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.

72,311,61770,076,049 shares of the registrant’s Common Stock, par value $1 per share, were outstanding on November 11, 2020.16, 2021.

Meritor, Inc., headquartered in Troy, Michigan, is a premier global supplier of a broad range of integrated systems, modules and components to original equipment manufacturers ("OEMs") and the aftermarket for the commercial vehicle, transportation and industrial sectors. We serve commercial truck, trailer, military, bus and coach, construction, and other industrial OEMs and certain aftermarkets. Our principal products are axles, drivelines, brakes, and suspension systems. As used in this Annual Report on Form 10-K, the terms "company," "Meritor," "we," "us" and "our" include Meritor, its consolidated subsidiaries and its predecessors unless the context indicates otherwise.

Meritor serves a broad range of customers worldwide, including medium- and heavy-duty truck OEMs, specialty vehicle manufacturers, certain aftermarkets, and trailer producers. Our total sales from continuing operations in fiscal year 20202021 were approximately $3$4 billion. Our ten largest customers accounted for approximately 6975 percent of fiscal year 20202021 sales from continuing operations. Sales from operations outside North America accounted for approximately 3540 percent of total sales from continuing operations in fiscal year 2020.2021. Our continuing operations also participated in four unconsolidated joint ventures, which we accounted for under the equity method of accounting and that generated revenues of approximately $0.7$1 billion in fiscal year 2020.2021.

Our fiscal year ends on the Sunday nearest to September 30. Fiscal year 2021 ended on October 3, 2021, fiscal year 2020 ended on September 27, 2020, and fiscal year 2019 ended on September 29, 2019, and fiscal year 2018 ended on September 30, 2018.2019. All year and quarter references relate to our fiscal year and fiscal quarters unless otherwise stated. For ease of presentation, September 30 is utilized consistently throughout this report to represent the fiscal year end.

References in this Annual Report on Form 10-K to our belief that we are a leading supplier or the world's leading supplier, and other similar statements as to our relative market position are based principally on calculations we have made. These calculations are based on information we have collected, including company and industry sales data obtained from internal and available external sources as well as our estimates. In addition to such quantitative data, our statements are based on other competitive factors such as our technological capabilities, engineering, research and development efforts, innovative solutions and the quality of our products and services, in each case relative to that of our competitors in the markets we address.

Our reporting segments are as follows:

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

We also believe connectivity offers many benefits to end users, vehicle manufacturers and Tier 1 suppliers like us. Similar to the increase in demand for smart home devices, our engineers are finding more areas where we can transform our offerings into smart products. The two main areas we are exploring include:

We are developing an electronic lube level monitoring device that eliminates the need for certain maintenance procedures saving time and money. For tire inflation, we are using sensors and related electronics that increase safety and improve efficiency via optimized tire pressure. And as manufacturers explore platooning, pairing and autonomous driving, knowing what is happening within the vehicle’s braking system is especially critical. The systems we are developing build upon our current pad wear sensor system and will monitor overall brake health, allowing strategic maintenance decisions as well as safer overall operation.

Meritor’s expanding range of next-generation technologies includes comprehensive solutions for standard axles, remote- mount configurations and fully electric powertrain systems which furthers our goal of becoming the electric drivetrain supplier of choice. Our 14Xe™ ePowertrain is based on the proven 14X axle design which maintains existing axle mounting hardware for ease of OEM integration. The modular system enables the interchangeability of key components, including electric motors, transmissions, gearing, brakes, wheel ends and housings. The 14Xe™ is designed for scalability and can be adapted to fit various powertrain needs based on the vehicle application and duty cycle. This year, weWe announced anthe expansion of our electric drivetrain solutions by introducing the 12Xe™ powertrain for Class 4, 5, 6 and 7 applications and the 17Xe™ powertrain for heavy-duty 4x2 and 6x2 trucks.

ThisThe 14Xe™ ePowertrain ishas already receivingreceived acclaims in the automotive industry. This year, weWe were recognized as a PACEpilot Honoree by Automotive News for our solutions to power Class 4 through 8 trucks and buses with electric powertrains instead of diesel-based systems, in addition to Diesel Progress’ Achievement of the Year and Electric Application of the Year awards.awards in 2020.

