31, 2017 USD ($)	Sep. 30, 2016 USD ($)
Line of Credit Facility [Line Items]
Borrowings outstanding	$ 0		$ 0
Letters of credit outstanding	$ 0		$ 0
Triggering Event One
Line of Credit Facility [Line Items]
Debt-to-EBITDA ratio	2.25
LIBOR
Line of Credit Facility [Line Items]
Basis spread on variable rate	3.00%
Unused capacity, commitment fee percentage	0.45%
Amended Revolving Credit Facility
Line of Credit Facility [Line Items]
Maximum borrowing capacity		$ 525,000,000
Deferred issuance cost		$ 4,000,000
Collateral test, maximum ratio	1.0
Value of company assets collateralized	$ 774,000,000
Maximum limit on issuance, letters of credit	$ 100,000,000
Overnight Revolving Credit Loans | Prime Rate
Line of Credit Facility [Line Items]
Basis spread on variable rate	2.00%

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Long-Term Debt - Repurchases of Debt Securities (Details) - Convertible Notes Payable - 4.625% convertible notes due 2026 - USD ($) $ in Millions	Apr. 15, 2016	Mar. 01, 2016
Debt Instrument [Line Items]
Principal amount of convertible notes repurchased		$ 55
Interest rate	4.625%
Repurchase price percentage	100.00%	100.00%

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Long-Term Debt - Capital Leases (Details) - USD ($)		9 Months Ended
	Mar. 20, 2012	Jun. 30, 2017	Sep. 30, 2016
Debt Instrument [Line Items]
Outstanding capital lease obligations		$ 13,000,000	$ 16,000,000
Financing Arrangements For Capital Leases
Debt Instrument [Line Items]
Maximum amount of progress payments for equipment under construction	$ 10,000,000
Financing Arrangements For Capital Leases | Five-Year Swap Rate
Debt Instrument [Line Items]
Basis spread on variable rate		5.64%
Capital Lease Arrangements
Debt Instrument [Line Items]
Capital lease, term	60 months
Outstanding capital lease obligations		$ 3,000,000	7,000,000
Capital Lease Arrangements | 30-Day LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate		4.75%
Other Capital Lease Arrangements
Debt Instrument [Line Items]
Outstanding capital lease obligations		$ 10,000,000	$ 9,000,000

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Long-Term Debt - Letter of Credit Facilities (Details) - USD ($)	Jun. 30, 2017	Sep. 30, 2016	Feb. 21, 2014
Other Letters of Credit Arrangements
Line of Credit Facility [Line Items]
Letters of credit outstanding	$ 5,000,000	$ 5,000,000
Standby Letters of Credit
Line of Credit Facility [Line Items]
Maximum limit on issuance, letters of credit			$ 25,000,000
Letters of credit outstanding	$ 18,000,000	$ 23,000,000

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Long-Term Debt - Export Financing Arrangements (Details) - Brazil - Note payable - Export Financing Arrangement - USD ($) $ in Millions	Jun. 30, 2017	Sep. 30, 2016
Debt Instrument [Line Items]
Interest rate	5.50%
Long-term debt outstanding		$ 9

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Long-Term Debt - Other (Details) - China - Notes Payable to Banks - Other Export Financing Arrangements - USD ($) $ in Millions	Jun. 30, 2017	Sep. 30, 2016
Debt Instrument [Line Items]
Debt default, amount	$ 35
Long-term debt outstanding	$ 16	$ 10

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Financial Instruments - Fair Value of Financial Instruments (Details) - USD ($) $ in Millions	Jun. 30, 2017	Sep. 30, 2016
Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 231	$ 160
Short-term debt	132	14
Long-term debt	858	982
Carrying Value | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign exchange forward contracts (other assets)	0	1
Foreign exchange forward contracts (other liabilities)	0	2
Carrying Value | Foreign currency option contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Short-term foreign currency option contracts (other assets)	1	0
Long-term foreign currency option contracts (other assets)	1	2
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	231	160
Short-term debt	245	14
Long-term debt	912	1,051
Fair Value | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign exchange forward contracts (other assets)	0	1
Foreign exchange forward contracts (other liabilities)	0	2
Fair Value | Foreign currency option contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Short-term foreign currency option contracts (other assets)	1	0
Long-term foreign currency option contracts (other assets)	$ 1	$ 2

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Financial Instruments - Offsetting of Derivative Assets and Liabilities (Details) - USD ($) $ in Millions	Jun. 30, 2017	Sep. 30, 2016
Derivative Asset
Gross Amounts Recognized	$ 1	$ 1
Gross Amounts Offset	(1)	0
Net Amounts Reported	0	1
Derivative Liabilities
Gross Amounts Recognized	1	2
Gross Amounts Offset	(1)	0
Net Amounts Reported	$ 0	$ 2

