TROY, MI — Phil Martens is the senior vice president and president of ArvinMeritor’s Light Vehicle Systems business group. In this position, he is responsible for the overall strategic and operational management of the company’s passenger vehicle components, modules and systems business.

He joined the company in September 2006, and prior to that role, was the president and COO of Plastech Engineered Products. Martens managed the company’s operations, sales, purchasing, product development, information technology, new business development and industrial design.
Before joining Plastech in 2005, Martens spent more than 18 years in various leadership positions with Ford Motor Co., including group vice president of Product Creation; vice president of North American Product Creation; and vice president of North American Product Development. He joined Ford in 1987 and held various engineering positions until 1999, when he was named managing director of Planning, Design and P rod uct Development of Mazda Motor Co. in Hiroshima, Japan.

Martens holds a Ph.D. in engineering from Lawrence Technical Institution, a Master of Business Administration from the University of Michigan, and a bachelor’s degree in mechanical engineering from Virginia Tech. He is a member of the National Advisory Council for the University of Michigan Engineering Schools, as well as a Kettering University Board of Trustees member.

In this exclusive Executive Interview, Martens brings us up to speed on the return of the Gabriel brand as part of the company’s focus on re-invigorating its global ride control business.

ArvinMeritor announced in March plans for the re-development of the company’s global ride control business as part of its overall vehicle stability strategy. What was behind the company’s decision to make ride control a primary part of its new vehicle stability strategy and a part of the company’s overall restructuring efforts?

There were a couple of things that led us to this decision. First of all, within ArvinMeritor, we looked at our portfolio of p rod uct lines and settled on three fundamental systems architectures that we wanted to pursue going forward. One of them is chassis systems. The other two are axle driveline systems and apertures systems, which is our doors and roof modules division.

Chassis systems was a core part of the original thinking behind the marriage of Arvin and Meritor back in 1999/2000. [When we began plans for re-development] we really saw a fragmentation of the marketplace. Looking at our core competencies, we thought we had the ability to compete at the top level within the industry and saw tremendous growth potential, primarily in Asia Pacific, as well as in the ride control area worldwide.

So, we made a very concerted effort last fall to start re-positioning ArvinMeritor in the chassis systems world, internally first and now externally. We brought our suspension components joint venture, Meritor Suspension Systems Company, back into the fold. We also have a fully-funded chassis technical center, at which we have about four or five new projects going on. Almost all of them are OEM development contracts for electronic-based ride control products.

The last piece [of the puzzle] was to look at the ‘harder’ chassis systems from our point of view, which is ride control. We took a big step forward for ArvinMeritor when we combined our commercial vehicle ride control and our light vehicle ride control units into one ride control group for the corporation. That also included bringing back out of discontinuing operations the Light Vehicle Aftermarket group as part of Chassis Systems.

We’ve also supplemented that by bringing in seasoned, experienced industry executives to run the business. Ed Frutig, who is our new vice president and general manager for Light Vehicle Chassis Systems, has extensive experience in chassis systems. He worked at ZF for many years and is actually very well-known in the industry for his innovative drive and market leadership skills.

We also brought in Tom Watson, who is our vice president of engineering and technical planning. He has extensive experience in control systems. We’re combining the experience of these two executives, along with Wayne Garrett, who is the head of operations. These three will help us recreate the technical competencies and footprint we need to be successful.

The bottom line is that this is a growth market for us, and we feel we can compete at the highest of levels. A lot of people have asked if we are really committed to doing this and the answer is, “Absolutely.” From the board on down, we made this decision and you don’t bring something out of discontinuing operations without complete management alignment. We’re in this for the long-term.

You mentioned combining the heavy duty and light duty ride control units. What are the advantages in combining these two divisions?

As we re-align our organization, we’re basically going to put our advanced and core chassis systems together at our technical center. We will have one head executive who is going to run both the advanced technology as well as our core technology — a very seasoned guy who really understands the business. As we migrate out our core components — such as strong sealing for the shocks, very good valving technology – we’re going to roll that out not only to Light Vehicle Systems (LVS) but also to our Commercial Vehicle Systems (CVS) shocks. So, basically it’s going to be an ongoing, continuous improvement to both our base shocks in LVS as well as CVS, to compete in that market.

