Guided Study Of Meritor Business Essay Example

in saving it from unexpected and unavoidable situations. The company must take responsibility for past mistakes and the only way to learn from them is to have confidence in what they are doing. By acknowledging and learning from mistakes, new leaders can steer the company towards new successes, something that Meritor has long desired. As the company moves forward, it is crucial to empower employees and foster a sense of belonging so that every individual works tirelessly on both personal and organizational levels to bring about necessary changes. Employee development programs are invaluable in bridging the gap between knowing and doing. This simple initiative can effectively transfer knowledge from academia to practical implementation in business.

The significance of employees understanding their work is that it often leads to the best outcomes and exceeds expectations. Meritor, a well-known name in the auto industry, needs to improve its operations and utilize its best practices to enhance efficiency. By optimizing resource use, the company can achieve higher output with the same resources. Additionally, the company can explore new market development opportunities on a larger scale compared to product development plans.

This would coincide with Meritor's plan to collaborate with various industries that utilize the advantages the company has already gained. Meritor has expressed their support for Henry Ford's Innovation Education Incubator (IEI), which was successfully launched in April 2011. The main goal of IEI is to introduce innovative digital education resources and revolutionary teaching strategies into K-12 classrooms nationwide, generating momentum among educators. This is just one example of how Meritor has recently aligned itself with new and diverse projects. These endeavors present a favorable company image and increase customer

engagement by grabbing the attention of potential clients.

In such endeavors, the impact is typically long term as it is difficult to determine the direct benefit. However, they are crucial for the stability of the company as it progresses towards a positive future. Meritor must rise to regain its former position and this can only be done through a dedicated strategy that aims to revolutionize the company.

Strategic Analysis

Historical Background and Present Context

The Meritor Company was founded in 1909 and continues to thrive today. They first established production with the Timken Detroit Axle on Clark St. in Detroit, Michigan.

The renowned Willard Rockwell assumed the presidency of the company in 1929 and popularized the saying "A large wheel is nothing without an axle". The company's vision is to be the acknowledged leader in providing advanced thrust train, mobility, braking, and aftermarket solutions for the global commercial vehicle and industrial markets. Meritor Inc. is a prominent global supplier of these solutions for commercial vehicles and industrial markets. Currently, Meritor operates in 20 different countries across 5 continents and has 65 locations.

With an impressive focus on global outreach, this company is actively involved in its surrounding communities through volunteer work and giving back. Moreover, they are dedicated to sustainability across three key areas: Social Responsibility and Governance; Excellence in Environmental Protection and Safety; and Advanced Product Design and Processes.

History of Meritor:

For over 100 years, Meritor has been in business, reaching a significant milestone in 1909 with the establishment of Timken Detroit Axle. In 1929, Timken Detroit Axle acquired Wisconsin Parts, leading to the formation of Timken-Detroit Axle and Wisconsin Axle.

Between 1929 and 1951, the company experienced rapid growth with operations

in Detroit and Jackson, Michigan, Oshkosh, Wisconsin, Utica, New York, Ashtabula and Kenton, Ohio, and New Castle, Pennsylvania. In 1953, Willard Rockwell merged Wisconsin Parts and Timken Detroit Axle to form Rockwell Spring and Axle Company. The company underwent a series of mergers and acquisitions between 1953 and 1997. In 1997, Rockwell International chose to separate its automotive division and established Meritor Automotive.

In 1998, A Meritor acquired Volvo Trucks' heavy vehicle fabrication operation, Euclid Industries, and Lucas Varity's Heavy Vehicle Braking Systems concerns. In 2000, Meritor Automotive and Arvin Industries merged to organize ArvinMeritor, Inc.

Company Mission, Vision, and Other Guiding Stars

Meritor Vision:

Meritor's vision is "To be the recognized leader in supplying advanced drivetrain, mobility, braking and aftermarket solutions for the planetary commercial vehicle and industrial markets" (Meritor vision, 2011).