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Financial Instruments - Fair Value of Financial Instruments by Valuation Hierarchy (Details) - USD ($) $ in Millions	Jun. 30, 2017	Sep. 30, 2016
Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 231	$ 160
Short-term debt	0	0
Long-term debt	0	0
Level 1 | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign exchange forward contracts (other assets)	0	0
Foreign exchange forward contracts (liability)	0	0
Level 1 | Foreign currency option contracts | Short-term
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency option contracts (asset)	0	0
Level 1 | Foreign currency option contracts | Long-term
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency option contracts (asset)	0	0
Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	0	0
Short-term debt	241	0
Long-term debt	903	1,040
Level 2 | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign exchange forward contracts (other assets)	0	1
Foreign exchange forward contracts (liability)	0	2
Level 2 | Foreign currency option contracts | Short-term
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency option contracts (asset)	0	0
Level 2 | Foreign currency option contracts | Long-term
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency option contracts (asset)	0	0
Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	0	0
Short-term debt	4	14
Long-term debt	9	11
Level 3 | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign exchange forward contracts (other assets)	0	0
Foreign exchange forward contracts (liability)	0	0
Level 3 | Foreign currency option contracts | Short-term
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency option contracts (asset)	1	0
Level 3 | Foreign currency option contracts | Long-term
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency option contracts (asset)	$ 1	$ 2

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Financial Instruments - Reconciliation of Changes in Fair Value (Details) - Level 3 - Foreign currency option contracts - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Fair Value, beginning of period	$ 5	$ 0	$ 2	$ 2
Purchases, issuances, sales and settlements:
Purchases	1	0	1	1
Settlements	(3)	0	(3)	0
Transfer in and / or out of Level 3	0	0	0	0
Reclass between short-term and long-term	0	0	0	0
Fair Value, end of period	2	0	2	0
Short-term
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Fair Value, beginning of period	3	0	0	1
Purchases, issuances, sales and settlements:
Purchases	0	0	0	1
Settlements	(2)	0	(2)	0
Transfer in and / or out of Level 3	0	0	0	0
Reclass between short-term and long-term	1	0	3	0
Fair Value, end of period	1	0	1	0
Long-term
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Fair Value, beginning of period	2	0	2	1
Purchases, issuances, sales and settlements:
Purchases	1	0	1	0
Settlements	(1)	0	(1)	0
Transfer in and / or out of Level 3	0	0	0	0
Reclass between short-term and long-term	(1)	0	(3)	0
Fair Value, end of period	1	0	1	0
Included in other income
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)	0	0	0	(2)
Total realized gains (losses)	0	0	0	0
Included in other income | Short-term
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)	0	0	0	(2)
Total realized gains (losses)	0	0	0	0
Included in other income | Long-term
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)	0	0	0	0
Total realized gains (losses)	0	0	0	0
Included in cost of sales
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)	(1)	0	2	(1)
Total realized gains (losses)	0	0	0	0
Included in cost of sales | Short-term
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)	(1)	0	0	0
Total realized gains (losses)	0	0	0	0
Included in cost of sales | Long-term
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Total unrealized gains (losses)	0	0	2	(1)
Total realized gains (losses)	$ 0	$ 0	$ 0	$ 0

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Financial Instruments - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2015	Jun. 30, 2017	Sep. 30, 2015	Sep. 30, 2016
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Cash equivalents	$ 0		$ 0		$ 0
Foreign exchange forward contracts
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Term of foreign exchange forward contract			1 year
Foreign currency contract, notional amount	125,000,000		$ 125,000,000		190,000,000
Foreign currency option contracts | India, Rupees
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Foreign currency contract, notional amount	141,000,000		141,000,000		174,000,000
Foreign currency option contracts | Sweden, Krona
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Foreign currency contract, notional amount	0		0		$ 0
Notional amount of contracts entered into during period		$ 19,000,000		$ 30,000,000
Foreign currency option contracts | Euro
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Foreign currency contract, notional amount	20,000,000		$ 20,000,000
Notional amount of contracts entered into during period	$ 35,000,000	$ 21,000,000		$ 27,000,000

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Retirement Benefit Liabilities - Summary of retirement benefits (Details) - USD ($) $ in Millions	Jun. 30, 2017	Sep. 30, 2016
Retirement Benefits [Abstract]
Retiree medical liability	$ 432	$ 447
Pension liability	261	283
Other	13	13
Subtotal	706	743
Less: current portion (included in compensation and benefits, Note 15)	(39)	(40)
Retirement benefits	$ 667	$ 703

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Retirement Benefit Liabilities - Components of net periodic pension and retiree medical expense (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Pension
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Interest cost	$ 13	$ 16	$ 39	$ 49
Assumed return on plan assets	(24)	(24)	(71)	(74)
Amortization of prior service costs	0	0	0	0
Recognized actuarial loss	8	6	23	18
Total expense (income)	(3)	(2)	(9)	(7)
Retiree Medical
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Interest cost	4	4	11	13
Assumed return on plan assets	0	0	0	0
Amortization of prior service costs	(1)	0	(2)	0
Recognized actuarial loss	4	3	11	9
Total expense (income)	$ 7	$ 7	$ 20	$ 22