To help us achieve our objectives in this important area, in fiscal year 2020 we acquired all outstanding common shares of Transportation Power, Inc. this year,("TransPower"), a California-based company that supplies integrated drive systems, full electric truck solutions and energy-storage subsystems to major manufacturers of trucks, school buses, refuse vehicles and terminal tractors. Transportation PowerTransPower has focused exclusively on developing electric drive solutions since its inception in 2010. With this acquisition, we advanceare advancing our M2022 plan priorities through increased investment in next-generation technologies.

Representing the first Class 8 production contract for electric drivetrains in the industry, we secured an agreement with PACCAR to be its non-exclusive supplier of ePowertrains for its Kenworth T680 and Peterbilt 579 and 520 battery-electric vehicles. We will be the initial launch partner and primary supplier for the integration of functional battery-electric systems on these refuse and heavy-duty chassis. Production is targeted to begin in calendar year 2021. We believe we will be the first supplier to begin production of electric powertrains for Class 8 electric vehicles, and we anticipate additional production contracts in 2021.the future.

We know that despite changes and volatility in global market conditions, it is important that we generate profitable top-line growth. We designed the M2022 plan to enable us to achieve the growth we are targeting while operating in a cyclical industry that can be greatly impacted by economic factors. We are increasing our market share with key customers, renewing long-term contracts and winning new business in all of our end markets around the globe across both of our reportable segments.

We expect to broaden our relationships with our global strategic customers, earn the business of new customers, increase aftermarket share in core product areas, expand our gear manufacturing, and enter near adjacent markets that we believe will be a good match with our core competencies.

We achieved major milestones in fiscal year 20202021 related to next-generation technologies engineered to fit multiple vehicle applications for customers’ needs now and in the future. Through new business awards with global manufacturers and continued evolution of our Blue Horizon™ powertrain solutions, we are establishing Meritor as a leader in transformative technologies for the commercial vehicle industry.

In fiscal 2021, we earned additional axle contracts with Ashok Leyland and Daimler India for medium and heavy-duty vehicles. We also now have standard position with Terex for front and rear drive axles and brakes on concrete mixers. We will supply an existing customer with independent front suspensions for recreational vehicles, and we entered a clear view toward maintaining our leading market positionsnew three-year agreement with best-in-class products and services. This year, we introduced new products, including our single piston air disc brake and a range of high efficiency axles which includes a vocational axle that is the firstJohn Deere for 100 percent of its type in decades.

As industry trends continue to drive the need for equipment that complies with environmental and safety-related regulatory provisions, OEMs select suppliers based not only on the cost and quality of their products, but also on their ability to meet stringent environmental and safety requirements and to service and support the customer after the sale. We use our technological and market expertise to develop and engineer products that address mobility, safety, regulatory and environmental concerns. In fiscal year 2019, weWe last published our firstannual sustainability report in March 2021 to share the work we have done in the areas of advanced technologies; environment, health and safety; manufacturing initiatives; human capital, social responsibility and corporate governance, and we will publish an updated report later this year.governance.

Our commitment to designing and manufacturing braking solutions for the commercial vehicle market has resulted in more commercial vehicles in North America having Meritor brakes than brakesthose made by other brake manufacturer.manufacturers. We believe our EX+ air disc brakes are among the highest performing brakes in the marketplace. We recentlypreviously announced the launch of our lightweight, single-piston EX+™ LS air disc brake, a next-generation braking solution designed and engineered for linehaul and trailer applications. This brake, which was recognized by Heavy Duty Trucking magazine as a Top 20 Product, will launch

We designed the EX+ LS air disc brake to meet fleet expectations for efficiency, safety and weight reduction. Built with exceptional taper wear control, the new air disc brake is designed and validated to perform like a twin-piston brake. Approximately 9 million of our air disc brakes are in operation globally.

We believe the quality of our core product lines, our ability to service our products through our aftermarket capabilities, and our sales and service support teams give us a competitive advantage. An important element of being a preferred supplier is the ability to deliver service through the entire lifecycle of the product. Also, as our industry becomes more international, our manufacturing footprint around the world and our ability to supply customers with regionally-tailored product solutions are competencies of increasing importance.

In addition to technology and product collaboration, we also meet regularly with our customers to review our performance in a number of other areas including quality, delivery and cost.

