10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended April 4, 2021

☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________ to ________

Commission File No. 1-15983

MERITOR, INC.

(Exact name of registrant as specified in its charter)

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

(248) 435-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1 Par Value	MTOR	New York Stock Exchange

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

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Registration S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

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

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

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

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

Yes ☐ No ☒

72,582,057 shares of Common Stock, $1.00 par value, of Meritor, Inc. were outstanding on May 3, 2021.

INDEX

			Page No.
PART I.	FINANCIAL INFORMATION:
	Item 1.	Financial Statements:
		Condensed Consolidated Statement of Operations - - Three and Six Months Ended March 31, 2021 and 2020	3
		Condensed Consolidated Statement Of Comprehensive Income - - Three and Six Months Ended March 31, 2021 and 2020	4
		Condensed Consolidated Balance Sheet - - March 31, 2021 and September 30, 2020	5
		Condensed Consolidated Statement of Cash Flows - - Six Months Ended March 31, 2021 and 2020	6
		Condensed Consolidated Statement of Equity - - Three and Six Months Ended March 31, 2021 and 2020	7
		Notes to Condensed Consolidated Financial Statements	9
	Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	29
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
	Item 4.	Controls and Procedures	48
PART II.	OTHER INFORMATION:
	Item 1.	Legal Proceedings	49
	Item 1A.	Risk Factors	49
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
	Item 5.	Other Information	50
	Item 6.	Exhibits	51
Signatures			52

2

MERITOR, INC.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(in millions, except per share amounts)

	Three Months Ended March 31,				Six Months Ended March 31,
	2021		2020		2021		2020
	(Unaudited)
Sales	$	983	$	871	$	1,872	$	1,772
Cost of sales	(835)		(757)		(1,609)		(1,531)
GROSS PROFIT	148		114		263		241
Selling, general and administrative	(69)		(59)		(134)		(129)
Income from WABCO distribution termination	—		265		—		265
Other operating expense, net	(2)		(10)		(9)		(15)
OPERATING INCOME	77		310		120		362
Other income, net	23		14		37		24
Equity in earnings of affiliates	5		6		16		12
Interest expense, net	(17)		(16)		(45)		(30)
INCOME BEFORE INCOME TAXES	88		314		128		368
Provision for income taxes	(22)		(73)		(29)		(86)
INCOME FROM CONTINUING OPERATIONS	66		241		99		282
INCOME FROM DISCONTINUED OPERATIONS, net of tax	—		1		—		1
NET INCOME	66		242		99		283
Less: Net income attributable to noncontrolling interests	(3)		(1)		(4)		(3)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	63	$	241	$	95	$	280
NET INCOME ATTRIBUTABLE TO MERITOR, INC.
Net income from continuing operations	$	63	$	240	$	95	$	279
Income from discontinued operations	—		1		—		1
Net income	$	63	$	241	$	95	$	280
BASIC EARNINGS PER SHARE
Continuing operations	$	0.87	$	3.27	$	1.31	$	3.68
Discontinued operations	—		0.01		—		0.01
Basic earnings per share	$	0.87	$	3.28	$	1.31	$	3.69
DILUTED EARNINGS PER SHARE
Continuing operations	$	0.86	$	3.19	$	1.30	$	3.58
Discontinued operations	—		0.01		—		0.01
Diluted earnings per share	$	0.86	$	3.20	$	1.30	$	3.59
Basic average common shares outstanding	72.4		73.4		72.3		75.8
Diluted average common shares outstanding	73.4		75.3		73.3		78.0

See Notes to Condensed Consolidated Financial Statements.

3

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in millions)

	Three Months Ended March 31,				Six Months Ended March 31,
	2021		2020		2021		2020
	(Unaudited)
Net income	$	66	$	242	$	99	$	283
Other comprehensive income (loss):
Foreign currency translation adjustments:
Attributable to Meritor, Inc.	(22)		(56)		33		(35)
Attributable to noncontrolling interests	(1)		—		—		—
Pension and other postretirement benefit related adjustments	2		2		5		5
Unrealized gain (loss) on cash flow hedges	—		(5)		1		(3)
Other comprehensive income (loss), net of tax	(21)		(59)		39		(33)
Total comprehensive income	45		183		138		250
Less: Comprehensive income attributable to noncontrolling interests	(2)		(1)		(4)		(3)
Comprehensive income attributable to Meritor, Inc.	$	43	$	182	$	134	$	247

See Notes to Condensed Consolidated Financial Statements.

4

MERITOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions)

	March 31, 2021		September 30, 2020
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	321	$	315
Receivables, trade and other, net	604		479
Inventories	510		435
Other current assets	72		54
TOTAL CURRENT ASSETS	1,507		1,283
NET PROPERTY	502		515
GOODWILL	510		501
OTHER ASSETS	621		585
TOTAL ASSETS	$	3,140	$	2,884
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term debt	$	17	$	39
Accounts and notes payable	593		423
Other current liabilities	279		264
TOTAL CURRENT LIABILITIES	889		726
LONG-TERM DEBT	1,186		1,188
RETIREMENT BENEFITS	176		196
OTHER LIABILITIES	276		279
TOTAL LIABILITIES	2,527		2,389
COMMITMENTS AND CONTINGENCIES (See Note 16)
EQUITY:
Common stock (March 31, 2021 and September 30, 2020, 104.0 and 103.7 shares issued and 72.6 and 72.3 shares outstanding, respectively)	106		105
Additional paid-in capital	788		808
Retained earnings	831		736
Treasury stock, at cost (March 31, 2021 and September 30, 2020, 31.4 and 31.4 shares, respectively)	(573)		(573)
Accumulated other comprehensive loss	(575)		(614)
Total equity attributable to Meritor, Inc.	577		462
Noncontrolling interests	36		33
TOTAL EQUITY	613		495
TOTAL LIABILITIES AND EQUITY	$	3,140	$	2,884

See Notes to Condensed Consolidated Financial Statements.

5

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)

	Six Months Ended March 31,
	2021		2020
	(Unaudited)
OPERATING ACTIVITIES
Net income	$	99	$	283
Less: Income from discontinued operations, net of tax	—		1
Income from continuing operations	99		282
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization	52		50
Deferred income tax expense (benefit)	2		(4)
Restructuring costs	8		15
Stock compensation expense	10		1
Equity in earnings of affiliates	(16)		(12)
Pension and retiree medical income	(26)		(21)
Loss on debt extinguishment	8		—
Dividends received from equity method investments	2		—
Pension and retiree medical contributions	(6)		(7)
Restructuring payments	(8)		(15)
Changes in off-balance sheet accounts receivable securitization and factoring programs	35		20
Changes in receivables, inventories and accounts payable	(63)		(8)
Changes in other current assets and liabilities	5		(49)
Changes in other assets and liabilities	5		38
Operating cash flows provided by continuing operations	107		290
Operating cash flows used for discontinued operations	—		—
CASH PROVIDED BY OPERATING ACTIVITIES	107		290
INVESTING ACTIVITIES
Capital expenditures	(26)		(33)
Cash paid for acquisition of Transportation Power, Inc., net of cash acquired	—		(13)
Other investing activities	(3)		9
CASH USED FOR INVESTING ACTIVITIES	(29)		(37)
FINANCING ACTIVITIES
Securitization	—		96
Borrowings against revolving line of credit	—		304
Proceeds from debt issuance	275		—
Redemption of notes	(281)		—
Redemption of convertible notes	(53)		—
Debt issuance costs	(5)		—
Term loan payments	(7)		(4)
Other financing activities	(1)		(1)
Net change in debt	(72)		395
Repurchase of common stock	—		(241)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(72)		154
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	—		(7)
CHANGE IN CASH AND CASH EQUIVALENTS	6		400
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	315		108
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	321	$	508

See Notes to Condensed Consolidated Financial Statements.

6

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(in millions)

(Unaudited)

	Three months ended March 31, 2021
	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Equity Attributable to Meritor, Inc.		Noncontrolling Interests		Total
Beginning Balance at December 31, 2020	$	106	$	784	$	768	$	(573)	$	(555)	$	530	$	35	$	565
Comprehensive income (loss)	—		—		63		—		(20)		43		2		45
Equity based compensation expense	—		4		—		—		—		4		—		4
Noncontrolling interest dividends	—		—		—		—		—		—		(1)		(1)
Ending Balance at March 31, 2021	$	106	$	788	$	831	$	(573)	$	(575)	$	577	$	36	$	613
	Three months ended March 31, 2020
	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Equity Attributable to Meritor, Inc.		Noncontrolling Interests		Total
Beginning Balance at December 31, 2019	$	105	$	804	$	530	$	(432)	$	(655)	$	352	$	32	$	384
Comprehensive income (loss)	—		—		241		—		(59)		182		1		183
Equity based compensation expense	—		(2)		—		—		—		(2)		—		(2)
Repurchase of common stock	—		—		—		(141)		—		(141)		—		(141)
Noncontrolling interest dividend	—		—		—		—		—		—		(1)		(1)
Other equity adjustments	—		1		—		—		—		1		—		1
Ending Balance at March 31, 2020	$	105	$	803	$	771	$	(573)	$	(714)	$	392	$	32	$	424

See Notes to Condensed Consolidated Financial Statements.

7

MERITOR, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(in millions)

(Unaudited)

	Six months ended March 31, 2021
	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Equity Attributable to Meritor, Inc.		Noncontrolling Interests		Total
Beginning Balance at September 30, 2020	$	105	$	808	$	736	$	(573)	$	(614)	$	462	$	33	$	495
Comprehensive income	—		—		95		—		39		134		4		138
Equity based compensation expense	—		10		—		—		—		10		—		10
Vesting of equity based awards	1		(1)		—		—		—		—		—		—
Repurchase of convertible notes	—		(30)		—		—		—		(30)		—		(30)
Noncontrolling interest dividend	—		—		—		—		—		—		(1)		(1)
Other equity adjustments	—		1		—		—		—		1		—		1
Ending Balance at March 31, 2021	$	106	$	788	$	831	$	(573)	$	(575)	$	577	$	36	$	613
	Six Months Ended March 31, 2020
	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Equity Attributable to Meritor, Inc.		Noncontrolling Interests		Total
Beginning Balance at September 30, 2019	$	104	$	803	$	491	$	(332)	$	(681)	$	385	$	30	$	415
Comprehensive income (loss)	—		—		280		—		(33)		247		3		250
Equity based compensation expense	—		1		—		—		—		1		—		1
Vesting of equity based awards	1		(1)		—		—		—		—		—		—
Repurchase of common stock	—		—		—		(241)		—		(241)		—		(241)
Noncontrolling interest dividend	—		—		—		—		—		—		(1)		(1)
Ending Balance at March 31, 2020	$	105	$	803	$	771	$	(573)	$	(714)	$	392	$	32	$	424

See Notes to Condensed Consolidated Financial Statements.

8

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 products, systems, modules and components to original equipment manufacturers ("OEMs") and the aftermarket for the commercial vehicle, transportation and industrial sectors. The company serves commercial truck, trailer, military, bus and coach, construction and other industrial OEMs and certain aftermarkets. The Condensed Consolidated Financial Statements are those of the company and its consolidated subsidiaries.

In the opinion of the company, the unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting solely of adjustments of a normal, recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. These statements should be read in conjunction with the company’s audited Consolidated Financial Statements and notes thereto included in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2020. The Condensed Consolidated Balance Sheet data as of September 30, 2020 was derived from audited financial statements but does not include all annual disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the three and six months ended March 31, 2021 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 second quarter of fiscal years 2021 and 2020 ended on April 4, 2021 and March 29, 2020, respectively. Fiscal year 2020 ended on September 27, 2020. All year and quarter references relate to the company’s fiscal year and fiscal quarters, unless otherwise stated. For ease of presentation, September 30 and March 31 are used consistently throughout this report to represent the fiscal year end and second fiscal quarter end, respectively.

COVID-19 Pandemic Update

In March 2020, the World Health Organization declared a global health pandemic related to the outbreak of a novel coronavirus. The COVID-19 pandemic adversely affected the company's financial performance in the second, third and fourth quarters of fiscal year 2020, and could have an impact on the second half of fiscal year 2021. In response to the COVID-19 pandemic, government health officials at times recommended and mandated precautions to mitigate the spread of the virus, including shelter-in-place orders, prohibitions on public gatherings and other similar measures. The company has been operating as an essential business in the U.S. All of the company's facilities were fully operational at the end of fiscal year 2020 and during the first two quarters of fiscal year 2021. Most of the company’s salaried employees are primarily working remotely until further notice. There is uncertainty around the duration and breadth of the COVID-19 pandemic, as well as the impact it will have on the company's operations, supply chain and demand for its products. As a result, the ultimate impact on the company's business, financial condition and operating results cannot be reasonably estimated at this time.

2. Earnings per Share

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

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

	Three Months Ended March 31,		Six Months Ended March 31,
	2021	2020	2021	2020
Basic average common shares outstanding	72.4	73.4	72.3	75.8
Impact of restricted shares, restricted share units and performance share units	1.0	1.1	1.0	1.3
Impact of convertible notes	—	0.8	—	0.9
Diluted average common shares outstanding	73.4	75.3	73.3	78.0

9

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In November 2020, the Board of Directors approved a grant of 0.3 million 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 $26.98, which was the company’s share price on the grant date of December 1, 2020. The Board of Directors also approved a grant of 0.3 million restricted share units to these executives. The restricted share units vest at the earlier of three years from the date of grant or upon termination of employment with the company under certain circumstances. The fair value of each restricted share unit was $26.98, which was the company's share price on the grant date of December 1, 2020.

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, 2020 to September 30, 2023, 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 (which, solely for purposes of our long-term incentive plan, includes an adjustment for the value of deferred tax assets in jurisdictions with net operating loss carry forwards or tax credits) which are each weighted at 50%. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.3 million performance share units.

On December 1, 2020, in response to retention and attrition concerns resulting from the COVID-19 pandemic’s impact on the company’s incentive compensation plans, and to continue to incentivize executive performance in a difficult and uncertain environment, the Compensation Committee of the Board of Directors adjusted the threshold level of the performance metrics required to be achieved for payout for the fiscal 2019-2021 performance cycle. The target and maximum levels were not modified. The impact of this adjustment did not have a material impact on the company's Condensed Consolidated Financial Statements.

3. New Accounting Standards

Accounting standards implemented during fiscal year 2021

On October 1, 2020, the company implemented Accounting Standards Update ("ASU") 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments, including accounts receivable. The ASU also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The guidance had an impact on the company's accounting policies and procedures related to calculation of allowance for doubtful accounts receivable but did not have a material impact on its Condensed Consolidated Financial Statements.

On October 1, 2020, the company implemented ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU add, modify, and eliminate certain disclosure requirements on fair value measurements in Topic 820. The guidance did not have a material impact on the company's Condensed Consolidated Financial Statements

Accounting standards to be implemented

Implementation of the following standards may result in a significant change in practice and/or have a significant financial impact on the company.

In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of debt and equity, including convertible instruments and contracts on an entity’s own equity. ASC 470-20 outlines five models to allocate the proceeds attributable to the issuance of a convertible debt instrument. This ASU removes from U.S. GAAP the separation models for convertible debt with a cash conversion feature (CCF) and convertible debt with a beneficial conversion feature (BCF). As a result of adopting this ASU, entities are not required to separately present in equity an embedded conversion feature in such debt. Instead, they should account for a convertible debt instrument wholly as debt. Applying the separation models in ASC 470-20 to convertible instruments with a CCF or BCF involves the recognition of a debt discount, which is amortized to interest expense. The elimination of CCF and BCF models will reduce reported interest expense and increase reported net income for convertible instruments issued within the scope of those models before the adoption of ASU 2020-06. The amendments in this ASU are required to be adopted by public business entities in fiscal years

10

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but not earlier than for a fiscal year beginning after December 15, 2020, including interim periods within those fiscal years. Entities are permitted to adopt the guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The company is currently evaluating the potential impact of this guidance on its accounting policies and its Condensed Consolidated Financial Statements.

4. Revenue

Disaggregation of revenue

In the following tables, revenue is disaggregated for each of our operating segments by primary geographical market for the three months ended March 31, 2021 and 2020 (in millions).

	Three Months Ended March 31, 2021
Primary Geographical Market	Commercial Truck		Aftermarket & Industrial		Total
U.S.	$	337	$	177	$	514
Canada	—		14		14
Mexico	44		5		49
Total North America	381		196		577
Sweden	74		—		74
Italy	58		5		63
United Kingdom	36		3		39
Other Europe	3		35		38
Total Europe	171		43		214
Brazil	81		1		82
China	34		1		35
India	50		—		50
Other Asia-Pacific	25		—		25
Total sales	$	742	$	241	$	983

	Three Months Ended March 31, 2020 (1)
Primary Geographical Market	Commercial Truck		Aftermarket & Industrial		Total
U.S.	$	307	$	211	$	518
Canada	—		15		15
Mexico	39		5		44
Total North America	346		231		577
Sweden	63		—		63
Italy	46		3		49
United Kingdom	30		3		33
Other Europe	1		36		37
Total Europe	140		42		182
Brazil	50		—		50
China	26		—		26
India	22		—		22
Other Asia-Pacific	14		—		14
Total sales	$	598	$	273	$	871

(1) Amounts for the three months ended March 31, 2020 have been recast to reflect reportable segment changes.

11

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Six Months Ended March 31, 2021
Primary Geographical Market	Commercial Truck		Aftermarket & Industrial		Total
U.S.	$	647	$	347	$	994
Canada	—		26		26
Mexico	80		10		90
Total North America	727		383		1,110
Sweden	151		—		151
Italy	111		10		121
United Kingdom	77		5		82
Other Europe	5		70		75
Total Europe	344		85		429
Brazil	137		1		138
China	64		1		65
India	83		—		83
Other Asia-Pacific	47		—		47
Total sales	$	1,402	$	470	$	1,872

	Six Months Ended March 31, 2020 (1)
Primary Geographical Market	Commercial Truck		Aftermarket & Industrial		Total
U.S.	$	635	$	417	$	1,052
Canada	—		29		29
Mexico	78		10		88
Total North America	713		456		1,169
Sweden	125		—		125
Italy	91		7		98
United Kingdom	63		5		68
Other Europe	2		73		75
Total Europe	281		85		366
Brazil	103		1		104
China	60		—		60
India	44		1		45
Other Asia-Pacific	28		—		28
Total sales	$	1,229	$	543	$	1,772

(1) Amounts for the six months ended March 31, 2020 have been recast to reflect reportable segment changes.

As of March 31, 2021 and September 30, 2020, Trade receivables, net, which are included in Receivables, trade and other, net, on the Condensed Consolidated Balance Sheet, were $553 million and $421 million, respectively.

For the three and six months ended March 31, 2021 and March 31, 2020, the company had no material bad-debt expense. There were no material contract assets, contract liabilities or deferred contract costs recorded on the Condensed Consolidated Balance Sheet as of March 31, 2021 and September 30, 2020.

12

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

5. Restructuring Costs

Restructuring reserves, primarily related to unpaid employee termination benefits, were $7 million at March 31, 2021 and $10 million at September 30, 2020. Restructuring costs are recorded within Other operating expense, net within the Condensed Consolidated Statement of Operations. The changes in restructuring reserves for the six months ended ended March 31, 2021 and 2020 are as follows (in millions):

	Employee Termination Benefits		Plant  Shutdown  & Other		Total
Balance at September 30, 2020	$	10	$	—	$	10
Activity during the period:
Charges	6		2		8
Cash payments	(8)		—		(8)
Other	(1)		(2)		(3)
Total restructuring reserves at March 31, 2021	7		—		7
Less: non-current restructuring reserves	—		—		—
Restructuring reserves – current, at March 31, 2021	$	7	$	—	$	7
Balance at September 30, 2019	$	8	$	—	$	8
Activity during the period:
Charges	15		—		15
Cash payments	(15)		—		(15)
Other	(1)		—		(1)
Total restructuring reserves at March 31, 2020	7		—		7
Less: non-current restructuring reserves	—		—		—
Restructuring reserves – current, at March 31, 2020	$	7	$	—	$	7

Global Restructuring Programs Fiscal Year 2021: On November 11, 2020, the company approved a restructuring plan to close three U.S. manufacturing plants and one European administration office in its Aftermarket & Industrial segment and consolidate their operations into existing facilities. The site closures include:

• Chicago, Illinois

• Livermore, California

• Livonia, Michigan

• Zurich, Switzerland

The closures impact approximately 150 hourly and salaried workers. These restructuring plans are intended to optimize the company’s manufacturing footprint, reduce costs and increase efficiencies. With this restructuring plan, the company expects to incur up to $19 million in restructuring charges in the Aftermarket & Industrial segment, consisting of an impact on long-lived assets of $9 million, severance related costs of $5 million and other associated costs of $5 million. During the first six months of fiscal year 2021, the company incurred $6 million in restructuring costs related to this plan. Restructuring actions associated with this plan are expected to be substantially complete by the end of 2021.

Global Restructuring Program Fiscal Year 2020: On June 2, 2020, the company approved and began executing a restructuring plan to reduce labor costs and align with current market forecasts. Under this plan, the company expects to incur approximately $13 million in employee severance costs that affects approximately eight percent of its global salaried positions, and will eliminate certain hourly roles. During fiscal year 2020, the company incurred $10 million in restructuring costs related to this plan of which $7 million was in the Commercial Truck segment and $3 million related to the Aftermarket & Industrial

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MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

segment. During the first six months of fiscal year 2021, the company incurred $2 million in restructuring costs related to this plan in the Commercial Truck segment. Restructuring actions associated with this plan are substantially complete.

6. Income Taxes

For the three months ended March 31, 2021, and 2020 the company recognized tax expense of $22 million and $73 million, respectively. This resulted in effective tax rates of 25% and 23%, respectively. For the six months ended March 31, 2021 and 2020, the company recognized tax expense of $29 million and $86 million, respectfully. This resulted in an effective tax rate of 23% for both periods.

7. Accounts Receivable Factoring and Securitization

The company has a U.S. accounts receivable securitization facility with PNC Bank and participates in various accounts receivable factoring programs, primarily with Nordea Bank for trade receivables from AB Volvo, as follows:

	Current Expiration	Total Facility Size as of 3/31/21				Utilized as of 3/31/21				Utilized as of 9/30/20
		EUR		USD		EUR		USD		EUR		USD
On-balance sheet arrangement
Committed U.S. accounts receivable securitization (1)	March 2024	N/A		$	110	N/A		$	4	N/A		$	3
Total on-balance sheet arrangement: (1)		N/A		$	110	N/A		$	4	N/A		$	3
Off-balance sheet arrangements
Committed Swedish factoring facility (2)(3)	March 2024	€	155	$	183	€	89	$	105	€	86	$	100
Committed U.S. factoring facility (2)	February 2023	N/A		75		N/A		44		N/A		30
Uncommitted U.K. factoring facility	February 2022	25		29		4		5		1		1
Uncommitted Italy factoring facility	June 2022	30		35		19		22		8		9
Other uncommitted factoring facilities (4)	None	N/A		N/A		17		20		12		14
Total off-balance sheet arrangements		€	210	$	322	€	129	$	196	€	107	$	154

(1) Availability subject to adequate eligible accounts receivable available for sale. The utilized amount includes $4 million of letters of credit as of March 31, 2021 and $3 million as of September 30, 2020.

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

(3) The facility is backed by a 364-day liquidity commitment from Nordea Bank which extends through June 22, 2021.

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

Off-balance sheet arrangements 

On March 31, 2021, the U.S. accounts receivable securitization facility with PNC bank was increased from $95 million to $110 million. Total costs associated with all of the off-balance sheet arrangements described above were $1 million for each of the three months ended March 31, 2021 and 2020. Total costs associated with all of the off-balance sheet arrangements described above were $2 million for each of the six months ended March 31, 2021 and 2020, and are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Operations.

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MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

8. Inventories

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

	March 31, 2021		September 30, 2020
Finished goods	$	139	$	119
Work in process	49		38
Raw materials, parts and supplies	322		278
Total	$	510	$	435

9. Net Property

     Net property is summarized as follows (in millions):

	March 31, 2021		September 30, 2020
Property at cost:
Land and land improvements	$	33	$	32
Buildings	238		228
Machinery and equipment	1,045		1,002
Company-owned tooling	158		151
Construction in progress	38		63
Total	1,512		1,476
Less: accumulated depreciation	(1,010)		(961)
Net property	$	502	$	515

10. Other Assets

Other assets are summarized as follows (in millions):

	March 31, 2021		September 30, 2020
Prepaid pension costs	$	206	$	179
Deferred income tax assets	30		30
Investments in non-consolidated joint ventures	119		107
Other	266		269
Other assets	$	621	$	585

During the second quarter of fiscal year 2021, the company recognized a $22 million pre-tax loss recovery, net of legal expenses, on the overpayment of value added taxes ("VAT") in Brazil. Of the amount recognized, $15 million was recognized in Sales consistent with the company’s VAT policy, $10 million in Other income, net and $3 million as expense in Selling, general and administrative. $19 million was recorded in Other current assets and $6 million recorded in Other assets as VAT credits to offset future income tax liabilities. $3 million was recorded in Current liabilities associated with legal expenses.

15

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

11. Other Current Liabilities

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

	March 31, 2021		September 30, 2020
Compensation and benefits	$	103	$	91
Product warranties	19		19
Other	157		154
Other current liabilities	$	279	$	264

Compensation and benefits includes the current portion of pension and retiree medical liability, accrued incentive compensation, salary and wages and accrued vacation, holiday and sick leave pay.

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

	Six Months Ended March 31,
	2021		2020
Total product warranties – beginning of period	$	54	$	50
Accruals for product warranties	12		7
Payments	(10)		(10)
Change in estimates and other	(2)		(2)
Total product warranties – end of period	54		45
Less: non-current product warranties	(35)		(29)
Product warranties – current	$	19	$	16

12. Other Liabilities

Other liabilities are summarized as follows (in millions):

	March 31, 2021		September 30, 2020
Asbestos-related liabilities (see Note 16)	$	64	$	67
Liabilities for uncertain tax positions	80		73
Product warranties (see Note 11)	35		35
Other	97		104
Other liabilities	$	276	$	279

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MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

13. Long-Term Debt

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

	March 31, 2021		September 30, 2020
3.25 percent convertible notes due 2037	$	321	$	320
7.875 percent convertible notes due 2026	—		23
4.50 percent notes due 2028	270		—
6.25 percent notes due 2025	296		295
6.25 percent notes due 2024	174		446
Term loan due 2024	159		166
Finance lease obligation	10		6
Unamortized discount on convertible notes	(27)		(29)
Subtotal	1,203		1,227
Less: current maturities	(17)		(39)
Long-term debt	$	1,186	$	1,188

Repurchase of 7.875 Percent Convertible Notes

On October 16, 2020, the company issued a notice of redemption for all of the $23 million aggregate principal amount outstanding of its 7.875 percent senior convertible notes due 2026 (the "7.875 Percent Convertible Notes"). As a result of the issuance of the notice of redemption, the 7.875 Percent Convertible Notes were convertible at any time prior to the close of business on November 30, 2020 at a rate of 83.3333 shares of common stock per $1,000 original principal amount of the 7.875 Percent Convertible Notes. All remaining outstanding 7.875 Percent Convertible Notes were surrendered in November 2020 for conversion and were settled in cash up to the accreted principal amount of the 7.875 Percent Convertible Notes and also settled in cash for the remainder of the conversion obligation in excess of the accreted principal amount, in accordance with the provisions of the indenture that governed the 7.875 Percent Convertible Notes. The conversion of the 7.875 Percent Convertible Notes was settled for $53 million, of which $23 million represented principal repayment and $30 million represented the payment of conversion in excess of the accreted principal. There was no loss on extinguishment. As of December 31, 2020, the 7.875 Percent Convertible Notes were fully redeemed. The 7.875 Percent Convertible Notes were classified as current as of September 30, 2020.

Repurchase of 6.25 Percent Notes due 2024

On December 16, 2020, the company redeemed $275 million of the outstanding $450 million aggregate principal amount of its 6.25 percent notes due 2024 (the "6.25 Percent Notes due 2024") for an aggregate purchase price of $287 million (including accrued interest of $6 million). The redemption price was equal to 102.083% of the principal amount of the 6.25 Percent Notes due 2024 redeemed, plus accrued and unpaid interest thereon up to but excluding the redemption date of December 16, 2020. This redemption was accounted for as an extinguishment of debt, and accordingly the company recognized a loss on debt extinguishment of $8 million. The loss on extinguishment is recorded in the Condensed Consolidated Statement of Operations within Interest expense, net. As of March 31, 2021, $175 million principal amount of the 6.25 Percent Notes due 2024 remained outstanding.

On May 4, 2021 the company issued a notice of redemption for the remaining $175 million principal amount outstanding of the 6.25 Percent Notes due 2024 for an expected aggregate purchase price of $180 million (including expected accrued interest of $3 million). The redemption price will be equal to 101.042% of the principal amount of the 6.25 Percent Notes due 2024 to be redeemed, plus accrued and unpaid interest, if any, thereon up to but excluding the redemption date, which is expected to be June 3, 2021.

4.50 Percent Notes due 2028

On December 1, 2020, the company completed the offering and sale of $275 million aggregate principal amount of its 4.50% notes due 2028 (the "4.50 Percent Notes"), including related guarantees by the subsidiaries of the company who from time to time guarantee the company’s senior secured revolving credit facility as it may be amended, extended, replaced or refinanced, or any subsequent credit facility, to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and to non-U.S. persons in offshore transactions outside the United States in

17

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

reliance on Regulation S under the Securities Act in a private placement exempt from the registration requirements of the Securities Act.

The net proceeds to the company from the sale of the 4.50 Percent Notes after deducting estimated offering expenses payable by the company were approximately $270 million. The company used the net proceeds from the offering, together with cash on hand, to redeem $275 million of the outstanding $450 million aggregate principal amount of its 6.25 Percent Notes due 2024, as described above.

The 4.50 Percent Notes will mature on December 15, 2028 and bear interest at a fixed rate of 4.500% per annum. The company will pay interest on the 4.50 Percent Notes from December 1, 2020 semi-annually, in arrears, on June 15 and December 15 of each year, beginning June 15, 2021. The 4.50 Percent Notes constitute senior unsecured obligations of the company and rank equally in right of payment with its existing and future senior unsecured indebtedness, and effectively junior to its existing and future secured indebtedness to the extent of the security therefor.

The 4.50 Percent Notes provide that, prior to December 15, 2023, the company may redeem, at its option, from time to time, the 4.50 Percent Notes, in whole or in part, at a redemption price equal to the sum of (i) 100% of the principal amount of the 4.50 Percent Notes to be redeemed, plus (ii) the applicable premium as of the redemption date on the 4.50 Percent Notes to be redeemed, plus (iii) accrued and unpaid interest, if any, to, but not including, the redemption date (subject to the right of holders of record on the relevant regular record date to receive interest due on an interest payment date that is on or prior to the redemption date) on the 4.50 Percent Notes to be redeemed.

The 4.50 Percent Notes provide that, on or after December 15, 2023, the company may redeem, at its option, from time to time, the 4.50 Percent Notes, in whole or in part, at the redemption prices (expressed as percentages of the principal amount of the 4.50 Percent Notes to be redeemed) set forth below, plus accrued and unpaid interest, if any, to, but not including, the redemption date (subject to the right of holders of record on the relevant regular record date to receive interest due on an interest payment date that is on or prior to the redemption date) on the 4.50 Percent Notes to be redeemed, if redeemed during the 12-month period beginning on December 15 of the years indicated below:

Year	Redemption Price
2023	102.250	%
2024	101.125	%
2025 and thereafter	100.000	%

The 4.50 Percent Notes also provide that, prior to December 15, 2023, the company may redeem, at its option, from time to time, up to 35% of the aggregate principal amount of the 4.50 Percent Notes with the net cash proceeds of one or more public sales of the company’s common stock at a redemption price equal to 104.500% of the principal amount of the 4.50 Percent Notes to be redeemed, plus accrued and unpaid interest, if any, to, but not including, the redemption date (subject to the right of holders of record on the relevant regular record date to receive interest due on an interest payment date that is on or prior to the redemption date) on the 4.50 Percent Notes to be redeemed so long as at least 65% of the aggregate principal amount of the 4.50 Percent Notes remains outstanding after each such redemption and notice of any such redemption is mailed within 90 days of any such sale of common stock.

If a change of control (as defined in the ninth supplemental indenture under which the 4.50 Percent Notes were issued) occurs, unless the company has exercised its right to redeem the 4.50 Percent Notes, each holder of the 4.50 Percent Notes may require the company to repurchase some or all of such holder’s 4.50 Percent Notes at a purchase price equal to 101% of the principal amount of the 4.50 Percent Notes to be repurchased, plus accrued and unpaid interest, if any, to, but not including, the repurchase date (subject to the right of holders of record on the relevant regular record date to receive interest due on an interest payment date that is on or prior to the repurchase date) on the 4.50 Percent Notes to be repurchased.

Revolving Credit Facility

On November 9, 2020, the company's senior secured revolving credit facility was increased by $60 million to $685 million through the addition of a new lender.

18

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The availability under the senior secured revolving credit facility is subject to a financial covenant based on the ratio of the company’s priority debt (consisting principally of amounts outstanding under the revolving credit facility, the U.S. accounts receivable securitization and factoring programs, and third-party non-working capital foreign debt) to EBITDA. The company is required to maintain a total priority-debt-to-EBITDA ratio, as defined in the credit agreement, of 2.25 to 1.00 or less as of the last day of each fiscal quarter throughout the term of the agreement. Availability under the senior secured revolving credit facility was constrained to $276 million on the last day of the second quarter of fiscal year 2021 due primarily to lower EBITDA in the third and fourth quarters of fiscal year 2020, which were impacted by the COVID-19 pandemic. The company has full availability until the next measurement point at the end of the third quarter of fiscal year 2021.

At March 31, 2021 and September 30, 2020, there were no borrowings outstanding under the senior secured revolving credit facility. The senior secured revolving credit facility includes $100 million of availability for the issuance of letters of credit. At March 31, 2021 and September 30, 2020, there were no letters of credit outstanding under the senior secured revolving credit facility.

Debt Securities

In November 2020, the company filed a shelf registration statement with the SEC registering an indeterminate 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 November 2020 shelf registration statement superseded and replaced the company's shelf registration statement filed in December 2017.

Other

One of the company's consolidated joint ventures in China participates in a bills of exchange program to settle its obligations with its trade suppliers. These programs are common in China and generally require the participation of local banks. Under these programs, the company's joint venture issues notes payable through the participating banks to its trade suppliers. If the issued notes payable remain unpaid on their respective due dates, this could constitute an event of default under the company’s revolving credit facility if the defaulted amount exceeds $35 million per bank. As of March 31, 2021 and September 30, 2020, the company had $22 million and $16 million, respectively, outstanding under this program at more than one bank.

14. Financial Instruments

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

	March 31, 2021				September 30, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	321	$	321	$	315	$	315
Short-term debt	17		16		39		58
Long-term debt	1,186		1,307		1,188		1,259
Foreign currency option contracts (other assets)	—		—		1		1
Foreign exchange forward contracts (other assets)	2		2		—		—
Foreign exchange forward contracts (other liabilities)	—		—		1		1

19

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

	March 31, 2021						September 30, 2020
	Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Reported		Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Reported
Derivative Assets
Foreign currency option contracts	$	—	$	—	$	—	$	1	$	—	$	1
Foreign exchange forward contracts	2		—		2		—		—		—
Derivative Liabilities
Foreign exchange forward contracts	—		—		—		1		—		1

Fair Value

FASB guidance provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical instruments (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

•Level 1 inputs use quoted prices in active markets for identical instruments.

•Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar instruments in active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

•Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related instrument.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest priority level input that is significant to the valuation. The company's assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

Fair value of financial instruments by the valuation hierarchy at March 31, 2021 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	321	$	—	$	—
Short-term debt	—		—		16
Long-term debt	—		1,154		153
Foreign exchange forward contracts (other assets)	—		2		—
Foreign exchange forward contracts (other liabilities)	—		—		—

Fair value of financial instruments by the valuation hierarchy at September 30, 2020 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	315	$	—	$	—
Short-term debt	—		43		15
Long-term debt	—		1,103		156
Foreign exchange forward contracts (other liabilities)	—		1		—
Foreign currency option contracts (other assets)	—		1		—

No transfers of assets between any of the Levels occurred during the three and six months ended March 31, 2021 and 2020.

20

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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

Foreign exchange forward contracts — The company uses foreign exchange forward purchase and sale contracts with varying terms that extend through fiscal year 2025 to hedge its exposure to changes in foreign currency exchange rates. As of March 31, 2021 and September 30, 2020, the notional amount of the company's foreign exchange contracts outstanding under its foreign currency cash flow hedging program was $71 million and $65 million, respectively. The fair value of foreign exchange forward contracts is based on a model which incorporates observable inputs including quoted spot rates, forward exchange rates and discounted future expected cash flows utilizing market interest rates with similar quality and maturity characteristics. For derivative instruments that are designated and qualify as cash flow hedges, changes in the fair value of the contracts is recorded in Accumulated Other Comprehensive Income (Loss) in the statement of shareholders’ equity and is recognized in operating income when the underlying forecasted transaction impacts earnings.

Foreign currency option contracts — The company uses option contracts to mitigate foreign exchange exposure on expected future foreign currency-denominated purchases. As of March 31, 2021 and September 30, 2020, the notional amount of the company's foreign exchange contracts outstanding was $25 million and $39 million, respectively. The company did not elect hedge accounting for these derivatives. Changes in fair value associated with these contracts are recorded in cost of sales in the Condensed Consolidated Statement of Operations.

The company uses option contracts to mitigate the risk of volatility in the translation of foreign currency earnings to U.S. dollars. As of March 31, 2021 and September 30, 2020, the notional amount of the company's option contracts outstanding was $10 million and $24 million, respectively. These option contracts did not qualify for a hedge accounting election. Changes in fair value associated with these contracts are recorded in the Condensed Consolidated Statement of Operations in other income, net.

The fair value of foreign currency option contracts is based on third-party proprietary models, which incorporate inputs at varying unobservable weights of quoted spot rates, market volatility, forward rates and time utilizing market instruments with similar quality and maturity characteristics.

Cross-currency swap contracts — The company has utilized cross-currency swap contracts to hedge a portion of its net investment in a foreign subsidiary against volatility in foreign exchange rates. These derivative instruments are designated and qualify as hedges of net investments in foreign operations using the spot method to assess effectiveness. Changes in fair values of the instruments are recognized in foreign currency translation adjustments, a component of other comprehensive income (loss) in the Condensed Consolidated Statement of Comprehensive Income (Loss), to offset the changes in the values of the net investments being hedged.

In the third quarter of fiscal year 2019, the company entered into multiple cross-currency swaps with a combined notional amount of $225 million and maturities in October 2022. These swaps hedged a portion of the net investment in a certain European subsidiary against volatility in the euro/U.S. dollar foreign exchange rate. In the second quarter of fiscal year 2020, the company settled these cross-currency swap contracts and received proceeds of $11 million, $1 million of which related to net accrued interest receivable.

The fair value of cross-currency swap contracts is based on a model which incorporates observable inputs, including quoted spot rates, forward exchange rates and discounted future expected cash flows, utilizing market interest rates with similar quality and maturity characteristics.

21

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

15. Retirement Benefit Liabilities

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

	March 31, 2021		September 30, 2020
Retiree medical liability	$	51	$	52
Pension liability	120		139
Other	17		17
Subtotal	188		208
Less: current portion (included in compensation and benefits, Note 11)	(12)		(12)
Retirement benefits	$	176	$	196

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

	2021				2020
	Pension		Retiree Medical		Pension		Retiree Medical
Interest cost	$	(8)	$	(1)	$	(10)	$	(1)
Assumed return on plan assets	24		—		24		—
Amortization of prior service benefit	—		9		—		9
Recognized actuarial loss	(8)		(3)		(8)		(3)
Total income	$	8	$	5	$	6	$	5

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

	2021				2020
	Pension		Retiree Medical		Pension		Retiree Medical
Interest cost	$	(17)	$	(1)	$	(21)	$	(1)
Assumed return on plan assets	48		—		48		—
Amortization of prior service benefit	—		18		—		18
Recognized actuarial loss	(16)		(6)		(16)		(7)
Total income	$	15	$	11	$	11	$	10

For the three months ended March 31, 2021 and 2020, the non-service cost components of the net periodic pension and Other Post-Employment Benefits ("OPEB") income were $13 million and $11 million, respectively, and are presented in Other income, net. For the six months ended March 31, 2021 and 2020, the non-service cost components of the net periodic pension and OPEB income were $26 million and $21 million, respectively, and are presented in Other income, net.

22

MERITOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

16. Contingencies

Environmental

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

The company has been designated as a potentially responsible party at ten Superfund sites, excluding sites as to which the company’s records disclose no involvement or as to which the company’s liability has been finally determined. Superfund is a United States federal government program designed to fund the cleanup of sites contaminated with hazardous substances and pollutants. Management estimates the total reasonably possible costs the company could incur for the remediation of the ten Superfund sites at March 31, 2021 to be approximately $22 million, of which $10 million is probable and recorded as a liability. Included in reasonably possible amounts are estimates for certain remediation actions that may be required if current actions are deemed inadequate by the regulators.

In addition to the Superfund sites, various other lawsuits, claims and proceedings have been asserted against the company, alleging violations of federal, state and local environmental protection requirements, or seeking remediation of alleged environmental impairments, principally at previously disposed-of properties. For these matters, management has estimated the total reasonably possible costs the company could incur at March 31, 2021 to be approximately $13 million, of which $4 million is probable and recorded as a liability.

Included in the company’s environmental liabilities are costs for on-going operation, maintenance and monitoring at environmental sites in which remediation has been put into place. This liability is discounted using discount rates in the range of 0 to 1.50 percent and is approximately $13 million at March 31, 2021. The undiscounted estimate of these costs is approximately $14 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, 2020	$	11	$	5	$	16
Payments and other	(2)		(1)		(3)
Accruals	1		—		1
Ending Balance at March 31, 2021	$	10	$	4	$	14

Environmental reserves are included in Other Current Liabilities (see Note 11) and Other Liabilities (see Note 12) 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Asbestos

    Rockwell International Corporation ("Rockwell") — ArvinMeritor, Inc. ("AM"), a predecessor of Meritor, along with many other companies, has been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos used in certain components of Rockwell products many years ago. Liability for these claims was transferred at the time of the spin-off of the automotive business from Rockwell in 1997. There were approximately 1,200 pending active asbestos claims in lawsuits that name AM, together with many other companies, as defendants as of March 31, 2021 and September 30, 2020. In March 2021, AM entered into a tolling agreement with an asbestos plaintiff's law firm. Under the terms of this agreement, AM agreed to toll the statute of limitations from expiring on asbestos claims in exchange for the plaintiff's firm agreeing not to raise a claim until there is product identification linking AM. The plaintiff firm also agreed to dismiss pending active claims for which product identification was not yet determined. The dismissal of these claims is expected to occur in the third fiscal quarter of fiscal year 2021. According to the terms of the tolling agreement, if the plaintiff's firm subsequently links AM's product to the plaintiff, they will refile a claim against AM.

A significant portion of the claims do not identify any Rockwell products or specify which of the claimants, if any, were exposed to asbestos attributable to Rockwell products, and past experience has shown that the vast majority of the claimants will likely never identify any of Rockwell products. Historically, AM has been dismissed from the vast majority of similar claims filed in the past with no payment to claimants. For those claimants who do show that they worked with Rockwell products, management nevertheless believes it has meritorious defenses, in substantial part due to the integrity of the products involved and the lack of any impairing medical condition on the part of many claimants.

Pending and Future Claims: The company engaged a third-party advisor with extensive experience in assessing asbestos-related liabilities to conduct a study to estimate its potential undiscounted liability for pending and future asbestos-related claims as of September 30, 2020. Management continuously monitors the underlying claims data and experience for the purpose of assessing the appropriateness of the assumptions used to estimate the liability.

As of September 30, 2020, the best estimate of the company's obligation for asbestos-related claims over the next 38 years was $78 million. The company recognized a liability for pending and future claims over the next 38 years of $75 million as of March 31, 2021. 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.

Recoveries: AM has insurance coverage that management believes covers indemnity and defense costs, over and above self-insurance retentions, for a significant portion of these claims. The company recognizes insurance recoveries when the claim for recovery is deemed probable and to the extent an insurable loss has been recognized in the financial statements. The company’s determination is based on analysis of the underlying insurance policies, historical experience with insurers, ongoing review of the solvency of insurers, and consideration of any insurance settlements The insurance receivables for Rockwell asbestos-related liabilities totaled $59 million and $62 million as of March 31, 2021 and September 30, 2020, respectively.

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

Indemnification

The company has provided indemnities in conjunction with certain transactions, primarily divestitures. These indemnities address a variety of matters, which may include environmental, tax, asbestos, labor and employment-related matters, and the periods of indemnification vary in duration.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Other

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

17. Shareholders' Equity

There were no dividends declared or paid in the first or second quarter of fiscal years 2021 and 2020. The payment of cash dividends and the amount of any dividend are subject to review and change at the discretion of the company's Board of Directors.

Common Stock and Debt Repurchase Authorizations

On November 7, 2019, the Board of Directors authorized the repurchase of up to $325 million of the company's common stock, which was an increase from the prior $250 million authorization approved on July 26, 2019. Repurchases can be made from time to time through open market purchases, privately negotiated transactions or otherwise, subject to compliance with legal and regulatory requirements and the company’s debt covenants. As of the end of fiscal year 2020, the company had repurchased 11.8 million shares of common stock for $266 million (including commission costs) pursuant to this authorization. There were no repurchases in the first or second quarter of fiscal year 2021. As of March 31, 2021, the amount remaining available for repurchases under this common stock repurchase authorization was $59 million. On March 25, 2020, the company suspended activity under its share repurchase program as a result of uncertainties in the global economy due to the COVID-19 pandemic.

On November 2, 2018, the Board of Directors authorized the repurchase of up to $200 million of the company's common stock and up to $100 million aggregate principal amount of any of the company's debt securities (including convertible debt securities), in each case from time to time through open market purchases, privately negotiated transactions or otherwise, subject to compliance with legal and regulatory requirements and the company's debt covenants. The remaining authority under the common stock repurchase authorization was superseded by the July 2019 authorization described above. As of March 31, 2021 and September 30, 2020, the amount remaining available for repurchase under this debt repurchase authorization was $76 million.

In November 2020, we filed a shelf registration statement with the Securities and Exchange Commission ("SEC"), registering an indeterminate amount of debt and/or equity securities that we may offer in one or more offerings on terms to be determined at the time of sale.

Accumulated Other Comprehensive Loss ("AOCL")

The components of AOCL and the changes in AOCL by components, net of tax, for the three months ended March 31, 2021 and 2020 are as follows (in millions):

	Foreign Currency Translation		Employee Benefit Related Adjustments		Unrealized Income (Loss) on cash flow hedges		Total
Balance at December 31, 2020	$	(74)	$	(480)	$	(1)	$	(555)
Other comprehensive income before reclassification	(22)		—		—		(22)
Amounts reclassified from accumulated other comprehensive loss	—		2		—		2
Net current-period other comprehensive income	(22)		2		—		(20)
Balance at March 31, 2021	$	(96)	$	(478)	$	(1)	$	(575)

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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
Prior service benefit	$	(9)	(a)
Actuarial losses	11		(a)
	2		Total before tax
	—		Tax benefit
Total reclassifications for the period	$	2	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 15 for additional details), which is recorded in other income (expense), net.

	Foreign Currency Translation		Employee Benefit Related Adjustments		Unrealized Income (Loss) on cash flow hedges		Total
Balance at December 31, 2019	$	(86)	$	(569)	$	—	$	(655)
Other comprehensive income before reclassification	(56)		—		(3)		(59)
Amounts reclassified from accumulated other comprehensive loss	—		2		(2)		—
Net current-period other comprehensive income	(56)		2		(5)		(59)
Balance at March 31, 2020	$	(142)	$	(567)	$	(5)	$	(714)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service benefit	$	(9)	(b)
Actuarial losses	11		(b)
	2		Total before tax
	—		Tax benefit
Total reclassifications for the period	$	2	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 15 for additional details), which is recorded in other income (expense), net.

The components of AOCL and the changes in AOCL by components, net of tax, for the six months ended March 31, 2021 and 2020 are as follows (in millions):

	Foreign Currency Translation		Employee Benefit Related Adjustments		Unrealized Income (Loss) on cash flow hedges		Total
Balance at September 30, 2020	$	(129)	$	(483)	$	(2)	$	(614)
Other comprehensive income before reclassification	33		1		1		35
Amounts reclassified from accumulated other comprehensive loss	—		4		—		4
Net current-period other comprehensive income	33		5		1		39
Balance at March 31, 2021	$	(96)	$	(478)	$	(1)	$	(575)

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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
Prior service benefit	$	(18)	(a)
Actuarial losses	22		(a)
	4		Total before tax
	—		Tax benefit
Total reclassifications for the period	$	4	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 15 for additional details), which is recorded in other income (expense), net.

	Foreign Currency Translation		Employee Benefit Related Adjustments		Unrealized Income (Loss) on cash flow hedges		Total
Balance at September 30, 2019	$	(107)	$	(572)	$	(2)	$	(681)
Other comprehensive income before reclassification	(35)		—		(3)		(38)
Amounts reclassified from accumulated other comprehensive loss	—		5		—		5
Net current-period other comprehensive income	(35)		5		(3)		(33)
Balance at March 31, 2020	$	(142)	$	(567)	$	(5)	$	(714)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service benefit	$	(18)	(b)
Actuarial losses	23		(b)
	5		Total before tax
	—		Tax benefit
Total reclassifications for the period	$	5	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 15 for additional details), which is recorded in other income (expense), net.

18. Business Segment Information

Segment information is summarized as follows (in millions):

	Commercial Truck		Aftermarket & Industrial		Eliminations		Total
Three Months Ended March 31, 2021
External Sales	$	742	$	241	$	—	$	983
Intersegment Sales	35		6		(41)		—
Total Sales	$	777	$	247	$	(41)	$	983
Three Months Ended March 31, 2020 (1)
External Sales	$	598	$	273	$	—	$	871
Intersegment Sales	33		4		(37)		—
Total Sales	$	631	$	277	$	(37)	$	871

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Commercial Truck		Aftermarket & Industrial		Eliminations		Total
Six Months Ended March 31, 2021
External Sales	$	1,402	$	470	$	—	$	1,872
Intersegment Sales	66		11		(77)		—
Total Sales	$	1,468	$	481	$	(77)	$	1,872
Six Months Ended March 31, 2020 (1)
External Sales	$	1,229	$	543	$	—	$	1,772
Intersegment Sales	65		9		(74)		—
Total Sales	$	1,294	$	552	$	(74)	$	1,772

(1) Amounts for the three and six months ended March 31, 2020 have been recast to reflect reportable segment changes.

	Three Months Ended March 31,				Six Months Ended March 31,
	2021		2020 (2)		2021		2020 (2)
Segment adjusted EBITDA:
Commercial Truck	$	73	$	58	$	136	$	115
Aftermarket & Industrial	34		46		69		85
Segment adjusted EBITDA	107		104		205		200
Unallocated legacy and corporate expense, net (1)	4		3		8		5
Interest expense, net	(17)		(16)		(45)		(30)
Provision for income taxes	(22)		(73)		(29)		(86)
Depreciation and amortization	(25)		(26)		(52)		(50)
Noncontrolling interests	(3)		(1)		(4)		(3)
Loss on sale of receivables	(1)		(1)		(2)		(2)
Restructuring	(2)		(10)		(8)		(15)
Brazil VAT Credit (3)	22		—		22		—
Transaction costs	—		(5)		—		(5)
Income from WABCO distribution termination	—		265		—		265
Income from continuing operations attributable to Meritor, Inc.	$	63	$	240	$	95	$	279

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

(2) Amounts for the three and six months ended March 31, 2020 have been recast to reflect reportable segment changes.

(3) Amount relates to the one-time recognition of a value added tax credit in Brazil.

	March 31, 2021		September 30, 2020
Segment Assets:
Commercial Truck	$	1,920	$	1,666
Aftermarket & Industrial	679		658
Total segment assets	2,599		2,324
Corporate (1)	737		714
Less: Accounts receivable sold under off-balance sheet factoring programs (2)	(196)		(154)
Total assets	$	3,140	$	2,884

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

(2) At March 31, 2021 and September 30, 2020, segment assets include $196 million and $154 million, respectively, of accounts receivable sold under off-balance sheet accounts receivable factoring programs (see Note 7). These sold receivables are included in segment assets as the CODM reviews segment assets inclusive of these balances.

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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 products, 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.

COVID-19 Pandemic Update

In March 2020 the World Health Organization declared a global health pandemic related to the outbreak of a novel coronavirus. The COVID-19 pandemic adversely affected our financial performance in the second, third and fourth quarters of fiscal year 2020, and could have an impact on the second half of fiscal year 2021. In response to the COVID-19 pandemic, government health officials at times recommended and mandated precautions to mitigate the spread of the virus, including shelter-in-place orders, prohibitions on public gatherings and other similar measures. The company has been operating as an essential business in the U.S. All of our facilities were fully operational at the end of fiscal year 2020 and during the first and second quarter of fiscal year 2021. Our salaried employees are primarily working remotely until further notice. There is uncertainty around the duration and breadth of the COVID-19 pandemic, as well as the impact it will have on our operations, supply chain and demand for our products. As a result, the ultimate impact on our business, financial condition and operating results cannot be reasonably estimated at this time.

Employee Health and Safety

In fiscal year 2020, we established and executed a “Safe Start” plan for the reopening of plants, test labs, distribution centers and administrative facilities. We intend to operate under the plan's enhanced safety guidelines for the foreseeable future. To ensure consistent application and compliance with the plan's safety protocols, in fiscal year 2020 we expanded the role of our Vice President and General Auditor to include responsibilities as Chief Safety Compliance Officer.

Operations

We have complied with various shelter-in-place and similar government orders in various locations around the world, as applicable. The impact of the COVID-19 pandemic led to suspended production in most of our global commercial truck manufacturing facilities during the second and third quarters of fiscal 2020. All of our facilities were fully operational by the end of fiscal year 2020 and during the first and second quarter of fiscal year 2021.

As we serve the transportation, industrial and defense industries, we continue to support customers who are actively engaged in the COVID-19 pandemic response. As the COVID-19 situation evolves, we will continue to monitor government and other mandates to understand the potential impact on our operations.

Change in Non-GAAP Measures

Beginning in the second quarter of fiscal year 2021, we revised our presentation of two non-GAAP measures, adjusted income (loss) from continuing operations and adjusted diluted earnings (loss) per share, to better align with the SEC’s guidance. An adjustment for non-cash tax expense related to the use of deferred tax assets in jurisdictions with net operating loss carryforwards or tax credits will no longer be included in these two non-GAAP measures; however the underlying availability and the benefits of the tax attributes to offset future taxable income has not changed. For comparability, references to prior period non-GAAP measures have been updated to show the effect of omitting this adjustment from adjusted income (loss) from continuing operations and adjusted diluted earnings (loss) per share.

2nd Quarter Fiscal Year 2021 Results

Our sales for the second quarter of fiscal year 2021 were $983 million, compared to $871 million in the same period in the prior fiscal year, an increase of 13 percent year over year. The increase in sales was primarily driven by higher global truck production in all markets, partially offset by the impact of the termination of our distribution arrangement with WABCO Holdings, Inc. ("WABCO"), which occurred late in the second quarter of fiscal year 2020.

Net income attributable to Meritor for the second quarter of fiscal year 2021 was $63 million compared to $241 million in the same period in the prior fiscal year. Lower net income year over year was driven primarily by $203 million of after-tax

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income associated with the termination of our distribution arrangement with WABCO during the second quarter of fiscal year 2020, partially offset by the recognition of $15 million of after-tax income related to value added tax credits in our wholly-owned Brazilian subsidiary during the second quarter of fiscal year 2021 and cost reduction actions executed in the second half of fiscal year 2020.

Adjusted EBITDA (see Non-GAAP Financial Measures below) for the second quarter of fiscal year 2021 was $111 million compared to $107 million in the same period in the prior fiscal year. Our adjusted EBITDA margin (see Non-GAAP Financial Measures below) in the second quarter of fiscal year 2021 was 11.3 percent compared to 12.3 percent in the same period in the prior fiscal year. The increase in adjusted EBITDA year over year was driven primarily by higher sales and cost reduction actions executed in the second half of the prior fiscal year, partially offset by higher incentive compensation and freight costs. Adjusted EBITDA margin decreased year over year due primarily to increased incentive compensation expense.

Net income from continuing operations attributable to the company for the second quarter of fiscal year 2021 was $63 million compared to $240 million in the same period in the prior fiscal year. Adjusted income from continuing operations attributable to the company (see Non-GAAP Financial Measures below) for the second quarter of fiscal year 2021 was $50 million compared to $48 million in the same period in the prior fiscal year, as updated

Cash provided by operating activities was $63 million in the second quarter of fiscal year 2021 compared to cash provided by operating activities of $309 million in the second quarter of fiscal year 2020. The decrease in operating cash flow year over year was driven primarily by $265 million of cash received in fiscal year 2020 from the termination of the distribution arrangement with WABCO in the second quarter of fiscal year 2020.

Trends and Uncertainties

     Industry Production Volumes

The following table reflects estimated on-highway commercial truck production volumes for selected original equipment markets for the three and six months ended March 31, 2021 and 2020 based on available sources and management’s estimates.

	Three Months Ended March 31,		Percent		Six Months Ended March 31,		Percent
	2021	2020	Change		2021	2020	Change
Estimated Commercial Truck production (in thousands):
North America, Heavy-Duty Trucks	69	61	13	%	134	130	3	%
North America, Medium-Duty Trucks	61	60	2	%	123	120	2	%
North America, Trailers	61	57	7	%	117	136	(14)	%
Western Europe, Heavy- and Medium-Duty Trucks	108	98	10	%	222	204	9	%
South America, Heavy- and Medium-Duty Trucks	33	22	50	%	66	52	27	%
India, Heavy- and Medium-Duty Trucks	55	43	28	%	113	91	24	%

North America:

During fiscal year 2021, we expect Heavy-Duty Truck production volumes to significantly increase from the levels experienced in fiscal year 2020.

Western Europe:

During fiscal year 2021, we expect production volumes in Western Europe to increase from the levels experienced in fiscal year 2020.

South America:

During fiscal year 2021, we expect production volumes to significantly increase from the levels experienced in fiscal year 2020.

China:

During fiscal year 2021, we expect production volumes to increase from the levels experienced in fiscal year 2020.

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India:

During fiscal year 2021, we expect production volumes to significantly increase from the levels experienced in fiscal year 2020.

Industry-Wide Issues and Other Significant Issues

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

•Uncertainty regarding the duration and severity of the COVID-19 pandemic and its effects on public health, the global economy and financial markets, as well as our industry, operations, workforce, supply chains, distribution systems and demand for our products;

•Uncertainty around the global economic outlook;

•Volatility in price and availability of steel, components, transportation costs and other commodities, including energy;

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

•Impact of currency exchange rate volatility; and

•Consolidation and globalization of OEMs and their suppliers.

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

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

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

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

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

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

•Competitively driven price reductions to our customers or potential price increases from our suppliers;

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

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

•Uncertainties of asbestos claim, environmental and other legal proceedings, the long-term solvency of our insurance carriers and the potential for higher-than-anticipated costs resulting from environmental liabilities, including those related to site remediation;

•Significant pension costs; and

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

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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 free cash flow conversion.

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 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. Free cash flow conversion is defined as free cash flow over adjusted income from continuing operations attributable to the company. Beginning in the second quarter of fiscal year 2021, the company will no longer include an adjustment for non-cash tax expense related to the use of deferred tax assets in jurisdictions with net operating loss carryforwards or tax credits in adjusted income (loss) from continuing operations and adjusted diluted earnings (loss) per share.

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, adjusted diluted earnings (loss) per share from continuing operations and free cash flow conversion are meaningful measures of performance to investors as they are commonly utilized to analyze financial performance in our industry, perform analytical comparisons, measure value creation, benchmark performance between periods and measure our performance against externally communicated targets.

Free cash flow is used by investors and management to analyze our ability to service and repay debt and return value directly to shareholders. Free cash flow conversion is a specific financial measure of our M2022 plan used to measure the company's ability to convert earnings to free cash flow and provides useful information about our ability to achieve strategic goals.

Management uses the aforementioned non-GAAP financial measures for planning and forecasting purposes, and segment adjusted EBITDA is also used as the primary basis for the Chief Operating Decision Maker ("CODM") to evaluate the performance of each of our reportable segments.

Our Board of Directors uses adjusted EBITDA margin, free cash flow, adjusted diluted earnings (loss) per share from continuing operations and free cash flow conversion as key metrics to determine management’s performance under our performance-based compensation plans, provided that, solely for this purpose, adjusted diluted earnings (loss) from continuing operations also includes an adjustment for the use of deferred tax assets in jurisdictions with net operating loss carryforwards or tax credits.

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

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

	Three Months Ended March 31,				Six Months Ended March 31,
	2021		2020 (3)		2021		2020 (3)
Income from continuing operations attributable to the company	$	63	$	240	$	95	$	279
Restructuring	2		10		8		15
Loss on debt extinguishment	—		—		8		—
Income from WABCO distribution termination	—		(265)		—		(265)
Brazil VAT Credit (1)	(22)		—		(22)		—
Transaction costs	—		5		—		5
Tax effect of adjustments (2)	7		58		4		57
Adjusted income from continuing operations attributable to the company	$	50	$	48	$	93	$	91
Diluted earnings per share from continuing operations	$	0.86	$	3.19	$	1.30	$	3.58
Impact of adjustments on diluted earnings per share	(0.18)		(2.55)		(0.03)		(2.41)
Adjusted diluted earnings per share from continuing operations	$	0.68	$	0.64	$	1.27	$	1.17

(1) Amount relates to a pre-tax loss recovery, net of legal expenses, on the overpayment of VAT in Brazil.

(2) Amount for the three months ended March 31, 2021 includes $7 million of income tax expense related to the Brazil VAT credit. Amount for the six months ended March 31, 2021 includes $7 million of income tax expense related to the Brazil VAT credit, $2 million of income tax benefits for the loss on debt extinguishment and $1 million of income tax benefits related to restructuring. Amount for the three months ended March 31, 2020 includes $62 million of income tax expense related to the WABCO distribution arrangement termination, $3 million of income tax benefits related to restructuring and $1 million of income tax benefits related to AxleTech transaction costs. Amount for the six months ended March 31, 2020 includes $62 million of income tax expense related to the WABCO distribution arrangement termination, $4 million of income tax benefits related to restructuring and $1 million of income tax benefits related to AxleTech transaction costs.

(3) For comparability, amounts for the three and six months ended March 31, 2020 have been updated to show the effect of omitting the non-cash tax adjustment from the calculation of adjusted income from continuing operations attributable to the company and adjusted diluted earnings per share from continuing operations.

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

	Three Months Ended March 31,						Six Months Ended March 31,
	2021			2020			2021			2020
Cash provided by operating activities	$	63		$	309		$	107		$	290
Capital expenditures	(16)			(17)			(26)			(33)
Free cash flow	$	47		$	292		$	81		$	257
Free cash flow / Net income from continuing operations attributable to the company	75		%	122		%	85		%	92		%
Free cash flow conversion (Free cash flow / Adjusted income from continuing operations attributable to the company)	94		%	608		%	87		%	282		%

33

MERITOR, INC.

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

	Three Months Ended March 31,						Six Months Ended March 31,
	2021			2020			2021			2020
Net income attributable to Meritor, Inc.	$	63		$	241		$	95		$	280
Income from discontinued operations, net of tax, attributable to Meritor, Inc.	—			(1)			—			(1)
Income from continuing operations, net of tax, attributable to Meritor, Inc.	$	63		$	240		$	95		$	279
Interest expense, net	17			16			45			30
Provision for income taxes	22			73			29			86
Depreciation and amortization	25			26			52			50
Noncontrolling interests	3			1			4			3
Loss on sale of receivables	1			1			2			2
Restructuring	2			10			8			15
Transaction costs	—			5			—			5
Income from WABCO distribution termination	—			(265)			—			(265)
Brazil VAT Credit (1)	(22)			—			(22)			—
Adjusted EBITDA	$	111		$	107		$	213		$	205
Adjusted EBITDA margin (2)	11.3		%	12.3		%	11.4		%	11.6		%
Unallocated legacy and corporate expense (income), net (3)	(4)			(3)			(8)			(5)
Segment adjusted EBITDA	$	107		$	104		$	205		$	200
Commercial Truck (4)
Segment adjusted EBITDA	$	73		$	58		$	136		$	115
Segment adjusted EBITDA margin (5)	9.4		%	9.2		%	9.3		%	8.9		%
Aftermarket & Industrial (4)
Segment adjusted EBITDA	$	34		$	46		69			$	85
Segment adjusted EBITDA margin (5)	13.8		%	16.6		%	14.3		%	15.4		%

(1) Amount relates to a pre-tax loss recovery, net of legal expenses, on the overpayment of VAT in Brazil.

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

(3) 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.

(4) Amounts for the three and six months ended March 31, 2020 have been recast to reflect reportable segment changes.

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

34

MERITOR, INC.

Results of Operations

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

   Sales

The following table reflects total company and business segment sales for the three months ended March 31, 2021 and 2020 (dollars in millions). The reconciliation is intended to reflect the trend in business segment sales and to illustrate the impact that changes in foreign currency exchange rates, volumes and other factors had on sales. Business segment sales include intersegment sales.

	Three Months Ended March 31,								Dollar Change Due To
	2021		2020 (1)		Dollar Change		% Change		Currency		Volume/ Other
Sales:
Commercial Truck
North America	$	381	$	346	$	35	10	%	$	—	$	35
Europe	171		140		31		22	%	15		16
South America	81		50		31		62	%	(16)		47
China	34		26		8		31	%	3		5
India	50		22		28		127	%	(1)		29
Other	25		14		11		79	%	2		9
Total External Sales	$	742	$	598	$	144	24	%	$	3	$	141
Intersegment Sales	35		33		2		6	%	3		(1)
Total Sales	$	777	$	631	$	146	23	%	$	6	$	140
Aftermarket & Industrial
North America	$	196	$	231	$	(35)	(15)	%	$	—	$	(35)
Europe	43		42		1		2	%	3		(2)
Other	2		—		2		N/A		—		2
Total External Sales	$	241	$	273	$	(32)	(12)	%	$	3	$	(35)
Intersegment Sales	6		4		2		50	%	2		—
Total Sales	$	247	$	277	$	(30)	(11)	%	$	5	$	(35)
Total External Sales	$	983	$	871	$	112	13	%	$	6	$	106

(1) Amounts for the three months ended March 31, 2020 have been recast to reflect reportable segment changes.

Commercial Truck sales were $777 million in the second quarter of fiscal year 2021, up 23 percent compared to the second quarter of fiscal year 2020. The increase in sales in the second quarter of fiscal year 2021 was primarily driven by higher global truck production in all markets.

Aftermarket & Industrial sales were $247 million in the second quarter of fiscal year 2021, down 11 percent compared to the second quarter of fiscal year 2020. The decrease in sales in the second quarter of fiscal year 2021 was primarily due to the impact from the termination of the WABCO distribution arrangement which occurred late in the second quarter of fiscal year 2020.

35

MERITOR, INC.

	Three Months Ended March 31,
	2021		2020		Dollar Change		% Change
Sales	$	983	$	871	$	112	13	%
Cost of sales	(835)		(757)		78		10	%
GROSS PROFIT	148		114		34		30	%
Selling, general and administrative	(69)		(59)		10		17	%
Income from WABCO distribution termination	—		265		(265)		N/A
Other operating expense, net	(2)		(10)		(8)		(80)	%
Other income, net	23		14		9		64	%
Equity in earnings of affiliates	5		6		(1)		(17)	%
Interest expense, net	(17)		(16)		1		6	%
INCOME BEFORE INCOME TAXES	88		314		(226)		(72)	%
Provision for income taxes	(22)		(73)		(51)		(70)	%
INCOME FROM CONTINUING OPERATIONS	66		241		(175)		(73)	%
INCOME FROM DISCONTINUED OPERATIONS, net of tax	—		1		(1)		(100)	%
NET INCOME	66		242		(176)		(73)	%
Less: Net income attributable to noncontrolling interests	(3)		(1)		2		(200)	%
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	63	$	241	$	(178)	(74)	%

Cost of Sales and Gross Profit

Cost of sales primarily represents materials, labor and overhead production costs associated with the company’s products and production facilities. Cost of sales for the three months ended March 31, 2021 was $835 million compared to $757 million in the same period in the prior fiscal year, representing an increase of 10 percent, primarily driven by increased market volumes. Total cost of sales was 84.9 percent and 86.9 percent of sales for the three-month periods ended March 31, 2021 and 2020, respectively.

Material costs represent the majority of our cost of sales and include raw materials, composed primarily of steel, and purchased components. Material costs for the three months ended March 31, 2021 increased $56 million compared to the same period in the prior fiscal year due to higher volumes and increased freight costs.

Labor and overhead costs for the three months ended March 31, 2021 increased by $22 million compared to the same period in the prior fiscal year primarily due to higher volume in our North American and European locations.

Other, net for the three months ended March 31, 2021 was flat compared to the same period in the prior fiscal year.

Gross profit was $148 million and $114 million for the three-month periods ended March 31, 2021 and 2020, respectively. Gross profit as a percentage of sales was 15.1 percent and 13.1 percent for the three-month periods ended March 31, 2021 and 2020, respectively.

Other Income Statement Items

Selling, general and administrative expenses ("SG&A") for the three months ended March 31, 2021 and 2020 were $69 million and $59 million, respectively. SG&A was higher in the second quarter of fiscal year 2021 primarily due to increased incentive compensation costs.

Other income, net for the three months ended March 31, 2021 and 2020 were $23 million and $14 million, respectively. Other income, net was higher in the second quarter of fiscal year 2021 primarily due to the recognition of $10 million of other income related to value-added tax credits in our wholly-owned Brazilian subsidiary during the second quarter of fiscal year 2021.

Provision for income taxes was $22 million for the three months ended March 31, 2021 compared to $73 million in the same period in the prior fiscal year. The decrease in tax expense is primarily related to the tax effect of the proceeds received from the termination of the WABCO distribution agreement during the second quarter of fiscal year 2020, partially offset by the tax effect of the Brazilian VAT credits recorded in the second quarter of fiscal year 2021.

36

MERITOR, INC.

Segment Adjusted EBITDA and Segment Adjusted EBITDA Margins

The following table reflects segment adjusted EBITDA and segment adjusted EBITDA margins for the three months ended March 31, 2021 and 2020 (dollars in millions).