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Contingencies - Additional Information (Details) $ in Millions			3 Months Ended			9 Months Ended
	Jul. 05, 2017 USD ($)	Dec. 12, 2015 USD ($)	Dec. 31, 2016 USD ($)	Sep. 30, 2016 USD ($) claim	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($) site claim	Sep. 30, 2009 USD ($)
Loss Contingencies [Line Items]
Environmental accrual balance				$ 13.0		$ 11.0
Discounted amount environmental accrual for on-going operations maintenance and monitoring						7.0
Undiscounted amount environmental accrual for on-going operations maintenance and monitoring						8.0
Maremont Asbestos
Loss Contingencies [Line Items]
Environmental accrual balance				$ 72.0		$ 73.0
Number of pending claims | claim				5,800		4,200
Obligation period for asbestos personal injury claims						10 years
Pending and future claims				$ 70.0		$ 70.0
Estimated insurance recoveries				32.0		27.0
Maremont Asbestos | Insurance Settlement
Loss Contingencies [Line Items]
Cash settlement awarded from others		$ 17.0
Litigation settlement, expense		5.0	$ 3.0	9.0
Increased liability		$ 12.0
Rockwell Asbestos
Loss Contingencies [Line Items]
Environmental accrual balance				$ 61.0		$ 64.0
Number of pending claims | claim				3,200		1,600
Obligation period for asbestos personal injury claims						10 years
Pending and future claims				$ 60.0		$ 60.0
Estimated insurance recoveries				27.0		27.0
Rockwell Asbestos | Insurance Settlement
Loss Contingencies [Line Items]
Cash settlement awarded from others				32.0	$ 3.0
Litigation settlement, expense				10.0		$ 12.0
Increased liability				22.0
Receivable recorded				12.0
Rockwell Asbestos | Insurance Settlement | Settled Litigation
Loss Contingencies [Line Items]
Cash settlement awarded from others					5.5
Rockwell Asbestos | Insurance Settlement 2
Loss Contingencies [Line Items]
Receivable recorded				6.0
TL Trailer Axles
Loss Contingencies [Line Items]
Cash settlement awarded from others					$ 6.0
Sisamex | Settled Litigation | Subsequent Event
Loss Contingencies [Line Items]
Cash settlement awarded to others	$ 10.0
Low Range
Loss Contingencies [Line Items]
Site contingency, accrual, discount rate						1.00%
Low Range | Maremont Asbestos
Loss Contingencies [Line Items]
Possible loss				70.0
Low Range | Rockwell Asbestos
Loss Contingencies [Line Items]
Possible loss				60.0
High Range
Loss Contingencies [Line Items]
Site contingency, accrual, discount rate						3.00%
High Range | Maremont Asbestos
Loss Contingencies [Line Items]
Possible loss				83.0
High Range | Rockwell Asbestos
Loss Contingencies [Line Items]
Possible loss				75.0
Superfund Sites
Loss Contingencies [Line Items]
Number of Superfund environmental sites | site						9
Environmental costs reasonably possible						$ 8.0
Environmental accrual balance				2.0		2.0
Non-Superfund Sites
Loss Contingencies [Line Items]
Environmental costs reasonably possible						27.0
Environmental accrual balance				11.0		9.0
Insurance Receivables | Rockwell Asbestos
Loss Contingencies [Line Items]
Estimated insurance recoveries				9.0		9.0
Indemnity Obligations
Loss Contingencies [Line Items]
Guarantee obligations recorded				11.0		11.0	$ 28.0
MSSC
Loss Contingencies [Line Items]
Indemnity obligations liability				1.0		1.0
Value Added Tax | Future tax years
Loss Contingencies [Line Items]
Increased liability				$ 10.0		$ 11.0

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Contingencies - Summary of environmental reserves (Details) $ in Millions	9 Months Ended
	Jun. 30, 2017 USD ($)
Accrual for Environmental Loss Contingencies [Roll Forward]
Beginning balance	$ 13
Payments and other	(4)
Accruals	2
Ending balance	11
Superfund Sites
Accrual for Environmental Loss Contingencies [Roll Forward]
Beginning balance	2
Payments and other	0
Accruals	0
Ending balance	2
Non-Superfund Sites
Accrual for Environmental Loss Contingencies [Roll Forward]
Beginning balance	11
Payments and other	(4)
Accruals	2
Ending balance	$ 9

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Contingencies - Asbestos related reserves and recoveries (Details) - USD ($) $ in Millions	Jun. 30, 2017	Sep. 30, 2016
Loss Contingencies [Line Items]
Asbestos-related liabilities	$ 11	$ 13
Maremont Asbestos
Loss Contingencies [Line Items]
Pending and future claims	70	70
Billed but unpaid claims	3	2
Asbestos-related liabilities	73	72
Asbestos-related insurance recoveries	27	32
Rockwell Asbestos
Loss Contingencies [Line Items]
Pending and future claims	60	60
Billed but unpaid claims	4	1
Asbestos-related liabilities	64	61
Asbestos-related insurance recoveries	$ 27	$ 27