In our M2022 plan, we set an overall quality target of less than 20 parts per million ("PPM"). In fiscal year 2020,2021, Meritor achieved a quality score of 3623 PPM. Also this fiscal year, four of our facilities and three of our joint ventures received the Daimler Master of Quality Award. In 2020, during an unprecedented year of supply constraints and severe workforce challenges, six of our facilities received the PACCAR 10 PPM award. We believe this level of quality further differentiates us in the commercial vehicle industry. Also this fiscal year, five of our facilities and three of our joint venture facilities received the Daimler Master of Quality Award. We also received Daimler's Supplier Award for outstanding performance in quality. During a peak North America commercial vehicle market in 2019, we supplied Daimler with 1.3 million axles, brakes and drivelines, all with a low defect rate based on PPM. We were honored to be recognized by Daimler, which has a global reputation for delivering quality products to its customers.

In fiscal year 2020,2021, we also continued our excellent OE delivery performance this year at 9996 percent. Despite the impact of the COVID-19 pandemic globally and the challenges it created for the entire supply chain, we maintained a very high delivery rate. Our customers rely on us for this level of delivery performance and it differentiates us from our peers.

We will maintain our focus on driving down operating costs through material cost-reduction and labor and burden improvements with a target achievement of 2 percent improvement per year. We drive material performance with three different approaches: commercial negotiations, best-cost-country sourcing and technical innovation. And, we are improving in labor and burden by addressing several areas simultaneously, including better equipment utilization, reduced changeover time, elimination of waste, improved shift and asset utilization, investing in equipment to improve cycle time and flexibility and employee involvement.

We believe we effectively manage complexity for low volumes and support our customers’ needs during periods of peak volumes. The quality, durability and on-time delivery of our products has earned us strong positions in the markets we support. As we seek to extend and expand our business with existing customers and establish relationships with new ones, our objective is to ensure we are getting a fair value for the recognized benefits of our products and services and the strong brand equity we hold in the marketplace.

We developed a Safe Start plan to protect our employees. It outlined specific policies that were audited at each of our sites including preventative measures in entry and common areas, heat mapping to identify areas that required modifications,

Every day, the safety of our employees is our top priority. Total case rate is a measure of recordable workplace injuries normalized per 100 employees per year. Our target under the M2022 plan is to achieve a case rate of less than 0.55. In fiscal year 2020,2021, we achieved an overall total recordable case rate of 0.570.61 injuries per 200,000 hours worked, compared to 0.590.57 in the prior year. More than 50Fifty percent of our facilities reported no recordable workplace injuries during fiscal year 2020.2021.

We believe that our strength to compete in the global market is dependent upon the engagement of every Meritor employee and that a high-performing team is critical to the level of performance we want to achieve. We have a strong and experienced leadership group and a committed team, both of which are focused on sustaining the strong foundation we built under the M2016 and M2019 plans. We will also continue to strengthenfocus on strengthening the diversity and inclusiveness of our workforce because we recognize the value of different opinions and backgrounds in a company as global as Meritor.

We have established various development and training programs to help our employees grow as we grow. For managers, we offer Management Essentials & Leadership Fundamentals cohort development programs and eLearning modules and courses that address important areas for advancement including accountability, delegation, and providing and receiving feedback.

For director-level employees, we offer a leadership development program through our eLearning platform that includes leadership learning modules, live instructor-led leader camps and live key-note speaker events, that align with our Meritor Code Leadership Model. For certain director-level employees, we offer Leadership Edge - a program whose objective is to develop advanced leadership skills, prepare high-potential leaders for senior level positions and strengthen business acumen.

And for certain senior-level leaders, we offer the Summit leadership development program, which provides executive coaching, the opportunity to attend specific executive training sessions tailored to each individual’s background and career goals, participation in a MBA-level finance course, if needed, and engagement in mentorship opportunities with a member of Meritor’s Board of Directors. To ensure we provide a rich experience for our employees, we will continue to measure employee engagement to build on the competencies that are important to our future.

To enhance our commitment to drive inclusiveness. We want to be leaders in this area. Executives facilitated focus groups this year with diverse employees and identified themes from those discussions that provided opportunities for improvement. Those themes were related to promotion and advancement, recruiting, and anti-discrimination. As a result,inclusiveness, we are making the job posting process more transparent and ensuring that all internal applicants who are not selected for new positions receive feedback. We are also making changes to our hiring and recruitment practiceshave partnered with the intentCenter of Automotive Diversity, Inclusion, & Advancement (CADIA) to remove any bias fromprovide professional development, tools, networks, insights and practical advice to create avenues for success with driving a diverse and inclusive culture. Several of our HR professionals have received Diversity, Equity, & Inclusion certifications. Team members are given the resume-screening processopportunity to gain awareness about DEI through the CADIA Academy. CADIA is conducting workshops for all people leaders to define why Diversity, Equity, and weInclusion are increasingimportant to them personally and to the level of management oversight on hiring decisions.organization. They will explore the priorities and measures required to set themselves and the organization up for transformation and sustainable success. Inclusive culture training is being rolled out in all U.S. plants and a diverse mentoring program has been launched. Longer term, we will refresh our unconscious bias training, develop a diversity mentor program, and explore fast-track programs for employees to ensure that we are retaining diverse talent and providing aggressive career tracks.