Meritor Mission:

1. To develop advanced merchandises that provide superior public presentation, energy efficiency and reliability.
2. To supply a taking portfolio of differentiated services back uping clients ' merchandises throughout their lifecycle.
3. To present on our committednesss while maximising value for our stockholders, clients, and employees (Meritor Mission, 2011).

Meritor Core Valuess:

1. Pursuit of Excellence
2. Integrity
3. Teamwork and Respect

Meritor Executive Management Team:

1. Charles G. McClure - Chairman of the Board,
   CEO and President
2. Vernon G. Baker II - Senior Vice President
   and General Counsel
3. Timothy E. Bowes - Vice President
   and President,
   Commercial Truck ; Industrial: Jeffrey A.
   Craig - Chief Fiscal Officer Pedro Ferro -
   Vice President
   and President,
   Aftermarket & Trailer Barbara G.
   Novak - Vice President
   and Corporate Secretary Larry E.
   Ott - Senior Vice President,
   Human Resources

   External Environment Assessment:
   Opportunities: In order to enhance its presence and reduce costs, ArvinMeritor has focused on emerging Asian markets such as India, China, and Korea in recent years.In 2005, the company entered into a partnership with FAW Sihuan Axle Brake

Group in China to produce air brakes, automatic slack adjusters, and air disc brakes for commercial vehicles.

Furthermore, in August 2005, ArvinMeritor formed a joint venture with DongWon Precision Industrial Co Ltd, based in Korea, to supply DPFs and exhaust systems. ArvinMeritor aims to triple its revenues in Asia over the next five years. In the Asia Pacific region, the company will focus on high-margin product lines. Its strategy for this region involves optimizing sourcing activities and establishing design and technology operations. In January 2007, ArvinMeritor announced a long-term supplier partnership with Trailmobile Corporation, a US-based company, to provide Meritor trailer axles, air suspensions, and brakes as standard offerings on all Trailmobile Trailers.

The company plans to establish a manufacturing facility in Wuxi, China in addition to its current operations. These ventures are expected to help increase sales and market position.

Threats:

ArvinMeritor operates in an industry where emissions and environmental regulations are becoming stricter. Compliance with these new standards is mandatory in the USA and Europe. Failure to comply may impact vehicle demand and subsequently affect the demand for the company's products as well. For example, the implementation of new standards is predicted to lead to a decline in heavy truck demand in North America region by 2013.

The company is at risk due to its reliance on a small group of providers for natural materials. If any of these providers were to fail, the company's performance would be negatively impacted. Furthermore, the increasing costs of natural materials, steel, and oil are jeopardizing the company's profits.

Evaluation of Internal Environment

Meritor has an Asset Turnover ratio of 1.70, exceeding the industry average of 1.40.

This shows that the company is

efficiently using its available capital resources to acquire a higher quality end product compared to its competitors. Meritor's Pre-Tax Margin ratio is 3.1, significantly lower than the industry average of 5.8. This suggests that the company has struggled to convert sales into profits while its competitors have implemented effective measures to reduce operating costs and other financial expenses, resulting in higher pre-tax earnings. A higher pre-tax profit indicates stronger financial strength for the company. Meritor's Interest Coverage Ratio, represented by its TIE ratio, is only 2.4, whereas the industry average is 6.8. In recent years, Meritor has undoubtedly faced challenges in paying off debts and meeting obligations.

When examining these numbers, potential investors can observe a slight indication of Meritor's future prospects. However, despite their efforts, the outlook for Meritor seems grim. This is evident in Meritor's P/E Ratio in this category, which is 8.30 compared to the industry average of 14.80. Furthermore, numerous competitors have witnessed growth, especially in terms of their stock prices.

Meritor's stock price has experienced a significant decline in recent years, currently standing at $4.66 as of 2/1/2013. In order to regain the confidence of investors, it is imperative for the company to make changes to its operations. Meritor's sales growth rate has been adversely affected due to customers either migrating to competitors or going out of business entirely. Conversely, despite the recession, the industry as a whole has managed to achieve a modest growth rate of 3.67%.