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Shareholders' Equity - Common Stock and Debt Repurchase Authorizations (Details)	Jul. 21, 2016 USD ($)
Debt Securities
Class of Stock [Line Items]
Debt repurchase program, amount authorized	$ 150,000,000
Common Stock
Class of Stock [Line Items]
Authorized repurchase of securities, with debt reduction target	$ 100,000,000

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Shareholders' Equity - Schedule of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	$ (794)	$ (742)	$ (809)	$ (766)
Other comprehensive income (loss) before reclassification	15	(9)	9	(3)
Amounts reclassified from accumulated other comprehensive loss	11	9	32	27
Net current-period other comprehensive income (loss)	26	0	41	24
Ending balance	(768)	(742)	(768)	(742)
Foreign Currency Translation
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(75)	(50)	(66)	(54)
Other comprehensive income (loss) before reclassification	17	(10)	8	(6)
Amounts reclassified from accumulated other comprehensive loss	0	0	0	0
Net current-period other comprehensive income (loss)	17	(10)	8	(6)
Ending balance	(58)	(60)	(58)	(60)
Employee Benefit Related Adjustments
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(718)	(687)	(740)	(705)
Other comprehensive income (loss) before reclassification	0	(2)	1	(2)
Amounts reclassified from accumulated other comprehensive loss	11	9	32	27
Net current-period other comprehensive income (loss)	11	7	33	25
Ending balance	(707)	(680)	(707)	(680)
Unrealized Loss, net of tax
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(1)	(5)	(3)	(7)
Other comprehensive income (loss) before reclassification	(2)	3	0	5
Amounts reclassified from accumulated other comprehensive loss	0	0	0	0
Net current-period other comprehensive income (loss)	(2)	3	0	5
Ending balance	$ (3)	$ (2)	$ (3)	$ (2)

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Shareholders' Equity - Reclassifications from AOCI (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total reclassifications for the period	$ 11	$ 9	$ 32	$ 27
Amount Reclassified from Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total reclassifications for the period	8
Amount Reclassified from Accumulated Other Comprehensive Income | Prior service costs
Accumulated Other Comprehensive Income (Loss) [Line Items]
Prior service costs	(1)		(2)
Amount Reclassified from Accumulated Other Comprehensive Income | Actuarial losses
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total before tax	12	9	34	27
Amount Reclassified from Accumulated Other Comprehensive Income | Employee Benefit Related Adjustment
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total before tax	11	9	32	27
Tax expense (benefit)	$ (3)	0	(10)	0
Total reclassifications for the period		$ 9	$ 22	$ 27

XML

Business Segment Information - Summary of Segment Information (Details) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($) segment	Jun. 30, 2016 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments | segment			2
Total Sales	$ 920	$ 841	$ 2,425	$ 2,471
Commercial Truck & Industrial
Segment Reporting Information [Line Items]
Total Sales	704	623	1,826	1,846
Aftermarket & Trailer
Segment Reporting Information [Line Items]
Total Sales	216	218	599	625
Operating Segments
Segment Reporting Information [Line Items]
Total Sales	920	841	2,425	2,471
Operating Segments | Commercial Truck & Industrial
Segment Reporting Information [Line Items]
Total Sales	728	640	1,887	1,904
Operating Segments | Aftermarket & Trailer
Segment Reporting Information [Line Items]
Total Sales	228	227	627	648
Eliminations
Segment Reporting Information [Line Items]
Total Sales	(36)	(26)	(89)	(81)
Eliminations | Commercial Truck & Industrial
Segment Reporting Information [Line Items]
Total Sales	24	17	61	58
Eliminations | Aftermarket & Trailer
Segment Reporting Information [Line Items]
Total Sales	$ 12	$ 9	$ 28	$ 23

XML

Business Segment Information - Segment Income Attributable to Parent (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Segment Reporting Information [Line Items]
Interest expense, net	$ (21)	$ (20)	$ (63)	$ (63)
Provision for income taxes	(11)	(8)	(30)	(22)
Depreciation and amortization			(55)	(48)
Noncontrolling interests	(3)	(1)	(5)	(2)
Asset impairment charges			(2)	0
Restructuring costs	0	(6)	(4)	(9)
Net income from continuing operations	49	42	86	103
Operating Segments
Segment Reporting Information [Line Items]
Segment adjusted EBITDA	101	99	249	255
Operating Segments | Commercial Truck & Industrial
Segment Reporting Information [Line Items]
Segment adjusted EBITDA	75	61	171	169
Operating Segments | Aftermarket & Trailer
Segment Reporting Information [Line Items]
Segment adjusted EBITDA	26	38	78	86
Segment Reconciling Items
Segment Reporting Information [Line Items]
Unallocated legacy and corporate costs, net	2	(3)	0	(2)
Interest expense, net	(21)	(20)	(63)	(63)
Provision for income taxes	(11)	(8)	(30)	(22)
Depreciation and amortization	(18)	(17)	(55)	(48)
Noncontrolling interests	(3)	(1)	(5)	(2)
Loss on sale of receivables	(2)	(2)	(4)	(6)
Asset impairment charges	1	0	(2)	0
Restructuring costs	$ 0	$ (6)	$ (4)	$ (9)