Meritor designs, develops, manufactures, markets, distributes, sells, services and supports a broad range of products for use in the transportation and industrial sectors. In addition to sales of original equipment systems and components, we provide our original equipment, aftermarket and remanufactured products to vehicle OEMs, their dealers (who in turn sell to motor carriers and commercial vehicle users of all sizes), independent distributors, and other end-users in certain aftermarkets.

The following chart sets forth, for each of the fiscal years 2021, 2020 2019 and 2018,2019, information about product sales comprising more than 10% of consolidated revenue in any of those years. A narrative description of our principal products follows the chart.

We believe we are one of the world's leading independent suppliers of axles for medium- and heavy-duty commercial vehicles, with the leading market position in axle manufacturing in North America, South America and Europe, and are one of the major axle manufacturers in the Asia-Pacific region. Our extensive truck axle product line includes a wide range of front steer axles and rear drive axles. Our front steer and rear drive axles can be equipped with our cam, wedge or air disc brakes, automatic slack adjusters, and complete wheel-end equipment such as hubs, rotors and drums.

We supply heavy-duty axles in certain global regions for use in numerous off-highway vehicle applications, including construction, material handling, and mining. We also supply axles for use in military tactical wheeled vehicles, principally in North America and Europe. These products are designed to tolerate high tonnage and operate under extreme conditions. We also supply axles for use in buses, coaches and recreational vehicles, fire trucks and other specialty vehicles in North America, Asia Pacific and Europe, and we believe we are a leading supplier of bus and coach axles in North America.

 

We are one of the major manufacturers of heavy-duty trailer axles in North America. Our trailer axles are available in more than 40 models in capacities from 20,000 to 30,000 pounds for virtually all heavy trailer applications and are available with our broad range of suspension modules and brake products, including drum brakes and disc brakes.

 

We supply universal joints and driveline components, including our Permalube™ universal joint and RPL Permalube™ driveline, which are maintenance free, permanently lubricated designs used often in the high mileage on-highway market. We supply drivelines in North America for use in numerous on-highway vehicle applications. We also supply transfer cases for use in specialty vehicles in North America, Turkey and Europe. In addition, we supply trailer air suspension systems and products with an increasing market presence in North America. We supply transfer cases and drivelines for use in military tactical wheeled vehicles, principally in North America and Europe. In addition, we also supply advanced suspension modules for use in light-, medium- and heavy-duty military tactical wheeled vehicles, principally in North America, Turkey and Europe.

We believe we are one of the leading independent suppliers of air brakes to medium- and heavy-duty commercial vehicle manufacturers in North America and Europe. In Brazil, we believe that Master Sistemas Automotivos Limitada, our 49%-owned joint venture with Randon S. A. Implementos e Participações, is a leading supplier of brakes and brake-related products.

Through manufacturing facilities located in North America, Asia Pacific and Europe, we manufacture a broad range of foundation air brakes, as well as automatic slack adjusters for brake systems. Our foundation air brake products include cam drum brakes, which offer improved lining life and tractor/trailer interchangeability; wedge drum brakes, which are lightweight and provide automatic internal wear adjustment; air disc brakes, which provide enhanced stopping distance and improved fade resistance for demanding applications; and wheel-end components such as hubs, drums and rotors.

 

Our brakes and brake system components are used in military tactical wheeled vehicles, principally in North America, Turkey and Europe. We supply brakes for use in buses, coaches and recreational vehicles, fire trucks and other specialty vehicles in North America and Europe, and we believe we are the leading supplier of bus and coach brakes in North America. We also supply brakes for commercial vehicles, buses and coaches in Asia Pacific and air and hydraulic brakes for off-highway vehicles in North America and Europe.

We supply electric drive systems that include an electric motor and inverter, power electronics, battery pack, electrified accessories, and all associated software and controls for terminal tractors and medium and heavy-duty trucks and buses.