Also as part of this new strategy, the company has decided to re-invest in the Gabriel brand, which was previously considered to be a discontinued operations, as you mentioned earlier. What was the thinking behind the decision to re-invest in Gabriel?

That’s an interesting question. When we looked at the portfolio of brands that we have within ArvinMeritor, the Gabriel brand is one of our strongest brands on a worldwide basis. If you go into markets like South America or India, Gabriel is extremely well-known. It’s a growth business. It’s also a 100-year-old brand that frankly, we feel has a lot of legs left.

We think we can expand in Mexico, South America, China and India. When we looked at the strength of the Gabriel name, in India it’s a real asset. It’s known in Mexico. It’s a real asset for our joint venture partner Gabriel de Venezuela. And then we looked at China, which we describe as an ‘open field’ where we can establish the Gabriel name, given all of the worldwide support that we have. So it really wasn’t that complicated a decision. The real question became: Why are we thinking of giving it up?

After some downtime in the marketplace, how will the company re-establish the reputation of this 100-year old brand? Are there any specific hurdles you feel the brand has to overcome?

I think it has to come in three areas. The first area that we will work on, and this will be a big focus for Ed Frutig and his team, is re-establishing the reputation and capabilities that we have at the OEM customer level on a worldwide basis.

The second area is the aftermarket. In the aftermarket arena, particularly here in North America, we have to spend some time re-marketing the Gabriel brand. But, we want to be able to offer in the aftermarket not only base capabilities but also some technological updates so that we actually have a somewhat broader ‘bandwidth’ of product line than we have today.

The third area is China. We have to establish the brand in China. We recognize that as a challenge, but to me it’s a significant opportunity.

Without a question, we have to spend time nurturing, developing and communicating the Gabriel brand in these three forums.

Can you share with us any specific marketing plans for growing the Gabriel business?

It’s a bit early in the game, but right now we are re-confirming our position within ride control with our major customers on a ‘real-time’ basis. In China, we’ve got some things going that we can’t talk about yet, which will kick-start our position there. Our counterparts in South America were delighted with our decision to do this because it gives them a real step forward in reinforcing the marketing of the brand. There will be more to come over time.

These restructuring efforts as you discussed are focusing on a more global strategy for the company. Why is this new global focus important for the Light Vehicle Systems (LVS) division and how will it change the way LVS does business?

We’re using chassis systems to accelerate everything we’re doing. There are opportunities in aftermarket distribution and joint venture capabilities. We’re building core electronics engineering with control systems capability. It has a marriage of our commercial vehicle and light vehicle businesses into one unit for ArvinMeritor, which will include our Light Vehicle Aftermarket in Europe. We have a plant in Bonneville, France, and a LVS engineering center in Dietzenbach, Germany, that we are thinking about using as our beachhead to move into that market. So when you think about globalization and how to pull it all together to make it work, the best example we have in the company is chassis systems.

In the past year, ArvinMeritor has sold a number of divisions, including most recently the sale of the Emissions Technologies (ET) business [sold to One Equity Partners this month], and also the sale of the Light Vehicle Aftermarket exhaust business [sold last year to International Muffler Co.] and the Purolator filter business [sold in February 2006 to Bosch and MANN+HUMMEL]. How has the elimination of these ‘non-core’ operations helped keep ArvinMeritor stable during these tough times in the automotive supplier industry?

Having worked on the OEM side, I know the number-one thing you want to have is a partner with a very strong balance sheet. I give Chip McClure and Jim Donlon credit for the work they have done the past two years. We probably have one of the strongest balance sheets in the industry. That gives us immense stability in terms of handling transitions like the sale of ET, but also allows us to now reinvest into areas like chassis systems on a global basis. I can tell you that selling our Emissions Technologies group now gives management the appropriate time and attention to devote to this. I think further evidence of that is the fact that we brought in a new management team as I mentioned earlier. We’ve also appointed Rakesh Sachdev to be our president of Asia Pacific to help us accelerate growth in that region.