XML

Business Segment Information - Schedule of Segment Assets (Details) - USD ($) $ in Millions	Jun. 30, 2017	Sep. 30, 2016
Segment Reporting Information [Line Items]
Total assets	$ 2,712	$ 2,494
Operating Segments
Segment Reporting Information [Line Items]
Total assets	2,084	1,869
Operating Segments | Commercial Truck & Industrial
Segment Reporting Information [Line Items]
Total assets	1,618	1,433
Operating Segments | Aftermarket & Trailer
Segment Reporting Information [Line Items]
Total assets	466	436
Corporate
Segment Reporting Information [Line Items]
Total assets	916	845
Segment Reconciling Items
Segment Reporting Information [Line Items]
Less: Accounts receivable sold under off-balance sheet factoring programs	$ (288)	$ (220)

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Supplemental Guarantor Condensed Consolidating Financial Statements - Additional Information (Details) - USD ($) $ in Millions	9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Sep. 30, 2016
Condensed Financial Information of Parent Company Only Disclosure [Abstract]
Parent's total ownership, percentage	100.00%
Parent
Condensed Financial Statements, Captions [Line Items]
Pension and retiree benefits, parent obligation	$ 672		$ 708
Proceeds from investment in subsidiary	1	$ 18
Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Debt and capital lease obligations, subsidiary portion	$ 12		$ 24

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Supplemental Guarantor Condensed Consolidating Financial Statements - Condensed Consolidating Statement of Operations (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Sales
Total Sales	$ 920	$ 841	$ 2,425	$ 2,471
Cost of sales	(778)	(714)	(2,073)	(2,119)
GROSS MARGIN	142	127	352	352
Selling, general and administrative	(73)	(59)	(192)	(175)
Restructuring costs	0	(6)	(4)	(9)
Other operating income (expense), net	0	0	(5)	(3)
OPERATING INCOME (LOSS)	69	62	151	165
Other income (expense), net	1	0	1	(1)
Equity in earnings of affiliates	14	9	32	26
Interest income (expense), net	(21)	(20)	(63)	(63)
INCOME (LOSS) BEFORE INCOME TAXES	63	51	121	127
Benefit (provision) for income taxes	(11)	(8)	(30)	(22)
Equity income from continuing operations of subsidiaries	0	0	0	0
INCOME FROM CONTINUING OPERATIONS	52	43	91	105
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1)	(1)	(1)	(4)
NET INCOME	51	42	90	101
Less: Net income attributable to noncontrolling interests	(3)	(1)	(5)	(2)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	48	41	85	99
Elims
Sales
Total Sales	(110)	(44)	(192)	(131)
Cost of sales	110	44	192	131
GROSS MARGIN	0	0	0	0
Selling, general and administrative	0	0	0	0
Restructuring costs	0	0	0	0
Other operating income (expense), net	0	0	0	0
OPERATING INCOME (LOSS)	0	0	0	0
Other income (expense), net	0	0	0	0
Equity in earnings of affiliates	0	0	0	0
Interest income (expense), net	0	0	0	0
INCOME (LOSS) BEFORE INCOME TAXES	0	0	0	0
Benefit (provision) for income taxes	0	0	0	0
Equity income from continuing operations of subsidiaries	(132)	(175)	(290)	(350)
INCOME FROM CONTINUING OPERATIONS	(132)	(175)	(290)	(350)
LOSS FROM DISCONTINUED OPERATIONS, net of tax	0	0	0	9
NET INCOME	(132)	(175)	(290)	(341)
Less: Net income attributable to noncontrolling interests	0	0	0	0
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	(132)	(175)	(290)	(341)
Parent
Sales
Total Sales	0	0	0	0
Parent | Reportable Legal Entities
Sales
Total Sales	0	0	0	0
Cost of sales	(13)	(14)	(42)	(40)
GROSS MARGIN	(13)	(14)	(42)	(40)
Selling, general and administrative	(34)	(23)	(77)	(62)
Restructuring costs	0	0	2	0
Other operating income (expense), net	(1)	0	(3)	(3)
OPERATING INCOME (LOSS)	(48)	(37)	(120)	(105)
Other income (expense), net	12	8	36	42
Equity in earnings of affiliates	0	0	0	0
Interest income (expense), net	(32)	(29)	(99)	(88)
INCOME (LOSS) BEFORE INCOME TAXES	(68)	(58)	(183)	(151)
Benefit (provision) for income taxes	19	(1)	54	(1)
Equity income from continuing operations of subsidiaries	98	101	215	255
INCOME FROM CONTINUING OPERATIONS	49	42	86	103
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(1)	(1)	(1)	(4)
NET INCOME	48	41	85	99
Less: Net income attributable to noncontrolling interests	0	0	0	0
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	48	41	85	99
Parent | Elims
Sales
Total Sales	0	0	0	0
Guarantors
Sales
Total Sales	528	410	1,244	1,247
Guarantors | Reportable Legal Entities
Sales
Total Sales	561	440	1,333	1,332
Cost of sales	(480)	(361)	(1,122)	(1,107)
GROSS MARGIN	81	79	211	225
Selling, general and administrative	(14)	(20)	(67)	(62)
Restructuring costs	1	(3)	(1)	(4)
Other operating income (expense), net	0	0	0	0
OPERATING INCOME (LOSS)	68	56	143	159
Other income (expense), net	(7)	(48)	(12)	(57)
Equity in earnings of affiliates	12	8	27	24
Interest income (expense), net	8	8	27	23
INCOME (LOSS) BEFORE INCOME TAXES	81	24	185	149
Benefit (provision) for income taxes	(21)	0	(56)	0
Equity income from continuing operations of subsidiaries	34	74	75	95
INCOME FROM CONTINUING OPERATIONS	94	98	204	244
LOSS FROM DISCONTINUED OPERATIONS, net of tax	0	0	0	(5)
NET INCOME	94	98	204	239
Less: Net income attributable to noncontrolling interests	0	0	0	0
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	94	98	204	239
Guarantors | Elims
Sales
Total Sales	33	30	89	85
Non- Guarantors
Sales
Total Sales	392	431	1,181	1,224
Non- Guarantors | Reportable Legal Entities
Sales
Total Sales	469	445	1,284	1,270
Cost of sales	(395)	(383)	(1,101)	(1,103)
GROSS MARGIN	74	62	183	167
Selling, general and administrative	(25)	(16)	(48)	(51)
Restructuring costs	(1)	(3)	(5)	(5)
Other operating income (expense), net	1	0	(2)	0
OPERATING INCOME (LOSS)	49	43	128	111
Other income (expense), net	(4)	40	(23)	14
Equity in earnings of affiliates	2	1	5	2
Interest income (expense), net	3	1	9	2
INCOME (LOSS) BEFORE INCOME TAXES	50	85	119	129
Benefit (provision) for income taxes	(9)	(7)	(28)	(21)
Equity income from continuing operations of subsidiaries	0	0	0	0
INCOME FROM CONTINUING OPERATIONS	41	78	91	108
LOSS FROM DISCONTINUED OPERATIONS, net of tax	0	0	0	(4)
NET INCOME	41	78	91	104
Less: Net income attributable to noncontrolling interests	(3)	(1)	(5)	(2)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	38	77	86	102
Non- Guarantors | Elims
Sales
Total Sales	$ 77	$ 14	$ 103	$ 46