In addition to the products discussed above, we sell other complementary products, including third-party and private label items, through our aftermarket distribution channels. These products are generally sold under master distribution or similar agreements with outside vendors and include brake shoes and friction materials; automatic slack adjusters; yokes and shafts; wheel-end hubs and drums; ABS and stability control systems; shock absorbers and air springs; and air brakes.

In North America, we design, engineer, market and sell products principally to OEMs, dealers and distributors. While our North American sales are typically direct to OEMs, our ultimate commercial truck customers include trucking and transportation fleets. Fleet customers may specify our components and integrated systems for installation in the vehicles they purchase from OEMs. We employ what we refer to as a "push-pull" marketing strategy. We "push" for being the standard product at the OEM. At the same time, our district field managers then call on fleets and OEM dealers to "pull-through" our components on specific truck purchases. For all other markets, we specifically design, engineer, market and sell products principally to OEMs for their market-specific needs or product specifications.

 

For certain large OEM customers, our supply arrangements are negotiated on a long-term contract basis for a multi-year period that may require us to provide annual cost reductions through price reductions or other cost benefits for the OEMs. If we are unable to generate sufficient cost savings in the future to offset such price reductions, our gross margins will be adversely affected. Sales to other OEMs are typically made through open order releases or purchase orders at market-based prices that do not require the purchase of a minimum number of products. The customer typically has the right to cancel or delay these orders on reasonable notice. We typically compete to either retain business or try to win new business from OEMs when long-term contracts expire.

 

We have established leading positions in many of the markets we serve as a global supplier of a broad range of drivetrain systems, brakes and components. Based on available industry data and internal company estimates, our market-leading positions include independent truck drive axles (i.e., those manufactured by an independent, non-captive supplier) in North America, Europe, South America and India through a joint venture; truck drivelines in North America; truck air brakes in North

 

 

Our product offerings allow us to service all stages of our customers’ vehicle ownership lifecycle. In North America, we stock and distribute thousands of parts from top national brands to our customers or what we refer to as our "all makes" strategy. Our district field managers call on our OEM's, OEM dealers, fleet customers and independent customers to market our full product line capabilities on a regular basis to seek to ensure that we satisfy our customers’ needs. Our aftermarket business sells products under the following brand names: Meritor, Euclid, Trucktechnic, US Gear, AxleTech and Mach.

 

Based on available industry data and internal company estimates, we believe our North America aftermarket business has the overall market leadership position for the portfolio of products that we offer. 

We compete worldwide with a number of North American and international providers of components and systems, some of which are owned by or associated with some of our customers. The principal competitive factors are price, quality, service, product performance, design and engineering capabilities, new product innovation and timely delivery. Certain OEMs manufacture their own components that compete with the types of products we supply.

 

The cost of our core products is susceptible to changes in overall steel commodity prices, including ingredients used for various grades of steel. We have generally structured our major steel supplier and customer contracts to absorb and pass on normal index-related market fluctuations in steel prices. While we have had steel pricing adjustment programs in place with most major OEMs, the price adjustment programs tend to lag behind the movement in steel costs and have generally not contemplated non-steel index related increases.

Significant future volatility in the commodity markets or a deterioration in product demand may require us to pursue customer price increases through surcharges or other pricing arrangements. In addition, if suppliers are inadequate for our needs, or if prices remain at current levels or increase and we are unable to either pass these prices to our customer base or otherwise mitigate the costs, our operating results could be further adversely affected.

We continuously work to address these competitive challenges by reducing costs and, as needed, restructuring operations. We manage supplier risk by conducting periodic assessments for all major suppliers and more frequent rigorous assessments of

As described above, our business strategies are focused on enhancing our market position by continuously evaluating the competitive differentiation of our product portfolio, focusing on our strengths and core competencies, and growing the businesses that offer the most attractive returns. Implementing these strategies involves various types of strategic initiatives.

As the industries in which we operate have become more globalized, joint ventures and other cooperative arrangements have become an important element of our business strategies. These strategic alliances provide for sales, product design, development and manufacturing in certain product and geographic areas. As of September 30, 2020,2021, our continuing operations participated in the following non-consolidated joint ventures:

Aggregate sales of our non-consolidated joint ventures were $1,011 million, $696 million $1,231 million and $1,101$1,231 million in fiscal years 2021, 2020 2019 and 2018,2019, respectively.