	Segment adjusted EBITDA						Segment adjusted EBITDA margins
	Three Months Ended March 31,						Three Months Ended March 31,
	2021		2020 (1)		Change		2021		2020 (1)		Change
Commercial Truck	$	73	$	58	$	15	9.4	%	9.2	%	0.20	pts
Aftermarket & Industrial	34		46		(12)		13.8	%	16.6	%	(2.80)	pts
Segment adjusted EBITDA	$	107	$	104	$	3	10.9	%	11.9	%	(1.00)	pts

(1) Amounts for the three months ended March 31, 2020 have been recast to reflect reportable segment changes.    

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

	Commercial Truck		Aftermarket & Industrial		TOTAL
Segment adjusted EBITDA– Quarter ended March 31, 2020 (1)	$	58	$	46	$	104
Higher short-and long-term variable compensation	(14)		(5)		(19)
Lower earnings from unconsolidated affiliates	(1)		—		(1)
Impact of foreign currency exchange rates	(6)		1		(5)
Volume, mix, pricing and other	36		(8)		28
Segment adjusted EBITDA – Quarter ended March 31, 2021	$	73	$	34	$	107

(1) Amounts for the three months ended March 31, 2020 have been recast to reflect reportable segment changes. 

Commercial Truck segment adjusted EBITDA was $73 million in the second quarter of fiscal year 2021, up $15 million from the same period in the prior fiscal year. Segment adjusted EBITDA margin increased from 9.2 percent in the second quarter of fiscal year 2020 to 9.4 percent in the second quarter of fiscal year 2021. The increase in segment adjusted EBITDA and segment adjusted EBITDA margin was driven primarily by conversion on higher revenue and cost reduction actions, partially offset by higher incentive compensation and freight costs.

Aftermarket & Industrial segment adjusted EBITDA was $34 million in the second quarter of fiscal year 2021, down $12 million from the same period in the prior fiscal year. Segment adjusted EBITDA margin decreased from 16.6 percent in the second quarter of fiscal year 2020 to 13.8 percent in the second quarter of fiscal year 2021. The decrease in segment adjusted EBITDA and segment adjusted EBITDA margin was driven primarily by the impact from the termination of the WABCO distribution arrangement during the second quarter of fiscal year 2020 and increased incentive compensation costs, partially offset by cost reduction actions.

37

MERITOR, INC.

Results of Operations

Six Months Ended March 31, 2021 Compared to Six Months Ended March 31, 2020

   Sales

The following table reflects total company and business segment sales for the six months ended March 31, 2021 and 2020 (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.

	Six Months Ended March 31,								Dollar Change Due To
	2021		2020 (1)		Dollar Change		% Change		Currency		Volume/ Other
Sales:
Commercial Truck
North America	$	727	$	713	$	14	2	%	$	—	$	14
Europe	344		281		63		22	%	29		34
South America	137		103		34		33	%	(35)		69
China	64		60		4		7	%	5		(1)
India	83		44		39		89	%	(2)		41
Other	47		28		19		68	%	3		16
Total External Sales	$	1,402	$	1,229	$	173	14	%	$	—	$	173
Intersegment Sales	66		65		1		2	%	5		(4)
Total Sales	$	1,468	$	1,294	$	174	13	%	$	5	$	169
Aftermarket & Industrial
North America	$	383	$	456	$	(73)	(16)	%	$	—	$	(73)
Europe	85		85		—		—	%	6		(6)
Other	2		2		—		—	%	—		—
Total External Sales	$	470	$	543	$	(73)	(13)	%	$	6	$	(79)
Intersegment Sales	11		9		2		22	%	4		(2)
Total Sales	$	481	$	552	$	(71)	(13)	%	$	10	$	(81)
Total External Sales	$	1,872	$	1,772	$	100	6	%	$	6	$	94

(1) Amounts for the six months ended March 31, 2020 have been recast to reflect reportable segment changes.

Commercial Truck sales were $1,468 million in the first six months of fiscal year 2021, up 13% percent compared to the first six months of fiscal year 2020, driven by higher global truck production in all markets.

Aftermarket & Industrial sales were $481 million in the first six months of fiscal year 2021, down 13% percent compared to the first six months of fiscal year 2020 primarily due to the impact from the termination of the WABCO distribution arrangement.

38

MERITOR, INC.

	Six Months Ended March 31,
	2021		2020		Dollar Change		% Change
Sales	$	1,872	$	1,772	$	100	6	%
Cost of sales	(1,609)		(1,531)		78		5	%
GROSS PROFIT	263		241		22		9	%
Selling, general and administrative	(134)		(129)		5		4	%
Income from WABCO distribution termination	—		265		(265)		N/A
Other operating expense, net	(9)		(15)		(6)		(40)	%
Other income, net	37		24		13		54	%
Equity in earnings of affiliates	16		12		4		33	%
Interest expense, net	(45)		(30)		15		50	%
INCOME BEFORE INCOME TAXES	128		368		(240)		(65)	%
Provision for income taxes	(29)		(86)		(57)		(66)	%
INCOME FROM CONTINUING OPERATIONS	99		282		(183)		(65)	%
INCOME FROM DISCONTINUED OPERATIONS, net of tax	—		1		(1)		100	%
NET INCOME	99		283		(184)		(65)	%
Less: Net income attributable to noncontrolling interests	(4)		(3)		1		33	%
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	$	95	$	280	$	(185)	(66)	%

Cost of Sales and Gross Profit

Cost of sales primarily represents materials, labor and overhead production costs associated with the company’s products and production facilities. Cost of sales for the six months ended March 31, 2021 was $1,609 million compared to $1,531 million in the same period in the prior fiscal year, representing an increase of 5 percent, primarily due to higher production volumes. Total cost of sales was 86.0 percent and 86.4 percent of sales for the six-month periods ended March 31, 2021 and 2020, respectively.

Material costs represent the majority of our cost of sales and include raw materials, composed primarily of steel, and purchased components. Material costs for the six months ended March 31, 2021 increased $47 million compared to the same period in the prior fiscal year due to increased volumes and higher freight costs.

Labor and overhead costs increased $33 million compared to the same period in the prior fiscal year primarily due to higher volumes in our U.S. and European locations.

Other, net for the six months ended March 31, 2021 decreased $2 million compared to the same period in the prior fiscal year.

Gross profit was $263 million and $241 million for the six-month periods ended March 31, 2021 and 2020, respectively. Gross profit as a percentage of sales was 14.0 percent and 13.6 percent for the six-month periods ended March 31, 2021 and 2020, respectively.

Other Income Statement Items

Selling, general and administrative expenses for the six months ended March 31, 2021 and 2020 were $134 million and $129 million, respectively. SG&A increased by $5 million primarily due to higher incentive costs and electrification costs, partly offset by cost reduction actions.

Other income, net for the six months ended March 31, 2021 and 2020 were $37 million and $24 million, respectively. Other income, net increased primarily due to the recognition of $10 million of other income related to value-added tax credits in our wholly-owned Brazilian subsidiary during the second quarter of fiscal year 2021.

Equity in earnings of affiliates was $16 million for the six months ended March 31, 2021 compared to $12 million in the same period in the prior year. The increase was primarily due to the recognition of a VAT credit of $6 million at our joint venture in Brazil during the first quarter of fiscal year 2021.

39

MERITOR, INC.

Interest expense, net for the six months ended March 31, 2021 and 2020 was $45 million and $30 million, respectively. The increase in interest expense, net is attributable to higher interest costs year over year as well as $8 million of debt extinguishment costs incurred in the first quarter of fiscal year 2021.

Provision for income taxes was $29 million in the first six months of fiscal year 2021 compared to $86 million in the same period in the prior fiscal year. The decrease in tax expense is primarily related to the tax effect of the proceeds received from the termination of the WABCO distribution arrangement during the second quarter of fiscal year 2020, partially offset by the tax effect of the Brazilian VAT credits recorded in the second quarter of fiscal year 2021.

Segment Adjusted EBITDA and Segment Adjusted EBITDA Margins

The following table reflects segment adjusted EBITDA and segment adjusted EBITDA margins for the six months ended March 31, 2021 and 2020 (dollars in millions).

	Segment adjusted EBITDA						Segment adjusted EBITDA margins
	Six Months Ended March 31,						Six Months Ended March 31,
	2021		2020 (1)		Change		2021		2020 (1)		Change
Commercial Truck	$	136	$	115	$	21	9.3	%	8.9	%	0.4	pts
Aftermarket & Industrial	69		85		(16)		14.3	%	15.4	%	(1.1)	pts
Segment adjusted EBITDA	$	205	$	200	$	5	11.0	%	11.3	%	(0.3)	pts

(1) Amounts for the six months ended March 31, 2020 have been recast to reflect reportable segment changes. 

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

	Commercial Truck		Aftermarket & Industrial		TOTAL
Segment adjusted EBITDA– Six Months Ended March 31, 2020 (1)	$	115	$	85	$	200
Higher short-and long-term variable compensation	(17)		(6)		(23)
Higher earnings from unconsolidated affiliates	4		—		4
Impact of foreign currency exchange rates	(13)		4		(9)
Volume, mix, pricing and other	47		(14)		33
Segment adjusted EBITDA - Six Months Ended March 31, 2021	$	136	$	69	$	205

(1) Amounts for the six months ended March 31, 2020 have been recast to reflect reportable segment changes. 

Commercial Truck segment adjusted EBITDA was $136 million in the first six months of fiscal year 2021, up $21 million from the same period in the prior fiscal year. Segment adjusted EBITDA margin increased from 8.9 percent in the first six months of fiscal year 2020 to 9.3 percent in the first six months of fiscal year 2021. The increase in segment adjusted EBITDA and segment adjusted EBITDA margin was driven primarily by conversion on higher revenue, and cost reduction actions, partially offset by higher incentive compensation, freight and electrification costs.

Aftermarket & Industrial segment adjusted EBITDA was $69 million in the first six months of fiscal year 2021, down $16 million from the same period in the prior fiscal year. Segment adjusted EBITDA margin decreased from 15.4 percent in the first six months of fiscal year 2020 to 14.3 percent in the first six months of fiscal year 2021. The decrease in segment adjusted EBITDA and segment adjusted EBITDA margin was driven primarily by the impact from the termination of the WABCO distribution arrangement and higher incentive compensation costs, partially offset by cost reduction actions.

40

MERITOR, INC.

Financial Condition

Cash Flows (in millions)

	Six Months Ended March 31,
	2021		2020
OPERATING CASH FLOWS
Income from continuing operations	$	99	$	282
Depreciation and amortization	52		50
Deferred income tax expense (benefit)	2		(4)
Restructuring costs	8		15
Stock compensation expense	10		1
Equity in earnings of affiliates	(16)		(12)
Pension and retiree medical income	(26)		(21)
Loss on debt extinguishment	8		—
Dividends received from equity method investments	2		—
Pension and retiree medical contributions	(6)		(7)
Restructuring payments	(8)		(15)
Proceeds from WABCO distribution termination	—		265
Income from WABCO distribution termination	—		(265)
Changes in receivables, inventories and accounts payable	(63)		(8)
Changes in off-balance sheet accounts receivable factoring	35		20
Changes in other current assets and liabilities	5		(49)
Changes in other assets and liabilities	5		38
Cash flows provided by continuing operations	107		290
Cash flows used for discontinued operations	—		—
CASH PROVIDED BY OPERATING ACTIVITIES	$	107	$	290

Cash provided by operating activities in the first six months of fiscal year 2021 was $107 million compared to $290 million in the same period of fiscal year 2020. The decrease in cash provided by operating activities was due to $265 million of cash received from the WABCO distribution arrangement termination in the second quarter of fiscal year 2020.

	Six Months Ended March 31,
	2021		2020
INVESTING CASH FLOWS
Capital expenditures	$	(26)	$	(33)
Cash paid for acquisition of TransPower, net of cash acquired	—		(13)
Other investing activities	(3)		9
CASH USED FOR INVESTING ACTIVITIES	$	(29)	$	(37)

Cash used for investing activities was $29 million in the first six months of fiscal year 2021 compared to $37 million in the same period in fiscal year 2020.

41

MERITOR, INC.

	Six Months Ended March 31,
	2021		2020
FINANCING CASH FLOWS
Securitization	$	—	$	96
Borrowings against revolving line of credit	—		304
Proceeds from debt issuance	275		—
Redemption of notes	(281)		—
Redemption of convertible notes	(53)		—
Debt issuance costs	(5)		—
Term loan payments	(7)		(4)
Other financing activities	(1)		(1)
Net change in debt	(72)		395
Repurchase of common stock	—		(241)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	$	(72)	$	154

Cash used for financing activities was $72 million in the first six months of fiscal year 2021 compared to cash provided by financing activities of $154 million in the same period of fiscal year 2020. The increase in cash used for financing activities is primarily related to the redemption of $275 million aggregate principal amount of our 6.25 Percent Notes due 2024 and the remaining $23 million of the 7.875 Percent Convertible Notes, partially offset by the issuance of $275 million aggregate principal amount of our 4.50 Percent Notes.

Liquidity

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

	March 31, 2021		September 30, 2020
Fixed-rate debt securities	$	740	$	741
Fixed-rate convertible notes	321		343
Unamortized discount on convertible notes	(27)		(29)
Term loan	159		166
Other borrowings	10		6
Total debt	$	1,203	$	1,227

Overview – Our principal operating and capital requirements are for working capital needs, capital expenditure requirements, debt service requirements, funding of pension and retiree medical costs and restructuring and product development programs. We expect fiscal year 2021 capital expenditures for our business segments to be approximately $95 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.

We believe our current financing arrangements provide us with the financial flexibility required to maintain our operations during the uncertain times of the COVID-19 pandemic and fund future growth, including actions required to improve our market share and further diversify our global operations, through the term of our revolving credit facility, which matures in June 2024.

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MERITOR, INC.

Sources of liquidity as of March 31, 2021, in addition to cash on hand, are as follows (in millions):

	Total Facility Size		Utilized as of 3/31/2021		Readily Available as of 3/31/2021		Current Expiration
On-balance sheet arrangements:
Senior secured revolving credit facility (1)	$	685	$	—	$	276	June 2024 (1)
Committed U.S. accounts receivable securitization (2)	110		4		106		March 2024
Total on-balance sheet arrangements	$	795	$	4	$	382
Off-balance sheet arrangements: (2)
Committed Swedish factoring facility (3)(4)	$	183	$	105	$	—	March 2024
Committed U.S. factoring facility (3)	75		44		—		February 2023
Uncommitted U.K. factoring facility	29		5		—		February 2022
Uncommitted Italy factoring facility	35		22		—		June 2022
Other uncommitted factoring facilities (5)	N/A		20		N/A		N/A
Total off-balance sheet arrangements	$	322	$	196	$	—
Total available sources	$	1,117	$	200	$	382

(1)The availability under the senior secured revolving credit facility is subject to a priority debt-to-EBITDA ratio covenant, as measured on the last day of the quarter based on trailing twelve month EBITDA as defined in the credit agreement. Availability was constrained on the last day of the second quarter of fiscal year 2021 due primarily to lower EBITDA in the third and fourth quarters of fiscal year 2020, which were impacted by the COVID-19 pandemic. The company has full availability until the next measurement point at the end of the third quarter of fiscal year 2021. The facility will expire in November 2023 if the outstanding principal amount of the 6.25 percent notes due 2024 is greater than $75 million at that time.

(2)Availability subject to adequate eligible accounts receivable available for sale. On March 31, 2021, the U.S. accounts receivable securitization facility with PNC bank was increased from $95 million to $110 million.

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

(4)The facility is backed by a 364-day liquidity commitment from Nordea Bank through June 22, 2021.

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

Cash and Liquidity Needs – At March 31, 2021, we had $321 million in cash and cash equivalents. Of our total cash held in jurisdictions outside of the U.S, we plan to repatriate approximately $38 million of cash, with respect to which no withholding taxes are expected to be owed. Of our total cash held in jurisdictions outside of the U.S., $29 million, if repatriated, could result in withholding taxes. In addition, we plan to utilize ongoing cash flow from domestic operations and external borrowings, to meet our liquidity needs in the U.S.

On March 31, 2021, the U.S. accounts receivable securitization facility with PNC bank was increased from $95 million to $110 million.

Our availability under the senior secured revolving credit facility is subject to a priority debt-to-EBITDA ratio covenant, as defined in the credit agreement, which may limit our borrowings under such agreement as of each quarter end. As long as we are in compliance with this covenant as of the quarter end, we have full availability under the senior secured 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 senior secured 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 senior secured revolving credit facility. At March 31, 2021, we were in compliance with the priority debt-to-EBITDA ratio covenant with a ratio of approximately 0.81x, which includes the income we recognized related to the termination of the WABCO distribution arrangement.

Equity Repurchase Authorization – On November 7, 2019, the Board of Directors authorized the repurchase of up to $325 million of the company's common stock, which was an increase from the prior $250 million authorization approved on July 26, 2019. Repurchases can be made from time to time through open market purchases, privately negotiated transactions or otherwise, subject to compliance with legal and regulatory requirements and the company’s debt covenants. On March 25, 2020, we suspended activity under our share repurchase program as a result of uncertainties in the global economy due to the COVID-19 pandemic. As of March 31, 2021 and September 30, 2020, the amount remaining available for repurchases under this common stock repurchase authorization was $59 million.

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MERITOR, INC.

Debt Repurchase Authorization – On November 2, 2018, our Board of Directors authorized the repurchase of up to $100 million aggregate principal amount of any of our debt securities (including convertible debt securities) from time to time through open market purchases, privately negotiated transactions or otherwise, subject to compliance with legal and regulatory requirements and our debt covenants. The amount remaining available for repurchases under this repurchase authorization was $76 million as of March 31, 2021 and September 30, 2020.

On May 4, 2021, we issued a notice of redemption for all of the remaining $175 million principal amount of the 6.25 Percent Notes due 2024. The redemption will be made pursuant to a special authorization from the Board of Directors. Refer to Note 13 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report.

Revolving Credit Facility – The senior secured revolving credit facility is discussed in Note 13 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report.

Redemption of 7.875 Percent Convertible Notes, Redemption of 6.25 Percent Notes Due 2024, and Issuance of 4.50 Percent Notes - Refer to Note 13 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report.

Other – Refer to Note 13 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report.

Credit Ratings – At May 3, 2021, our Standard & Poor’s corporate credit rating and senior unsecured credit rating were BB and BB-, respectively, and our Moody’s Investors Service corporate credit rating and senior unsecured credit rating were Ba3 and B1, respectively. Any lowering of our credit ratings could increase our cost of future borrowings and could reduce our access to capital markets and result in lower trading prices for our securities.

Subsidiary Guarantees of Debt – Certain of the company's 100% owned subsidiaries, as defined in the credit agreement for the senior secured revolving credit facility (collectively, the "Guarantors") irrevocably and unconditionally guarantee amounts outstanding under the senior secured revolving credit facility on a joint and several basis. Similar subsidiary guarantees are provided for the benefit of the holders of the notes outstanding under the company's indentures. The notes are guaranteed on a senior unsecured basis by each of the company’s subsidiaries from time to time guaranteeing its senior secured revolving credit facility, as it may be amended, extended, replaced or refinanced, or any subsequent credit facility. The guarantees remain in effect until the earlier to occur of payment in full of the notes or termination or release of the applicable corresponding guarantee under the company’s senior secured revolving credit facility, as it may be amended, extended, replaced or refinanced, or any subsequent credit facility. The guarantees rank equally with existing and future senior unsecured indebtedness of the Guarantors and are effectively subordinated to all of the existing and future secured indebtedness of the Guarantors, to the extent of the value of the assets securing such indebtedness.

The following represents summarized financial information, in millions, of Meritor, Inc. ("Parent") and the Guarantors (collectively, "the Combined Entities"). The information has been prepared on a combined basis and excludes any investments of the Parent or Guarantors in non-guarantor subsidiaries. Intercompany transactions and amounts between the Combined Entities have been eliminated. Equity income from continuing operations of subsidiaries has been eliminated.

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MERITOR, INC.

Statement of Operations Information	Six Months Ended March 31, 2021		Year ended September 30, 2020
Net Sales	$	1,040	$	1,863
Gross profit	112		188
Net income (loss) from continuing operations	(5)		190
Net income (loss)	(5)		191
Net income (loss) attributable to Meritor, Inc.	(5)		191
Balance Sheet Information	March 31, 2021		September 30, 2020
Current Assets	$	585	$	566
Non-current Assets	1,072		1,053
Current Liabilities	455		413
Non-current Liabilities	1,518		1,639
Redeemable Preferred Stock	—		—
Noncontrolling Interest	—		—

At March 31, 2021 and September 30, 2020, amounts owed by the Combined Entities to non-guarantor entities totaled approximately $32 million and $100 million, respectively, and amounts owed to the Combined Entities from non-guarantor entities totaled approximately $219 million and $156 million, respectively. For the six months ended March 31, 2021, intercompany sales from the Combined Entities to non-guarantor subsidiaries was $45 million. For the six months ended March 31, 2021, intercompany sales from non-guarantor subsidiaries to the Combined Entities was $77 million. For the year ended September 30, 2020, intercompany sales from the Combined Entities to non-guarantor subsidiaries was $79 million. For the year ended September 30, 2020, intercompany sales from non-guarantor subsidiaries to the Combined Entities was $102 million.

Off-Balance Sheet Arrangements

Accounts Receivable Factoring Arrangements – We participate in accounts receivable factoring programs with a total amount utilized at March 31, 2021 of $196 million, of which $149 million was attributable to committed factoring facilities involving the sale of AB Volvo accounts receivables. The remaining amount of $47 million was related to factoring by certain of our European subsidiaries under uncommitted factoring facilities with financial institutions. The receivables under all of these programs are sold at face value and are excluded from the consolidated balance sheet. Total facility size, utilized amounts, readily available amounts and expiration dates for each of these programs are shown in the table above under Liquidity.

The Swedish facility is backed by a 364-day liquidity commitment from Nordea Bank, which was renewed through June 22, 2021. 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 – There were $12 million and $8 million of off-balance sheet letters of credit outstanding through letter of credit facilities as of March 31, 2021 and September 30, 2020, respectively.

Contingencies

Contingencies related to environmental, asbestos and other matters are discussed in Note 16 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report.

Critical Accounting Policies

Our significant accounting policies are consistent with those described in Note 2 to our Consolidated Financial Statements in Item 8 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 (the "2020 Form 10-K"). Our critical accounting estimates are consistent with those described in Item 7 of our 2020 Form 10-K.

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MERITOR, INC.

New Accounting Pronouncements

New Accounting Pronouncements are discussed in Note 3 of the Notes to the Condensed Consolidated Financial Statements in Part I of this Quarterly Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

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

We use foreign currency forward contracts to minimize the earnings exposures arising from foreign currency exchange risk on foreign currency purchases and sales. Gains and losses on the underlying foreign currency exposures are partially offset with gains and losses on the foreign currency forward contracts. Under this cash flow hedging program, we designate the foreign currency contracts as cash flow hedges of underlying foreign currency forecasted purchases and sales. Changes in the fair value of these contracts are recorded in Accumulated other comprehensive loss in the Condensed Consolidated Statement of Equity and is recognized in operating income when the underlying forecasted transaction impacts earnings. These contracts have varying terms that extend through fiscal year 2025.

We use cross-currency swap contracts to hedge a portion of our net investment in a foreign subsidiary against volatility in foreign exchange rates. These derivative instruments are designated and qualify as hedges of net investments in foreign operations. Settlements and changes in fair values of the instruments are recognized in foreign currency translation adjustments, a component of other comprehensive income (loss) in the Condensed Consolidated Statement of Comprehensive Income, to offset the changes in the values of the net investments being hedged.

In the third quarter of fiscal year 2019, we entered into multiple cross-currency swap contracts with a combined notional amount of $225 million and maturities in October 2022. These swaps hedged a portion of the net investment in a certain European subsidiary against volatility in the euro/U.S. dollar foreign exchange rate. In the second quarter of fiscal year 2020, we settled these cross-currency swap contracts and received proceeds of $11 million, $1 million of which related to net accrued interest receivable.

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

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

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MERITOR, INC.

Market Risk

	Assuming a 10% Increase in Rates		Assuming a 10% Decrease in Rates		Change In
Foreign Currency Sensitivity:
Forward contracts in USD (1)	$	(2.0)	$	2.0	Fair Value
Forward contracts in Euro (1)	(1.3)		1.3		Fair Value
Foreign currency denominated debt (2)	0.9		(0.9)		Fair Value
Foreign currency option contracts in USD	0.5		—		Fair Value
Foreign currency option contracts in Euro	(0.1)		0.7		Fair Value
	Assuming a 50 BPS Increase in Rates		Assuming a 50  BPS Decrease in Rates		Change In
Interest Rate Sensitivity:
Debt – fixed rate (3)	$	(41.7)	$	44.3	Fair Value
Debt – variable rate	(0.8)		0.8		Cash flow

(1) Includes only the risk related to the derivative instruments and does not include the risk related to the underlying exposure. The analysis assumes overall derivative instruments and debt levels remain unchanged for each hypothetical scenario.

(2)At March 31, 2021, the fair value of outstanding foreign currency denominated debt was $8.6 million. A 10% decrease in quoted currency exchange rates would result in a decrease of $0.9 million in foreign currency denominated debt. At March 31, 2021, a 10% increase in quoted currency exchange rates would result in an increase of $0.9 million in foreign currency denominated debt.

(3)At March 31, 2021, the fair value of outstanding debt was $1,323 million. A 50 basis points decrease in quoted interest rates would result in an increase of $44.3 million in the fair value of fixed rate debt. A 50 basis points increase in quoted interest rates would result in a decrease of $41.7 million in the fair value of fixed rate debt.

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MERITOR, INC.

Item 4. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the "Exchange Act"), management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2021. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of March 31, 2021, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in the company’s internal control over financial reporting that occurred during the quarter ended March 31, 2021 that materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

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

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MERITOR, INC.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Except as set forth in Note 16 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, 2020.

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, 2020.

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

Issuer repurchases

The independent trustee of our 401(k) plans purchases shares in the open market to fund investments by employees in our common stock, one of the investment options available under such plans, and any matching contributions in company stock we provide under certain of such plans. In addition, our stock incentive plans permit payment of an option exercise price by means of cashless exercise through a broker and permit the satisfaction of the minimum statutory tax obligations upon exercise of options and the vesting of restricted stock units through stock withholding. There were no shares withheld in the second quarter of fiscal year 2021 to satisfy tax obligations for exercise of options. In addition, our stock incentive plans also permit the satisfaction of tax obligations upon the vesting of restricted stock through stock withholding. There were no shares withheld in the second quarter of fiscal year 2021 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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MERITOR, INC.

Item 5. Other Information

Cautionary Statement

This Quarterly Report on Form 10-Q contains statements relating to future results of the company (including certain outlooks, projections and business trends) that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "estimate," "should," "are likely to be," "will" and similar expressions. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to the duration and severity of the COVID-19 pandemic and its effects on public health, the global economy and financial markets, as well as our industry, operations, workforce, supply chains, distribution systems and demand for our products; reliance on major OEM customers and possible negative outcomes from contract negotiations with our major customers, including failure to negotiate acceptable terms in contract renewal negotiations and our ability to obtain new customers; the outcome of actual and potential product liability, warranty and recall claims; our ability to successfully manage rapidly changing volumes in the commercial truck markets and work with our customers to manage demand expectations in view of rapid changes in production levels; global economic and market cycles and conditions; availability and sharply rising costs of raw materials, including steel, and our ability to manage or recover such costs; our ability to manage possible adverse effects on European markets or our European operations, or financing arrangements related thereto following the United Kingdom's decision to exit the European Union or, in the event one or more other countries exit the European monetary union; risks inherent in operating abroad (including foreign currency exchange rates, restrictive government actions regarding trade, implications of foreign regulations relating to pensions and potential disruption of production and supply due to terrorist attacks or acts of aggression); risks related to our joint ventures; rising costs of pension benefits; the ability to achieve the expected benefits of strategic initiatives and restructuring actions; our ability to successfully integrate the products and technologies of Fabco Holdings, Inc., AA Gear Mfg., Inc., AxleTech and Transportation Power, Inc. and future results of such acquisitions, including their generation of revenue and their being accretive; the demand for commercial and specialty vehicles for which we supply products; whether our liquidity will be affected by declining vehicle production in the future; OEM program delays; demand for and market acceptance of new and existing products; successful development and launch of new products; labor relations of our company, our suppliers and customers, including potential disruptions in supply of parts to our facilities or demand for our products due to work stoppages; the financial condition of our suppliers and customers, including potential bankruptcies; possible adverse effects of any future suspension of normal trade credit terms by our suppliers; potential impairment of long-lived assets, including goodwill; potential adjustment of the value of deferred tax assets; competitive product and pricing pressures; the amount of our debt; our ability to continue to comply with covenants in our financing agreements; our ability to access capital markets; credit ratings of our debt; the outcome of existing and any future legal proceedings, including any proceedings or related liabilities with respect to environmental, asbestos-related, or other matters; possible changes in accounting rules; and other substantial costs, risks and uncertainties, including but not limited to those detailed herein and from time to time in other filings of the company with the SEC. These forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law.

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MERITOR, INC.

Item 6. Exhibits

3-a	Amended and Restated Articles of Incorporation of Meritor effective January 23, 2020, filed as Exhibit 3-a to Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 29, 2019, is incorporated herein by reference.
3-b**	Amended and Restated By-laws of Meritor effective February 28, 2021.
10-a**	Eleventh Amendment to the Receivables Purchase Agreement dated as of March 31, 2021, 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.
22**	Guarantor Subsidiaries of Meritor Inc.
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	Inline XBRL INSTANCE DOCUMENT - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL TAXONOMY EXTENSION SCHEMA
101.PRE	Inline XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
101.LAB	Inline XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.CAL	Inline XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF	Inline XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

** Filed herewith.

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MERITOR, INC.

SIGNATURES

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

		MERITOR, INC.
Date:	May 4, 2021	By:	/s/	Hannah S. Lim-Johnson
				Hannah S. Lim-Johnson
				Senior Vice President, Chief Legal Officer and Corporate Secretary
				(For the registrant)
Date:	May 4, 2021	By:	/s/	Carl D. Anderson II
				Carl D. Anderson II
				Senior Vice President, Chief Financial Officer
Date:	May 4, 2021	By:	/s/	Paul D. Bialy
				Paul D. Bialy
				Vice President, Chief Accounting Officer

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EX-3.B

Exhibit 3-b

AMENDED AND RESTATED BY-LAWS

OF

MERITOR, INC.

(As of February 28, 2021)

ARTICLE I

Office

SECTION 1.1. Registered Office. The registered office of Meritor, Inc. (the "Corporation") in the State of Indiana shall be in the City of Indianapolis, County of Marion.

SECTION 1.2. Principal Business Office. The principal business office of the Corporation shall be in the City of Troy, County of Oakland, in the State of Michigan.

SECTION 1.3. Other Offices. The Corporation may also have an office or offices at such other place or places either in or outside the State of Indiana as the Board of Directors may from time to time determine or the business of the Corporation requires.

ARTICLE 2

Meeting of Shareholders

SECTION 2.1. Place of Meetingsand Participation in Meetings by Remote Communication. Each meeting of shareholders of the Corporation shall be held at such place, if any, in or outside of the State of Indiana, as the Board of Directors may designate in the notice of such meeting. The Board of Directors, acting in its sole discretion, may establish guidelines and procedures in accordance with applicable provisions of the Indiana Business Corporation Law, as amended from time to time (the “Act”), and any other applicable law for the participation by shareholders in a meeting of shareholders by means of remote communication, and may determine that any meeting of shareholders will not be held at any place but will instead be held solely by means of remote communication. Shareholders complying with such procedures and guidelines and otherwise entitled to vote at a meeting of shareholders shall be deemed present in person and entitled to vote at the meeting of shareholders, whether such meeting is to be held at a designated place or solely by means of remote communication. If no such designation or determination is made by the Board of Directors, the place of the meeting shall be at the principal business office of the Corporation.

SECTION 2.2. Annual Meetings. An annual meeting of shareholders for the purpose of electing directors and transacting such other business as may properly be brought before the meeting, notice of which was given in the notice of meeting, shall be held on a date and time as the Board of Directors may determine.

    If for any reason any annual meeting shall not be held at the time herein provided, the same may be held at any time thereafter, upon notice as hereinafter provided, or the business thereof may be transacted at any special meeting of shareholders called for that purpose.

    The Board of Directors may, upon public notice given prior to the scheduled meeting date, postpone, for as long as and to the extent permitted by the Act, any previously scheduled annual or special meeting of shareholders.

    SECTION 2.3. Special Meetings. Special meetings of shareholders, unless otherwise required by statute and subject to the rights of holders of any class of Preferred Stock of the Corporation, may be called only by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies (the "Whole Board"). Business transacted at any special meeting shall be confined to the purpose or purposes stated in the notice of such special meeting. Meetings may be held without notice if all shareholders entitled to vote are present or if notice is waived by those not present.

    SECTION 2.4. Notice of Shareholders' Meetings. Notice of each meeting of shareholders, whether annual or special, stating the date, time and place, if any, and the means of remote communication, if any, by which shareholders may be deemed to be present in person and vote at such meeting, and, in the case of special meetings, the purpose or purposes for which such meeting is called, shall be mailed, postage prepaid, to each shareholder entitled to vote thereat, at the shareholder's address as it appears on the records of the Corporation, not less than 10 nor more than 60 days before the date of the meeting unless otherwise prescribed by statute. If an annual or special meeting of shareholders is adjourned to a different date, time or place, notice need not be given of the new date, time, or place, if any, if the new date, time, or place and the means of remote communication, if any, by which shareholders may be deemed to be present in person and vote at such meeting are announced at the meeting before adjournment, unless a new record date is or must be established for the adjourned meeting.

    SECTION 2.5. Record Dates.

    (a)    In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of shares or for the purpose of any other lawful action, the Board of Directors may designate a date as the record date which, for purposes of a meeting of shareholders or other event requiring shareholder action, shall not be more than 70 nor less than 10 days before the date of such meeting or event.

    (b)    If a record date has not been fixed as provided in the preceding paragraph (a), then:

2

        (i)    The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders of the Corporation shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and

(ii)    The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

    (c)    Only those who shall be shareholders of record on the record date so fixed as aforesaid shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend or other distribution, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding the transfer of any shares on the books of the Corporation after the applicable record date, provided, however, the Board of Directors may fix a new record date for any adjourned meeting and shall fix a new record date if a meeting is adjourned to a date more than 120 days after the date originally fixed for the meeting.

    SECTION 2.6. List of Shareholders. The Secretary of the Corporation shall, from information obtained from the transfer agent, prepare and make, before each meeting of shareholders, an alphabetical list of shareholders entitled to vote thereat, arranged by voting group, showing the address and number of shares registered in the name of each shareholder. Such list shall be open to the examination of any such shareholder or such shareholder's agent or attorney authorized in writing ("shareholder agent"), for any purpose germane to the meeting, during ordinary business hours, for a period of at least 5 days prior to the meeting for which the list was prepared and continuing through the meeting, either at a place in the city where the meeting is being held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. Such list shall be produced and kept at the time and place of meeting during the whole time thereof for inspection by any such shareholder or shareholder agent who is present. If the meeting is held solely by means of remote communication, the list shall be open to examination by any shareholder at any time during the meeting on a reasonably accessible electronic network, and information required to access this list shall be provided with the notice of the meeting. The stock ledger shall be the only evidence as to who are the shareholders entitled to examine the stock ledger, the list referred to in this section or the books of the Corporation, or to vote in person or by proxy at any meeting of shareholders.