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Supplemental Guarantor Condensed Consolidating Financial Statements - Condensed Consolidating Statement of Comprehensive Income (Loss) (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Condensed Statement of Income Captions [Line Items]
Net income	$ 51	$ 42	$ 90	$ 101
Other comprehensive income (loss), net of tax	26	0	40	24
Total comprehensive income	77	42	130	125
Less: Comprehensive loss (income) attributable to noncontrolling interests	(3)	(1)	(4)	(2)
Comprehensive income attributable to Meritor, Inc.	74	41	126	123
Elims
Condensed Statement of Income Captions [Line Items]
Net income	(132)	(175)	(290)	(341)
Other comprehensive income (loss), net of tax	(18)	6	(14)	(4)
Total comprehensive income	(150)	(169)	(304)	(345)
Less: Comprehensive loss (income) attributable to noncontrolling interests	0	0	0	0
Comprehensive income attributable to Meritor, Inc.	(150)	(169)	(304)	(345)
Parent | Reportable Legal Entities
Condensed Statement of Income Captions [Line Items]
Net income	48	41	85	99
Other comprehensive income (loss), net of tax	26	0	40	24
Total comprehensive income	74	41	125	123
Less: Comprehensive loss (income) attributable to noncontrolling interests	1	0	1	0
Comprehensive income attributable to Meritor, Inc.	75	41	126	123
Guarantors | Reportable Legal Entities
Condensed Statement of Income Captions [Line Items]
Net income	94	98	204	239
Other comprehensive income (loss), net of tax	0	44	2	56
Total comprehensive income	94	142	206	295
Less: Comprehensive loss (income) attributable to noncontrolling interests	0	0	0	0
Comprehensive income attributable to Meritor, Inc.	94	142	206	295
Non- Guarantors | Reportable Legal Entities
Condensed Statement of Income Captions [Line Items]
Net income	41	78	91	104
Other comprehensive income (loss), net of tax	18	(50)	12	(52)
Total comprehensive income	59	28	103	52
Less: Comprehensive loss (income) attributable to noncontrolling interests	(4)	(1)	(5)	(2)
Comprehensive income attributable to Meritor, Inc.	$ 55	$ 27	$ 98	$ 50