We have significant research, development, engineering and product design capabilities. We spent $76 million in fiscal year 2021, $74 million in fiscal year 2020 and $75 million in fiscal year 2019 and $73 million in fiscal year 2018 on company-sponsored research, development and engineering. We employ professional engineers and scientists globally and have additional engineering capabilities through contract arrangements in low-cost countries. We also have advanced technical centers in North America, South America, Europe and India.

We own or license many United States and foreign patents and patent applications in our engineering and manufacturing operations and other activities. While in the aggregate these patents and licenses are considered important to the operation of our businesses, management does not believe that the loss or termination of any one of them would materially affect a business segment or Meritor as a whole.

Our registered trademarks for Meritor® and the Bull design are important to our business. Other significant trademarks owned by us include Euclid® and Trucktechnic® for aftermarket products.

We believe that our ability to compete in the global market depends on the engagement of every one of our employees, and that a high-performing team is critical to the level of performance we want to achieve. By maintaining relationships with leading universities, we are able to identify and recruit top talent. In order to attract the best candidates, we offer market competitive compensation and benefits around the globe, annual incentive programs for salaried and hourly employees, long-term incentive programs for executives and health and wellness benefits. To retain top talent, we encourage professional

To ensure we provide a rich experience for our employees, we measure organizational culture and engagement to build on the competencies that are important for our future success. We routinely engage independent third parties to conduct cultural and employee engagement surveys. These include corporate culture assessments, as well as real-time feedback on employee engagement and a holistic approach survey on employee well-being focused on physical, emotional, social and financial health.

In addition, we aim to diversify our workforce because we recognize the value of engaging different opinions and backgrounds in a global company. We are committed to recruiting, developing and retaining a high-performing and diverse workforce. We are in the process of initiatinghave recently initiated a mentoring program for diverse employees, implementingimplemented various recruitment initiatives, refreshingrefreshed mandatory unconscious bias training, and are targeting efforts to attract qualified women and underrepresented minorities for positions at all levels of the company and employee led resource groups, including the African American Resource Group, the Women’s Employee Resource Group and the LGBT Resource Group.

The process of estimating environmental liabilities is complex and dependent on physical and scientific data at the site, uncertainties as to remedies and technologies to be used, and the outcome of discussions with regulatory agencies. The actual amount of costs or damages for which we may be held responsible could materially exceed our current estimates because of uncertainties, including the financial condition of other potentially responsible parties, the success of the remediation and other factors that make it difficult to predict actual costs accurately. However, based on management's assessment, after consulting with Meritor's Interim Chief Legal Officer and with outside advisors who specialize in environmental matters, and subject to the difficulties inherent in estimating these future costs, we believe that our 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 adverse effect on our 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 remedy could significantly change our estimates. Management cannot assess the possible impact of compliance with future requirements.

We may experience seasonal variations in the demand for our products, to the extent OEM vehicle production fluctuates. Historically, for most of our operations, demand has been somewhat lower in the quarters ended September 30 and December 31, when OEM plants may close for summer shutdowns and holiday periods or when there are fewer selling days during the quarter. Our aftermarket business and our operations in India generally experience seasonally higher demand in the quarter ending March 31.

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, and other filings we make with the Securities and Exchange Commission ("SEC") are available free of charge on our website (www.Meritor.com), as soon as reasonably practicable after they are filed. The information contained on our company’s website is not included in, or incorporated by reference into, this Annual Report on Form 10-K. 

This Annual Report on Form 10-K 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, customers, operations, workforce, supply chains, distribution systems and operations;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, transportation and labor, and our ability to manage or recover such costs; technological changes in our industry as a result of the trends toward electrified drivetrains and the integration of advanced electronics and their impact on the demand for our products and services; 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; rising costs of pension benefits; 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.

Our business, financial condition and results of operations can be impacted by a number of risks, including those described below and elsewhere in this Annual Report on Form 10-K, any one of which could cause our actual results to vary materially from recent results or from anticipated future results. Any of these individual risks could materially and adversely affect our business, financial condition and results of operations. This effect could be compounded if multiple risks were to occur.