I think a lot of this is an investment. We’re investing in products, we’re investing the markets and we think these are critical enablers to long-term success. When you take out the non-core operations, it frees up operating cash, it frees up time and it really is, for us, a significant commitment to areas like chassis systems, axle driveline and apertures. So I think it’s the right thing to do for the company and it helps us, financially, to be very stable during tough times.

I believe that ArvinMeritor is positioning itself very well, to be a smart systems provider for our customers and we’re beginning to see the fruits of that. When we get development contracts for our new electronic ride control products, to me, it’s a real indication that our customers are seeing real value. That really was the result of funding our chassis technical center p rod ucts last fall. It gave us all the confidence we needed to move forward with internal commitments to getting into the full chassis systems and now, making ride control the center of all of that.

As the U.S. automotive supplier industry get to the tail end of a very turbulent few years, what do you think will be the biggest issue for U.S. parts manufacturers going forward?

I think the number-one thing is constancy of purpose. There’s going to be so much change in terms of ownership structure and other factors, primarily amongst the U.S. suppliers, that those that remain focused on what they are doing are going to emerge in the best shape. By moving out of what we consider the non-core emissions group we could focus on a stable operating set of product lines and a stable management team. We believe we did this at the most opportunistic time, as others around us look to make management changes, restructuring, etc. What we tried to do is quickly make the necessary big move and bring the management team in. Now, stability and constancy of purpose are the two critical success factors. The ones that are successful today have had those two key elements – management stability and constancy of purpose over a period time. To Chip McClure’s credit, he has put together a superb team, not only at the president level but also the vice president level. I think we’ve got what it takes to be a premier Tier 1 supplier over the next three to five years.

Another point I see as critical for manufacturers going forward is having a diverse customer base. I’ve been with companies where you are aligned to a couple of OEMs too tightly, and it can really be a problem. So, I think having a good strategy to be aligned with European customers, Asian customers and North American customers is very important.

The other thing is being diversified in the various regions and having a presence in the key growth regions that I alluded to earlier. You’ve got to be aligned in those growth regions and have a good, strong strategy for how you are going to support your customers in those regions.

And finally, making sure that your manufacturing footprint is aligned into those low-cost regions is very important. One of the strengths of ArvinMeritor is that we have a very diverse customer base, we are targeting having a third of our business in each of the regions globally and we have a very good strategy moving forward. We just need to stick to it, keep the team in place and keep moving in that direction.

In general, where do you see the ride control category heading in the next three to five years?

From a macro point of view, I think the ride control area is going to continue to evolve with a couple of very important factors. First of all, I think we’re going to see a continued evolution of technology. Not only with the high-end products but also with the more ‘volume-related’ p rod ucts. I think we’re going to see some improvements in roll stability control and vehicle stability that will be available to a wide range of customers – not only sedans and crossover vehicles but also on the heavier duty vehicles. I also think when I look at the regions around the world, and China particularly, given the demands we’re seeing from our customers, the whole chassis systems area will be a tremendous area of opportunity. There is a huge need for knowledgeable global chassis systems players. I think the area of ride control is going to evolve pretty rapidly, both from a technology perspective and also a regional perspective.

One of the important things we see with bringing CVS and LVS together is that we now have strength in our aftermarket customers and we really want to continue to support them. If you look at markets like China, Mexico and South America, we see high growth for the aftermarket shock business and we want to make sure our technology continues to be updated.

In the higher-end regions like Europe and North America there’s going to be a strong emphasis on safety, active roll control systems, active dampening, smart chassis control modules that are integrated with brakes, steering, shocks and even active roll stay bars. I can see this becoming more and more of a growth industry and we’ve got to continue to align ourselves for that safety factor. That’s going to roll-out then to other countries as it goes forward.

In the higher-end countries like Europe and North America there’s going to be a strong emphasis on safety, active roll control systems, active dampening, smart chassis control modules that are integrated with brakes, steering, shocks and even active roll stay bars. I can see this becoming more and more of a growth industry and we’ve got to continue to align ourselves for that safety factor. That’s going to roll-out then to other countries as it goes forward.