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Supplemental Guarantor Condensed Consolidating Financial Statements - Condensed Consolidating Balance Sheet (Details) - USD ($) $ in Millions		Jun. 30, 2017		Sep. 30, 2016		Jun. 30, 2016	Sep. 30, 2015
CURRENT ASSETS:
Cash and cash equivalents		$ 231	[1]	$ 160	[1]	$ 129	$ 193
Receivables trade and other, net	[1]	500		396
Inventories	[1]	360		316
Other current assets		37		33
TOTAL CURRENT ASSETS		1,128		905
NET PROPERTY	[1]	430		439
GOODWILL	[1]	391		390
OTHER ASSETS		763		760
INVESTMENTS IN SUBSIDIARIES		0		0
TOTAL ASSETS		2,712		2,494
CURRENT LIABILITIES:
Short-term debt		132		14
Accounts and notes payable	[1]	602		475
Other current liabilities		277		268
TOTAL CURRENT LIABILITIES		1,011		757
LONG-TERM DEBT		858		982
RETIREMENT BENEFITS		667		703
INTERCOMPANY PAYABLE (RECEIVABLE)		0		0
OTHER LIABILITIES		220		238
MEZZANINE EQUITY		12		0
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.		(84)		(211)
NONCONTROLLING INTERESTS	[1]	28		25
TOTAL LIABILITIES, MEZZANINE EQUITY AND DEFICIT		2,712		2,494
ASSETS, LIABILITIES, AND EQUITY HELD-FOR-SALE
Cash and cash equivalents		1		1
Receivables, trade and other, net		11		8
Inventories		2		1
Goodwill		1
Net property		3		5
Accounts and notes payable		10		5
Noncontrolling interests		2		3
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		(3,635)		(3,254)
TOTAL ASSETS		(3,635)		(3,254)
CURRENT LIABILITIES:
Short-term debt		0		0
Accounts and notes payable		0		0
Other current liabilities		0		0
TOTAL CURRENT LIABILITIES		0		0
LONG-TERM DEBT		0		0
RETIREMENT BENEFITS		0		0
INTERCOMPANY PAYABLE (RECEIVABLE)		0		0
OTHER LIABILITIES		0		0
MEZZANINE EQUITY		0
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.		(3,635)		(3,254)
NONCONTROLLING INTERESTS		0		0
TOTAL LIABILITIES, MEZZANINE EQUITY AND DEFICIT		(3,635)		(3,254)
Parent | Reportable Legal Entities
CURRENT ASSETS:
Cash and cash equivalents		150		90		35	73
Receivables trade and other, net		1		1
Inventories		0		0
Other current assets		5		5
TOTAL CURRENT ASSETS		156		96
NET PROPERTY		21		22
GOODWILL		0		0
OTHER ASSETS		437		447
INVESTMENTS IN SUBSIDIARIES		2,866		2,575
TOTAL ASSETS		3,480		3,140
CURRENT LIABILITIES:
Short-term debt		128		1
Accounts and notes payable		51		42
Other current liabilities		103		90
TOTAL CURRENT LIABILITIES		282		133
LONG-TERM DEBT		850		971
RETIREMENT BENEFITS		645		680
INTERCOMPANY PAYABLE (RECEIVABLE)		1,744		1,534
OTHER LIABILITIES		31		34
MEZZANINE EQUITY		12
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.		(84)		(212)
NONCONTROLLING INTERESTS		0		0
TOTAL LIABILITIES, MEZZANINE EQUITY AND DEFICIT		3,480		3,140
Guarantors | Reportable Legal Entities
CURRENT ASSETS:
Cash and cash equivalents		4		4		3	6
Receivables trade and other, net		43		39
Inventories		165		143
Other current assets		14		12
TOTAL CURRENT ASSETS		226		198
NET PROPERTY		201		198
GOODWILL		219		219
OTHER ASSETS		129		132
INVESTMENTS IN SUBSIDIARIES		769		679
TOTAL ASSETS		1,544		1,426
CURRENT LIABILITIES:
Short-term debt		3		4
Accounts and notes payable		230		172
Other current liabilities		70		74
TOTAL CURRENT LIABILITIES		303		250
LONG-TERM DEBT		1		3
RETIREMENT BENEFITS		0		0
INTERCOMPANY PAYABLE (RECEIVABLE)		(1,966)		(1,768)
OTHER LIABILITIES		146		162
MEZZANINE EQUITY		0
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.		3,060		2,779
NONCONTROLLING INTERESTS		0		0
TOTAL LIABILITIES, MEZZANINE EQUITY AND DEFICIT		1,544		1,426
Non- Guarantors | Reportable Legal Entities
CURRENT ASSETS:
Cash and cash equivalents		77		66		$ 91	$ 114
Receivables trade and other, net		456		356
Inventories		195		173
Other current assets		18		16
TOTAL CURRENT ASSETS		746		611
NET PROPERTY		208		219
GOODWILL		172		171
OTHER ASSETS		197		181
INVESTMENTS IN SUBSIDIARIES		0		0
TOTAL ASSETS		1,323		1,182
CURRENT LIABILITIES:
Short-term debt		1		9
Accounts and notes payable		321		261
Other current liabilities		104		104
TOTAL CURRENT LIABILITIES		426		374
LONG-TERM DEBT		7		8
RETIREMENT BENEFITS		22		23
INTERCOMPANY PAYABLE (RECEIVABLE)		222		234
OTHER LIABILITIES		43		42
MEZZANINE EQUITY		0
EQUITY (DEFICIT) ATTRIBUTABLE TO MERITOR, INC.		575		476
NONCONTROLLING INTERESTS		28		25
TOTAL LIABILITIES, MEZZANINE EQUITY AND DEFICIT		$ 1,323		$ 1,182

[1] As of June 30, 2017, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $11 million Receivables, trade and other, net; (iii) $2 million Inventories; (iv) $3 million Net property; (v) $1 million Goodwill; (vi) $10 million Accounts and notes payable; and (vii) $2 million Noncontrolling interests. As of September 30, 2016, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $8 million Receivables, trade and other, net; (iii) $1 million Inventories; (iv) $5 million Net property; (v) $5 million Accounts and notes payable; and (vi) $3 million Noncontrolling interests.