We are dependent upon large OEM customers with substantial bargaining power with respect to price and other commercial terms. In addition, we have long-term contracts with certain of these customers that are subject to renegotiation and renewal from time to time. Loss of all or a substantial portion of sales to any of our large volume customers for whatever reason (including, but not limited to, loss of contracts or failure to negotiate acceptable terms in contract renewal negotiations, loss of market share by these customers, insolvency of such customers, reduced or delayed customer requirements, plant shutdowns, strikes or other work stoppages affecting production by such customers), continued reduction of prices to these customers, or a

The amount of our sales to large OEM customers, including the realization of future sales from awarded business or obtaining new business or customers, is inherently subject to a number of risks and uncertainties, including the number of vehicles that these OEM customers actually produce and sell. Several of our significant customers have major union contracts that expire periodically and are subject to renegotiation. Any strikes or other actions that affect our customers' production during this process would also affect our sales. Further, to the extent that the financial condition, including bankruptcy or market share, of any of our largest customers deteriorates or their sales otherwise continue to decline, our financial position and results of operations could be adversely affected. In addition, our customers generally have the right to replace us with another supplier under certain circumstances. Accordingly, we may not in fact realize all of the future sales represented by our awarded business. Any failure to realize these sales could have a material adverse effect on our financial condition and results of operations.

Production and sales in the commercial vehicle market have historically been volatile. Our business may experience difficulty in adapting to rapidly changing production and sales volumes. In an upturn of the cycle, when demand increases for production, we may have difficulty in meeting such extreme or rapidly increasing demand. This difficulty may include not having sufficient manpower or working capital to meet the needs of our customers or relying on other suppliers who may not be able to respond quickly to a changed environment when demand increases rapidly. In addition, certain volume requirements can necessitate premium freight and the associated costs to support the customer demand. In contrast, in the downturn of the cycle, we may have difficulty sustaining profitability given fixed costs (as further discussed below).

The COVID-19 pandemic has led to a significant downturn in the global economy, which is adversely affecting, and is expected to continue to adversely affect during fiscal year 2021,affected our results of operations, financial condition and cash flows. Thereflows during fiscal year 2021. Although there have been signs of a recovery, there is still uncertainty around the duration and breadth of the COVID-19 pandemic, and as a result the ultimate impact on our business, financial condition or operating results cannot be reasonably estimated at this time. In addition, past recessions have had a significant adverse impact on our business, customers and suppliers. Our cash and liquidity needs are impacted by the level, variability and timing of our customers' worldwide vehicle production and other factors outside of our control. If the global economy experiences another significant decline in the future, our results of operations, financial condition and cash flow would be materially adversely affected.

Our levels of fixed costs can make it difficult to adjust our cost base to the extent necessary, or to make such adjustments on a timely basis, and continued volume declines can result in non-cash impairment charges as the value of certain long-lived assets is reduced. As a result, our financial condition and results of operations have been and would be expected to continue to be adversely affected during periods of prolonged declining production and sales volumes in the commercial vehicle markets.

The negative impact on our financial condition and results of operations from continued volume declines could also have negative effects on our liquidity. If cash flows are not available from our operations, we may be required to rely on the banking and credit markets to meet our financial commitments and short-term liquidity needs; however, we cannot predict whether that funding will be available at all or on commercially reasonable terms. In addition, in the event of reduced sales, levels of receivables would decline, which would lead to a decline in funding available under our U.S. receivables facilities or under our European factoring arrangements.

Our working capital requirements can vary significantly, depending in part on the level, variability and timing of our customers' worldwide vehicle production and payment terms with our customers and suppliers. As production volumes

In addition, since many of our accounts receivable factoring programs support our working capital requirements in Europe, any dissolution of the European monetary union, if it were to occur, or any other termination of our European factoring agreements could have a material adverse effect on our liquidity if we were unable to renegotiate such agreements or find alternative sources of liquidity.

One of our consolidated joint ventures in China participates in bills of exchange programs to settle accounts receivable from its customers and obligations to its trade suppliers. These programs are common in China and generally require the participation of local banks. Any disruption in these programs, could have an adverse effect on our liquidity if we were unable to find alternative sources of liquidity.

The industries in which we operate have been characterized historically by significant periodic fluctuations in overall demand for medium- and heavy-duty trucks and other vehicles for which we supply products, resulting in corresponding fluctuations in demand for our products. The length and timing of any cycle in the vehicle industry cannot be predicted with certainty.

