Meritor Wins Heavy-Duty Truck Electrification Business From PACCAR

Meritor Inc. MTOR will provide integrated electrification on PACCAR Inc. PCAR heavy-duty trucks as more of its traditional business evolves to battery-powered trucks.

The nonexclusive supply agreement for the Kenworth T680 and Peterbilt 579 and 520 battery-electric refuse and heavy-duty chassis follows a year of prototype and demonstration vehicles built with Transportation Power Inc., including a one-year trial with Werner Systems Inc. WERN.

Absorbing TransPower

Meritor on Jan. 17 purchased the remaining shares it did not own in San Diego-based TransPower for an undisclosed sum. The acquisition positions Meritor for significant growth in electrification, along with the fourth-quarter 2019 purchase of AxleTech, a maker of electronic axles.

Production on the PACCAR vehicles is targeted for early 2021 with full ramp-up expected in 2022, Meritor CEO Jay Craig told analysts on the company's first-quarter earnings call Thursday.

Meritor will supply five to 10 times as much content on electric vehicles as it does on traditionally diesel-powered commercial vehicles, he said.

"The purchase of TransPower and the integration has significant growth opportunities in all types of applications, so there is a lot of white space," Craig said. "We are taking them from prototype and low volume to production. TransPower brings development expertise and jump-starts us to be a full vehicle integrator."

Electric Future

Eventually, some manufacturers that rely on Meritor for electrification components and systems today will make it core internal business, but that is not a concern, Craig said.

"Offsetting that will be two different items," he said. "E-axles will begin to be placed on more vehicles with more content and there are some in the segment that won't be able to execute all the integration services needed."

The integration of AxleTech should be complete by 2022. It contributed about $43 million in revenue during the first fiscal quarter.

Meritor, the world's largest independent supplier of heavy-duty truck axles, will add MT-12X and MT-17X to its MT14-X tandem dual-axle offerings for agriculture, construction and utility, fire and rescue and heavy-haul. 

The new MD Series medium-duty trucks that Mack Trucks will manufacture near Roanoke, Virginia, will come with Meritor axles.

The company also will grow its disc brake business, said Chris Villavarayan, recently named Meritor chief operating officer. That includes a supply agreement with Daimler Trucks for air disc brakes.

Earnings Highlights

Meritor posted first-quarter fiscal sales of $901 million, down $137 million, or approximately 13%, from the same period last year. Lower global production volumes were partially offset by AxleTech's contribution.  

Net income was $39 million, or $0.48 per diluted share, compared to net income of $90 million, or $1.03 per diluted share, in the same period last year. 

Commercial Truck segment sales were $622 million, down $157 million, or 20%, compared to the same period last year. The decrease in sales was driven primarily by decreased market volumes for most regions across the segment.

Meritor adjusted guidance on sales and earnings for fiscal 2020 to the low end of previous estimates. 

Meritor shares fell Thursday, Jan. 30, 2020, following its first-quarter fiscal 2020 earnings report. (FreightWaves SONAR/STOCK.MTOR)

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