    SECTION 2.7. Quorum and Adjournments. At each meeting of shareholders, the holders of a majority of the voting power of the shares of the Corporation entitled to vote, present in person or by proxy, shall constitute a quorum of shareholders for all purposes unless the presence of a larger proportion is required by statute or by the Corporation's Articles of Incorporation (the "Articles of Incorporation"), and, in such cases, the presence of the proportion so required shall constitute a quorum. Whether or not there is such a quorum, the Chairman of the meeting or the shareholders present in person or by

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proxy constituting a majority of the shares present may adjourn the meeting from time to time without notice other than an announcement at the meeting. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting, and only those shareholders entitled to vote at the meeting as originally called shall be entitled to vote at any adjournment or adjournments thereof. The absence from any meeting of the number of shareholders required by law or by the Articles of Incorporation or by these By-Laws for action upon any given matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if the number of shareholders required in respect of such other matter or matters shall be present.

    SECTION 2.8. Voting by Shareholders; Proxies. Except as otherwise provided by law, the Articles of Incorporation or these ByLaws, each shareholder entitled to vote shall at every meeting of the shareholders have one vote for each share entitled to vote held by such shareholder. Any vote on shares may be given by the shareholder entitled thereto in person or by proxy appointed by an instrument in writing, subscribed (or transmitted by electronic means and authenticated as provided by law) by such shareholder or by the shareholder's attorney thereunto authorized, and delivered to the Secretary; provided, however, that no proxy shall be voted after 11 months from its date unless the proxy provides for a shorter or longer period. Except as otherwise set forth in the Articles of Incorporation with respect to the right of the holders of any class or series of Preferred Stock to elect additional directors under specified circumstances, election of directors at all meetings of shareholders at which directors are to be elected shall be by a plurality of the votes cast for the election of directors at the meeting. If a quorum exists, action on a matter (other than the election of directors) submitted to shareholders entitled to vote thereon at any meeting shall be approved if the votes cast favoring the action exceed the votes cast opposing the action, unless a greater number of affirmative votes is required by law, the Articles of Incorporation or these By-Laws.

    SECTION 2.9. Conduct of Business.

    (a)    Presiding Officer. The Executive Chairman of the Board of Directors shall preside as Chairman of shareholder meetings and shall determine the order and conduct of business and all matters of procedure at such meetings. The Executive Chairman shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the shareholders will vote at the meeting. In the absence of the Executive Chairman, the Lead Independent Director shall assume the duties of the Chairman of the shareholder meeting specified in this paragraph (a) of Section 2.9. In the absence of the Lead Independent Director, the Chief Executive Officer and President shall assume the duties of the Chairman of the shareholder meeting specified in this paragraph (a) of Section 2.9. If each of the Executive Chairman, the Lead Independent Director and the Chief Executive Officer and President is absent, a director or an officer of the Corporation chosen by the Board of Directors shall assume the duties of the Chairman of the shareholder meeting specified in this paragraph (a) of Section 2.9.

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    (b)    Secretary. The Secretary, or, in his or her absence, an Assistant Secretary, shall act as Secretary at all meetings of the shareholders. In the absence from any such meeting of the Secretary and the Assistant Secretaries, the Chairman of the shareholder meeting may appoint any person to act as Secretary of the meeting.

    (c)    Annual Meetings of Shareholders.

        (i)    Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders (A) pursuant to the Corporation's notice of meeting, (B) by or at the direction of the Board of Directors or (C) by any shareholder of the Corporation who was a shareholder of record at the time of giving of notice provided for in this Section 2.9, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.9.

        (ii)    For nominations or other business to be properly brought before any annual meeting by a shareholder pursuant to clause (C) of paragraph (c)(i) of this Section 2.9, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for shareholder action. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a shareholder's notice as described above. Such shareholder's notice shall set forth (A) as to each person whom the shareholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; (C) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (x) the name and address of such shareholder, as they appear on the Corporation's books, and of

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such beneficial owner and (y) the class and number of shares of the Corporation which are owned beneficially and of record by such shareholder and such beneficial owner.

        (iii)    Notwithstanding anything in the second sentence of paragraph (c)(ii) of this Section 2.9 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 100 days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice required by this Section 2.9 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which public announcement is first made by the Corporation.

        (iv)    Notwithstanding anything in the second sentence of paragraph (c)(ii) of this Section 2.9 to the contrary, in the event that any person nominated by the Board of Directors for election as a director (other than a person nominated to fill a vacancy created by the death of a director) was not a director or nominee named (A) in the Corporation's proxy statement for the preceding annual meeting or (B) in a public announcement made by the Corporation at least 100 days prior to the first anniversary of the preceding year's annual meeting (a "New Nominee"), a shareholder's notice required by this Section 2.9 shall also be considered timely, but only with respect to nominees for election as director equal in number to the number of New Nominees, if it is delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which public announcement is first made by the Corporation of the election or nomination of such New Nominee to the Board of Directors.

    (d)    Special Meetings of Shareholders. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the Corporation's notice of meeting (A) by or at the direction of the Board of Directors or (B) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this Section 2.9, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.9. Nominations by shareholders of persons for election to the Board of Directors may be made at such a special meeting of shareholders if the shareholder's notice required by paragraph (c)(ii) of this Section 2.9 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the date on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such

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meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a shareholder's notice as described above.

    (e) General.

        (i)    Except where the terms of any class or series of Preferred Stock of the Corporation require the election of one or more directors by the holders of such Preferred Stock voting as a single class and except as provided in Section 3.3 of these By-Laws, only such persons who are nominated in accordance with the procedures set forth in this Section 2.9 shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.9. Except as otherwise provided by law, the Articles of Incorporation of these By-Laws, the person presiding at the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed in accordance with the procedures set forth in this Section 2.9 and, if any nomination or business proposed is not in compliance with this Section 2.9, to declare that such defective nomination or proposal shall be disregarded.

        (ii)    For purposes of this Section 2.9, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

        (iii)    Notwithstanding the foregoing provisions of this Section 2.9, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.9. Nothing in this Section 2.9 shall be deemed to affect any rights of (x) shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (y) holders of any series of Preferred Stock to elect directors under specified circumstances.

    SECTION 2.10. Inspectors. There shall be appointed by the Board of Directors, before each meeting of shareholders, two inspectors of the vote. Such inspectors shall first take and subscribe an oath or affirmation faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of their ability. If two inspectors are not appointed in advance of any such meeting by the Board of Directors or one or both appointed inspectors fail or refuse to act, then one or both inspectors, as the case may be, shall be appointed for the meeting by the person presiding thereat. Such inspectors shall be responsible for tallying and certifying the vote taken on any matter at each meeting which is required to be tallied and certified by them in the resolution of the Board of Directors appointing them or the appointment of the person presiding at such meeting as the case may be. Except as otherwise provided by these By-Laws or the laws of the State of Indiana, such inspectors shall also decide all questions touching upon the

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qualification of voters, the validity of proxies and ballots, and the acceptance and rejection of votes. In the case of a tie vote by the inspectors on any question, the person presiding at the meeting shall decide such question. The Board of Directors shall have the authority to make rules establishing presumptions as to the validity and sufficiency of proxies.

ARTICLE 3

Directors

    SECTION 3.1. Number. Subject to the rights of the holders of any class or series of Preferred Stock to elect additional directors under specified circumstances, the number of directors shall be set, and from time to time may be increased or decreased to the extent provided for in the Articles of Incorporation, exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the Whole Board. A director need not be a shareholder.

    SECTION 3.2. Executive Chairman of the Board of Directors. The Executive Chairman of the Board of Directors shall be elected from among the directors, shall preside at all meetings of the shareholders and of the Board, and shall have such other powers and duties as from time to time may be prescribed by the Board. The Executive Chairman of the Board shall perform all duties incidental to his or her office which may be required by law and all such other duties as are properly required of him or her by the Board of Directors. The Executive Chairman may not serve as the Chief Executive Officer and President.

    SECTION 3.3.    Vacancies. Except where the terms of any class or series of Preferred Stock of the Corporation require the election of one or more directors by the holders of such Preferred Stock voting as a single class and except to the extent the Board of Directors determines otherwise, vacancies occurring on the Board of Directors and newly-created directorships resulting from any increase in the number of directors may be filled only by the affirmative vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and any director so chosen shall hold office (i) prior to the election of Directors at the annual meeting of shareholders to be held prior to 2023, for a term expiring at the annual meeting of shareholders at which the term of office of the class of directors to which such director has been elected expires or (ii) commencing with the election of directors at the annual meeting of shareholders held in 2023, for a term expiring at the next annual meeting of shareholders, and in each case until his or her successor is duly elected and qualified or until the earlier of his or her death, resignation or removal in a manner permitted by statute or these By-Laws. No decrease in the number of authorized directors constituting the Whole Board shall shorten the term of any incumbent director.

    SECTION 3.4. Powers. The property, affairs and business of the Corporation shall be managed by the Board of Directors which may exercise all powers of the

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Corporation and do all lawful acts and things not by statute or by the Articles of Incorporation or these By-Laws directed or required to be exercised or done by the shareholders.

    SECTION 3.5. Place of Meetings. The place of any meeting of the Board of Directors may be either in or outside the State of Indiana as the Board may from time to time determine or as shall be specified or fixed in the respective notices or waivers of notice thereof.

    SECTION 3.6. Annual Meetings. Annual meetings of the Board of Directors shall be held each year on the same day as the shareholder's annual meeting for such year, at the time and place determined by the Board of Directors. Notice of such meeting need not be given. Such meeting may be held at any other time or place which shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors.

    SECTION 3.7 Regular Meetings. Regular meetings of the Board of Directors shall be held at the dates, times and places designated by the Board of Directors from time to time. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day not a legal holiday. Notice of regular meetings need not be given.

    SECTION 3.8. Special Meetings. Special meetings of the Board of Directors may be called by the Executive Chairman of the Board; and shall be called by the Executive Chairman of the Board or the Secretary upon the written request of three directors of the Corporation.

    SECTION 3.9. Notice of Special Meetings. Notice of each special meeting of the Board of Directors shall be given to each director. The notice shall state the principal purpose or purposes of the meeting.

    SECTION 3.10. Quorum. Except as provided in Section 3.3, a whole number of directors equal to at least a majority of the Whole Board shall constitute a quorum for the transaction of business at all meetings of the Board of Directors, and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors unless otherwise provided by law, the Articles of Incorporation or these ByLaws. If a quorum shall not be present at any meeting of the Board of Directors, the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. Notice of any adjourned meeting need not be given. The directors shall act only as a board and the individual directors shall have no power as such.

    SECTION 3.11. Informal Action. Unless otherwise restricted by statute, the Articles of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken

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without a meeting if a written consent thereto is signed by all directors or by all members of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors or of such committee.

    SECTION 3.12. Attendance by Conference Telephone. Members of the Board of Directors or any committee designated by the Board of Directors may participate in a meeting of such Board of Directors or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

    SECTION 3.13. Order of Business. At all meetings of the Board of Directors, business shall be transacted in the order determined by the Board.

    SECTION 3.14. Resignations. Any director of the Corporation may resign at any time by giving written notice to the Executive Chairman of the Board or the Secretary of the Corporation. The resignation of any director shall take effect at the time of the receipt of such notice or at any later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

    SECTION 3.15. Committees.

    (a)    The Board of Directors may from time to time, in its discretion, by resolution passed by a majority of the Whole Board, designate, and appoint, from the directors, committees of one or more persons which shall have and may exercise such lawfully delegable powers and duties conferred or authorized by the resolutions of designation and appointment.

    (b)    Each member of a committee shall continue in office until a director to succeed him or her shall have been elected and shall have qualified, or until he or she ceases to be a director or until he or she shall have resigned or shall have been removed in the manner hereinafter provided. Any vacancy in a committee shall be filled by the vote of a majority of the Whole Board at any regular or special meeting thereof.

    (c)    The Board of Directors may, by resolution passed by a majority of the Whole Board, designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.

    (d)    Unless otherwise provided by the Board of Directors, each committee shall appoint a chairman. Each committee shall keep a record of its acts and proceedings and report the same from time to time to the Board of Directors.

    (e)    Any regular or alternate member of a committee may resign at any time by giving written notice to the Executive Chairman of the Board or the Secretary of the Corporation. Such resignation shall take effect at the time of the receipt of such notice or

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at any later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

    (f)    Any regular or alternate member of a committee may be removed with or without cause at any time by resolution passed by a majority of the Whole Board at any regular or special meeting.

    (g)    Regular meetings of each committee, of which no notice shall be necessary, shall be held on such days and at such places as the chairman of the committee shall determine or as shall be fixed by a resolution passed by a majority of all the members of such committee. Special meetings of each committee will be called by the Secretary at the request of any two members of such committee (or the sole member, if a committee of one), or in such other manner as may be determined by the committee. Notice of each special meeting of a committee shall be mailed to each member thereof at least two days before the meeting or shall be given personally or by telephone or other electronic transmission at least one day before the meeting. Every such notice shall state the time and place, but need not state the purposes of the meeting. No notice of any meeting of a committee shall be required to be given to any alternate.

    (h)    Unless the Board of Directors shall provide otherwise, the presence of a majority of the total membership of any committee of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of such committee and the act of a majority of those present shall be necessary and sufficient for the taking of any action thereat.

    SECTION 3.16. Compensation of Directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and at each meeting of a committee of the Board of Directors of which they are members. Unless otherwise provided in these By-Laws, the Board of Directors shall have the authority to fix compensation of all directors for their services to the Corporation as directors and for their services to the Corporation as regular or alternate members of committees of the Board of Directors.

    SECTION 3.17. Removal. Subject to the rights of the holders of any class or series of Preferred Stock, any director or the entire Board of Directors may be removed from office at any time, but only for cause and only by the affirmative vote by the holders of at least 80 percent of the voting power of all of the then outstanding shares of capital stock of the Corporation entitled to vote at an election of directors, voting together as a single class.

    SECTION 3.18. Board Structure. The Corporation elects not to be governed by Section 23-1-33-6(c) of the Act.

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ARTICLE 4

Notices

    SECTION 4.1. Notices. Notices to directors and shareholders shall be in writing and delivered personally or mailed to their addresses appearing on the records of the Corporation or, if to directors, by telegram, cable, telephone, telecopy, facsimile, other electronic transmission, wireless or a nationally recognized overnight delivery service or personally. Notice to directors by mail shall be given at least five days before the meeting. Notice to directors by telegram, cable, telephone, telecopy, facsimile, other electronic transmission, wireless or personal delivery, shall be given a reasonable time before the meeting, but in no event less than two days before the meeting. Notice by mail shall be deemed to be given when mailed to the director at his or her address appearing on the records of the Corporation. Notice by telegram or cable shall be deemed to be given when the telegram or cable addressed to the director at his or her address appearing on the records of the Corporation is delivered to the telegraph company. Notice by telephone, telecopy, facsimile, other electronic transmission or wireless shall be deemed to be given when transmitted by telephone, telecopy, facsimile, other electronic transmission or wireless to the number, electronic address or wireless call designation appearing on the records of the Corporation for the director (regardless of whether the director shall have personally received such telephone call or wireless message), provided confirmation of transmission shall be made promptly by telegram or cable in the manner specified above.

    SECTION 4.2. Waiver of Notice. Whenever any notice is required, a waiver thereof signed by the person entitled to such notice and filed with the minutes or corporate records, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance of any person at any meeting of shareholders or directors shall constitute a waiver of notice of such meeting, except when such person attends only for the express purpose of objecting, at the beginning of the meeting (or in the case of a director's meeting, promptly upon such director's arrival), to the transaction of any business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

ARTICLE 5

Officers

    SECTION 5.1. Designation; Number; Election. The Board of Directors shall elect the officers of the Corporation. Such officers shall be an Executive Chairman of the Board of Directors, a Chief Executive Officer and President, one or more Vice Presidents as the Board of Directors shall determine from time to time, a Controller, a Treasurer and a Secretary.

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    In addition to any officer elected by the Board of Directors, the Board of Directors, the Executive Chairman or the Chief Executive Officer and President, at any time, may appoint and remove such additional officers and agents as the Board of Directors, the Executive Chairman or the Chief Executive Officer and President may determine from time to time. Such persons shall have such authority, and perform such duties as provided in these ByLaws or as the Board of Directors, the Executive Chairman or the Chief Executive Officer and President may from time to time prescribe. The Board of Directors, the Executive Chairman or the Chief Executive Officer and President may from time to time authorize any officer to appoint and remove agents and employees and to prescribe their powers and duties.

    One person may hold more than one office at the same time provided the duties of such officers as prescribed by these By-Laws may be properly and consistently performed by one person; provided, however, that the Chief Executive Officer may not serve as the Executive Chairman.

    SECTION 5.2. Term of Office; Removal; Resignations; Vacancies. The term of each officer shall be for one year and continue until his or her successor is chosen and qualified or until the earlier of his or her death, resignation or removal, except that any such officer elected by the Board of Directors, excluding the Executive Chairman and the Chief Executive Officer and President, at any time, may be suspended by the Executive Chairman or the Chief Executive Officer and President until the Board of Directors convenes, and any such officer, including the Executive Chairman and the Chief Executive Officer and President, may be removed at any time by the affirmative vote of a majority of the members of the Whole Board.

    All appointed officers, agents and representatives of the Corporation shall hold office only during the pleasure of the Board of Directors or the officer appointing them.

    Any officer elected by the Board of Directors may resign at any time by giving written notice to the Executive Chairman of the Board, the Chief Executive Officer and President or the Secretary. Any other officer may resign at any time by giving written notice to the Executive Chairman of the Board or the Chief Executive Officer and President. Any such resignation shall take effect at the date of receipt of such notice or at any later time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

    A vacancy in any office because of death, resignation, removal or otherwise, shall be filled for the unexpired portion of the term in the manner provided in these ByLaws for regular election or appointment to such office.

    SECTION 5.3. Compensation of Officers. The Board of Directors or the compensation committee of the Board of Directors shall have the authority to fix compensation of all officers elected by the Board. The Executive Chairman and/or such officer as the Executive Chairman may designate shall have the authority to fix compensation of all other officers of the Corporation.

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SECTION 5.4. Executive Chairman of the Board of Directors. The Executive Chairman of the Board of Directors shall, subject to the Board of Directors, be responsible for the general oversight of the operation of the business and affairs of the Corporation. He or she shall report to the Board of Directors.

    He or she shall (a) preside at all meetings of the shareholders and of the Board of Directors, and shall have plenary power to set the agenda, determine the procedure and rules of order and make definitive rulings at meetings of shareholders; (b) work with the Chief Executive Officer and President to develop corporate strategies, make key business decisions and develop management talent; (c) work with the Lead Director to organize and set the agenda for regular and special meetings of the Board of Directors based on input from senior management of the Corporation; (d) ensure that the Board of Directors receives accurate, timely and clear information on: (i) the Corporation’s performance, (ii) the issues, challenges and opportunities facing the Corporation, and (iii) matters reserved to the Board of Directors for decision; (e) represent the Corporation (together with the Chief Executive Officer and President) to external constituencies, including shareholders and other investors, as required; (f) advise and support the Chief Executive Officer and President, including performing the duties of the Chief Executive Officer and President in the absence or disability of the Chief Executive Officer and President; and (g) have such other powers and perform such other duties as may be prescribed by the Board of Directors or provided in these By-Laws.

    SECTION 5.5. Chief Executive Officer and President. The Chief Executive Officer and President shall, subject to the general oversight of the Executive Chairman, be responsible for the day-to-day management and overall charge of the administration and operation of the Corporation’s business and the general supervision of the policies and affairs of the Corporation. He or she shall report to the Executive Chairman (acting on behalf of the Board of Directors) and to the Board of Directors directly.

    He or she shall (a) see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect or otherwise implemented; (b) have the power to appoint officers for any division who, as such, shall not be officers of the Corporation; (c) in the absence or disability of the Executive Chairman, preside at meetings of the Board of Directors and perform such other duties of the Executive Chairman as may be assigned to him or her by the Board of Directors; and (d) have such other powers and perform such other duties as may be prescribed by the Board of Directors or provided in these By-Laws.

In the absence or disability of the Executive Chairman and the Chief Executive Officer and President, on assembling for a regular or special meeting of the Board of Directors, the directors shall choose another member of the Board of Directors or another officer in attendance to preside at such meeting.

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    SECTION 5.6. Vice Presidents. Each Vice President shall have the powers and duties prescribed in these By-Laws or assigned to him or her by the Board of Directors, the Executive Chairman or the Chief Executive Officer and President. The Board of Directors, the Executive Chairman or the Chief Executive Officer and President may designate one or more of such Vice Presidents as executive, senior or assistant Vice Presidents.

    SECTION 5.7. Controller. Subject to control and supervision by the Executive Chairman, the Chief Executive Officer and President and the Board of Directors, the Controller shall be in charge of the accounts of the Corporation and its subsidiaries; maintain adequate records of all assets, liabilities and business transactions; and have the other powers and duties prescribed by these By-Laws or by the Board of Directors, the Executive Chairman or the Chief Executive Officer and President, and the usual powers and duties pertaining to his or her office.

    SECTION 5.8. Assistant Controllers. The Assistant Controllers shall have the powers and duties prescribed by these By-Laws or assigned by the Controller. In the absence or disability of the Controller, they shall have all his or her other powers and duties.

    SECTION 5.9 Treasurer. Subject to control and supervision by the Executive Chairman, the Chief Executive Officer and President and the Board of Directors, the Treasurer shall have charge of and shall be responsible for the receipt, disbursement and safekeeping of all funds and securities of the Corporation (and shall deposit all such funds in the name of the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of these By-Laws), propose financial policies, negotiate loans, be responsible for the maintenance of proper insurance coverages and from time to time and whenever requested to do so, render statements of the condition of the finances of the Corporation to the Board of Directors; and have the other powers and duties prescribed by these By-Laws or by the Board of Directors, the Executive Chairman or the Chief Executive Officer and President, and the usual powers and duties pertaining to his or her office.

    SECTION 5.10. Assistant Treasurers. The Assistant Treasurers shall have the powers and duties prescribed by these By-Laws or assigned by the Treasurer. In the absence of the Treasurer, they shall have all his or her other powers and duties.

SECTION 5.11. Secretary. Subject to control and supervision by the Board of Directors, the Executive Chairman and the Chief Executive Officer and President, the Secretary shall attend and record proceedings of meetings of shareholders, the Board of Directors and any committee of the Board of Directors, keep or cause to be kept in books provided for such purpose such records of proceedings and have the other powers and duties prescribed by these By-Laws or by the Board of Directors, the Executive Chairman or the Chief Executive Officer and President, and the usual powers and duties pertaining to his or her office, including having custody of the corporate seal, if any, and affixing it to all documents as required to attest the same.

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    SECTION 5.12. Assistant Secretaries. The Assistant Secretaries shall have the powers and duties prescribed by these By-Laws or assigned by the Secretary. In the absence or disability of the Secretary, they shall have all his or her powers and duties.

    SECTION 5.13. Certain Agreements. The Board of Directors shall have power to authorize or direct the proper officers of the Corporation, on behalf of the Corporation, to enter into valid and binding agreements in respect of employment, incentive or deferred compensation, stock options, and similar or related matters, notwithstanding the fact that a person with whom the Corporation so contracts may be a member of its Board of Directors. Any such agreement may validly and lawfully bind the Corporation for a term of more than one year, in accordance with its terms, notwithstanding the fact that one of the elements of any such agreement may involve the employment by the Corporation of an officer, as such, for such term.

ARTICLE 6

Conduct of Business

    SECTION 6.1. Contracts; Loans. The Board of Directors, except as in these By-Laws otherwise provided, may authorize any officer, employee or agent of the Corporation to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances.

    No loan shall be contracted on behalf of the Corporation and no negotiable paper shall be issued in its name, unless authorized by the Board of Directors.

    SECTION 6.2. Checks. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, employee or employees, of the Corporation as shall from time to time be determined in accordance with authorization of the Board of Directors.

    SECTION 6.3. Banking. All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may from time to time designate, or as may be designated by any officer or officers of the Corporation to whom such power may be delegated by the Board, and for the purpose of such deposit the officers and employees who have been authorized to do so in accordance with the determinations of the Board may endorse, assign and deliver checks, drafts, and other orders for the payment of money which are payable to the order of the Corporation.

    SECTION 6.4. Voting of Stock. Except as otherwise provided in these ByLaws or in the Articles of Incorporation, and unless otherwise provided by

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resolution of the Board of Directors, the Executive Chairman or any other officer elected by the Board of Directors may from time to time appoint an attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation to cast the votes which the Corporation may be entitled to cast as a shareholder or otherwise in any other corporation any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporation, or to consent in writing to any action by such other corporation, and may instruct the person or persons so appointed as to the manner of casting such vote or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as he may deem necessary or proper in the premises.

ARTICLE 7

Share Certificates and Their Transfer

    SECTION 7.1. Share Certificates. Certificates for shares of the Corporation shall be in such form as shall be approved by the Board of Directors and shall be signed by the Executive Chairman, Chief Executive Officer and President or a Vice President, and by the Secretary or any Assistant Secretary, and shall not be valid unless so signed. Such certificates shall be appropriately numbered in order of issue, by class and series, and contain the name of the registered holder, the number of shares and the date of issue. If such certificates are countersigned (a) by a transfer agent other than the Corporation or its employee, or (b) by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile.

    In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he, she or it were such officer, transfer agent, or registrar at the date of issue.

    The Board of Directors may by resolution or resolutions provide that some or all of any or all classes or series of the shares of stock of the Corporation shall be uncertificated shares. Notwithstanding the preceding sentence, every holder of uncertificated shares, upon request, shall be entitled to receive from the Corporation a certificate representing the number of shares registered in such shareholder's name on the books of the Corporation.

    During any period when more than one class of shares of the Corporation is authorized, there shall be set forth on the face or back of certificates issued to represent each class or series of shares, a statement that the Corporation will furnish without charge to each shareholder who so requests, the designation, preferences and relative, participating, optional or other special rights of each class of shares or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

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    SECTION 7.2. Transfer of Shares. Upon surrender to the Corporation or a transfer agent of the Corporation by the holder of record or by such person's attorney or other duly constituted representative of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, as the Corporation may reasonably require, it shall be the duty of the Corporation and such transfer agent to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction on the books of the Corporation. No certificate shall be issued in exchange for any certificate until the former certificate for the same number of shares of the same class and series shall have been surrendered and canceled, except as provided in Section 7.4.

    SECTION 7.3. Regulations. The Board of Directors shall have authority to make rules and regulations concerning the issue, transfer and registration of certificates for shares of the Corporation and concerning the registration of pledges of uncertificated shares.

    SECTION 7.4. Lost, Stolen and Destroyed Certificates. The Corporation may issue a new certificate or certificates for shares or may register uncertificated shares, if then authorized by the Board of Directors, in place of any issued certificate alleged to have been lost, stolen or destroyed upon such terms and conditions as the Board of Directors may prescribe.

    SECTION 7.5. Record Ownership; Registered Shareholders. A record of the name and address of each holder of the shares of the Corporation, the number of shares held by such shareholder, the number or numbers of any share certificate or certificates issued to such shareholder and the number of shares represented thereby, and the date of issuance of the shares held by such shareholder shall be made on the Corporation's books. The Corporation shall be entitled to treat the holder of record (according to the books of the Corporation) of any share or shares (including any holder registered in a bookentry or direct registration system maintained by the Corporation or a transfer agent or a registrar designated by the Board of Directors) as the holder in fact thereof and owner for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not the Corporation shall have express or other notice thereof, except as expressly provided by applicable law.

    SECTION 7.6. Transfer Agents and Registrars. The Board of Directors may from time to time appoint a transfer agent and a registrar in one or more cities, may require all certificates evidencing shares of the Corporation to bear the signatures of a transfer agent and a registrar, may provide that such certificates shall be transferable in more than one city, and may provide for the functions of transfer agent and registrar to be combined in one agency.

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ARTICLE 8

Indemnification

    SECTION 8.1. Litigation Brought By Third Parties. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, formal or informal (other than an action by or in the right of the Corporation) (an "Action") by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation (a "Corporate Person"), or is or was serving at the request of the Corporation as a director, officer, employee, agent, partner, trustee or member or in another authorized capacity (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under this Section 8.1) (collectively, an "Authorized Capacity") of or for another corporation, unincorporated association, business trust, estate, partnership, joint venture, individual, trust, employee benefit plan, or other legal entity, whether or not organized or formed for profit (collectively, "Another Entity"), against expenses (including attorneys' fees), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such Action ("Expenses") if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any Action by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe his or her conduct was unlawful.

    SECTION 8.2. Litigation by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any Action by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a Corporate Person, or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity against Expenses actually and reasonably incurred by him or her in connection with that defense or settlement of such Action if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or willful misconduct in the performance of his or her duty to the Corporation unless and only to the extent that a court of equity or the court in which such Action was pending shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court of equity or other court shall deem proper.

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    SECTION 8.3. Successful Defense. To the extent that a person who is or was a Corporate Person or serving at the request of the Corporation in an Authorized Capacity of or for Another Entity has been successful on the merits or otherwise in defense of any Action, referred to in Section 8.1 and 8.2 of this Article, or in defense of any claim, issue or matter therein, he or she shall be indemnified against Expenses actually and reasonably incurred by or on behalf of him or her in connection therewith. If any such person is not wholly successful in any such Action but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters therein, the Corporation shall indemnify such person against all Expenses actually and reasonably incurred by or on behalf of such person in connection with each claim, issue or matter that is successfully resolved. For purposes of this Section 8.3 and without limitation, the termination of any claim, issue or matter by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

    Notwithstanding any other provision of this section, to the extent any person is a witness in, but not a party to, any Action, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a Corporate Person or serving at the request of the Corporation in an Authorized Capacity of or for Another Entity, he or she shall be indemnified against all Expenses actually and reasonably incurred by or on behalf of him or her in connection therewith.

    SECTION 8.4. Determination of Conduct.

(a) Any indemnification under Section 8.1 or 8.2 of this Article (unless ordered by a court) shall be made by the Corporation only upon a determination that indemnification of the person is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 8.1 or 8.2. Such determination shall be made (1) if a Change of Control (as hereinafter defined) shall not have occurred, (A) by the Board of Directors by a majority vote of a quorum consisting of the Disinterested Directors (as hereinafter defined) or, if such a quorum cannot be obtained, by majority vote of a committee duly designated by the Board of Directors consisting solely of two (2) or more Disinterested Directors or (B) if there are no Disinterested Directors or, even if there are Disinterested Directors and a majority of such Disinterested Directors so directs, by (i) Independent Counsel (as hereinafter defined) in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, or (ii) the shareholders of the Corporation, provided, however, that shares owned by or voted under the control of directors who are at the time not Disinterested Directors may not be voted on the determination; or (2) if a Change of Control shall have occurred, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, unless the claimant shall request that such determination be made by or at the direction of the Board of Directors, in which case it shall be made in accordance with clause (1) of this sentence. Any claimant shall be entitled to be indemnified against the Expenses actually and reasonably incurred by such claimant in cooperating with the person or entity making the determination of entitlement to indemnification (irrespective of the determination as to the claimant's entitlement to

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indemnification) and, to the extent successful, in connection with any litigation or arbitration with respect to such claim or the enforcement thereof.

    (b)    If a Change of Control shall not have occurred, or if a Change of Control shall have occurred and a director, officer, employee or agent requests pursuant to clause (2) of the second sentence in Section 8.4(a) that the determination whether the claimant is entitled to indemnification be made by or at the direction of the Board of Directors, the claimant shall be conclusively presumed to have been determined pursuant to Section 8.4(a) to be entitled to indemnification if (1)(a) within fifteen days after the next regularly scheduled meeting of the Board of Directors following receipt by the Corporation of the request therefor, the Board of Directors shall not have resolved by majority vote of the Disinterested Directors to submit such determination to (i) Independent Counsel for its determination or (ii) the shareholders for their determination at the next annual meeting, or any special meeting that may be held earlier, after such receipt, and (b) within sixty days after receipt by the Corporation of the request therefor (or within ninety days after such receipt if the Board of Directors in good faith determines that additional time is required by it for the determination and, prior to expiration of such sixtyday period, notifies the claimant thereof), the Board of Directors shall not have made the determination by a majority vote of the Disinterested Directors, or (2) after a resolution of the Board of Directors, timely made pursuant to clause (1)(a)(ii) above, to submit the determination to the shareholders, the shareholders meeting at which the determination is to be made shall not have been held on or before the date prescribed (or on or before a later date, not to exceed sixty days beyond the original date, to which such meeting may have been postponed or adjourned on good cause by the Board of Directors acting in good faith); provided, however, that this sentence shall not apply if the claimant has misstated or failed to state a material fact in connection with his or her request for indemnification. Such presumed determination that a claimant is entitled to indemnification shall be deemed to have been made (I) at the end of the sixtyday or ninetyday period (as the case may be) referred to in clause (1)(b) of the immediately preceding sentence or (II) if the Board of Directors has resolved on a timely basis to submit the determination to the shareholders, on the last date within the period prescribed by law for holding such shareholders meeting (or a postponement or adjournment thereof as permitted above).

SECTION 8.5. Advance Payment. Expenses incurred in defending an Action shall be paid by the Corporation in advance of the final disposition of such Action to a director or officer, promptly after receipt of a request therefor stating in reasonable detail the expenses incurred, and to an employee or agent as authorized by the Board of Directors; provided that in each case (a) the Corporation shall have received an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation hereunder, (b) the indemnitee furnishes the Corporation a written affirmation of his or her good faith belief that he or she has satisfied the standard of conduct in Section 8.1 or 8.2 and (c) a determination is made by those making the

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decision pursuant to Section 8.4 that the facts then known would not preclude indemnification under these By-Laws.

    SECTION 8.6. Procedures for Determination. The Board of Directors shall establish reasonable procedures for the submission of claims for indemnification hereunder, determination of the entitlement of any person thereto and review of any such determination. Such procedures shall be set forth in an appendix to these ByLaws and shall be deemed for all purposes to be a part hereof.

    SECTION 8.7. By-Law Not Exclusive. The indemnification provided by this Article 8 shall not be deemed exclusive of any other rights to which any person may be entitled under any by-law, agreement, vote of shareholders or Disinterested Directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, agent or participant and shall inure to the benefit of the heirs, executors and administrators of such a person. Notwithstanding any amendment, alteration or repeal of this section or any of its provisions, or of any of the procedures established by the Board of Directors pursuant to Section 8.6, any person who is or was a Corporate Person or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity shall be entitled to indemnification in accordance with the provisions hereof and thereof with respect to any action taken or omitted prior to such amendment, alteration or repeal except to the extent otherwise required by law.

    SECTION 8.8. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a Corporate Person or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article or the Business Corporation Law of the State of Indiana.

    SECTION 8.9. Effect of Invalidity. The invalidity or unenforceability of any provision of this Article 8 shall not affect the validity or enforceability of the remaining provisions of this Article 8.

    SECTION 8.10. Definitions. For purposes of this Article 8:

(a) "Change of Control" means a change of control of the Corporation at any time after the effective time of the merger of Arvin Industries, Inc. with and into the Corporation of a nature that would be required to be reported in a proxy statement pursuant to Section 14(a) of the Exchange Act or in a Form 8-K pursuant to Section 13 of the Exchange Act (or in any similar form or schedule under either of those provisions or any successor provision), whether or not the Corporation is then subject to such reporting requirement; provided, however, that, without limitation, a Change of Control shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule

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13d3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities without the prior approval of at least twothirds of the members of the Board of Directors in office immediately prior to such person attaining such percentage interest; (ii) the Corporation is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors immediately thereafter; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any director whose election became effective prior to or at the time of the merger of Arvin Industries, Inc. with and into the Corporation and any new director whose election or nomination for election by the Corporation's shareholders was approved by a vote of at least twothirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors.