Despite Meritor's disappointing indication of its future compared to its competitors, the company has several strengths in the automotive parts industry. It provides a diverse range of products including exhaust systems, roof systems, suspension systems,

and braking systems. Meritor particularly excels in the wheels and door systems sectors. Moreover, its key brands such as Gabriel, Meritor, Ryde FX, and Euclid have achieved considerable global commercial success. Additionally, Meritor boasts a broad customer base that includes major OEMs such as GM, Ford, Daimler, Chrysler, Volkswagen BMW decree as well as various Asia-based OEMs.

Meritor has a wide geographic coverage with 112 manufacturing facilities across 26 states. The company generates about 50% of its revenues outside the North American region. This allows the company to balance risks efficiently despite the disruptive nature of the North American car industry.

Weaknesses

The softening of global financial markets has weakened Meritor's ability to access credit markets. Additionally, the poor financial health of North American OEMs also forced ArvinMeritor to repatriate significant profits from its international operations.

The company has been given a corporate recognition rating of 'B+ ' by S&A;P and 'B ' by Fitch, which indicates a negative outlook. If strategic programs are delayed, these ratings could decrease, impacting Meritor's access to credit markets, capital markets, and increasing costs for the company. Additionally, the company is facing increasing costs for pension and postretirement benefits. Meritor uses forecast and trend data to plan for healthcare and pension obligations. To address these concerns, ArvinMeritor amended certain retiree medical plans and phased out others, including the elimination of Medicare benefits for eligible retirees starting in January 2006.

These enterprises faced legal challenges from the United Auto Workers. In a separate case, Meritor reached a settlement with USW, agreeing to pay $28m to medical beneficiaries over a 10-year period.

Schemes in Action at [ Meritor ]

Supplier Diversity as a Core Business Strategy:

Corporations that embrace

diversity will have a competitive advantage. Supplier diversity is essential for companies looking to grow their business, increase revenue, and strengthen their customer and supply base. With increased focus on supplier diversity and pressures to increase purchases from minority-owned businesses, it is important to view supplier diversity as a core business strategy rather than just a socially responsible activity.

Profitable Growth:

The company's primary goal is to achieve profitable growth by fulfilling orders efficiently and reducing costs. The increase in revenue directly corresponds to an increase in earnings.

Merchandise and Technology Focus:

Meritor's main focus is on its merchandise offerings and the engineering it uses to produce products that enhance the overall experience for its customers. This consumer-centric approach sets Meritor apart from many of its competitors.

Strategy Analysis and Choice

In order to navigate the volatile environment of the industry in recent years, Meritor should pursue a Leverage Strategy. This involves utilizing their limited resources to either enter new markets or improve existing products in current markets. To maintain their competitive advantage, Meritor needs to develop a factor that will serve as a catalyst for growth and strengthen their position as a leading player in the industry.

In order to improve the effectiveness of the execution phase and find the purchase factor, strategic creativeness plays a crucial role. To achieve this, the organization needs to devote specific attention and resources to developing the strategy. Only after successful and relevant preparation can the effectiveness of the execution phase significantly improve. It is also advantageous for Meritor to enhance its financial ratios and bottom-line by forming strategic alliances, such as the one with

Meritor Wabco. These alliances will provide it with a sustainable and difficult-to-replicate competitive advantage over rivals.

