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Meritor partially restores pay cuts while trimming salaried jobs

Drivetrain supplier also plans to sell $300 million in debt if it can find buyers

Meritor will cut about 230 global salaried positions as part of a new round of cost cutting at the commercial vehicle drivetrain supplier. (Photo: Meritor)

Commercial vehicle drivetrain supplier Meritor Inc. (NYSE: MTOR) will cut 230 salaried positions globally by the end of the year and continue to pay lower salaries as it copes with the impact of the COVID-19 pandemic.

Troy, MIchigan-based Meritor was among the first industrial companies to announce pay reductions for salaried employees. On Wednesday, the company said it is partially restoring salaries: 

  • CEO/Board of Directors: 20% reduction (from 60% reduction)
  • Other officers: 15% reduction (from 50% reduction)
  • Executives (vice presidents and directors): 15% reduction (from 25% reduction)
  • All other salaried employees in the United States and Canada: 10% reduction (from 20% reduction)

Eliminating positions

Based on current market forecasts for global truck and trailer production, the 110-year-old supplier of drivetrain, mobility, braking and aftermarket products for commercial vehicles and industrial markets is cutting 8% of its global salaried workforce of 7,000 by the end of the year. 

About 230 jobs and unfilled positions are affected, spokeswoman Krista Sohm told FreightWaves. Meritor expects to take a $25 million charge for severance costs.


It is Meritor’s second significant restructuring in less than a year. The company cut salaried and hourly workers in commercial truck and aftermarket, industrial and trailer divisions in the last three months of 2019, responding to lower new Class 8 truck orders.  

New debt

Meritor also plans to sell $300 million in private placement senior debt if it can find buyers. The company expects to use the proceeds to repay a portion of its outstanding balance under its senior secured credit facility.

Meritor reaffirmed its financial guidance for the third quarter of fiscal 2020. It expects a revenue range between $400 million and $500 million. 

Cash flow from operations is expected to range from negative $150 million to negative $225 million, including a one-time negative $125 million to negative $175 million impact from selling accounts receivable at a discount to a financing company.


Meritor said it will provide a longer-term outlook for fiscal 2021 and its M2022 plan performance during the company’s third-quarter earnings call if it thinks its market forecasts are reliable.

“It remains too early to forecast the long-term impact of this crisis on the industry, but the actions we are announcing today reflect a set of coordinated steps toward finalizing our business plan for fiscal year 2021 and 2022,” said Jay Craig, Meritor CEO and president.

“We moved quickly during the pandemic to stabilize cash flow for the third and fourth quarter so that we could focus on the long-term health of the company, which includes rightsizing the organization,” Craig said in a statement. “We are pleased that we were able to lessen the salary reductions and look forward to regaining our full momentum.”

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Alan Adler

Alan Adler is an award-winning journalist who worked for The Associated Press and the Detroit Free Press. He also spent two decades in domestic and international media relations and executive communications with General Motors.