(b)    "the Corporation" shall include, in addition to the surviving or resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify a director, officer, employee or agent of such constituent corporation, or any director, officer, employee or agent of such constituent corporation who is or was serving at the request of such constituent corporation as a director, officer, employee or agent of Another Entity shall stand in the same position under the provisions of this Article 8 with respect to the surviving or resulting corporation as he or she would have with respect to such constituent corporation if its separate existence had continued.

    (c)    "Disinterested Director" means a director of the Corporation who is not and was not a party to an action, suit or proceeding in respect of which indemnification is sought by a director, officer, employee or agent.

    (d)    "Independent Counsel" means a law firm, or a member of a law firm, that (i) is experienced in matters of corporation law; (ii) neither presently is, nor in the past five years has been, retained to represent the Corporation, the director, officer, employee or agent claiming indemnification or any other party to the Action giving rise to a claim for indemnification under this section, in any matter material to the Corporation, the claimant or any such other party; and (iii) would not, under applicable standards of professional conduct then prevailing, have a conflict of interest in representing either the Corporation or such director, officer, employee or agent in an action to determine the Corporation's or such person's rights under this Article 8.

    SECTION 8.11. Actions Against the Corporation. No indemnification shall be payable to an officer, director, employee or agent pursuant to this Article 8 with respect to any action against the Corporation commenced by such officer, director, employee or agent unless the Board of Directors shall have authorized the commencement thereof or

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unless and to the extent that this Article 8 or the procedures established pursuant to Section 8.6 shall specifically provide for indemnification of expenses relating to the enforcement of rights under this Article 8 and such procedures.

    SECTION 8.12. Change in Law. Notwithstanding the foregoing provisions of Article 8, the Corporation shall indemnify any person who is or was a Corporate Person or is or was serving at the request of the Corporation in an Authorized Capacity of or for Another Entity to the full extent permitted by the Act or by any other applicable law, as may from time to time be in effect.

ARTICLE 9

General

    SECTION 9.1. Dividends. Subject to any provisions of any applicable statute or of the Articles of Incorporation, dividends may be declared upon the capital stock of the Corporation by the Board of Directors at any regular or special meeting thereof; and such dividends may be paid in cash, property or shares of the Corporation.

    SECTION 9.2. Fiscal Year. The fiscal year of the Corporation shall be the fifty-two or fifty-three week period beginning on the Monday following the Sunday closest to the last day of September of each year and ending on the Sunday closest to the last day of September of the following year.

    SECTION 9.3. Severability. If any provision of these By-Laws, or its application thereof to any person or circumstances, is held invalid, the remainder of these By- Laws and the application of such provision to other persons or circumstances shall not be affected thereby.

    SECTION 9.4. Amendments. Except as otherwise expressly provided in the Articles of Incorporation or the Act, these By-laws may from time to time be altered, amended or repealed, or new By-laws may be adopted, by either (a) the Board of Directors by the affirmative vote of a majority of the total number of directors at the time, or (b) the affirmative vote, at a meeting of the shareholders of the Corporation, of the holders of at least a majority of the voting power of the shares of the Corporation then entitled to vote at an election of directors, voting together as a single class.

    SECTION 9.5     Control Shares. Chapter 42 of the Indiana Business Corporation Law (IBCL § 23-1-42-1 et. seq.) shall not apply to the acquisition of shares of voting stock of the Corporation.

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APPENDIX

Procedures for Submission and

Determination of Claims for Indemnification

Pursuant to Article 8 of the ByLaws.

SECTION 1. Purpose. The Procedures for Submission and Determination of Claims for Indemnification Pursuant to Article 8 of the By-Laws (the "Procedures") are to implement the provisions of Article 8 of the By-Laws of the Corporation (the "By-Laws") in compliance with the requirement of Section 8.6 thereof.

SECTION 2. Definitions. For purposes of these Procedures:

(A) All terms that are defined in Article 8 of the By-Laws shall have the meanings ascribed to them therein when used in these Procedures unless otherwise defined herein.

(B) "Expenses" include all reasonable attorneys' fees, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in, a Proceeding; and shall also include such retainers as counsel may reasonably require in advance of undertaking the representation of an indemnitee in a Proceeding.

(C) "Indemnitee" includes any person who was or is, or is threatened to be made, a witness in or a party to any Proceeding by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent (except in each of the foregoing situations to the extent any agreement, arrangement or understanding of agency contains provisions that supersede or abrogate indemnification under Article 8 of the By-Laws) of another corporation or of any partnership, joint venture, trust, employee benefit plan or other enterprise.

(D) "Proceeding" includes any action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative, except one initiated by an Indemnitee unless the Board of Directors shall have authorized the commencement thereof.

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SECTION 3. Submission and Determination of Claims.

(A) To obtain indemnification or advancement of Expenses under Article 8 of the By-Laws, an Indemnitee shall submit to the Secretary of the Corporation a written request therefor, including therein or therewith such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to permit a determination as to whether and what extent the Indemnitee is entitled to indemnification or advancement of Expenses, as the case may be. The Secretary shall, promptly upon receipt of a request for indemnification, advise the Board of Directors thereof in writing if a determination in accordance with Section 8.4 of the By-Laws is required.

(B) Upon written request by an Indemnitee for indemnification pursuant to Section 3(A) hereof, a determination with respect to the Indemnitee's entitlement thereto in the specific case, if required by the By-Laws, shall be made in accordance with Section 8.4 of the By-Laws, and, if it is so determined that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within ten days after such determination. The Indemnitee shall cooperate with the person, persons or entity making such determination, with respect to the Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination.

(C) If entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8.4 of the By-Laws, the Independent Counsel shall be selected as provided in this Section 3(C). The Independent Counsel shall be selected by the Board of Directors by majority vote of a quorum consisting of Disinterested Directors, or, if such a quorum cannot be obtained, by majority vote of a committee duly designated by the Board of Directors consisting solely of two or more Disinterested Directors, or, if such a quorum cannot be obtained and such a committee cannot be designated, by a majority vote of the full Board of Directors (in which selection Directors who are not Disinterested Directors may participate), and the Corporation shall give written notice to the Indemnitee advising the Indemnitee of the identity of the Independent Counsel so selected. The Indemnitee may, within seven days after such written notice of selection shall have been given, deliver to the Corporation a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Article 8 of the By-Laws, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is made, the Independent Counsel so selected may not serve as Independent Counsel unless and until a court has determined that such objection is without merit. If, within twenty days after the next regularly scheduled Board of Directors meeting following

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submission by the Indemnitee of a written request for indemnification pursuant to Section 3(A) hereof, no Independent Counsel shall have been selected and not objected to, either the Corporation or the Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Indemnitee to the selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom an objection is favorably resolved or the person so appointed shall act as Independent Counsel under Section 8.4 of the By-Laws. The Corporation shall pay any and all reasonable fees and expenses (including without limitation any advance retainers reasonably required by counsel) of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 8.4 of the By-Laws, and the Corporation shall pay all reasonable fees and expenses (including without limitation any advance retainers reasonably required by counsel) incident to the procedures of Section 8.4 of the By-Laws and this Section 3(C), regardless of the manner in which Independent Counsel was selected or appointed. Upon the delivery of its opinion pursuant to Article 8 of the By-Laws or, if earlier, the due commencement of any judicial proceeding or arbitration pursuant to Section 4(A)(3) of these Procedures, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

(D) If a Change of Control shall have occurred, in making a determination with respect to entitlement to indemnification under the By-Laws, the person, persons or entity making such determination shall presume that an Indemnitee is entitled to indemnification under the By-Laws if the Indemnitee has submitted a request for indemnification in accordance with Section 3(A) hereof, and the Corporation shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.

SECTION 4. Review and Enforcement of Determination.

(A) In the event that (1) advancement of Expenses is not timely made pursuant to Section 8.5 of the By-Laws, (2) payment of indemnification is not made pursuant to Section 8.3 of the By-Laws within ten days after receipt by the Corporation of written request therefor, (3) a determination is made pursuant to Section 8.4 of the By-Laws that an Indemnitee is not entitled to indemnification under the By-Laws, (4) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8.4 of the By-Laws and such determination shall not have been made and delivered in a written opinion within ninety days after receipt by the Corporation of the written request for indemnification, or (5) payment of indemnification is not made within ten days after a determination has been made pursuant to Section 8.4 of the By-Laws that an Indemnitee is entitled to indemnification or within ten days after such

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determination is deemed to have been made pursuant to Section 8.4 of the By-Laws, the Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Indiana, or in any other court of competent jurisdiction, of the Indemnitee's entitlement to such indemnification or advancement of Expenses. Alternatively, the Indemnitee, at his or her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. The Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within one year following the date on which the Indemnitee first has the right to commence such proceeding pursuant to this Section 4(A). The Corporation shall not oppose the Indemnitee's right to seek any such adjudication or award in arbitration.

(B) In the event that a determination shall have been made pursuant to Section 8.4 of the By-Laws that an Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 4 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and the Indemnitee shall not be prejudiced by reason of that adverse determination. If a Change of Control shall have occurred, the Corporation shall have the burden of proving in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

(C) If a determination shall have been made or deemed to have been made pursuant to Section 8.4 of the By-Laws that an Indemnitee is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 4, absent (1) a misstatement or omission of a material fact in connection with the Indemnitee's request for indemnification, or (2) a prohibition of such indemnification under applicable law.

(D) The Corporation shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the procedures and presumptions of these Procedures are not valid, binding and enforceable, and shall stipulate in any such judicial proceeding or arbitration that the Corporation is bound by all the provisions of these Procedures.

(E) In the event that an Indemnitee, pursuant to this Section 4, seeks to enforce the Indemnitee's rights under, or to recover damages for breach of, Article 8 of the By-Laws or these Procedures in a judicial proceeding or arbitration, the Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all expenses (of the types described in the definition of Expenses in Section 2 of these Procedures) actually and reasonably incurred in such judicial proceeding or arbitration, but only if the Indemnitee prevails therein. If it shall be determined in such judicial proceeding or arbitration that the Indemnitee is entitled to receive part but not all of the

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indemnification or advancement of Expenses sought, the expenses incurred by the Indemnitee in connection with such judicial proceeding or arbitration shall be appropriately prorated.

SECTION 5. Amendments. These Procedures may be amended at any time and from time to time in the same manner as any ByLaw of the Corporation in accordance with the Articles of Incorporation, the By-Laws and the Act; provided, however, that notwithstanding any amendment, alteration or repeal of these Procedures or any provision hereof, any Indemnitee shall be entitled to utilize these Procedures with respect to any claim for indemnification arising out of any action taken or omitted prior to such amendment, alteration or repeal except to the extent otherwise required by law.

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EX-10.A

Exhibit 10-a

EXECUTION VERSION

ELEVENTH AMENDMENT TO THE

RECEIVABLES PURCHASE AGREEMENT

This ELEVENTH AMENDMENT TO THE RECEIVABLES PURCHASE AGREEMENT (this “Amendment”), dated as of March 31, 2021 (the “Amendment Date”), is entered into by and among the following parties:

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

(ii)    MERITOR, INC. (“Meritor”), 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”), and desire to amend the Receivables Purchase Agreement as set forth herein.

B.Concurrently herewith, the Seller, the Servicer, the Administrator and PNC Capital Markets LLC are entering into that certain Amended and Restated Fee Letter, dated as of the date hereof (the “Amended and Restated Fee Letter”)

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 following new defined terms are added to Exhibit I of the Receivables Purchase Agreement in appropriate alphabetical order:

“Erroneous Payment” has the meaning assigned to it in Section 4.16(a).

“Erroneous Payment Notice” has the meaning assigned to it in Section 4.16(a).

“Overnight Bank Funding Rate” means for any day, the rate comprised of both overnight federal funds and overnight eurocurrency borrowings by U.S.-managed banking offices of depository institutions, as such composite rate shall be determined by

the Federal Reserve Bank of New York (“NYFRB”), as set forth on its public website from time to time, and as published on the next succeeding Business Day as the overnight bank funding rate by the NYFRB (or by such other recognized electronic source (such as Bloomberg) selected by the Administrator for the purpose of displaying such rate); provided, that if such day is not a Business Day, the Overnight Bank Funding Rate for such day shall be such rate on the immediately preceding Business Day; provided, further, that if such rate shall at any time, for any reason, no longer exist, a comparable replacement rate determined by the Administrator at such time (which determination shall be conclusive absent manifest error). If the Overnight Bank Funding Rate determined as above would be less than zero percent (0.00%) per annum, then such rate shall be deemed to be zero percent (0.00%) per annum. The rate of interest charged shall be adjusted as of each Business Day based on changes in the Overnight Bank Funding Rate without notice to the Seller.

(b)The defined term “Federal Funds Rate” as well as the definition thereof set forth in Exhibit I to the Receivables Purchase Agreement is hereby deleted in its entirety.

(c)Clause (b) of the definition of “Base Rate” set forth in Exhibit I to the Receivables Purchase Agreement is hereby replaced in its entirety with the following:

    (b)    0.50% per annum above the latest Overnight Bank Funding Rate; and

(d)The definition of “Purchase Limit” set forth in Exhibit I to the Receivables Purchase Agreement is hereby replaced in its entirety with the following:

“Purchase Limit” means $110,000,000 as reduced from time to time pursuant to Section 1.1(c). References to the unused portion of the Purchase Limit shall mean, at any time, an amount equal to (x) the Purchase Limit at such time, minus (y) the sum of the Aggregate Capital plus the LC Participation Amount.

(e)The definition of “Scheduled Commitment Termination Date” set forth in Exhibit I to the Receivables Purchase Agreement is hereby amended by deleting the date “December 7, 2022” where it appears therein and substituting the date “March 29, 2024” therefor.

(f)Clause (c) of Section 1.14 the Receivables Purchase Agreement is hereby amended by replacing the term “Federal Funds Rate” where it appears therein with the phrase “Overnight Bank Funding Rate”.

(g)Clause (b) of Section 1.15 the Receivables Purchase Agreement is hereby amended by replacing the term “Federal Funds Rate” where it appears therein with the phrase “Overnight Bank Funding Rate”.

(h)Section 1.23 of the Agreement is hereby deleted in its entirety and replaced with the following:

Section 1.23    Successor Euro-Rate or LMIR Index.

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    (a) Notwithstanding anything to the contrary herein or in any other Transaction Document, if a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date have occurred prior to the Reference Time in respect of any setting of the then-current Benchmark, then (x) if a Benchmark Replacement is determined in accordance with clause (1) or (2) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Transaction Document in respect of such Benchmark setting and subsequent Benchmark settings without any amendment to, or further action or consent of any other party to, this Agreement or any other Transaction Document and (y) if a Benchmark Replacement is determined in accordance with clause (3) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Transaction Document in respect of any Benchmark setting at or after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Purchasers without any amendment to, or further action or consent of any other party to, this Agreement or any other Transaction Document so long as the Administrator has not received, by such time, written notice of objection to such Benchmark Replacement from Purchasers comprising the Majority Purchaser Agents.

1.Benchmark Replacement Conforming Changes. In connection with the implementation of a Benchmark Replacement, the Administrator will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Transaction Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Transaction Document.

1.Notices; Standards for Decisions and Determinations. The Administrator will promptly notify the Seller and the Purchasers of (i) any occurrence of a Benchmark Transition Event, a Term SOFR Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date, (ii) the implementation of any Benchmark Replacement, (iii) the effectiveness of any Benchmark Replacement Conforming Changes, (iv) the removal or reinstatement of any tenor of a Benchmark pursuant to paragraph (d) below and (v) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrator or, if applicable, any Purchaser (or group of Purchasers) pursuant to this Section 1.23, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Transaction Document, except, in each case, as expressly required pursuant to this Section 1.23.

2.Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary herein or in any other Transaction Document, at any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including Term SOFR, Euro-Rate or LMIR) and either (A) any tenor for such Benchmark is not

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displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrator in its reasonable discretion or (B) the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is or will be no longer representative, then the Administrator may modify the definition of “Settlement Period” for any Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (ii) if a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (B) is not, or is no longer, subject to an announcement that it is or will no longer be representative for a Benchmark (including a Benchmark Replacement), then the Administrator may modify the definition of “Settlement Period” for all Benchmark settings at or after such time to reinstate such previously removed tenor.

3.Benchmark Unavailability Period. Upon the Seller’s receipt of notice of the commencement of a Benchmark Unavailability Period, the Seller may revoke any request for a Purchase bearing interest based on Euro-Rate or LMIR, as applicable, conversion to or continuation of Purchases bearing interest based on Euro-Rate or LMIR, as applicable, to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Seller will be deemed to have converted any such request into a request for a Purchase of or conversion to Purchases bearing interest under the Base Rate. During any Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark is not an Available Tenor, the component of the Base Rate based upon the then-current Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of the Base Rate.

4.Secondary Term SOFR Conversion. Notwithstanding anything to the contrary herein or in any other Transaction Document and subject to the proviso below in this paragraph, if a Term SOFR Transition Event and its related Benchmark Replacement Date have occurred prior to the Reference Time in respect of any setting of the then-current Benchmark, then (i) the applicable Benchmark Replacement will replace the then-current Benchmark for all purposes hereunder or under any Transaction Document in respect of such Benchmark setting (the “Secondary Term SOFR Conversion Date”) and subsequent Benchmark settings, without any amendment to, or further action or consent of any other party to, this Agreement or any other Transaction Document; and (ii) Purchases outstanding on the Secondary Term SOFR Conversion Date bearing interest based on the then-current Benchmark shall be deemed to have been converted to Purchases bearing interest at the Benchmark Replacement with a tenor approximately the same length as the interest payment period of the then-current Benchmark; provided that, this paragraph (f) shall not be effective unless the Administrator has delivered to the Purchasers and the Seller a Term SOFR Notice.

5.Certain Defined Terms. As used in this Section 1.23:

“Available Tenor”means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if the then current Benchmark is a term rate or is based on a term rate, any tenor for such Benchmark that is or may be used for determining the length of a

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Settlement Period pursuant to this Agreement as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Settlement Period” pursuant to paragraph (d) of this Section 1.23, or (y) if the then current Benchmark is not a term rate nor based on a term rate, any payment period for interest calculated with reference to such Benchmark pursuant to this Agreement as of such date. For the avoidance of doubt, the Available Tenor for LMIR is one month.

“Benchmark”means, initially, Euro-Rate or LMIR, as applicable; provided that if a Benchmark Transition Event a Term SOFR Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date have occurred with respect to Euro-Rate or LMIR, as applicable, or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to paragraph (a) of this Section 1.23.

“Benchmark Replacement” means, for any Available Tenor, the first alternative set forth in the order below that can be determined by the Administrator for the applicable Benchmark Replacement Date:

SECTION 1.the sum of: (a) Term SOFR and (b) the related Benchmark Replacement Adjustment;

SECTION 2.the sum of: (a) Daily Simple SOFR and (b) the related Benchmark Replacement Adjustment;

(3) the sum of: (a) the alternate benchmark rate that has been selected by the Administrator and the Seller as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement for the then-current Benchmark for U.S. dollar-denominated syndicated credit facilities at such time and (b) the related Benchmark Replacement Adjustment;

provided that, in the case of clause (1), such Unadjusted Benchmark Replacement is displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrator in its reasonable discretion; provided, further, that, with respect to a Term SOFR Transition Event, on the applicable Benchmark Replacement Date, the “Benchmark Replacement” shall revert to and shall be determined as set forth in clause (1) of this definition. If the Benchmark Replacement as determined pursuant to clause (1), (2) or (3) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Transaction Documents.

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“Benchmark Replacement Adjustment”means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement for any applicable Available Tenor for any setting of such Unadjusted Benchmark Replacement:

(1) for purposes of clauses (1) and (2) of the definition of “Benchmark Replacement,” the first alternative set forth in the order below that can be determined by the Administrator:

(a) the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) as of the Reference Time such Benchmark Replacement is first set for such Available Tenor that has been selected or recommended by the Relevant Governmental Body for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for the applicable Corresponding Tenor;

(b) the spread adjustment (which may be a positive or negative value or zero) as of the Reference Time such Benchmark Replacement is first set for such Available Tenor that would apply to the fallback rate for a derivative transaction referencing the ISDA Definitions to be effective upon an index cessation event with respect to such Benchmark for the applicable Corresponding Tenor; and

(2) for purposes of clause (3) of the definition of “Benchmark Replacement,” the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrator and the Seller for the applicable Corresponding Tenor giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body on the applicable Benchmark Replacement Date or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated syndicated credit facilities;

provided that, (x) in the case of clause (1) above, such adjustment is displayed on a screen or other information service that publishes such Benchmark Replacement Adjustment from time to time as selected by the Administrator in its reasonable discretion and (y) if the then-current Benchmark is a term rate, more than one tenor of such Benchmark is available as of the applicable Benchmark Replacement Date and the applicable Unadjusted Benchmark Replacement will not be a term rate, the Available Tenor of such Benchmark for purposes of this definition of “Benchmark Replacement Adjustment” shall be deemed to be the Available Tenor that has approximately the same length (disregarding business day adjustments) as the payment period for interest calculated with reference to such Unadjusted Benchmark Replacement.

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“Benchmark Replacement Conforming Changes”means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “Settlement Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Administrator decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrator in a manner substantially consistent with market practice (or, if the Administrator decides that adoption of any portion of such market practice is not administratively feasible or if the Administrator determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Administrator decides is reasonably necessary in connection with the administration of this Agreement and the other Transaction Documents).

“Benchmark Replacement Date”means the earliest to occur of the following events with respect to the then-current Benchmark:

(1) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof);

(2) in the case of clause (3) of the definition of “Benchmark Transition Event,” the date determined by the Administrator, which date shall promptly follow the date of the public statement or publication of information referenced therein;

(3) in the case of a Term SOFR Transition Event, the date that is set forth in the Term SOFR Notice provided to the Purchasers and the Seller pursuant to this Section 1.23, which date shall be at least 30 days from the date of the Term SOFR Notice; or

(4) in the case of an Early Opt-in Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election is provided to the Purchasers, so long as the Administrator has not received, by 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Early Opt-in Election is provided to the Purchasers, written notice of objection to such Early Opt-in Election from Purchasers comprising the Majority Purchaser Agents.

For the avoidance of doubt, (i) if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time

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for such determination and (ii) the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (1) or (2) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).

“Benchmark Transition Event”means the occurrence of one or more of the following events with respect to the then-current Benchmark:

(1) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);

(2) a public statement or publication of information by an Official Body having jurisdiction over the Administrator, the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Federal Reserve Board, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); or

(3) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) or an Official Body having jurisdiction over the Administrator announcing that all Available Tenors of such Benchmark (or such component thereof) are no longer representative.

For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).

“Benchmark Unavailability Period”means the period (if any) (x) beginning at the time that a Benchmark Replacement Date pursuant to clauses (1) or (2) of that definition has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all

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purposes hereunder and under any Transaction Document in accordance with this Section 1.23 and (y) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Transaction Document in accordance with this Section 1.23.

“Corresponding Tenor”with respect to any Available Tenor means, as applicable, either a tenor (including overnight) or an interest payment period having approximately the same length (disregarding business day adjustment) as such Available Tenor.

“Daily Simple SOFR”means, for any day, SOFR, with the conventions for this rate (which will include a lookback) being established by the Administrator in accordance with the conventions for this rate selected or recommended by the Relevant Governmental Body for determining “Daily Simple SOFR” for business loans; provided, that if the Administrator decides that any such convention is not administratively feasible for the Administrator, then the Administrator may establish another convention in its reasonable discretion.

“Early Opt-in Election”means, if the then-current Benchmark is Euro-Rate or LMIR, as applicable, the occurrence of:

(1) a notification by the Administrator to (or the request by the Seller to the Administrator to notify) each of the other parties hereto that at least five currently outstanding U.S. dollar-denominated syndicated credit facilities at such time contain (as a result of amendment or as originally executed) a SOFR-based rate (including SOFR, a term SOFR or any other rate based upon SOFR) as a benchmark rate (and such syndicated credit facilities are identified in such notice and are publicly available for review), and

(2) the joint election by the Administrator and the Seller to trigger a fallback from Euro-Rate or LMIR, as applicable, and the provision by the Administrator of written notice of such election to the Purchasers.

“Floor”means the benchmark rate floor, if any, provided in this Agreement initially (as of the execution of this Agreement, the modification, amendment or renewal of this Agreement or otherwise) with respect to Euro-Rate or LMIR, as applicable, or, if no floor is specified, zero.

“ISDA Definitions”means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time by the International Swaps and Derivatives Association, Inc. or such successor thereto.

“Reference Time”with respect to any setting of the then-current Benchmark means (1) if such Benchmark is Euro-Rate or LMIR, as applicable, 11:00 a.m. (London time) on the day that is two London banking days preceding the date of such setting, and (2) if such Benchmark is not

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Euro-Rate or LMIR, as applicable, the time determined by the Administrator in its reasonable discretion.

“Relevant Governmental Body”means the Federal Reserve Board or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board or the Federal Reserve Bank of New York, or any successor thereto.

“SOFR”means, with respect to any Business Day, a rate per annum equal to the secured overnight financing rate for such Business Day published by the SOFR Administrator on the SOFR Administrator’s Website on the immediately succeeding Business Day.

“SOFR Administrator”means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).

“SOFR Administrator’s Website”means the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.

“Term SOFR”means, for the applicable Corresponding Tenor as of the applicable Reference Time, the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.

“Term SOFR Notice” means a notification by the Administrator to the Purchasers and the Seller of the occurrence of a Term SOFR Transition Event.

“Term SOFR Transition Event” means the determination by the Administrator that (a) Term SOFR has been recommended for use by the Relevant Governmental Body, and is determinable for each Available Tenor, (b) the administration of Term SOFR is administratively feasible for the Administrator and (c) a Benchmark Transition Event has previously occurred resulting in a Benchmark Replacement in accordance with this Section 1.23 that is not Term SOFR.

“Unadjusted Benchmark Replacement”means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.

i.The following new Section 4.16 is added to the Agreement immediately following the existing Section 4.15 thereof:

Section 4.16 Erroneous Payments.

1.Each Purchaser hereby agrees that (i) if the Administrator notifies such Purchaser that the Administrator has determined in its sole discretion that any funds received by such Purchaser from the Administrator or any of its Affiliates were erroneously transmitted to, or otherwise erroneously or mistakenly received by, such Purchaser (whether or not known to such Purchaser (whether as a payment, prepayment or repayment of Capital, Discount, fees or

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otherwise); individually and collectively, an “Erroneous Payment”) and demands the return of such Erroneous Payment (or a portion thereof), such Purchaser shall promptly, but in no event later than one Business Day thereafter, return to the Administrator the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Purchaser to the date such amount is repaid to the Administrator in same day funds at the greater of the Overnight Bank Funding Rate and a rate determined by the Administrator in accordance with banking industry rules on interbank compensation from time to time in effect and (ii) such Purchaser shall not assert any right or claim to the Erroneous Payment, and hereby waives any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrator for the return of any Erroneous Payments received, including without limitation waiver of any defense based on “discharge for value” or any similar doctrine. A notice of the Administrator to any Purchaser under this clause (a) shall be conclusive, absent manifest error.

2.Without limiting immediately preceding clause (a), each Purchaser hereby further agrees that if it receives an Erroneous Payment from the Administrator (or any of its Affiliates) (i) that is in an amount different than (other than a de minimis difference), or on a different date from, that specified in a notice of payment sent by the Administrator (or any of its Affiliates) with respect to such Erroneous Payment (an “Erroneous Payment Notice”), or (ii) that was not preceded or accompanied by an Erroneous Payment Notice, it shall be on notice that, in each such case, an error has been made with respect to such Erroneous Payment. Each Purchaser further agrees that, in each such case, or if it otherwise becomes aware an Erroneous Payment (or portion thereof) may have been sent in error, such Purchaser shall promptly notify the Administrator of such occurrence and, upon demand from the Administrator, it shall promptly, but in no event later than one (1) Business Day thereafter, return to the Administrator the amount of any such Erroneous Payment (or portion thereof) that was received by such Purchaser to the date such amount is repaid to the Administrator in same day funds at the greater of the Overnight Bank Funding Rate and a rate determined by the Administrator in accordance with banking industry rules on interbank compensation from time to time in effect.

3.The Seller and Servicer hereby agree that (i) in the event an Erroneous Payment (or portion thereof) is not recovered from any Purchaser that has received such Erroneous Payment (or portion thereof) for any reason, the Administrator shall be subrogated to all the rights of such Purchaser with respect to such amount and (ii) an Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Seller or Servicer (or any Affiliate thereof).

    (d)    Each party’s obligations under this Section 4.16 shall survive the resignation or replacement of the Administrator or any transfer of rights or obligations by, or the replacement of, a Purchaser, the termination of the Commitments or the repayment, satisfaction or discharge of all obligations (or any portion thereof) under any Transaction Document.

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ii.The following new Section 5.17 is added to the Agreement immediately following the existing Section 5.16 thereof:

Section 5.17    Euro-Rate Notification.

Section 1.23 of this Agreement provides a mechanism for determining an alternative rate of interest in the event that the London interbank offered rate is no longer available or in certain other circumstances. The Administrator does not warrant or accept any responsibility for and shall not have any liability with respect to, the administration, submission or any other matter related to the London interbank offered rate or other rates in the definition of "Euro-Rate" or “LMIR”, as applicable, or with respect to any alternative or successor rate thereto, or replacement rate therefor.

iii.Schedule IV to the Receivables Purchase Agreement is hereby replaced in its entirety with Schedule IV attached hereto.

SECTION 3.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:

iv.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).

v.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.

vi.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 4.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

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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 5.Effectiveness. This Amendment shall become effective as of the Amendment Date upon the satisfaction of the following conditions precedent:

vii.Execution of Amendment. The Administrator shall have received counterparts hereto duly executed by each of the parties hereto.

viii.Execution of Amended and Restated Fee Letter. The Administrator shall have received counterparts of the Amended and Restated Fee Letter duly executed by each of the parties thereto.

ix.Receipt of Fees. The Administrator shall have received confirmation that the “Amendment Fee” under and as defined in the Amended and Restated Fee Letter has been paid in full in accordance with the terms of the Amended and Restated Fee Letter.

x.Opinion. The Administrator shall have received a favorable opinion, addressed to the Administrator, each Purchaser Agent and each Purchaser, in form and substance reasonably satisfactory to the Administrator, from counsel for the Seller and the Servicer covering such matters as the Administrator may reasonably request, including, without limitation, certain due authorization, no conflicts and New York enforceability matters.

SECTION 6.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.

SECTION 7.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 8.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 51402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

SECTION 9.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]

13

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/ Mike Lei    

Name:    Mike Lei

Title:    President and Treasurer

MERITOR, INC.,

as Initial Servicer

By: /s/ Mike Lei    

Name:    Mike Lei

Title:     Vice President and Treasurer

PNC BANK, NATIONAL ASSOCIATION,

S-1

Eleventh Amendment to the

Receivables Purchase Agreement

(ArvinMeritor Receivables Corporation)

as a Related Committed Purchaser,

as an LC Participant, as a Purchaser Agent,

as LC Bank and as Administrator

By: /s/ Michael Brown    

Name: Michael Brown

Title: Senior Vice President

S-2

Eleventh Amendment to the

Receivables Purchase Agreement

(ArvinMeritor Receivables Corporation)

SCHEDULE IV

PURCHASER GROUPS AND MAXIMUM COMMITMENTS

Purchaser Group of PNC Bank, National Association
Party	Capacity	Maximum Commitment
PNC Bank, National Association	Related Committed Purchaser	$110,000,000
PNC Bank, National Association	LC Participant	$110,000,000
PNC Bank, National Association	LC Bank	N/A
PNC Bank, National Association	Purchaser Agent	N/A

Schedule IV

EX-22

Exhibit 22

Guarantor Subsidiaries of Meritor, Inc.

The following subsidiaries, as of April 4, 2021, irrevocably and unconditionally guarantee amounts outstanding under the company’s senior secured revolving credit facility and the senior unsecured notes outstanding under its indentures on a joint and several basis:

Arvin Holdings Netherlands B.V.

Arvin Technologies, Inc.

ArvinMeritor Filters Operating Co., LLC    

ArvinMeritor Limited

ArvinMeritor OE, LLC

Arvinmeritor Sweden AB    

ArvinMeritor Technology, LLC

AxleTech International IP Holdings, LLC

CAX Intermediate, LLC

CAX Holdings, LLC

Meritor Aftermarket USA, LLC

Meritor Cayman Islands, Ltd.

Meritor Electric Vehicles, LLC

Meritor Heavy Vehicle Braking Systems (U.S.A.), LLC

Meritor Heavy Vehicle Systems, LLC

Meritor Heavy Vehicle Systems (Singapore) Pte., Ltd.

Meritor Heavy Vehicle Systems (Venezuela), Inc.

Meritor Holdings, LLC

Meritor, Inc., a Nevada Corporation

Meritor Industrial Aftermarket, LLC

Meritor Industrial France, LLC

Meritor Industrial Holdings, LLC

Meritor Industrial Holdings Brazil, LLC

Meritor Industrial Holdings France, LLC

Meritor Industrial Acquisition Holdings, LLC

Meritor Industrial International Holdings, LLC

Meritor Industrial Overseas Services, LLC

Meritor Industrial Products, LLC

Meritor International Holdings, LLC

Meritor Luxembourg S.A.R.L.

Meritor Management Corp.

Meritor Netherlands, B.V.

Meritor Specialty Products, LLC

Meritor Technology, LLC

Transportation Power, LLC

EX-31.A

Exhibit 31-a

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO

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

I, Chris Villavarayan, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Meritor, Inc. for the quarterly period ended April 4, 2021;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 4, 2021

/s/ Chris Villavarayan

Chris Villavarayan

President, Chief Executive Officer

EX-31.B

Exhibit 31-b

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO

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

I, Carl D. Anderson II, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Meritor, Inc. for the quarterly period ended April 4, 2021;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 4, 2021

/s/ Carl D. Anderson II

Carl D. Anderson II

Senior Vice President, Chief Financial Officer

EX-32.A

Exhibit 32-a

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO RULE

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

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

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

1.The Quarterly Report of Meritor, Inc. on Form 10-Q for the quarterly period ended April 4, 2021 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/ Chris Villavarayan

Chris Villavarayan

President, Chief Executive Officer

Date: May 4, 2021

EX-32.B

Exhibit 32-b

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

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

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

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

1.The Quarterly Report of Meritor, Inc. on Form 10-Q for the quarterly period ended April 4, 2021 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, and

2.The information contained in that report fairly presents, in all material respects, the financial condition and results of operations of Meritor, Inc.