Meritor can utilize the strength of its other concerns to its advantage by aligning its resources with its opportunities. The recent restructuring of Meritor's business sections demonstrates the company's commitment to adapt to changes in the environment. Both management and employees are willing to reshape the organizational structure to align with the consolidation of business sections. Strategy Execution: Alliance. Divestitures: The company frequently sells off sections that are not aligned with its core strategic objectives. The following sections were divested recently: In 2009, we sold our 51% stake in Gabriel de Venezuela to our joint venture partner. In the same year, we also sold our Gabriel Ride Control Products North America business to an affiliate of OpenGate Capital. Additionally, in 2009, we sold our Wheels business to Iochpe-Maxion S.A., a Brazilian manufacturer of wheels and frames for commercial vehicles, railroad cargo cars, and castings.In financial year 2010, we sold our 57% stake in Meritor Suspension Systems Company (MSSC) to a subsidiary of Mitsubishi Steel Mfg.Co., LTD. We also sold our faculty assembly operations in Belvidere, Illinois. In financial year 2011, we sold our Body Systems business to Inteva Products Holding Cooperatieve U.A., which is affiliated with Inteva Products, LLC. Additionally, we sold Gabriel Europe (Bonneval) installation to TRW Automotive Holdings France and closed our EU Trailer operations in Cwmbran, U.K., as well as related warehouses in Spain and Italy. Furthermore, in FY07, the company implemented Performance Plus, a long-term profit improvement and cost reduction initiative.

Significant actions have been identified to improve the environmental impact and cost-effectiveness. This includes eliminating 2,800

positions in North America and Europe, as well as consolidating and integrating certain global facilities. These changes will be implemented over the course of several years (Glassdoor, 2012).

Strategy Execution: Action Plan

Meritor has had to adapt its business and operating strategies to address unprecedented challenges in recent years. These challenges include volatile credit markets, impairment, a rapid upturn in the commercial vehicle market, and a global recession. The company is working to align itself with these new business conditions and improve its position for the future. There are several key challenges that Meritor is currently facing which could affect its overall profitability and competitive edge. One of the biggest challenges is the worldwide production volumes in 2013, which are expected to be lower than those in 2012 in North America and Europe.

The production volumes in South America have decreased significantly in 2012 due to stricter emission regulations for commercial vehicles. The recovery of production volumes in South America has been slower than anticipated, and demand for parts is expected to remain low during the first half of the 2013 fiscal year. Production volumes in China and India have also declined compared to 2011 levels. It is not expected that these volumes will return to previous levels in the near future, given the current economic conditions. The profitability and growth of Meritor's Industrial Segment continues to be a key focus for the company's leadership.

In 2012, Meritor's military plans were at their highest point. However, these plans are expected to decrease as old military contracts are nearing their end in the coming years. If new contracts are not secured, there could be long-term consequences for the Industrial Segment.

Additionally, the profitability of new contracts may not match previous periods. Meritor is also facing challenges such as uncertainty in the global market, fluctuations in prices and availability of materials, disruptions in financial markets affecting credit availability and cost, higher energy and transportation expenses, currency exchange rate volatility, consolidation and globalization of OEMs and suppliers, and substantial pension and retiree healthcare costs. These factors are anticipated to impact Meritor's overall financial performance.In 2013, Meritor Inc. may face challenges in meeting analyst expectations due to various factors such as the loss of contracts, difficulties in negotiating favorable terms in contract renewal talks, disruptions in the European Union, fluctuations in production volumes, increases in steel prices and other costs from customers, unexpected closures or production interruptions, significant declines in economic activity in key markets, higher than anticipated price reductions for customers, price increases from suppliers, restructuring expenses, higher than planned warranty costs, and government regulations.

Strategy Review, Evaluation, and Control

In 2012, the company reviewed and evaluated its strategies.

Revisions have been made to the coverage construction, aiming to enhance efficiency. Two new countries have been established to categorize Commercial Truck and Industrial, as well as Aftermarket ; A ; Trailer. Along with this change, there have been executive level alterations announced relating to the revised coverage. These adjustments have resulted in smaller divisions for the company to manage, creating a more favorable working environment for their employees.

I suggest that Meritor needs to implement a three-step review process to monitor the progress of its new strategy implementation. The first step of this review process should occur at the team or unit level on a weekly basis.

During this review process, team members would meet to discuss the progress of their individual assignments or goals. They would address any obstacles, resource constraints, or other concerns that need to be communicated to upper management for immediate resolution. In this meeting, the team would also discuss upcoming milestones for the project, pending deliverables from other cross-functional team members, and any design and development changes or issues that need to be communicated to the cross-functional teams.