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Supplemental Guarantor Condensed Consolidating Financial Statements - Condensed Consolidating Statement of Cash Flows (Details) - USD ($) $ in Millions	9 Months Ended
	Jun. 30, 2017		Jun. 30, 2016
Condensed Cash Flow Statements, Captions [Line Items]
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	$ 136		$ 144
INVESTING ACTIVITIES
Capital expenditures	(52)		(66)
Other investing activities	0		3
Net investing cash flows provided by discontinued operations	2		4
CASH USED FOR INVESTING ACTIVITIES	(50)		(59)
FINANCING ACTIVITIES
Repayment of notes			(55)
Repurchase of common stock	0		(81)
Debt issuance costs	(4)		0
Intercompany advances	0		0
Other financing activities	(12)		(15)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(16)		(151)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1		2
CHANGE IN CASH AND CASH EQUIVALENTS	71		(64)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	160	[1]	193
CASH AND CASH EQUIVALENTS AT END OF PERIOD	231	[1]	129
Elims
Condensed Cash Flow Statements, Captions [Line Items]
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	0		0
INVESTING ACTIVITIES
Capital expenditures	0		0
Other investing activities			0
Net investing cash flows provided by discontinued operations	0		0
CASH USED FOR INVESTING ACTIVITIES	0		0
FINANCING ACTIVITIES
Repayment of notes			0
Repurchase of common stock			0
Debt issuance costs	0
Intercompany advances	0		0
Other financing activities	0		0
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	0		0
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	0		0
CHANGE IN CASH AND CASH EQUIVALENTS	0		0
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	0		0
CASH AND CASH EQUIVALENTS AT END OF PERIOD	0		0
Parent | Reportable Legal Entities
Condensed Cash Flow Statements, Captions [Line Items]
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	(24)		124
INVESTING ACTIVITIES
Capital expenditures	(8)		(16)
Other investing activities			0
Net investing cash flows provided by discontinued operations	0		0
CASH USED FOR INVESTING ACTIVITIES	(8)		(16)
FINANCING ACTIVITIES
Repayment of notes			(55)
Repurchase of common stock			(81)
Debt issuance costs	(4)
Intercompany advances	96		(10)
Other financing activities	0		0
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	92		(146)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	0		0
CHANGE IN CASH AND CASH EQUIVALENTS	60		(38)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	90		73
CASH AND CASH EQUIVALENTS AT END OF PERIOD	150		35
Guarantors | Reportable Legal Entities
Condensed Cash Flow Statements, Captions [Line Items]
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	28		25
INVESTING ACTIVITIES
Capital expenditures	(27)		(29)
Other investing activities			4
Net investing cash flows provided by discontinued operations	2		1
CASH USED FOR INVESTING ACTIVITIES	(25)		(24)
FINANCING ACTIVITIES
Repayment of notes			0
Repurchase of common stock			0
Debt issuance costs	0
Intercompany advances	0		0
Other financing activities	(3)		(4)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(3)		(4)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	0		0
CHANGE IN CASH AND CASH EQUIVALENTS	0		(3)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	4		6
CASH AND CASH EQUIVALENTS AT END OF PERIOD	4		3
Non- Guarantors | Reportable Legal Entities
Condensed Cash Flow Statements, Captions [Line Items]
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	132		(5)
INVESTING ACTIVITIES
Capital expenditures	(17)		(21)
Other investing activities			(1)
Net investing cash flows provided by discontinued operations	0		3
CASH USED FOR INVESTING ACTIVITIES	(17)		(19)
FINANCING ACTIVITIES
Repayment of notes			0
Repurchase of common stock			0
Debt issuance costs	0
Intercompany advances	(96)		10
Other financing activities	(9)		(11)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(105)		(1)
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	1		2
CHANGE IN CASH AND CASH EQUIVALENTS	11		(23)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	66		114
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$ 77		$ 91

[1] As of June 30, 2017, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $11 million Receivables, trade and other, net; (iii) $2 million Inventories; (iv) $3 million Net property; (v) $1 million Goodwill; (vi) $10 million Accounts and notes payable; and (vii) $2 million Noncontrolling interests. As of September 30, 2016, Assets and Liabilities held for sale were: (i) $1 million Cash and cash equivalents; (ii) $8 million Receivables, trade and other, net; (iii) $1 million Inventories; (iv) $5 million Net property; (v) $5 million Accounts and notes payable; and (vi) $3 million Noncontrolling interests.