/s/ Carl D. Anderson II

Carl D. Anderson II

Senior Vice President, Chief Financial Officer

Date: May 4, 2021

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COVER PAGE - shares	6 Months Ended
	Mar. 31, 2021	May 03, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Apr. 04, 2021
Document Transition Report	false
Entity File Number	1-15983
Entity Registrant Name	MERITOR, INC.
Entity Incorporation, State or Country Code	IN
Entity Tax Identification Number	38-3354643
Entity Address, Address Line One	2135 West Maple Road
Entity Address, City or Town	Troy
Entity Address, State or Province	MI
Entity Address, Postal Zip Code	48084-7186
City Area Code	248
Local Phone Number	435-1000
Title of 12(b) Security	Common Stock, $1 Par Value
Trading Symbol	MTOR
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		72,582,057
Amendment Flag	false
Entity Central Index Key	0001113256
Current Fiscal Year End Date	--09-30
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2

XML

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - USD ($) shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Income Statement [Abstract]
Sales	$ 983	$ 871	$ 1,872	$ 1,772
Cost of sales	(835)	(757)	(1,609)	(1,531)
GROSS PROFIT	148	114	263	241
Selling, general and administrative	(69)	(59)	(134)	(129)
Income from WABCO distribution termination	0	265	0	265
Other operating expense, net	(2)	(10)	(9)	(15)
OPERATING INCOME	77	310	120	362
Other income, net	23	14	37	24
Equity in earnings of affiliates	5	6	16	12
Interest expense, net	(17)	(16)	(45)	(30)
INCOME BEFORE INCOME TAXES	88	314	128	368
Provision for income taxes	(22)	(73)	(29)	(86)
INCOME FROM CONTINUING OPERATIONS	66	241	99	282
INCOME FROM DISCONTINUED OPERATIONS, net of tax	0	1	0	1
NET INCOME	66	242	99	283
Less: Net income attributable to noncontrolling interests	(3)	(1)	(4)	(3)
NET INCOME ATTRIBUTABLE TO MERITOR, INC.	63	241	95	280
NET INCOME ATTRIBUTABLE TO MERITOR, INC.
Net income from continuing operations	63	240	95	279
Income from discontinued operations	0	1	0	1
Net income	$ 63	$ 241	$ 95	$ 280
BASIC EARNINGS PER SHARE
Continuing operations (in usd per share)	$ 0.87	$ 3.27	$ 1.31	$ 3.68
Discontinued operations (in usd per share)	0	0.01	0	0.01
Basic earnings per share (in usd per share)	0.87	3.28	1.31	3.69
DILUTED EARNINGS PER SHARE
Continuing operations (in usd per share)	0.86	3.19	1.30	3.58
Discontinued operations (in usd per share)	0	0.01	0	0.01
Diluted earnings per share (in usd per share)	$ 0.86	$ 3.20	$ 1.30	$ 3.59
Basic average common shares outstanding (in shares)	72.4	73.4	72.3	75.8
Diluted average common shares outstanding (in shares)	73.4	75.3	73.3	78.0

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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Statement of Comprehensive Income [Abstract]
Net income	$ 66	$ 242	$ 99	$ 283
Foreign currency translation adjustments:
Attributable to Meritor, Inc.	(22)	(56)	33	(35)
Attributable to noncontrolling interests	(1)	0	0	0
Pension and other postretirement benefit related adjustments	2	2	5	5
Unrealized gain (loss) on cash flow hedges	0	(5)	1	(3)
Other comprehensive income (loss), net of tax	(21)	(59)	39	(33)
Total comprehensive income	45	183	138	250
Less: Comprehensive income attributable to noncontrolling interests	(2)	(1)	(4)	(3)
Comprehensive income attributable to Meritor, Inc.	$ 43	$ 182	$ 134	$ 247

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CONDENSED CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
CURRENT ASSETS:
Cash and cash equivalents	$ 321	$ 315
Receivables, trade and other, net	604	479
Inventories	510	435
Other current assets	72	54
TOTAL CURRENT ASSETS	1,507	1,283
NET PROPERTY	502	515
GOODWILL	510	501
OTHER ASSETS	621	585
TOTAL ASSETS	3,140	2,884
CURRENT LIABILITIES:
Short-term debt	17	39
Accounts and notes payable	593	423
Other current liabilities	279	264
TOTAL CURRENT LIABILITIES	889	726
LONG-TERM DEBT	1,186	1,188
RETIREMENT BENEFITS	176	196
OTHER LIABILITIES	276	279
TOTAL LIABILITIES	2,527	2,389
COMMITMENTS AND CONTINGENCIES (See Note 16)
EQUITY:
Common stock (March 31, 2021 and September 30, 2020, 104.0 and 103.7 shares issued and 72.6 and 72.3 shares outstanding, respectively)	106	105
Additional paid-in capital	788	808
Retained earnings	831	736
Treasury stock, at cost (March 31, 2021 and September 30, 2020, 31.4 and 31.4 shares, respectively)	(573)	(573)
Accumulated other comprehensive loss	(575)	(614)
Total equity attributable to Meritor, Inc.	577	462
Noncontrolling interests	36	33
TOTAL EQUITY	613	495
TOTAL LIABILITIES AND EQUITY	$ 3,140	$ 2,884

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CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) - shares shares in Millions	Mar. 31, 2021	Sep. 30, 2020
Statement of Financial Position [Abstract]
Common shares issued (in shares)	104.0	103.7
Common shares outstanding (in shares)	72.6	72.3
Treasury stock (in shares)	31.4	31.4

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020	Sep. 30, 2020
OPERATING ACTIVITIES
Net income	$ 66	$ 242	$ 99	$ 283
Less: Income from discontinued operations, net of tax	0	1	0	1
Income from continuing operations	66	241	99	282
Adjustments to income from continuing operations to arrive at cash provided by operating activities:
Depreciation and amortization			52	50
Deferred income tax expense (benefit)			2	(4)
Restructuring costs			8	15
Stock compensation expense			10	1
Equity in earnings of affiliates	(5)	(6)	(16)	(12)
Pension and retiree medical income			(26)	(21)
Loss on debt extinguishment			8	0
Dividends received from equity method investments			2	0
Pension and retiree medical contributions			(6)	(7)
Restructuring payments			(8)	(15)
Changes in off-balance sheet accounts receivable securitization and factoring programs			35	20
Changes in receivables, inventories and accounts payable			(63)	(8)
Changes in other current assets and liabilities			5	(49)
Changes in other assets and liabilities			5	38
Operating cash flows provided by continuing operations			107	290
Operating cash flows used for discontinued operations			0	0
CASH PROVIDED BY OPERATING ACTIVITIES			107	290
INVESTING ACTIVITIES
Capital expenditures			(26)	(33)
Cash paid for acquisition of Transportation Power, Inc., net of cash acquired			0	(13)
Other investing activities			(3)	9
CASH USED FOR INVESTING ACTIVITIES			(29)	(37)
FINANCING ACTIVITIES
Securitization			0	96
Borrowings against revolving line of credit			0	304
Proceeds from debt issuance			275	0
Redemption of notes			(281)	0
Redemption of convertible notes			(53)	0
Debt issuance costs			(5)	0
Term loan payments			(7)	(4)
Other financing activities			(1)	(1)
Net change in debt			(72)	395
Repurchase of common stock			0	(241)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES			(72)	154
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH AND CASH EQUIVALENTS			0	(7)
CHANGE IN CASH AND CASH EQUIVALENTS			6	400
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			315	108	$ 108
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$ 321	$ 508	$ 321	$ 508	$ 315

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CONDENSED CONSOLIDATED STATEMENT OF EQUITY - USD ($) $ in Millions	Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Loss	Total Equity Attributable to Meritor, Inc.	Noncontrolling Interests
Beginning balance at Sep. 30, 2019	$ 415	$ 104	$ 803	$ 491	$ (332)	$ (681)	$ 385	$ 30
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	250			280		(33)	247	3
Equity based compensation expense	1		1				1
Vesting of equity based awards	0	1	(1)
Repurchase of common stock	(241)				(241)		(241)
Noncontrolling interest dividend	(1)							(1)
Ending Balance at Mar. 31, 2020	424	105	803	771	(573)	(714)	392	32
Beginning balance at Dec. 31, 2019	384	105	804	530	(432)	(655)	352	32
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	183			241		(59)	182	1
Equity based compensation expense	(2)		(2)				(2)
Repurchase of common stock	(141)				(141)		(141)
Noncontrolling interest dividend	(1)							(1)
Other equity adjustments	1		1				1
Ending Balance at Mar. 31, 2020	424	105	803	771	(573)	(714)	392	32
Beginning balance at Sep. 30, 2020	495	105	808	736	(573)	(614)	462	33
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	138			95		39	134	4
Equity based compensation expense	10		10				10
Vesting of equity based awards	0	1	(1)
Repurchase of convertible notes	(30)		(30)				(30)
Noncontrolling interest dividend	(1)							(1)
Other equity adjustments	1		1				1
Ending Balance at Mar. 31, 2021	613	106	788	831	(573)	(575)	577	36
Beginning balance at Dec. 31, 2020	565	106	784	768	(573)	(555)	530	35
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	45			63		(20)	43	2
Equity based compensation expense	4		4				4
Noncontrolling interest dividend	(1)							(1)
Ending Balance at Mar. 31, 2021	$ 613	$ 106	$ 788	$ 831	$ (573)	$ (575)	$ 577	$ 36

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Basis of Presentation

6 Months Ended

Mar. 31, 2021

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 products, systems, modules and components to original equipment manufacturers ("OEMs") and the aftermarket for the commercial vehicle, transportation and industrial sectors. The company serves commercial truck, trailer, military, bus and coach, construction and other industrial OEMs and certain aftermarkets. The Condensed Consolidated Financial Statements are those of the company and its consolidated subsidiaries.

In the opinion of the company, the unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting solely of adjustments of a normal, recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. These statements should be read in conjunction with the company’s audited Consolidated Financial Statements and notes thereto included in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2020. The Condensed Consolidated Balance Sheet data as of September 30, 2020 was derived from audited financial statements but does not include all annual disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the three and six months ended March 31, 2021 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 second quarter of fiscal years 2021 and 2020 ended on April 4, 2021 and March 29, 2020, respectively. Fiscal year 2020 ended on September 27, 2020. All year and quarter references relate to the company’s fiscal year and fiscal quarters, unless otherwise stated. For ease of presentation, September 30 and March 31 are used consistently throughout this report to represent the fiscal year end and second fiscal quarter end, respectively.

COVID-19 Pandemic Update

In March 2020, the World Health Organization declared a global health pandemic related to the outbreak of a novel coronavirus. The COVID-19 pandemic adversely affected the company's financial performance in the second, third and fourth quarters of fiscal year 2020, and could have an impact on the second half of fiscal year 2021. In response to the COVID-19 pandemic, government health officials at times recommended and mandated precautions to mitigate the spread of the virus, including shelter-in-place orders, prohibitions on public gatherings and other similar measures. The company has been operating as an essential business in the U.S. All of the company's facilities were fully operational at the end of fiscal year 2020 and during the first two quarters of fiscal year 2021. Most of the company’s salaried employees are primarily working remotely until further notice. There is uncertainty around the duration and breadth of the COVID-19 pandemic, as well as the impact it will have on the company's operations, supply chain and demand for its products. As a result, the ultimate impact on the company's business, financial condition and operating results cannot be reasonably estimated at this time.

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Earnings per Share

6 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Earnings per Share

Earnings per Share

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

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

	Three Months Ended March 31,		Six Months Ended March 31,
	2021	2020	2021	2020
Basic average common shares outstanding	72.4	73.4	72.3	75.8
Impact of restricted shares, restricted share units and performance share units	1.0	1.1	1.0	1.3
Impact of convertible notes	—	0.8	—	0.9
Diluted average common shares outstanding	73.4	75.3	73.3	78.0

In November 2020, the Board of Directors approved a grant of 0.3 million 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 $26.98, which was the company’s share price on the grant date of December 1, 2020. The Board of Directors also approved a grant of 0.3 million restricted share units to these executives. The restricted share units vest at the earlier of three years from the date of grant or upon termination of employment with the company under certain circumstances. The fair value of each restricted share unit was $26.98, which was the company's share price on the grant date of December 1, 2020.

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, 2020 to September 30, 2023, 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 (which, solely for purposes of our long-term incentive plan, includes an adjustment for the value of deferred tax assets in jurisdictions with net operating loss carry forwards or tax credits) which are each weighted at 50%. The number of performance share units that vest will be between 0% and 200% of the grant date amount of 0.3 million performance share units.

On December 1, 2020, in response to retention and attrition concerns resulting from the COVID-19 pandemic’s impact on the company’s incentive compensation plans, and to continue to incentivize executive performance in a difficult and uncertain environment, the Compensation Committee of the Board of Directors adjusted the threshold level of the performance metrics required to be achieved for payout for the fiscal 2019-2021 performance cycle. The target and maximum levels were not modified. The impact of this adjustment did not have a material impact on the company's Condensed Consolidated Financial Statements.

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New Accounting Standards

6 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

New Accounting Standards

New Accounting Standards

Accounting standards implemented during fiscal year 2021

On October 1, 2020, the company implemented Accounting Standards Update ("ASU") 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments, including accounts receivable. The ASU also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The guidance had an impact on the company's accounting policies and procedures related to calculation of allowance for doubtful accounts receivable but did not have a material impact on its Condensed Consolidated Financial Statements.

On October 1, 2020, the company implemented ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU add, modify, and eliminate certain disclosure requirements on fair value measurements in Topic 820. The guidance did not have a material impact on the company's Condensed Consolidated Financial Statements

Accounting standards to be implemented

Implementation of the following standards may result in a significant change in practice and/or have a significant financial impact on the company.

In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of debt and equity, including convertible instruments and contracts on an entity’s own equity. ASC 470-20 outlines five models to allocate the proceeds attributable to the issuance of a convertible debt instrument. This ASU removes from U.S. GAAP the separation models for convertible debt with a cash conversion feature (CCF) and convertible debt with a beneficial conversion feature (BCF). As a result of adopting this ASU, entities are not required to separately present in equity an embedded conversion feature in such debt. Instead, they should account for a convertible debt instrument wholly as debt. Applying the separation models in ASC 470-20 to convertible instruments with a CCF or BCF involves the recognition of a debt discount, which is amortized to interest expense. The elimination of CCF and BCF models will reduce reported interest expense and increase reported net income for convertible instruments issued within the scope of those models before the adoption of ASU 2020-06. The amendments in this ASU are required to be adopted by public business entities in fiscal years

beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but not earlier than for a fiscal year beginning after December 15, 2020, including interim periods within those fiscal years. Entities are permitted to adopt the guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The company is currently evaluating the potential impact of this guidance on its accounting policies and its Condensed Consolidated Financial Statements.

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Revenue

6 Months Ended

Mar. 31, 2021

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

Disaggregation of revenue

In the following tables, revenue is disaggregated for each of our operating segments by primary geographical market for the three months ended March 31, 2021 and 2020 (in millions).

	Three Months Ended March 31, 2021
Primary Geographical Market	Commercial Truck		Aftermarket & Industrial		Total
U.S.	$	337	$	177	$	514
Canada	—		14		14
Mexico	44		5		49
Total North America	381		196		577
Sweden	74		—		74
Italy	58		5		63
United Kingdom	36		3		39
Other Europe	3		35		38
Total Europe	171		43		214
Brazil	81		1		82
China	34		1		35
India	50		—		50
Other Asia-Pacific	25		—		25
Total sales	$	742	$	241	$	983

	Three Months Ended March 31, 2020 (1)
Primary Geographical Market	Commercial Truck		Aftermarket & Industrial		Total
U.S.	$	307	$	211	$	518
Canada	—		15		15
Mexico	39		5		44
Total North America	346		231		577
Sweden	63		—		63
Italy	46		3		49
United Kingdom	30		3		33
Other Europe	1		36		37
Total Europe	140		42		182
Brazil	50		—		50
China	26		—		26
India	22		—		22
Other Asia-Pacific	14		—		14
Total sales	$	598	$	273	$	871

(1) Amounts for the three months ended March 31, 2020 have been recast to reflect reportable segment changes.

	Six Months Ended March 31, 2021
Primary Geographical Market	Commercial Truck		Aftermarket & Industrial		Total
U.S.	$	647	$	347	$	994
Canada	—		26		26
Mexico	80		10		90
Total North America	727		383		1,110
Sweden	151		—		151
Italy	111		10		121
United Kingdom	77		5		82
Other Europe	5		70		75
Total Europe	344		85		429
Brazil	137		1		138
China	64		1		65
India	83		—		83
Other Asia-Pacific	47		—		47
Total sales	$	1,402	$	470	$	1,872

	Six Months Ended March 31, 2020 (1)
Primary Geographical Market	Commercial Truck		Aftermarket & Industrial		Total
U.S.	$	635	$	417	$	1,052
Canada	—		29		29
Mexico	78		10		88
Total North America	713		456		1,169
Sweden	125		—		125
Italy	91		7		98
United Kingdom	63		5		68
Other Europe	2		73		75
Total Europe	281		85		366
Brazil	103		1		104
China	60		—		60
India	44		1		45
Other Asia-Pacific	28		—		28
Total sales	$	1,229	$	543	$	1,772

(1) Amounts for the six months ended March 31, 2020 have been recast to reflect reportable segment changes.

As of March 31, 2021 and September 30, 2020, Trade receivables, net, which are included in Receivables, trade and other, net, on the Condensed Consolidated Balance Sheet, were $553 million and $421 million, respectively.

For the three and six months ended March 31, 2021 and March 31, 2020, the company had no material bad-debt expense. There were no material contract assets, contract liabilities or deferred contract costs recorded on the Condensed Consolidated Balance Sheet as of March 31, 2021 and September 30, 2020.

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Restructuring Costs

6 Months Ended

Mar. 31, 2021

Restructuring and Related Activities [Abstract]

Restructuring Costs

Restructuring Costs

Restructuring reserves, primarily related to unpaid employee termination benefits, were $7 million at March 31, 2021 and $10 million at September 30, 2020. Restructuring costs are recorded within Other operating expense, net within the Condensed Consolidated Statement of Operations. The changes in restructuring reserves for the six months ended ended March 31, 2021 and 2020 are as follows (in millions):

	Employee Termination Benefits		Plant  Shutdown  & Other		Total
Balance at September 30, 2020	$	10	$	—	$	10
Activity during the period:
Charges	6		2		8
Cash payments	(8)		—		(8)
Other	(1)		(2)		(3)
Total restructuring reserves at March 31, 2021	7		—		7
Less: non-current restructuring reserves	—		—		—
Restructuring reserves – current, at March 31, 2021	$	7	$	—	$	7
Balance at September 30, 2019	$	8	$	—	$	8
Activity during the period:
Charges	15		—		15
Cash payments	(15)		—		(15)
Other	(1)		—		(1)
Total restructuring reserves at March 31, 2020	7		—		7
Less: non-current restructuring reserves	—		—		—
Restructuring reserves – current, at March 31, 2020	$	7	$	—	$	7

Global Restructuring Programs Fiscal Year 2021: On November 11, 2020, the company approved a restructuring plan to close three U.S. manufacturing plants and one European administration office in its Aftermarket & Industrial segment and consolidate their operations into existing facilities. The site closures include:

• Chicago, Illinois

• Livermore, California

• Livonia, Michigan

• Zurich, Switzerland

The closures impact approximately 150 hourly and salaried workers. These restructuring plans are intended to optimize the company’s manufacturing footprint, reduce costs and increase efficiencies. With this restructuring plan, the company expects to incur up to $19 million in restructuring charges in the Aftermarket & Industrial segment, consisting of an impact on long-lived assets of $9 million, severance related costs of $5 million and other associated costs of $5 million. During the first six months of fiscal year 2021, the company incurred $6 million in restructuring costs related to this plan. Restructuring actions associated with this plan are expected to be substantially complete by the end of 2021.

Global Restructuring Program Fiscal Year 2020: On June 2, 2020, the company approved and began executing a restructuring plan to reduce labor costs and align with current market forecasts. Under this plan, the company expects to incur approximately $13 million in employee severance costs that affects approximately eight percent of its global salaried positions, and will eliminate certain hourly roles. During fiscal year 2020, the company incurred $10 million in restructuring costs related to this plan of which $7 million was in the Commercial Truck segment and $3 million related to the Aftermarket & Industrial

segment. During the first six months of fiscal year 2021, the company incurred $2 million in restructuring costs related to this plan in the Commercial Truck segment. Restructuring actions associated with this plan are substantially complete.

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Income Taxes	6 Months Ended
	Mar. 31, 2021
Income Tax Disclosure [Abstract]
Income Taxes	Income TaxesFor the three months ended March 31, 2021, and 2020 the company recognized tax expense of $22 million and $73 million, respectively. This resulted in effective tax rates of 25% and 23%, respectively. For the six months ended March 31, 2021 and 2020, the company recognized tax expense of $29 million and $86 million, respectfully. This resulted in an effective tax rate of 23% for both periods.

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Accounts Receivable Factoring and Securitization

6 Months Ended

Mar. 31, 2021

Accounts Receivable Factoring And Securitization [Abstract]

Accounts Receivable Factoring and Securitization

Accounts Receivable Factoring and Securitization

The company has a U.S. accounts receivable securitization facility with PNC Bank and participates in various accounts receivable factoring programs, primarily with Nordea Bank for trade receivables from AB Volvo, as follows:

	Current Expiration	Total Facility Size as of 3/31/21				Utilized as of 3/31/21				Utilized as of 9/30/20
		EUR		USD		EUR		USD		EUR		USD
On-balance sheet arrangement
Committed U.S. accounts receivable securitization (1)	March 2024	N/A		$	110	N/A		$	4	N/A		$	3
Total on-balance sheet arrangement: (1)		N/A		$	110	N/A		$	4	N/A		$	3
Off-balance sheet arrangements
Committed Swedish factoring facility (2)(3)	March 2024	€	155	$	183	€	89	$	105	€	86	$	100
Committed U.S. factoring facility (2)	February 2023	N/A		75		N/A		44		N/A		30
Uncommitted U.K. factoring facility	February 2022	25		29		4		5		1		1
Uncommitted Italy factoring facility	June 2022	30		35		19		22		8		9
Other uncommitted factoring facilities (4)	None	N/A		N/A		17		20		12		14
Total off-balance sheet arrangements		€	210	$	322	€	129	$	196	€	107	$	154

(1) Availability subject to adequate eligible accounts receivable available for sale. The utilized amount includes $4 million of letters of credit as of March 31, 2021 and $3 million as of September 30, 2020.

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

(3) The facility is backed by a 364-day liquidity commitment from Nordea Bank which extends through June 22, 2021.

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

Off-balance sheet arrangements 

On March 31, 2021, the U.S. accounts receivable securitization facility with PNC bank was increased from $95 million to $110 million. Total costs associated with all of the off-balance sheet arrangements described above were $1 million for each of the three months ended March 31, 2021 and 2020. Total costs associated with all of the off-balance sheet arrangements described above were $2 million for each of the six months ended March 31, 2021 and 2020, and are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Operations.

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Inventories

6 Months Ended

Mar. 31, 2021

Inventory Disclosure [Abstract]

Inventories

Inventories

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

	March 31, 2021		September 30, 2020
Finished goods	$	139	$	119
Work in process	49		38
Raw materials, parts and supplies	322		278
Total	$	510	$	435

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Net Property

6 Months Ended

Mar. 31, 2021

Property, Plant and Equipment [Abstract]

Net Property

Net Property

     Net property is summarized as follows (in millions):

	March 31, 2021		September 30, 2020
Property at cost:
Land and land improvements	$	33	$	32
Buildings	238		228
Machinery and equipment	1,045		1,002
Company-owned tooling	158		151
Construction in progress	38		63
Total	1,512		1,476
Less: accumulated depreciation	(1,010)		(961)
Net property	$	502	$	515

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Other Assets

6 Months Ended

Mar. 31, 2021

Other Assets, Noncurrent [Abstract]

Other Assets

Other Assets

Other assets are summarized as follows (in millions):

	March 31, 2021		September 30, 2020
Prepaid pension costs	$	206	$	179
Deferred income tax assets	30		30
Investments in non-consolidated joint ventures	119		107
Other	266		269
Other assets	$	621	$	585

During the second quarter of fiscal year 2021, the company recognized a $22 million pre-tax loss recovery, net of legal expenses, on the overpayment of value added taxes ("VAT") in Brazil. Of the amount recognized, $15 million was recognized in Sales consistent with the company’s VAT policy, $10 million in Other income, net and $3 million as expense in Selling, general and administrative. $19 million was recorded in Other current assets and $6 million recorded in Other assets as VAT credits to offset future income tax liabilities. $3 million was recorded in Current liabilities associated with legal expenses.

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Other Current Liabilities

6 Months Ended

Mar. 31, 2021

Other Liabilities, Current [Abstract]

Other Current Liabilities

Other Current Liabilities

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

	March 31, 2021		September 30, 2020
Compensation and benefits	$	103	$	91
Product warranties	19		19
Other	157		154
Other current liabilities	$	279	$	264

Compensation and benefits includes the current portion of pension and retiree medical liability, accrued incentive compensation, salary and wages and accrued vacation, holiday and sick leave pay.

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

	Six Months Ended March 31,
	2021		2020
Total product warranties – beginning of period	$	54	$	50
Accruals for product warranties	12		7
Payments	(10)		(10)
Change in estimates and other	(2)		(2)
Total product warranties – end of period	54		45
Less: non-current product warranties	(35)		(29)
Product warranties – current	$	19	$	16

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Other Liabilities

6 Months Ended

Mar. 31, 2021

Other Liabilities Disclosure [Abstract]

Other Liabilities

Other Liabilities

Other liabilities are summarized as follows (in millions):

	March 31, 2021		September 30, 2020
Asbestos-related liabilities (see Note 16)	$	64	$	67
Liabilities for uncertain tax positions	80		73
Product warranties (see Note 11)	35		35
Other	97		104
Other liabilities	$	276	$	279

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Long-Term Debt

6 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

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

	March 31, 2021		September 30, 2020
3.25 percent convertible notes due 2037	$	321	$	320
7.875 percent convertible notes due 2026	—		23
4.50 percent notes due 2028	270		—
6.25 percent notes due 2025	296		295
6.25 percent notes due 2024	174		446
Term loan due 2024	159		166
Finance lease obligation	10		6
Unamortized discount on convertible notes	(27)		(29)
Subtotal	1,203		1,227
Less: current maturities	(17)		(39)
Long-term debt	$	1,186	$	1,188

Repurchase of 7.875 Percent Convertible Notes

On October 16, 2020, the company issued a notice of redemption for all of the $23 million aggregate principal amount outstanding of its 7.875 percent senior convertible notes due 2026 (the "7.875 Percent Convertible Notes"). As a result of the issuance of the notice of redemption, the 7.875 Percent Convertible Notes were convertible at any time prior to the close of business on November 30, 2020 at a rate of 83.3333 shares of common stock per $1,000 original principal amount of the 7.875 Percent Convertible Notes. All remaining outstanding 7.875 Percent Convertible Notes were surrendered in November 2020 for conversion and were settled in cash up to the accreted principal amount of the 7.875 Percent Convertible Notes and also settled in cash for the remainder of the conversion obligation in excess of the accreted principal amount, in accordance with the provisions of the indenture that governed the 7.875 Percent Convertible Notes. The conversion of the 7.875 Percent Convertible Notes was settled for $53 million, of which $23 million represented principal repayment and $30 million represented the payment of conversion in excess of the accreted principal. There was no loss on extinguishment. As of December 31, 2020, the 7.875 Percent Convertible Notes were fully redeemed. The 7.875 Percent Convertible Notes were classified as current as of September 30, 2020.

Repurchase of 6.25 Percent Notes due 2024

On December 16, 2020, the company redeemed $275 million of the outstanding $450 million aggregate principal amount of its 6.25 percent notes due 2024 (the "6.25 Percent Notes due 2024") for an aggregate purchase price of $287 million (including accrued interest of $6 million). The redemption price was equal to 102.083% of the principal amount of the 6.25 Percent Notes due 2024 redeemed, plus accrued and unpaid interest thereon up to but excluding the redemption date of December 16, 2020. This redemption was accounted for as an extinguishment of debt, and accordingly the company recognized a loss on debt extinguishment of $8 million. The loss on extinguishment is recorded in the Condensed Consolidated Statement of Operations within Interest expense, net. As of March 31, 2021, $175 million principal amount of the 6.25 Percent Notes due 2024 remained outstanding.

On May 4, 2021 the company issued a notice of redemption for the remaining $175 million principal amount outstanding of the 6.25 Percent Notes due 2024 for an expected aggregate purchase price of $180 million (including expected accrued interest of $3 million). The redemption price will be equal to 101.042% of the principal amount of the 6.25 Percent Notes due 2024 to be redeemed, plus accrued and unpaid interest, if any, thereon up to but excluding the redemption date, which is expected to be June 3, 2021.

4.50 Percent Notes due 2028

On December 1, 2020, the company completed the offering and sale of $275 million aggregate principal amount of its 4.50% notes due 2028 (the "4.50 Percent Notes"), including related guarantees by the subsidiaries of the company who from time to time guarantee the company’s senior secured revolving credit facility as it may be amended, extended, replaced or refinanced, or any subsequent credit facility, to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and to non-U.S. persons in offshore transactions outside the United States in

reliance on Regulation S under the Securities Act in a private placement exempt from the registration requirements of the Securities Act.

The net proceeds to the company from the sale of the 4.50 Percent Notes after deducting estimated offering expenses payable by the company were approximately $270 million. The company used the net proceeds from the offering, together with cash on hand, to redeem $275 million of the outstanding $450 million aggregate principal amount of its 6.25 Percent Notes due 2024, as described above.

The 4.50 Percent Notes will mature on December 15, 2028 and bear interest at a fixed rate of 4.500% per annum. The company will pay interest on the 4.50 Percent Notes from December 1, 2020 semi-annually, in arrears, on June 15 and December 15 of each year, beginning June 15, 2021. The 4.50 Percent Notes constitute senior unsecured obligations of the company and rank equally in right of payment with its existing and future senior unsecured indebtedness, and effectively junior to its existing and future secured indebtedness to the extent of the security therefor.

The 4.50 Percent Notes provide that, prior to December 15, 2023, the company may redeem, at its option, from time to time, the 4.50 Percent Notes, in whole or in part, at a redemption price equal to the sum of (i) 100% of the principal amount of the 4.50 Percent Notes to be redeemed, plus (ii) the applicable premium as of the redemption date on the 4.50 Percent Notes to be redeemed, plus (iii) accrued and unpaid interest, if any, to, but not including, the redemption date (subject to the right of holders of record on the relevant regular record date to receive interest due on an interest payment date that is on or prior to the redemption date) on the 4.50 Percent Notes to be redeemed.

The 4.50 Percent Notes provide that, on or after December 15, 2023, the company may redeem, at its option, from time to time, the 4.50 Percent Notes, in whole or in part, at the redemption prices (expressed as percentages of the principal amount of the 4.50 Percent Notes to be redeemed) set forth below, plus accrued and unpaid interest, if any, to, but not including, the redemption date (subject to the right of holders of record on the relevant regular record date to receive interest due on an interest payment date that is on or prior to the redemption date) on the 4.50 Percent Notes to be redeemed, if redeemed during the 12-month period beginning on December 15 of the years indicated below:

Year	Redemption Price
2023	102.250	%
2024	101.125	%
2025 and thereafter	100.000	%

The 4.50 Percent Notes also provide that, prior to December 15, 2023, the company may redeem, at its option, from time to time, up to 35% of the aggregate principal amount of the 4.50 Percent Notes with the net cash proceeds of one or more public sales of the company’s common stock at a redemption price equal to 104.500% of the principal amount of the 4.50 Percent Notes to be redeemed, plus accrued and unpaid interest, if any, to, but not including, the redemption date (subject to the right of holders of record on the relevant regular record date to receive interest due on an interest payment date that is on or prior to the redemption date) on the 4.50 Percent Notes to be redeemed so long as at least 65% of the aggregate principal amount of the 4.50 Percent Notes remains outstanding after each such redemption and notice of any such redemption is mailed within 90 days of any such sale of common stock.

If a change of control (as defined in the ninth supplemental indenture under which the 4.50 Percent Notes were issued) occurs, unless the company has exercised its right to redeem the 4.50 Percent Notes, each holder of the 4.50 Percent Notes may require the company to repurchase some or all of such holder’s 4.50 Percent Notes at a purchase price equal to 101% of the principal amount of the 4.50 Percent Notes to be repurchased, plus accrued and unpaid interest, if any, to, but not including, the repurchase date (subject to the right of holders of record on the relevant regular record date to receive interest due on an interest payment date that is on or prior to the repurchase date) on the 4.50 Percent Notes to be repurchased.

Revolving Credit Facility

On November 9, 2020, the company's senior secured revolving credit facility was increased by $60 million to $685 million through the addition of a new lender.

The availability under the senior secured revolving credit facility is subject to a financial covenant based on the ratio of the company’s priority debt (consisting principally of amounts outstanding under the revolving credit facility, the U.S. accounts receivable securitization and factoring programs, and third-party non-working capital foreign debt) to EBITDA. The company is required to maintain a total priority-debt-to-EBITDA ratio, as defined in the credit agreement, of 2.25 to 1.00 or less as of the last day of each fiscal quarter throughout the term of the agreement. Availability under the senior secured revolving credit facility was constrained to $276 million on the last day of the second quarter of fiscal year 2021 due primarily to lower EBITDA in the third and fourth quarters of fiscal year 2020, which were impacted by the COVID-19 pandemic. The company has full availability until the next measurement point at the end of the third quarter of fiscal year 2021.

At March 31, 2021 and September 30, 2020, there were no borrowings outstanding under the senior secured revolving credit facility. The senior secured revolving credit facility includes $100 million of availability for the issuance of letters of credit. At March 31, 2021 and September 30, 2020, there were no letters of credit outstanding under the senior secured revolving credit facility.

Debt Securities

In November 2020, the company filed a shelf registration statement with the SEC registering an indeterminate 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 November 2020 shelf registration statement superseded and replaced the company's shelf registration statement filed in December 2017.

Other

One of the company's consolidated joint ventures in China participates in a bills of exchange program to settle its obligations with its trade suppliers. These programs are common in China and generally require the participation of local banks. Under these programs, the company's joint venture issues notes payable through the participating banks to its trade suppliers. If the issued notes payable remain unpaid on their respective due dates, this could constitute an event of default under the company’s revolving credit facility if the defaulted amount exceeds $35 million per bank. As of March 31, 2021 and September 30, 2020, the company had $22 million and $16 million, respectively, outstanding under this program at more than one bank.

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Financial Instruments

6 Months Ended

Mar. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

Financial Instruments

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

	March 31, 2021				September 30, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	321	$	321	$	315	$	315
Short-term debt	17		16		39		58
Long-term debt	1,186		1,307		1,188		1,259
Foreign currency option contracts (other assets)	—		—		1		1
Foreign exchange forward contracts (other assets)	2		2		—		—
Foreign exchange forward contracts (other liabilities)	—		—		1		1

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

	March 31, 2021						September 30, 2020
	Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Reported		Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Reported
Derivative Assets
Foreign currency option contracts	$	—	$	—	$	—	$	1	$	—	$	1
Foreign exchange forward contracts	2		—		2		—		—		—
Derivative Liabilities
Foreign exchange forward contracts	—		—		—		1		—		1

Fair Value

FASB guidance provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical instruments (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

•Level 1 inputs use quoted prices in active markets for identical instruments.

•Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar instruments in active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

•Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related instrument.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest priority level input that is significant to the valuation. The company's assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

Fair value of financial instruments by the valuation hierarchy at March 31, 2021 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	321	$	—	$	—
Short-term debt	—		—		16
Long-term debt	—		1,154		153
Foreign exchange forward contracts (other assets)	—		2		—
Foreign exchange forward contracts (other liabilities)	—		—		—

Fair value of financial instruments by the valuation hierarchy at September 30, 2020 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	315	$	—	$	—
Short-term debt	—		43		15
Long-term debt	—		1,103		156
Foreign exchange forward contracts (other liabilities)	—		1		—
Foreign currency option contracts (other assets)	—		1		—

No transfers of assets between any of the Levels occurred during the three and six months ended March 31, 2021 and 2020.