The second step of this reappraisal process will occur bi-weekly, where all cross-functional team members (Finance, Marketing, Engineering, HR, Manufacturing, etc.) will be invited to discuss the results or meeting minutes from their team meeting at the unit level (step one). This meeting will serve as a platform to communicate messages, decisions, changes, and other important information that needs to be communicated to the entire organization. During this meeting, the team will review and track milestones for the project and discuss any deviations from the plan. The third step of this reappraisal process will occur monthly with managers from each cross-functional organization. During this review, one representative from all cross-functional teams will attend (Finance, Marketing, Engineering, HR, Manufacturing, etc.).

Meritor will provide a 10-minute position update on the advancement of their section. In addition to this, the meeting will also serve as an opportunity to address issues to upper management. To measure strategy execution and identify the root causes of gaps between the program and actions/results, Meritor can use unit-level and cross-functional team-level milestones with specific deadlines. These milestones can be reviewed during weekly, bi-weekly, and monthly meetings to ensure everything is on track. It is crucial for Meritor to ensure

it is following the path that will lead to successful strategy execution.

When implementing new or existing strategic initiatives, such as restructuring the business model or organizational hierarchy, it is crucial to not lose sight of the ultimate goal. By always keeping the end in mind, we can better plan for today and achieve our objectives. Similarly, to ensure the achievement of long-term strategic goals, Meritor must establish a system of continuous review and control. If a division or business section deviates from the intended path, disciplinary action can be taken. To review progress, a separate committee or group of individuals can be assigned to assess the work done by individual sections. They can analyze how well the goals of different sections align with the overall corporate objectives and identify areas where there has been a deviation from the initial intended alignment.

Continuous reappraisals should be conducted quarterly to ensure strict monitoring of the progress and direction of implemented strategies. Allowing a longer period between reviews may cause companies to deviate from their objectives. The main focus of the review process should be the areas that the company wants to improve through its new strategy. This process provides an accurate assessment of whether the organization has successfully executed its strategy within the uncertainties of the real world. Additionally, it is important to implement disciplinary action in the most effective manner by adapting the strategy to align with changing trends or new factors that have emerged since its initial development.

Meritor has made changes to its construction and procedure, but its financials remain below industry standards. This indicates the need for further action to improve the company's bottom-line. Throughout

our class discussions, we have learned about the PDSA cycle and how it can be integrated into the review process. The key component is critically analyzing the progress made since implementing the strategy and assessing its success in achieving desired outcomes. The PDSA cycle allows for continuous monitoring of the company's performance, both financially and operationally. It helps identify areas of improvement and areas of struggle. The importance of the PDSA cycle is evident, as it forms the basis of our class from start to finish. Therefore, any organization in the strategy evaluation phase can effectively utilize the PDSA cycle to maximize resources and determine which strategy best serves its purpose.

The text highlights the challenges faced by the scheme execution phase and emphasizes the importance of evaluating workforce and resources in order to ensure success. It also acknowledges the potential risks of partnering with third-party sellers and emphasizes the need for a contingency plan to avoid unexpected situations.

The supervisors or departmental caputs are responsible for ensuring the inclusion of a second provider or contractor as soon as the first one withdraws for any reason. The support of all stakeholders, including suppliers and clients, is crucial in any expansion or business restructuring process. Therefore, the leadership at Meritor must be aware of this and closely monitor these plans to prevent any setback from hindering the company's recovery.

Decision: Prioritize Synthesis, Integration, and Summarization:

Meritor should establish a dedicated team that will closely oversee the step-by-step change process. The company should find ways to enhance monitoring and reduce deviations from the established path.

Throughout this semester, we have emphasized the importance of successfully executing a scheme. It is this execution

that sets apart a company that neglects opportunities from one that reflects on them. Meritor must utilize the SWOT analysis to determine its core advantages and identify the opportunities available to it.