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

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

Foreign exchange forward contracts — The company uses foreign exchange forward purchase and sale contracts with varying terms that extend through fiscal year 2025 to hedge its exposure to changes in foreign currency exchange rates. As of March 31, 2021 and September 30, 2020, the notional amount of the company's foreign exchange contracts outstanding under its foreign currency cash flow hedging program was $71 million and $65 million, respectively. The fair value of foreign exchange forward contracts is based on a model which incorporates observable inputs including quoted spot rates, forward exchange rates and discounted future expected cash flows utilizing market interest rates with similar quality and maturity characteristics. For derivative instruments that are designated and qualify as cash flow hedges, changes in the fair value of the contracts is recorded in Accumulated Other Comprehensive Income (Loss) in the statement of shareholders’ equity and is recognized in operating income when the underlying forecasted transaction impacts earnings.

Foreign currency option contracts — The company uses option contracts to mitigate foreign exchange exposure on expected future foreign currency-denominated purchases. As of March 31, 2021 and September 30, 2020, the notional amount of the company's foreign exchange contracts outstanding was $25 million and $39 million, respectively. The company did not elect hedge accounting for these derivatives. Changes in fair value associated with these contracts are recorded in cost of sales in the Condensed Consolidated Statement of Operations.

The company uses option contracts to mitigate the risk of volatility in the translation of foreign currency earnings to U.S. dollars. As of March 31, 2021 and September 30, 2020, the notional amount of the company's option contracts outstanding was $10 million and $24 million, respectively. These option contracts did not qualify for a hedge accounting election. Changes in fair value associated with these contracts are recorded in the Condensed Consolidated Statement of Operations in other income, net.

The fair value of foreign currency option contracts is based on third-party proprietary models, which incorporate inputs at varying unobservable weights of quoted spot rates, market volatility, forward rates and time utilizing market instruments with similar quality and maturity characteristics.

Cross-currency swap contracts — The company has utilized cross-currency swap contracts to hedge a portion of its net investment in a foreign subsidiary against volatility in foreign exchange rates. These derivative instruments are designated and qualify as hedges of net investments in foreign operations using the spot method to assess effectiveness. Changes in fair values of the instruments are recognized in foreign currency translation adjustments, a component of other comprehensive income (loss) in the Condensed Consolidated Statement of Comprehensive Income (Loss), to offset the changes in the values of the net investments being hedged.

In the third quarter of fiscal year 2019, the company entered into multiple cross-currency swaps with a combined notional amount of $225 million and maturities in October 2022. These swaps hedged a portion of the net investment in a certain European subsidiary against volatility in the euro/U.S. dollar foreign exchange rate. In the second quarter of fiscal year 2020, the company settled these cross-currency swap contracts and received proceeds of $11 million, $1 million of which related to net accrued interest receivable.

The fair value of cross-currency swap contracts is based on a model which incorporates observable inputs, including quoted spot rates, forward exchange rates and discounted future expected cash flows, utilizing market interest rates with similar quality and maturity characteristics.

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Retirement Benefit Liabilities

6 Months Ended

Mar. 31, 2021

Retirement Benefits [Abstract]

Retirement Benefit Liabilities

Retirement Benefit Liabilities

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

	March 31, 2021		September 30, 2020
Retiree medical liability	$	51	$	52
Pension liability	120		139
Other	17		17
Subtotal	188		208
Less: current portion (included in compensation and benefits, Note 11)	(12)		(12)
Retirement benefits	$	176	$	196

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

	2021				2020
	Pension		Retiree Medical		Pension		Retiree Medical
Interest cost	$	(8)	$	(1)	$	(10)	$	(1)
Assumed return on plan assets	24		—		24		—
Amortization of prior service benefit	—		9		—		9
Recognized actuarial loss	(8)		(3)		(8)		(3)
Total income	$	8	$	5	$	6	$	5

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

	2021				2020
	Pension		Retiree Medical		Pension		Retiree Medical
Interest cost	$	(17)	$	(1)	$	(21)	$	(1)
Assumed return on plan assets	48		—		48		—
Amortization of prior service benefit	—		18		—		18
Recognized actuarial loss	(16)		(6)		(16)		(7)
Total income	$	15	$	11	$	11	$	10

For the three months ended March 31, 2021 and 2020, the non-service cost components of the net periodic pension and Other Post-Employment Benefits ("OPEB") income were $13 million and $11 million, respectively, and are presented in Other income, net. For the six months ended March 31, 2021 and 2020, the non-service cost components of the net periodic pension and OPEB income were $26 million and $21 million, respectively, and are presented in Other income, net.

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Contingencies

6 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Contingencies

Environmental

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

The company has been designated as a potentially responsible party at ten Superfund sites, excluding sites as to which the company’s records disclose no involvement or as to which the company’s liability has been finally determined. Superfund is a United States federal government program designed to fund the cleanup of sites contaminated with hazardous substances and pollutants. Management estimates the total reasonably possible costs the company could incur for the remediation of the ten Superfund sites at March 31, 2021 to be approximately $22 million, of which $10 million is probable and recorded as a liability. Included in reasonably possible amounts are estimates for certain remediation actions that may be required if current actions are deemed inadequate by the regulators.

In addition to the Superfund sites, various other lawsuits, claims and proceedings have been asserted against the company, alleging violations of federal, state and local environmental protection requirements, or seeking remediation of alleged environmental impairments, principally at previously disposed-of properties. For these matters, management has estimated the total reasonably possible costs the company could incur at March 31, 2021 to be approximately $13 million, of which $4 million is probable and recorded as a liability.

Included in the company’s environmental liabilities are costs for on-going operation, maintenance and monitoring at environmental sites in which remediation has been put into place. This liability is discounted using discount rates in the range of 0 to 1.50 percent and is approximately $13 million at March 31, 2021. The undiscounted estimate of these costs is approximately $14 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, 2020	$	11	$	5	$	16
Payments and other	(2)		(1)		(3)
Accruals	1		—		1
Ending Balance at March 31, 2021	$	10	$	4	$	14

Environmental reserves are included in Other Current Liabilities (see Note 11) and Other Liabilities (see Note 12) in the Condensed Consolidated Balance Sheet.

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

Asbestos

    Rockwell International Corporation ("Rockwell") — ArvinMeritor, Inc. ("AM"), a predecessor of Meritor, along with many other companies, has been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos used in certain components of Rockwell products many years ago. Liability for these claims was transferred at the time of the spin-off of the automotive business from Rockwell in 1997. There were approximately 1,200 pending active asbestos claims in lawsuits that name AM, together with many other companies, as defendants as of March 31, 2021 and September 30, 2020. In March 2021, AM entered into a tolling agreement with an asbestos plaintiff's law firm. Under the terms of this agreement, AM agreed to toll the statute of limitations from expiring on asbestos claims in exchange for the plaintiff's firm agreeing not to raise a claim until there is product identification linking AM. The plaintiff firm also agreed to dismiss pending active claims for which product identification was not yet determined. The dismissal of these claims is expected to occur in the third fiscal quarter of fiscal year 2021. According to the terms of the tolling agreement, if the plaintiff's firm subsequently links AM's product to the plaintiff, they will refile a claim against AM.

A significant portion of the claims do not identify any Rockwell products or specify which of the claimants, if any, were exposed to asbestos attributable to Rockwell products, and past experience has shown that the vast majority of the claimants will likely never identify any of Rockwell products. Historically, AM has been dismissed from the vast majority of similar claims filed in the past with no payment to claimants. For those claimants who do show that they worked with Rockwell products, management nevertheless believes it has meritorious defenses, in substantial part due to the integrity of the products involved and the lack of any impairing medical condition on the part of many claimants.

Pending and Future Claims: The company engaged a third-party advisor with extensive experience in assessing asbestos-related liabilities to conduct a study to estimate its potential undiscounted liability for pending and future asbestos-related claims as of September 30, 2020. Management continuously monitors the underlying claims data and experience for the purpose of assessing the appropriateness of the assumptions used to estimate the liability.

As of September 30, 2020, the best estimate of the company's obligation for asbestos-related claims over the next 38 years was $78 million. The company recognized a liability for pending and future claims over the next 38 years of $75 million as of March 31, 2021. 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.

Recoveries: AM has insurance coverage that management believes covers indemnity and defense costs, over and above self-insurance retentions, for a significant portion of these claims. The company recognizes insurance recoveries when the claim for recovery is deemed probable and to the extent an insurable loss has been recognized in the financial statements. The company’s determination is based on analysis of the underlying insurance policies, historical experience with insurers, ongoing review of the solvency of insurers, and consideration of any insurance settlements The insurance receivables for Rockwell asbestos-related liabilities totaled $59 million and $62 million as of March 31, 2021 and September 30, 2020, respectively.

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

Indemnification

The company has provided indemnities in conjunction with certain transactions, primarily divestitures. These indemnities address a variety of matters, which may include environmental, tax, asbestos, labor and employment-related matters, and the periods of indemnification vary in duration.

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

Other

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

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Shareholders' Equity

6 Months Ended

Mar. 31, 2021

Equity [Abstract]

Shareholders' Equity

Shareholders' Equity

There were no dividends declared or paid in the first or second quarter of fiscal years 2021 and 2020. The payment of cash dividends and the amount of any dividend are subject to review and change at the discretion of the company's Board of Directors.

Common Stock and Debt Repurchase Authorizations

On November 7, 2019, the Board of Directors authorized the repurchase of up to $325 million of the company's common stock, which was an increase from the prior $250 million authorization approved on July 26, 2019. Repurchases can be made from time to time through open market purchases, privately negotiated transactions or otherwise, subject to compliance with legal and regulatory requirements and the company’s debt covenants. As of the end of fiscal year 2020, the company had repurchased 11.8 million shares of common stock for $266 million (including commission costs) pursuant to this authorization. There were no repurchases in the first or second quarter of fiscal year 2021. As of March 31, 2021, the amount remaining available for repurchases under this common stock repurchase authorization was $59 million. On March 25, 2020, the company suspended activity under its share repurchase program as a result of uncertainties in the global economy due to the COVID-19 pandemic.

On November 2, 2018, the Board of Directors authorized the repurchase of up to $200 million of the company's common stock and up to $100 million aggregate principal amount of any of the company's debt securities (including convertible debt securities), in each case from time to time through open market purchases, privately negotiated transactions or otherwise, subject to compliance with legal and regulatory requirements and the company's debt covenants. The remaining authority under the common stock repurchase authorization was superseded by the July 2019 authorization described above. As of March 31, 2021 and September 30, 2020, the amount remaining available for repurchase under this debt repurchase authorization was $76 million.

In November 2020, we filed a shelf registration statement with the Securities and Exchange Commission ("SEC"), registering an indeterminate amount of debt and/or equity securities that we may offer in one or more offerings on terms to be determined at the time of sale.

Accumulated Other Comprehensive Loss ("AOCL")

The components of AOCL and the changes in AOCL by components, net of tax, for the three months ended March 31, 2021 and 2020 are as follows (in millions):

	Foreign Currency Translation		Employee Benefit Related Adjustments		Unrealized Income (Loss) on cash flow hedges		Total
Balance at December 31, 2020	$	(74)	$	(480)	$	(1)	$	(555)
Other comprehensive income before reclassification	(22)		—		—		(22)
Amounts reclassified from accumulated other comprehensive loss	—		2		—		2
Net current-period other comprehensive income	(22)		2		—		(20)
Balance at March 31, 2021	$	(96)	$	(478)	$	(1)	$	(575)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service benefit	$	(9)	(a)
Actuarial losses	11		(a)
	2		Total before tax
	—		Tax benefit
Total reclassifications for the period	$	2	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 15 for additional details), which is recorded in other income (expense), net.

	Foreign Currency Translation		Employee Benefit Related Adjustments		Unrealized Income (Loss) on cash flow hedges		Total
Balance at December 31, 2019	$	(86)	$	(569)	$	—	$	(655)
Other comprehensive income before reclassification	(56)		—		(3)		(59)
Amounts reclassified from accumulated other comprehensive loss	—		2		(2)		—
Net current-period other comprehensive income	(56)		2		(5)		(59)
Balance at March 31, 2020	$	(142)	$	(567)	$	(5)	$	(714)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service benefit	$	(9)	(b)
Actuarial losses	11		(b)
	2		Total before tax
	—		Tax benefit
Total reclassifications for the period	$	2	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 15 for additional details), which is recorded in other income (expense), net.

The components of AOCL and the changes in AOCL by components, net of tax, for the six months ended March 31, 2021 and 2020 are as follows (in millions):

	Foreign Currency Translation		Employee Benefit Related Adjustments		Unrealized Income (Loss) on cash flow hedges		Total
Balance at September 30, 2020	$	(129)	$	(483)	$	(2)	$	(614)
Other comprehensive income before reclassification	33		1		1		35
Amounts reclassified from accumulated other comprehensive loss	—		4		—		4
Net current-period other comprehensive income	33		5		1		39
Balance at March 31, 2021	$	(96)	$	(478)	$	(1)	$	(575)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service benefit	$	(18)	(a)
Actuarial losses	22		(a)
	4		Total before tax
	—		Tax benefit
Total reclassifications for the period	$	4	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 15 for additional details), which is recorded in other income (expense), net.

	Foreign Currency Translation		Employee Benefit Related Adjustments		Unrealized Income (Loss) on cash flow hedges		Total
Balance at September 30, 2019	$	(107)	$	(572)	$	(2)	$	(681)
Other comprehensive income before reclassification	(35)		—		(3)		(38)
Amounts reclassified from accumulated other comprehensive loss	—		5		—		5
Net current-period other comprehensive income	(35)		5		(3)		(33)
Balance at March 31, 2020	$	(142)	$	(567)	$	(5)	$	(714)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service benefit	$	(18)	(b)
Actuarial losses	23		(b)
	5		Total before tax
	—		Tax benefit
Total reclassifications for the period	$	5	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 15 for additional details), which is recorded in other income (expense), net.

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Business Segment Information

6 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

Business Segment Information

Business Segment Information

Segment information is summarized as follows (in millions):

	Commercial Truck		Aftermarket & Industrial		Eliminations		Total
Three Months Ended March 31, 2021
External Sales	$	742	$	241	$	—	$	983
Intersegment Sales	35		6		(41)		—
Total Sales	$	777	$	247	$	(41)	$	983
Three Months Ended March 31, 2020 (1)
External Sales	$	598	$	273	$	—	$	871
Intersegment Sales	33		4		(37)		—
Total Sales	$	631	$	277	$	(37)	$	871

	Commercial Truck		Aftermarket & Industrial		Eliminations		Total
Six Months Ended March 31, 2021
External Sales	$	1,402	$	470	$	—	$	1,872
Intersegment Sales	66		11		(77)		—
Total Sales	$	1,468	$	481	$	(77)	$	1,872
Six Months Ended March 31, 2020 (1)
External Sales	$	1,229	$	543	$	—	$	1,772
Intersegment Sales	65		9		(74)		—
Total Sales	$	1,294	$	552	$	(74)	$	1,772

(1) Amounts for the three and six months ended March 31, 2020 have been recast to reflect reportable segment changes.

	Three Months Ended March 31,				Six Months Ended March 31,
	2021		2020 (2)		2021		2020 (2)
Segment adjusted EBITDA:
Commercial Truck	$	73	$	58	$	136	$	115
Aftermarket & Industrial	34		46		69		85
Segment adjusted EBITDA	107		104		205		200
Unallocated legacy and corporate expense, net (1)	4		3		8		5
Interest expense, net	(17)		(16)		(45)		(30)
Provision for income taxes	(22)		(73)		(29)		(86)
Depreciation and amortization	(25)		(26)		(52)		(50)
Noncontrolling interests	(3)		(1)		(4)		(3)
Loss on sale of receivables	(1)		(1)		(2)		(2)
Restructuring	(2)		(10)		(8)		(15)
Brazil VAT Credit (3)	22		—		22		—
Transaction costs	—		(5)		—		(5)
Income from WABCO distribution termination	—		265		—		265
Income from continuing operations attributable to Meritor, Inc.	$	63	$	240	$	95	$	279

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

(2) Amounts for the three and six months ended March 31, 2020 have been recast to reflect reportable segment changes.

(3) Amount relates to the one-time recognition of a value added tax credit in Brazil.

	March 31, 2021		September 30, 2020
Segment Assets:
Commercial Truck	$	1,920	$	1,666
Aftermarket & Industrial	679		658
Total segment assets	2,599		2,324
Corporate (1)	737		714
Less: Accounts receivable sold under off-balance sheet factoring programs (2)	(196)		(154)
Total assets	$	3,140	$	2,884

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

(2) At March 31, 2021 and September 30, 2020, segment assets include $196 million and $154 million, respectively, of accounts receivable sold under off-balance sheet accounts receivable factoring programs (see Note 7). These sold receivables are included in segment assets as the CODM reviews segment assets inclusive of these balances.

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New Accounting Standards (Policies)

6 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

New Accounting Standards

New Accounting Standards

Accounting standards implemented during fiscal year 2021

On October 1, 2020, the company implemented Accounting Standards Update ("ASU") 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments, including accounts receivable. The ASU also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The guidance had an impact on the company's accounting policies and procedures related to calculation of allowance for doubtful accounts receivable but did not have a material impact on its Condensed Consolidated Financial Statements.

On October 1, 2020, the company implemented ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU add, modify, and eliminate certain disclosure requirements on fair value measurements in Topic 820. The guidance did not have a material impact on the company's Condensed Consolidated Financial Statements

Accounting standards to be implemented

Implementation of the following standards may result in a significant change in practice and/or have a significant financial impact on the company.

In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of debt and equity, including convertible instruments and contracts on an entity’s own equity. ASC 470-20 outlines five models to allocate the proceeds attributable to the issuance of a convertible debt instrument. This ASU removes from U.S. GAAP the separation models for convertible debt with a cash conversion feature (CCF) and convertible debt with a beneficial conversion feature (BCF). As a result of adopting this ASU, entities are not required to separately present in equity an embedded conversion feature in such debt. Instead, they should account for a convertible debt instrument wholly as debt. Applying the separation models in ASC 470-20 to convertible instruments with a CCF or BCF involves the recognition of a debt discount, which is amortized to interest expense. The elimination of CCF and BCF models will reduce reported interest expense and increase reported net income for convertible instruments issued within the scope of those models before the adoption of ASU 2020-06. The amendments in this ASU are required to be adopted by public business entities in fiscal years

beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but not earlier than for a fiscal year beginning after December 15, 2020, including interim periods within those fiscal years. Entities are permitted to adopt the guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The company is currently evaluating the potential impact of this guidance on its accounting policies and its Condensed Consolidated Financial Statements.

Inventories

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

Fair Value

Fair Value

FASB guidance provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical instruments (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

•Level 1 inputs use quoted prices in active markets for identical instruments.

•Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar instruments in active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

•Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related instrument.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest priority level input that is significant to the valuation. The company's assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

Environmental

Environmental

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

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Earnings per Share (Tables)

6 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Schedule of Reconciliation of Basic Average Common Shares Outstanding

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

	Three Months Ended March 31,		Six Months Ended March 31,
	2021	2020	2021	2020
Basic average common shares outstanding	72.4	73.4	72.3	75.8
Impact of restricted shares, restricted share units and performance share units	1.0	1.1	1.0	1.3
Impact of convertible notes	—	0.8	—	0.9
Diluted average common shares outstanding	73.4	75.3	73.3	78.0

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Revenue (Tables)

6 Months Ended

Mar. 31, 2021

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregation of Revenue by Operating Segment

In the following tables, revenue is disaggregated for each of our operating segments by primary geographical market for the three months ended March 31, 2021 and 2020 (in millions).

	Three Months Ended March 31, 2021
Primary Geographical Market	Commercial Truck		Aftermarket & Industrial		Total
U.S.	$	337	$	177	$	514
Canada	—		14		14
Mexico	44		5		49
Total North America	381		196		577
Sweden	74		—		74
Italy	58		5		63
United Kingdom	36		3		39
Other Europe	3		35		38
Total Europe	171		43		214
Brazil	81		1		82
China	34		1		35
India	50		—		50
Other Asia-Pacific	25		—		25
Total sales	$	742	$	241	$	983

	Three Months Ended March 31, 2020 (1)
Primary Geographical Market	Commercial Truck		Aftermarket & Industrial		Total
U.S.	$	307	$	211	$	518
Canada	—		15		15
Mexico	39		5		44
Total North America	346		231		577
Sweden	63		—		63
Italy	46		3		49
United Kingdom	30		3		33
Other Europe	1		36		37
Total Europe	140		42		182
Brazil	50		—		50
China	26		—		26
India	22		—		22
Other Asia-Pacific	14		—		14
Total sales	$	598	$	273	$	871

(1) Amounts for the three months ended March 31, 2020 have been recast to reflect reportable segment changes.

	Six Months Ended March 31, 2021
Primary Geographical Market	Commercial Truck		Aftermarket & Industrial		Total
U.S.	$	647	$	347	$	994
Canada	—		26		26
Mexico	80		10		90
Total North America	727		383		1,110
Sweden	151		—		151
Italy	111		10		121
United Kingdom	77		5		82
Other Europe	5		70		75
Total Europe	344		85		429
Brazil	137		1		138
China	64		1		65
India	83		—		83
Other Asia-Pacific	47		—		47
Total sales	$	1,402	$	470	$	1,872

	Six Months Ended March 31, 2020 (1)
Primary Geographical Market	Commercial Truck		Aftermarket & Industrial		Total
U.S.	$	635	$	417	$	1,052
Canada	—		29		29
Mexico	78		10		88
Total North America	713		456		1,169
Sweden	125		—		125
Italy	91		7		98
United Kingdom	63		5		68
Other Europe	2		73		75
Total Europe	281		85		366
Brazil	103		1		104
China	60		—		60
India	44		1		45
Other Asia-Pacific	28		—		28
Total sales	$	1,229	$	543	$	1,772

(1) Amounts for the six months ended March 31, 2020 have been recast to reflect reportable segment changes.

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Restructuring Costs (Tables)

6 Months Ended

Mar. 31, 2021

Restructuring and Related Activities [Abstract]

Schedule of Changes in Restructuring Reserves

The changes in restructuring reserves for the six months ended ended March 31, 2021 and 2020 are as follows (in millions):

	Employee Termination Benefits		Plant  Shutdown  & Other		Total
Balance at September 30, 2020	$	10	$	—	$	10
Activity during the period:
Charges	6		2		8
Cash payments	(8)		—		(8)
Other	(1)		(2)		(3)
Total restructuring reserves at March 31, 2021	7		—		7
Less: non-current restructuring reserves	—		—		—
Restructuring reserves – current, at March 31, 2021	$	7	$	—	$	7
Balance at September 30, 2019	$	8	$	—	$	8
Activity during the period:
Charges	15		—		15
Cash payments	(15)		—		(15)
Other	(1)		—		(1)
Total restructuring reserves at March 31, 2020	7		—		7
Less: non-current restructuring reserves	—		—		—
Restructuring reserves – current, at March 31, 2020	$	7	$	—	$	7

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Accounts Receivable Factoring and Securitization (Tables)

6 Months Ended

Mar. 31, 2021

Accounts Receivable Factoring And Securitization [Abstract]

Schedule of Accounts Receivable Factoring and Securitization

The company has a U.S. accounts receivable securitization facility with PNC Bank and participates in various accounts receivable factoring programs, primarily with Nordea Bank for trade receivables from AB Volvo, as follows:

	Current Expiration	Total Facility Size as of 3/31/21				Utilized as of 3/31/21				Utilized as of 9/30/20
		EUR		USD		EUR		USD		EUR		USD
On-balance sheet arrangement
Committed U.S. accounts receivable securitization (1)	March 2024	N/A		$	110	N/A		$	4	N/A		$	3
Total on-balance sheet arrangement: (1)		N/A		$	110	N/A		$	4	N/A		$	3
Off-balance sheet arrangements
Committed Swedish factoring facility (2)(3)	March 2024	€	155	$	183	€	89	$	105	€	86	$	100
Committed U.S. factoring facility (2)	February 2023	N/A		75		N/A		44		N/A		30
Uncommitted U.K. factoring facility	February 2022	25		29		4		5		1		1
Uncommitted Italy factoring facility	June 2022	30		35		19		22		8		9
Other uncommitted factoring facilities (4)	None	N/A		N/A		17		20		12		14
Total off-balance sheet arrangements		€	210	$	322	€	129	$	196	€	107	$	154

(1) Availability subject to adequate eligible accounts receivable available for sale. The utilized amount includes $4 million of letters of credit as of March 31, 2021 and $3 million as of September 30, 2020.

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

(3) The facility is backed by a 364-day liquidity commitment from Nordea Bank which extends through June 22, 2021.

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

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Inventories (Tables)

6 Months Ended

Mar. 31, 2021

Inventory Disclosure [Abstract]

Schedule of Inventories

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

	March 31, 2021		September 30, 2020
Finished goods	$	139	$	119
Work in process	49		38
Raw materials, parts and supplies	322		278
Total	$	510	$	435

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Net Property (Tables)

6 Months Ended

Mar. 31, 2021

Property, Plant and Equipment [Abstract]

Schedule of Net Property

Net property is summarized as follows (in millions):

	March 31, 2021		September 30, 2020
Property at cost:
Land and land improvements	$	33	$	32
Buildings	238		228
Machinery and equipment	1,045		1,002
Company-owned tooling	158		151
Construction in progress	38		63
Total	1,512		1,476
Less: accumulated depreciation	(1,010)		(961)
Net property	$	502	$	515

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Other Assets (Tables)

6 Months Ended

Mar. 31, 2021

Other Assets, Noncurrent [Abstract]

Schedule of Other Assets

Other assets are summarized as follows (in millions):

	March 31, 2021		September 30, 2020
Prepaid pension costs	$	206	$	179
Deferred income tax assets	30		30
Investments in non-consolidated joint ventures	119		107
Other	266		269
Other assets	$	621	$	585

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Other Current Liabilities (Tables)

6 Months Ended

Mar. 31, 2021

Other Liabilities, Current [Abstract]

Schedule of Other Current Liabilities

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

	March 31, 2021		September 30, 2020
Compensation and benefits	$	103	$	91
Product warranties	19		19
Other	157		154
Other current liabilities	$	279	$	264

Schedule of Changes in Product Warranties

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

	Six Months Ended March 31,
	2021		2020
Total product warranties – beginning of period	$	54	$	50
Accruals for product warranties	12		7
Payments	(10)		(10)
Change in estimates and other	(2)		(2)
Total product warranties – end of period	54		45
Less: non-current product warranties	(35)		(29)
Product warranties – current	$	19	$	16

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Other Liabilities (Tables)

6 Months Ended

Mar. 31, 2021

Other Liabilities Disclosure [Abstract]

Schedule of Other Liabilities

Other liabilities are summarized as follows (in millions):

	March 31, 2021		September 30, 2020
Asbestos-related liabilities (see Note 16)	$	64	$	67
Liabilities for uncertain tax positions	80		73
Product warranties (see Note 11)	35		35
Other	97		104
Other liabilities	$	276	$	279

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Long-Term Debt (Tables)

6 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Schedule of Long-term Debt

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

	March 31, 2021		September 30, 2020
3.25 percent convertible notes due 2037	$	321	$	320
7.875 percent convertible notes due 2026	—		23
4.50 percent notes due 2028	270		—
6.25 percent notes due 2025	296		295
6.25 percent notes due 2024	174		446
Term loan due 2024	159		166
Finance lease obligation	10		6
Unamortized discount on convertible notes	(27)		(29)
Subtotal	1,203		1,227
Less: current maturities	(17)		(39)
Long-term debt	$	1,186	$	1,188

Schedule of Debt Instrument Redemption

Notes to be redeemed, if redeemed during the 12-month period beginning on December 15 of the years indicated below:

Year	Redemption Price
2023	102.250	%
2024	101.125	%
2025 and thereafter	100.000	%

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Financial Instruments (Tables)

6 Months Ended

Mar. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Fair Value of Financial Instruments

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

	March 31, 2021				September 30, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	321	$	321	$	315	$	315
Short-term debt	17		16		39		58
Long-term debt	1,186		1,307		1,188		1,259
Foreign currency option contracts (other assets)	—		—		1		1
Foreign exchange forward contracts (other assets)	2		2		—		—
Foreign exchange forward contracts (other liabilities)	—		—		1		1

Schedule of Offsetting of Derivative Assets and Liabilities

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

	March 31, 2021						September 30, 2020
	Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Reported		Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Reported
Derivative Assets
Foreign currency option contracts	$	—	$	—	$	—	$	1	$	—	$	1
Foreign exchange forward contracts	2		—		2		—		—		—
Derivative Liabilities
Foreign exchange forward contracts	—		—		—		1		—		1

Schedule of Fair Value of Financial Instruments by Valuation Hierarchy

Fair value of financial instruments by the valuation hierarchy at March 31, 2021 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	321	$	—	$	—
Short-term debt	—		—		16
Long-term debt	—		1,154		153
Foreign exchange forward contracts (other assets)	—		2		—
Foreign exchange forward contracts (other liabilities)	—		—		—

Fair value of financial instruments by the valuation hierarchy at September 30, 2020 is as follows (in millions):

	Level 1		Level 2		Level 3
Cash and cash equivalents	$	315	$	—	$	—
Short-term debt	—		43		15
Long-term debt	—		1,103		156
Foreign exchange forward contracts (other liabilities)	—		1		—
Foreign currency option contracts (other assets)	—		1		—

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Retirement Benefit Liabilities (Tables)

6 Months Ended

Mar. 31, 2021

Retirement Benefits [Abstract]

Schedule of Retirement Benefit Liabilities

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

	March 31, 2021		September 30, 2020
Retiree medical liability	$	51	$	52
Pension liability	120		139
Other	17		17
Subtotal	188		208
Less: current portion (included in compensation and benefits, Note 11)	(12)		(12)
Retirement benefits	$	176	$	196

Schedule of Components of Net Periodic Pension and Retiree Medical Income

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

	2021				2020
	Pension		Retiree Medical		Pension		Retiree Medical
Interest cost	$	(8)	$	(1)	$	(10)	$	(1)
Assumed return on plan assets	24		—		24		—
Amortization of prior service benefit	—		9		—		9
Recognized actuarial loss	(8)		(3)		(8)		(3)
Total income	$	8	$	5	$	6	$	5

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

	2021				2020
	Pension		Retiree Medical		Pension		Retiree Medical
Interest cost	$	(17)	$	(1)	$	(21)	$	(1)
Assumed return on plan assets	48		—		48		—
Amortization of prior service benefit	—		18		—		18
Recognized actuarial loss	(16)		(6)		(16)		(7)
Total income	$	15	$	11	$	11	$	10

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Contingencies (Tables)

6 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Schedule 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, 2020	$	11	$	5	$	16
Payments and other	(2)		(1)		(3)
Accruals	1		—		1
Ending Balance at March 31, 2021	$	10	$	4	$	14

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Shareholders' Equity (Tables)

6 Months Ended

Mar. 31, 2021

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Loss

The components of AOCL and the changes in AOCL by components, net of tax, for the three months ended March 31, 2021 and 2020 are as follows (in millions):

	Foreign Currency Translation		Employee Benefit Related Adjustments		Unrealized Income (Loss) on cash flow hedges		Total
Balance at December 31, 2020	$	(74)	$	(480)	$	(1)	$	(555)
Other comprehensive income before reclassification	(22)		—		—		(22)
Amounts reclassified from accumulated other comprehensive loss	—		2		—		2
Net current-period other comprehensive income	(22)		2		—		(20)
Balance at March 31, 2021	$	(96)	$	(478)	$	(1)	$	(575)

	Foreign Currency Translation		Employee Benefit Related Adjustments		Unrealized Income (Loss) on cash flow hedges		Total
Balance at December 31, 2019	$	(86)	$	(569)	$	—	$	(655)
Other comprehensive income before reclassification	(56)		—		(3)		(59)
Amounts reclassified from accumulated other comprehensive loss	—		2		(2)		—
Net current-period other comprehensive income	(56)		2		(5)		(59)
Balance at March 31, 2020	$	(142)	$	(567)	$	(5)	$	(714)

The components of AOCL and the changes in AOCL by components, net of tax, for the six months ended March 31, 2021 and 2020 are as follows (in millions):

	Foreign Currency Translation		Employee Benefit Related Adjustments		Unrealized Income (Loss) on cash flow hedges		Total
Balance at September 30, 2020	$	(129)	$	(483)	$	(2)	$	(614)
Other comprehensive income before reclassification	33		1		1		35
Amounts reclassified from accumulated other comprehensive loss	—		4		—		4
Net current-period other comprehensive income	33		5		1		39
Balance at March 31, 2021	$	(96)	$	(478)	$	(1)	$	(575)

	Foreign Currency Translation		Employee Benefit Related Adjustments		Unrealized Income (Loss) on cash flow hedges		Total
Balance at September 30, 2019	$	(107)	$	(572)	$	(2)	$	(681)
Other comprehensive income before reclassification	(35)		—		(3)		(38)
Amounts reclassified from accumulated other comprehensive loss	—		5		—		5
Net current-period other comprehensive income	(35)		5		(3)		(33)
Balance at March 31, 2020	$	(142)	$	(567)	$	(5)	$	(714)

Schedule of Reclassification Out of Accumulated Other Comprehensive Income

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service benefit	$	(9)	(a)
Actuarial losses	11		(a)
	2		Total before tax
	—		Tax benefit
Total reclassifications for the period	$	2	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 15 for additional details), which is recorded in other income (expense), net.

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service benefit	$	(9)	(b)
Actuarial losses	11		(b)
	2		Total before tax
	—		Tax benefit
Total reclassifications for the period	$	2	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 15 for additional details), which is recorded in other income (expense), net.

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service benefit	$	(18)	(a)
Actuarial losses	22		(a)
	4		Total before tax
	—		Tax benefit
Total reclassifications for the period	$	4	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 15 for additional details), which is recorded in other income (expense), net.

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statement of Operations
Employee Benefit Related Adjustment
Prior service benefit	$	(18)	(b)
Actuarial losses	23		(b)
	5		Total before tax
	—		Tax benefit
Total reclassifications for the period	$	5	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 15 for additional details), which is recorded in other income (expense), net.

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Business Segment Information (Tables)

6 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

Schedule of Segment Information

Segment information is summarized as follows (in millions):

	Commercial Truck		Aftermarket & Industrial		Eliminations		Total
Three Months Ended March 31, 2021
External Sales	$	742	$	241	$	—	$	983
Intersegment Sales	35		6		(41)		—
Total Sales	$	777	$	247	$	(41)	$	983
Three Months Ended March 31, 2020 (1)
External Sales	$	598	$	273	$	—	$	871
Intersegment Sales	33		4		(37)		—
Total Sales	$	631	$	277	$	(37)	$	871

	Commercial Truck		Aftermarket & Industrial		Eliminations		Total
Six Months Ended March 31, 2021
External Sales	$	1,402	$	470	$	—	$	1,872
Intersegment Sales	66		11		(77)		—
Total Sales	$	1,468	$	481	$	(77)	$	1,872
Six Months Ended March 31, 2020 (1)
External Sales	$	1,229	$	543	$	—	$	1,772
Intersegment Sales	65		9		(74)		—
Total Sales	$	1,294	$	552	$	(74)	$	1,772

(1) Amounts for the three and six months ended March 31, 2020 have been recast to reflect reportable segment changes.

Schedule of Segment Income Attributable to Parent

	Three Months Ended March 31,				Six Months Ended March 31,
	2021		2020 (2)		2021		2020 (2)
Segment adjusted EBITDA:
Commercial Truck	$	73	$	58	$	136	$	115
Aftermarket & Industrial	34		46		69		85
Segment adjusted EBITDA	107		104		205		200
Unallocated legacy and corporate expense, net (1)	4		3		8		5
Interest expense, net	(17)		(16)		(45)		(30)
Provision for income taxes	(22)		(73)		(29)		(86)
Depreciation and amortization	(25)		(26)		(52)		(50)
Noncontrolling interests	(3)		(1)		(4)		(3)
Loss on sale of receivables	(1)		(1)		(2)		(2)
Restructuring	(2)		(10)		(8)		(15)
Brazil VAT Credit (3)	22		—		22		—
Transaction costs	—		(5)		—		(5)
Income from WABCO distribution termination	—		265		—		265
Income from continuing operations attributable to Meritor, Inc.	$	63	$	240	$	95	$	279

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

(2) Amounts for the three and six months ended March 31, 2020 have been recast to reflect reportable segment changes.

(3) Amount relates to the one-time recognition of a value added tax credit in Brazil.

Schedule of Segment Assets

	March 31, 2021		September 30, 2020
Segment Assets:
Commercial Truck	$	1,920	$	1,666
Aftermarket & Industrial	679		658
Total segment assets	2,599		2,324
Corporate (1)	737		714
Less: Accounts receivable sold under off-balance sheet factoring programs (2)	(196)		(154)
Total assets	$	3,140	$	2,884

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

(2) At March 31, 2021 and September 30, 2020, segment assets include $196 million and $154 million, respectively, of accounts receivable sold under off-balance sheet accounts receivable factoring programs (see Note 7). These sold receivables are included in segment assets as the CODM reviews segment assets inclusive of these balances.

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Earnings per Share - Reconciliation of Average Common Shares Outstanding (Details) - shares shares in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Earnings Per Share [Abstract]
Basic average common shares outstanding (in shares)	72.4	73.4	72.3	75.8
Impact of restricted shares, restricted share units and performance share units (in shares)	1.0	1.1	1.0	1.3
Impact of convertible notes (in shares)	0.0	0.8	0.0	0.9
Diluted average common shares outstanding (in shares)	73.4	75.3	73.3	78.0

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Earnings per Share - Additional Information (Details) - Executives - $ / shares	Dec. 01, 2020	Nov. 30, 2020
Performance shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized for grant (in shares)		300,000
Number or shares issuable per performance share unit (in shares)		1
Fair value on grant date (in usd per share)	$ 26.98
Performance period	3 years
Shares granted (in shares)	300,000
Performance shares | Vesting after three-year performance period
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighting for each of four performance metrics (percent)	50.00%
Performance shares | Vesting after three-year performance period | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	0.00%
Performance shares | Vesting after three-year performance period | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	200.00%
Restricted share units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized for grant (in shares)	300,000
Fair value on grant date (in usd per share)	$ 26.98
Vesting period	3 years

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Revenue (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020	Sep. 30, 2020
Disaggregation of Revenue [Line Items]
Sales	$ 983	$ 871	$ 1,872	$ 1,772
Trade receivables, net	553		553		$ 421
U.S.
Disaggregation of Revenue [Line Items]
Sales	514	518	994	1,052
Canada
Disaggregation of Revenue [Line Items]
Sales	14	15	26	29
Mexico
Disaggregation of Revenue [Line Items]
Sales	49	44	90	88
Total North America
Disaggregation of Revenue [Line Items]
Sales	577	577	1,110	1,169
Sweden
Disaggregation of Revenue [Line Items]
Sales	74	63	151	125
Italy
Disaggregation of Revenue [Line Items]
Sales	63	49	121	98
United Kingdom
Disaggregation of Revenue [Line Items]
Sales	39	33	82	68
Other Europe
Disaggregation of Revenue [Line Items]
Sales	38	37	75	75
Total Europe
Disaggregation of Revenue [Line Items]
Sales	214	182	429	366
Brazil
Disaggregation of Revenue [Line Items]
Sales	82	50	138	104
China
Disaggregation of Revenue [Line Items]
Sales	35	26	65	60
India
Disaggregation of Revenue [Line Items]
Sales	50	22	83	45
Other Asia-Pacific
Disaggregation of Revenue [Line Items]
Sales	25	14	47	28
Commercial Truck
Disaggregation of Revenue [Line Items]
Sales	742	598	1,402	1,229
Commercial Truck | U.S.
Disaggregation of Revenue [Line Items]
Sales	337	307	647	635
Commercial Truck | Canada
Disaggregation of Revenue [Line Items]
Sales	0	0	0	0
Commercial Truck | Mexico
Disaggregation of Revenue [Line Items]
Sales	44	39	80	78
Commercial Truck | Total North America
Disaggregation of Revenue [Line Items]
Sales	381	346	727	713
Commercial Truck | Sweden
Disaggregation of Revenue [Line Items]
Sales	74	63	151	125
Commercial Truck | Italy
Disaggregation of Revenue [Line Items]
Sales	58	46	111	91
Commercial Truck | United Kingdom
Disaggregation of Revenue [Line Items]
Sales	36	30	77	63
Commercial Truck | Other Europe
Disaggregation of Revenue [Line Items]
Sales	3	1	5	2
Commercial Truck | Total Europe
Disaggregation of Revenue [Line Items]
Sales	171	140	344	281
Commercial Truck | Brazil
Disaggregation of Revenue [Line Items]
Sales	81	50	137	103
Commercial Truck | China
Disaggregation of Revenue [Line Items]
Sales	34	26	64	60
Commercial Truck | India
Disaggregation of Revenue [Line Items]
Sales	50	22	83	44
Commercial Truck | Other Asia-Pacific
Disaggregation of Revenue [Line Items]
Sales	25	14	47	28
Aftermarket & Industrial
Disaggregation of Revenue [Line Items]
Sales	241	273	470	543
Aftermarket & Industrial | U.S.
Disaggregation of Revenue [Line Items]
Sales	177	211	347	417
Aftermarket & Industrial | Canada
Disaggregation of Revenue [Line Items]
Sales	14	15	26	29
Aftermarket & Industrial | Mexico
Disaggregation of Revenue [Line Items]
Sales	5	5	10	10
Aftermarket & Industrial | Total North America
Disaggregation of Revenue [Line Items]
Sales	196	231	383	456
Aftermarket & Industrial | Sweden
Disaggregation of Revenue [Line Items]
Sales	0	0	0	0
Aftermarket & Industrial | Italy
Disaggregation of Revenue [Line Items]
Sales	5	3	10	7
Aftermarket & Industrial | United Kingdom
Disaggregation of Revenue [Line Items]
Sales	3	3	5	5
Aftermarket & Industrial | Other Europe
Disaggregation of Revenue [Line Items]
Sales	35	36	70	73
Aftermarket & Industrial | Total Europe
Disaggregation of Revenue [Line Items]
Sales	43	42	85	85
Aftermarket & Industrial | Brazil
Disaggregation of Revenue [Line Items]
Sales	1	0	1	1
Aftermarket & Industrial | China
Disaggregation of Revenue [Line Items]
Sales	1	0	1	0
Aftermarket & Industrial | India
Disaggregation of Revenue [Line Items]
Sales	0	0	0	1
Aftermarket & Industrial | Other Asia-Pacific
Disaggregation of Revenue [Line Items]
Sales	$ 0	$ 0	$ 0	$ 0

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Restructuring Costs - Additional Information (Details)		6 Months Ended		12 Months Ended
	Nov. 11, 2020 USD ($) plant position office	Mar. 31, 2021 USD ($)	Mar. 31, 2020 USD ($)	Sep. 30, 2020 USD ($)	Jun. 02, 2020 USD ($)	Sep. 30, 2019 USD ($)
Restructuring Cost and Reserve [Line Items]
Restructuring reserves		$ 7,000,000	$ 7,000,000	$ 10,000,000		$ 8,000,000
Restructuring costs		8,000,000	15,000,000
Employee Termination Benefits
Restructuring Cost and Reserve [Line Items]
Restructuring reserves		7,000,000	7,000,000	10,000,000		$ 8,000,000
Restructuring costs		6,000,000	$ 15,000,000
Global Restructuring Programs 2021
Restructuring Cost and Reserve [Line Items]
Number of positions expected to be eliminated | position	150
Global Restructuring Programs 2021 | Aftermarket & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs expected to be incurred	$ 19,000,000
Restructuring costs		6,000,000
Global Restructuring Programs 2021 | Aftermarket & Industrial | Employee Termination Benefits
Restructuring Cost and Reserve [Line Items]
Restructuring costs expected to be incurred	5,000,000
Global Restructuring Programs 2021 | Aftermarket & Industrial | Asset Impairment
Restructuring Cost and Reserve [Line Items]
Restructuring costs expected to be incurred	9,000,000
Global Restructuring Programs 2021 | Aftermarket & Industrial | Other Restructuring
Restructuring Cost and Reserve [Line Items]
Restructuring costs expected to be incurred	$ 5,000,000
Global Restructuring Programs 2020
Restructuring Cost and Reserve [Line Items]
Restructuring costs				10,000,000
Global Restructuring Programs 2020 | Employee Termination Benefits
Restructuring Cost and Reserve [Line Items]
Restructuring costs expected to be incurred					$ 13,000,000
Percentage of global salaried positions affected					8.00%
Global Restructuring Programs 2020 | Commercial Truck
Restructuring Cost and Reserve [Line Items]
Restructuring costs		$ 2,000,000		7,000,000
Global Restructuring Programs 2020 | Aftermarket & Industrial
Restructuring Cost and Reserve [Line Items]
Restructuring costs				$ 3,000,000
U.S. | Global Restructuring Programs 2021 | Aftermarket & Industrial
Restructuring Cost and Reserve [Line Items]
Expected number of facilities to close | plant	3
Total Europe | Global Restructuring Programs 2021 | Aftermarket & Industrial
Restructuring Cost and Reserve [Line Items]
Expected number of facilities to close | office	1

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Restructuring Costs - Changes in Restructuring Reserves (Details) $ in Millions	6 Months Ended		12 Months Ended
	Mar. 31, 2021 USD ($)	Mar. 31, 2020 USD ($)	Sep. 30, 2020 USD ($)
Restructuring Reserve [Roll Forward]
Beginning balance	$ 10	$ 8	$ 8
Activity during the period:
Charges	8	15
Cash payments	(8)	(15)
Other	(3)	(1)
Ending balance	7	7	10
Less: non-current restructuring reserves	0	0
Restructuring reserves – current	7	7
Employee Termination Benefits
Restructuring Reserve [Roll Forward]
Beginning balance	10	8	8
Activity during the period:
Charges	6	15
Cash payments	(8)	(15)
Other	(1)	(1)
Ending balance	7	7	10
Less: non-current restructuring reserves	0	0
Restructuring reserves – current	7	7
Plant Shutdown & Other
Restructuring Reserve [Roll Forward]
Beginning balance	0	0	0
Activity during the period:
Charges	2	0
Cash payments	0	0
Other	(2)	0
Ending balance	0	0	$ 0
Less: non-current restructuring reserves	0	0
Restructuring reserves – current	$ 0	$ 0

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Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 22	$ 73	$ 29	$ 86
Effective income tax rate, percent	25.00%	23.00%	23.00%	23.00%

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Accounts Receivable Factoring and Securitization (Details) € in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021 USD ($)	Mar. 31, 2020 USD ($)	Mar. 31, 2021 USD ($)	Mar. 31, 2020 USD ($)	Mar. 31, 2021 EUR (€)	Mar. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2020 EUR (€)
Accounts Receivable Factoring And Securitization [Line Items]
On-balance sheet arrangement, Total Facility Size	$ 110		$ 110
On-balance sheet arrangement, Utilized	4		4				$ 3
Off-balance sheet arrangement, Total Facility Size	322		322		€ 210
Off-balance sheet arrangement, Utilized	196		196		129		154	€ 107
Costs associated with off balance sheet factoring arrangements	1	$ 1	2	$ 2
Committed U.S. accounts receivable securitization
Accounts Receivable Factoring And Securitization [Line Items]
On-balance sheet arrangement, Total Facility Size	110		110
On-balance sheet arrangement, Utilized	4		4				3
Off-balance sheet arrangement, Total Facility Size	110		110			$ 95
Committed U.S. accounts receivable securitization | Letter of Credit
Accounts Receivable Factoring And Securitization [Line Items]
Letters of credit outstanding	4		4				3
Committed Swedish factoring facility
Accounts Receivable Factoring And Securitization [Line Items]
Off-balance sheet arrangement, Total Facility Size	183		183		155
Off-balance sheet arrangement, Utilized	105		$ 105		89		100	86
Liquidity commitment			364 days
Committed U.S. factoring facility
Accounts Receivable Factoring And Securitization [Line Items]
Off-balance sheet arrangement, Total Facility Size	75		$ 75
Off-balance sheet arrangement, Utilized	44		44				30
Uncommitted U.K. factoring facility
Accounts Receivable Factoring And Securitization [Line Items]
Off-balance sheet arrangement, Total Facility Size	29		29		25
Off-balance sheet arrangement, Utilized	5		5		4		1	1
Uncommitted Italy factoring facility
Accounts Receivable Factoring And Securitization [Line Items]
Off-balance sheet arrangement, Total Facility Size	35		35		30
Off-balance sheet arrangement, Utilized	22		22		19		9	8
Other uncommitted factoring facilities
Accounts Receivable Factoring And Securitization [Line Items]
Off-balance sheet arrangement, Utilized	$ 20		$ 20		€ 17		$ 14	€ 12

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Inventories (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
Inventory Disclosure [Abstract]
Finished goods	$ 139	$ 119
Work in process	49	38
Raw materials, parts and supplies	322	278
Total inventories	$ 510	$ 435

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Net Property (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
Property, Plant and Equipment [Line Items]
Property at cost	$ 1,512	$ 1,476
Less: accumulated depreciation	(1,010)	(961)
Net property	502	515
Land and land improvements
Property, Plant and Equipment [Line Items]
Property at cost	33	32
Buildings
Property, Plant and Equipment [Line Items]
Property at cost	238	228
Machinery and equipment
Property, Plant and Equipment [Line Items]
Property at cost	1,045	1,002
Company-owned tooling
Property, Plant and Equipment [Line Items]
Property at cost	158	151
Construction in progress
Property, Plant and Equipment [Line Items]
Property at cost	$ 38	$ 63

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Other Assets - Summary of Other Assets (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
Other Assets, Noncurrent [Abstract]
Prepaid pension costs	$ 206	$ 179
Deferred income tax assets	30	30
Investments in non-consolidated joint ventures	119	107
Other	266	269
Other assets	$ 621	$ 585

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Other Assets - Additional Information (Details) $ in Millions	3 Months Ended
	Mar. 31, 2021 USD ($)
Schedule of Deferred Costs, Capitalized, Prepaid and Other Assets [Line Items]
Pre-tax income (loss)	$ 22
Sales
Schedule of Deferred Costs, Capitalized, Prepaid and Other Assets [Line Items]
Pre-tax income (loss)	15
Other Income
Schedule of Deferred Costs, Capitalized, Prepaid and Other Assets [Line Items]
Pre-tax income (loss)	10
Selling, General and Administrative Expenses
Schedule of Deferred Costs, Capitalized, Prepaid and Other Assets [Line Items]
Pre-tax income (loss)	(3)
Other Current Assets
Schedule of Deferred Costs, Capitalized, Prepaid and Other Assets [Line Items]
VAT credit	19
Other Assets
Schedule of Deferred Costs, Capitalized, Prepaid and Other Assets [Line Items]
VAT credit	6
Current Liabilities
Schedule of Deferred Costs, Capitalized, Prepaid and Other Assets [Line Items]
Value added tax associated with legal expenses	$ 3

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Other Current Liabilities - Summary of Other Current Liabilities (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020	Mar. 31, 2020
Other Liabilities, Current [Abstract]
Compensation and benefits	$ 103	$ 91
Product warranties	19	19	$ 16
Other	157	154
Other current liabilities	$ 279	$ 264

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Other Current Liabilities - Summary of Changes in Product Warranties (Details) - USD ($) $ in Millions	6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Sep. 30, 2020
Movement in Standard Product Warranty Accrual [Roll Forward]
Total product warranties – beginning of period	$ 54	$ 50
Accruals for product warranties	12	7
Payments	(10)	(10)
Change in estimates and other	(2)	(2)
Total product warranties – end of period	54	45
Less: non-current product warranties	(35)	(29)	$ (35)
Product warranties – current	$ 19	$ 16	$ 19

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Other Liabilities (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020	Mar. 31, 2020
Other Liabilities Disclosure [Abstract]
Asbestos-related liabilities (see Note 16)	$ 64	$ 67
Liabilities for uncertain tax positions	80	73
Product warranties (see Note 11)	35	35	$ 29
Other	97	104
Other liabilities	$ 276	$ 279

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Long-Term Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Millions	Mar. 31, 2021	Dec. 16, 2020	Dec. 01, 2020	Oct. 16, 2020	Sep. 30, 2020
Debt Instrument [Line Items]
Finance lease obligation	$ 10				$ 6
Subtotal	1,203				1,227
Less: current maturities	(17)				(39)
Long-term debt	1,186				1,188
Convertible Notes
Debt Instrument [Line Items]
Unamortized discount on convertible notes	$ (27)				(29)
3.25 percent convertible notes due 2037 | Convertible Notes
Debt Instrument [Line Items]
Interest rate (percent)	3.25%
Debt	$ 321				320
7.875 percent convertible notes due 2026 | Convertible Notes
Debt Instrument [Line Items]
Interest rate (percent)	7.875%			7.875%
Debt	$ 0			$ 23	23
4.50 percent notes due 2028 | Senior Notes
Debt Instrument [Line Items]
Interest rate (percent)	4.50%		4.50%
Long-term debt outstanding	$ 270				0
6.25 percent notes due 2025 | Senior Notes
Debt Instrument [Line Items]
Interest rate (percent)	6.25%
Long-term debt outstanding	$ 296				295
6.25 percent notes due 2024 | Senior Notes
Debt Instrument [Line Items]
Interest rate (percent)	6.25%	6.25%
Debt	$ 175	$ 450	$ 450
Long-term debt outstanding	174				446
Term loan due 2024 | Term Loan
Debt Instrument [Line Items]
Long-term debt outstanding	$ 159				$ 166

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Long-Term Debt - 7.875 Percent Convertible Notes (Details)		1 Months Ended	6 Months Ended
	Oct. 16, 2020 USD ($)	Nov. 30, 2020 USD ($)	Mar. 31, 2021 USD ($)	Mar. 31, 2020 USD ($)	Sep. 30, 2020 USD ($)
Debt Instrument [Line Items]
Redemption of convertible notes			$ 53,000,000	$ 0
Loss on debt extinguishment			$ 8,000,000	$ 0
7.875 percent convertible notes due 2026
Debt Instrument [Line Items]
Redemption of convertible notes	$ 53,000,000
Convertible Notes | 7.875 percent convertible notes due 2026
Debt Instrument [Line Items]
Interest rate (percent)	7.875%		7.875%
Debt	$ 23,000,000		$ 0		$ 23,000,000
Principal amount of convertible notes repurchased	23,000,000
Debt instrument, repurchase amount in excess of accreted principal	30,000,000
Loss on debt extinguishment	$ 0
Convertible Notes | 7.875 percent convertible notes due 2026 | Redemption Period One
Debt Instrument [Line Items]
Conversion ratio of common stock per principal		83.3333
Principal amount per note for conversion		$ 1,000

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Long-Term Debt - 6.25 Percent Notes (Details) - USD ($)				6 Months Ended
	May 04, 2021	Dec. 16, 2020	Dec. 01, 2020	Mar. 31, 2021	Mar. 31, 2020
Debt Instrument [Line Items]
Early repayment of senior debt				$ 281,000,000	$ 0
Loss on debt extinguishment				$ 8,000,000	$ 0
Senior Notes | 6.25 percent notes due 2024
Debt Instrument [Line Items]
Interest rate (percent)		6.25%		6.25%
Early repayment of senior debt		$ 275,000,000	$ 275,000,000
Debt		450,000,000	$ 450,000,000	$ 175,000,000
Debt instrument aggregate purchase price		287,000,000
Debt instrument, accrued interest repurchase amount		$ 6,000,000
Debt instrument, redemption price		102.083%
Loss on debt extinguishment		$ 8,000,000
Senior Notes | 6.25 percent notes due 2024 | Subsequent Event
Debt Instrument [Line Items]
Debt	$ 175,000,000
Debt instrument aggregate purchase price	180,000,000
Debt instrument, accrued interest repurchase amount	$ 3,000,000
Debt instrument, redemption price	101.042%

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Long-Term Debt - 4.50 Percent Notes (Details) - USD ($)			6 Months Ended
	Dec. 16, 2020	Dec. 01, 2020	Mar. 31, 2021	Mar. 31, 2020
Debt Instrument [Line Items]
Early repayment of senior debt			$ 281,000,000	$ 0
4.50 percent notes due 2028 | Prior to December 15, 2023
Debt Instrument [Line Items]
Redemption Price			104.50%
4.50 percent notes due 2028 | Senior Notes
Debt Instrument [Line Items]
Interest rate (percent)		4.50%	4.50%
Principle amount of debt		$ 275,000,000
Proceeds from debt issuances		$ 270,000,000
Percentage of principal that may be redeemed			35.00%
Percentage of principal outstanding			65.00%
4.50 percent notes due 2028 | Senior Notes | Prior to December 15, 2023
Debt Instrument [Line Items]
Redemption Price		100.00%
4.50 percent notes due 2028 | Senior Notes | 2023
Debt Instrument [Line Items]
Redemption Price		102.25%
4.50 percent notes due 2028 | Senior Notes | 2024
Debt Instrument [Line Items]
Redemption Price		101.125%
4.50 percent notes due 2028 | Senior Notes | 2025 and thereafter
Debt Instrument [Line Items]
Redemption Price		100.00%
4.50 percent notes due 2028 | Senior Notes | Change In Control Redemption
Debt Instrument [Line Items]
Redemption Price			101.00%
6.25 percent notes due 2024 | Senior Notes
Debt Instrument [Line Items]
Interest rate (percent)	6.25%		6.25%
Early repayment of senior debt	$ 275,000,000	$ 275,000,000
Debt	$ 450,000,000	$ 450,000,000	$ 175,000,000
Redemption Price	102.083%

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Long-Term Debt - Revolving Credit Facility (Details) - Revolving Credit Facility	Nov. 09, 2020 USD ($)	Mar. 31, 2021 USD ($)	Sep. 30, 2020 USD ($)
Line of Credit Facility [Line Items]
Borrowings outstanding		$ 0	$ 0
Letters of credit outstanding		0	$ 0
Amended Revolving Credit Facility
Line of Credit Facility [Line Items]
Revolving credit facility increased	$ 60,000,000
Maximum borrowing capacity	$ 685,000,000
Priority-debt-to-EBITDA ratio	2.25
Current borrowing capacity		276,000,000
Maximum limit on issuance, letters of credit		$ 100,000,000

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Long-Term Debt - Other (Details) - China - Notes Payable to Banks - Other Export Financing Arrangements - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
Debt Instrument [Line Items]
Debt default, amount	$ 35
Long-term debt outstanding	$ 22	$ 16

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Financial Instruments - Fair Value of Financial Instruments (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 321	$ 315
Short-term debt	17	39
Long-term debt	1,186	1,188
Carrying Value | Foreign currency option contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency contract assets	0	1
Carrying Value | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency contract assets	2	0
Foreign currency contract liabilities	0	1
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	321	315
Short-term debt	16	58
Long-term debt	1,307	1,259
Fair Value | Foreign currency option contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency contract assets	0	1
Fair Value | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency contract assets	2	0
Foreign currency contract liabilities	$ 0	$ 1

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Financial Instruments - Offsetting of Derivative Assets and Liabilities (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
Foreign currency option contracts
Derivative Assets
Gross Amounts Recognized	$ 0	$ 1
Gross Amounts Offset	0	0
Net Amounts Reported	0	1
Foreign exchange forward contracts
Derivative Assets
Gross Amounts Recognized	2	0
Gross Amounts Offset	0	0
Net Amounts Reported	2	0
Derivative Liabilities
Gross Amounts Recognized	0	1
Gross Amounts Offset	0	0
Net Amounts Reported	$ 0	$ 1

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Financial Instruments - Fair Value of Financial Instruments by Valuation Hierarchy (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 321	$ 315
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 currency contract assets	0
Foreign currency contract liabilities	0	0
Level 1 | Foreign currency option contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency contract assets		0
Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	0	0
Short-term debt	0	43
Long-term debt	1,154	1,103
Level 2 | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency contract assets	2
Foreign currency contract liabilities	0	1
Level 2 | Foreign currency option contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency contract assets		1
Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	0	0
Short-term debt	16	15
Long-term debt	153	156
Level 3 | Foreign exchange forward contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency contract assets	0
Foreign currency contract liabilities	$ 0	0
Level 3 | Foreign currency option contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency contract assets		$ 0

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Financial Instruments - Additional Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2021	Sep. 30, 2020	Jun. 30, 2019
Foreign exchange forward contracts | Cash flow hedge | Designated as hedging instrument
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Aggregate notional amount		$ 71,000,000	$ 65,000,000
Foreign currency option contracts, purchase risk
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Aggregate notional amount		25,000,000	39,000,000
Foreign currency option contracts, translation risk
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Aggregate notional amount		$ 10,000,000	$ 24,000,000
Cross-currency swaps | Net investment hedge | Designated as hedging instrument
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Aggregate notional amount				$ 225,000,000
Proceeds from settlement of swap contracts	$ 11,000,000
Component of proceeds that was previously in net accrued interest receivable	$ 1,000,000

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Retirement Benefit Liabilities - Summary of Retirement Benefits (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
Retirement Benefits [Abstract]
Retiree medical liability	$ 51	$ 52
Pension liability	120	139
Other	17	17
Subtotal	188	208
Less: current portion (included in compensation and benefits, Note 11)	(12)	(12)
Retirement benefits	$ 176	$ 196

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Retirement Benefit Liabilities - Components of Net Periodic Pension and Retiree Medical Income (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Pension
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Interest cost	$ (8)	$ (10)	$ (17)	$ (21)
Assumed return on plan assets	24	24	48	48
Amortization of prior service benefit	0	0	0	0
Recognized actuarial loss	(8)	(8)	(16)	(16)
Total income	8	6	15	11
Retiree Medical
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Interest cost	(1)	(1)	(1)	(1)
Assumed return on plan assets	0	0	0	0
Amortization of prior service benefit	9	9	18	18
Recognized actuarial loss	(3)	(3)	(6)	(7)
Total income	$ 5	$ 5	$ 11	$ 10

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Retirement Benefit Liabilities - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Retirement Benefits [Abstract]
Non-service cost components of the net periodic pension and OPEB income	$ 13	$ 11	$ 26	$ 21

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Contingencies - Additional Information (Details) $ in Millions	6 Months Ended	12 Months Ended
	Mar. 31, 2021 USD ($) site	Sep. 30, 2020 USD ($) claim
Loss Contingencies [Line Items]
Environmental accrual balance	$ 14	$ 16
Discounted amount environmental accrual for on-going operations maintenance and monitoring	13
Undiscounted amount environmental accrual for on-going operations maintenance and monitoring	$ 14
Rockwell Asbestos
Loss Contingencies [Line Items]
Number of pending claims | claim		1,200
Obligation period for asbestos personal injury claims	38 years	38 years
Pending and future claims	$ 75
Asbestos-related insurance recoveries	$ 59	$ 62
Low Range
Loss Contingencies [Line Items]
Site contingency, accrual, discount rate	0.00%
Low Range | Rockwell Asbestos
Loss Contingencies [Line Items]
Possible loss		78
High Range
Loss Contingencies [Line Items]
Site contingency, accrual, discount rate	1.50%
Superfund Sites
Loss Contingencies [Line Items]
Number of superfund environmental sites | site	10
Environmental costs reasonably possible	$ 22
Environmental accrual balance	10	11
Non-Superfund Sites
Loss Contingencies [Line Items]
Environmental costs reasonably possible	13
Environmental accrual balance	$ 4	$ 5

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Contingencies - Summary of Environmental Reserves (Details) $ in Millions	6 Months Ended
	Mar. 31, 2021 USD ($)
Environmental Reserves
Beginning balance	$ 16
Payments and other	(3)
Accruals	1
Ending balance	14
Superfund Sites
Environmental Reserves
Beginning balance	11
Payments and other	(2)
Accruals	1
Ending balance	10
Non-Superfund Sites
Environmental Reserves
Beginning balance	5
Payments and other	(1)
Accruals	0
Ending balance	$ 4

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Shareholders' Equity - Common Stock and Debt Repurchase Authorizations (Details) - USD ($)	3 Months Ended				12 Months Ended
	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2020	Nov. 07, 2019	Jul. 26, 2019	Nov. 02, 2018
Class of Stock [Line Items]
Dividends declared or paid	$ 0	$ 0	$ 0	$ 0
Repurchase Program, November 2018
Class of Stock [Line Items]
Debt repurchase program, amount authorized								$ 100,000,000
Remaining authorized repurchase amount under debt repurchase	$ 76,000,000				$ 76,000,000
Common Stock | Repurchase Progam, November 2019
Class of Stock [Line Items]
Authorized repurchase of securities, with debt reduction target (up to)						$ 325,000,000	$ 250,000,000
Number of shares authorized to be repurchased (in shares)	0	0			11,800,000
Shares repurchased during period					$ 266,000,000
Remaining authorized repurchase amount under the stock repurchase program	$ 59,000,000
Common Stock | Repurchase Program, November 2018
Class of Stock [Line Items]
Authorized repurchase of securities, with debt reduction target (up to)								$ 200,000,000

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Shareholders' Equity - Schedule of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	$ 565	$ 384	$ 495	$ 415
Other comprehensive income before reclassification	(22)	(59)	35	(38)
Amounts reclassified from accumulated other comprehensive loss	2	0	4	5
Net current-period other comprehensive income	(20)	(59)	39	(33)
Ending Balance	613	424	613	424
Foreign Currency Translation
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(74)	(86)	(129)	(107)
Other comprehensive income before reclassification	(22)	(56)	33	(35)
Amounts reclassified from accumulated other comprehensive loss	0	0	0	0
Net current-period other comprehensive income	(22)	(56)	33	(35)
Ending Balance	(96)	(142)	(96)	(142)
Employee Benefit Related Adjustments
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(480)	(569)	(483)	(572)
Other comprehensive income before reclassification	0	0	1	0
Amounts reclassified from accumulated other comprehensive loss	2	2	4	5
Net current-period other comprehensive income	2	2	5	5
Ending Balance	(478)	(567)	(478)	(567)
Unrealized Income (Loss) on cash flow hedges
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(1)	0	(2)	(2)
Other comprehensive income before reclassification	0	(3)	1	(3)
Amounts reclassified from accumulated other comprehensive loss	0	(2)	0	0
Net current-period other comprehensive income	0	(5)	1	(3)
Ending Balance	(1)	(5)	(1)	(5)
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Income (Loss), Net Of Tax [Roll Forward]
Beginning balance	(555)	(655)	(614)	(681)
Ending Balance	$ (575)	$ (714)	$ (575)	$ (714)

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Shareholders' Equity - Changes in Accumulated Other Comprehensive Income (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Accumulated Other Comprehensive Income (Loss) [Line Items]
Employee Benefit Related Adjustment	$ 23	$ 14	$ 37	$ 24
Tax benefit	(22)	(73)	(29)	(86)
NET INCOME	66	242	99	283
Amount Reclassified from Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income (Loss) [Line Items]
NET INCOME	2	2	4	5
Amount Reclassified from Accumulated Other Comprehensive Income | Prior service benefit
Accumulated Other Comprehensive Income (Loss) [Line Items]
Employee Benefit Related Adjustment	(9)	(9)	(18)	(18)
Amount Reclassified from Accumulated Other Comprehensive Income | Actuarial losses
Accumulated Other Comprehensive Income (Loss) [Line Items]
Employee Benefit Related Adjustment	11	11	22	23
Amount Reclassified from Accumulated Other Comprehensive Income | Employee Benefit Related Adjustments
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total before tax	2	2	4	5
Tax benefit	$ 0	$ 0	$ 0	$ 0

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Business Segment Information - Summary of Segment Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Segment Reporting Information [Line Items]
Sales	$ 983	$ 871	$ 1,872	$ 1,772
External Sales
Segment Reporting Information [Line Items]
Sales	983	871	1,872	1,772
Commercial Truck
Segment Reporting Information [Line Items]
Sales	742	598	1,402	1,229
Aftermarket & Industrial
Segment Reporting Information [Line Items]
Sales	241	273	470	543
Reportable Segments | Commercial Truck
Segment Reporting Information [Line Items]
Sales	777	631	1,468	1,294
Reportable Segments | Commercial Truck | External Sales
Segment Reporting Information [Line Items]
Sales	742	598	1,402	1,229
Reportable Segments | Aftermarket & Industrial
Segment Reporting Information [Line Items]
Sales	247	277	481	552
Reportable Segments | Aftermarket & Industrial | External Sales
Segment Reporting Information [Line Items]
Sales	241	273	470	543
Eliminations
Segment Reporting Information [Line Items]
Sales	41	37	77	74
Eliminations | Commercial Truck
Segment Reporting Information [Line Items]
Sales	35	33	66	65
Eliminations | Aftermarket & Industrial
Segment Reporting Information [Line Items]
Sales	$ 6	$ 4	$ 11	$ 9

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Business Segment Information - Segment Income Attributable to Parent (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Segment Reporting Information [Line Items]
Interest expense, net	$ (17)	$ (16)	$ (45)	$ (30)
Provision for income taxes	(22)	(73)	(29)	(86)
Depreciation and amortization			(52)	(50)
Noncontrolling interests	(3)	(1)	(4)	(3)
Restructuring			(8)	(15)
Income from WABCO distribution termination	0	265	0	265
Income from continuing operations attributable to Meritor, Inc.	63	240	95	279
Reportable Segments
Segment Reporting Information [Line Items]
Segment adjusted EBITDA	107	104	205	200
Reportable Segments | Commercial Truck
Segment Reporting Information [Line Items]
Segment adjusted EBITDA	73	58	136	115
Reportable Segments | Aftermarket & Industrial
Segment Reporting Information [Line Items]
Segment adjusted EBITDA	34	46	69	85
Segment Reconciling Items
Segment Reporting Information [Line Items]
Unallocated legacy and corporate expense, net	4	3	8	5
Interest expense, net	(17)	(16)	(45)	(30)
Provision for income taxes	(22)	(73)	(29)	(86)
Depreciation and amortization	(25)	(26)	(52)	(50)
Noncontrolling interests	(3)	(1)	(4)	(3)
Loss on sale of receivables	(1)	(1)	(2)	(2)
Restructuring	(2)	(10)	(8)	(15)
Brazil VAT	22	0	22	0
Transaction costs	0	(5)	0	(5)
Income from WABCO distribution termination	$ 0	$ 265	$ 0	$ 265

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Business Segment Information - Schedule of Segment Assets (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
Segment Reporting Information [Line Items]
Total assets	$ 3,140	$ 2,884
Reportable Segments
Segment Reporting Information [Line Items]
Total assets	2,599	2,324
Reportable Segments | Commercial Truck
Segment Reporting Information [Line Items]
Total assets	1,920	1,666
Reportable Segments | Aftermarket & Industrial
Segment Reporting Information [Line Items]
Total assets	679	658
Corporate
Segment Reporting Information [Line Items]
Total assets	737	714
Segment Reconciling Items
Segment Reporting Information [Line Items]
Less: Accounts receivable sold under off-balance sheet factoring programs	$ (196)	$ (154)