Production and sales of the vehicles for which we supply products generally depend on economic conditions and a variety of other factors that are outside our control, including freight tonnage, customer spending and preferences, vehicle age, labor relations and regulatory requirements. In particular, demand for our Commercial Truck segment products can be affected by a pre-buy before the effective date of new regulatory requirements, such as changes in emissions standards. Historically, implementation of new, more stringent, emissions standards has increased heavy-duty truck demand prior to the effective date of the new standards, and correspondingly decreased this demand after the new standards are implemented. In addition, any expected increase in the heavy-duty truck demand prior to the effective date of new emissions standards may be offset by instability in the financial markets and resulting economic contraction in the U.S. and worldwide markets.

Sales from the aftermarket portion of our Aftermarket and Industrial segment depend on overall levels of truck ton miles and gross domestic product (GDP), among other things, and may be influenced by times of slower economic growth or economic contraction based on the average age of commercial truck fleets.

We may also experience seasonal variations in the demand for our products to the extent that vehicle production fluctuates. Historically, for most of our business, demand has been somewhat lower in the quarters ended September 30 and December 31, when OEM plants may close during model changeovers and vacation and holiday periods or when there are fewer selling days during the quarter. In addition, our aftermarket business and our operations in India generally experience seasonally higher demand in the quarter ending March 31.

Prices of raw materials, primarily steel, for our manufacturing needs and costs of labor and transportation have fluctuatedrisen sharply inover the past years, including rapid increases which had a negative impact on our operating income for certain periods.year. These steel price increases, along with increasing labor and transportation costs, createdare creating pressure on profit margins, and as they recur in the future, they couldare expected to continue unfavorably impactimpacting our financial results going forward. While we have had steel pricing adjustment programs in place with most major OEMs, the price adjustment programs typically lag the increase in steel costs and have generally not contemplated all non-index-related increases in steel costs. Raw material price fluctuation, together with the volatility of the commodity markets, which can be impacted by a variety of factors, including changes in trade laws and tariffs, will continue to pose risks to our financial results. We are also experiencing ongoing labor shortages in the certain geographies and increased competition for qualified candidates. These shortages could adversely affect our ability to meet customer demand and are increasing labor costs, which reduce our profitability. If we are unable to pass price increases on to our customer base or otherwise mitigate the costs, our operating income could be adversely affected.

To a certain extent, pricing pressure by OEMs is a characteristic of the commercial vehicle industry. Virtually all OEMs have price reduction initiatives and objectives each year with their suppliers, and such actions are expected to continue in the future. Accordingly, we must be able to reduce our operating costs in order to maintain our current margins. Price reductions have impacted our margins and may do so in the future. There can be no assurance that we will be able to avoid future customer price reductions or offset future customer price reductions through improved operating efficiencies, new manufacturing processes, sourcing alternatives or other cost reduction initiatives.

Each of Meritor's businesses operates in a highly competitive environment. We compete worldwide with a number of North American and international providers of components and systems, some of which are owned by or associated with some of our customers. Certain OEMs manufacture products for their own use that compete with the types of products we supply, and any future increase in this activity could displace Meritor's sales. In addition, cost reduction strategies in our industry have led to an increase in the consolidation and globalization of OEMs and their suppliers, which could increase the amount of competition or displacement we face from OEMs that manufacture products similar to ours for their own use or from suppliers that are affiliated with or otherwise supported by OEMs.

The commercial vehicle market is also experiencing a period of significant technological change as a result of the trends toward electrified drivetrains and the integration of advanced electronics into traditional products. These trends have led to an increase in the significance of technology to our current and future products and the amount of capital we need to invest to develop these new technologies, as well as an increase in the amount of competition we face from technology focused new market entrants. We are investing in the development of new products and technologies, but the future market acceptance and investment returns for these products are uncertain. If we misjudge the amount of capital to invest or are otherwise unable to continue providing products that meet our customers’ needs in this environment of rapid technological change, our market competitiveness could be adversely affected.affected as demand for our current products and services is reduced.

Some of our significant suppliers have experienced weak financial conditions in the past. In addition, some of our significant suppliers are located in developing countries. We are dependent upon the ability of our suppliers to meet performance and quality specifications and delivery schedules. The inability of a supplier to meet these requirements, the loss of a significant supplier, or any labor issues or work stoppages at a significant supplier could disrupt the supply of raw materials and parts to our facilities and could have an adverse effect on us.

A work stoppage at one or more of our manufacturing facilities could have a material adverse effect on our business. In addition, if a significant customer were to experience a work stoppage, that customer could halt or limit purchases of our products, which could result in shutting down the related manufacturing facilities. Also, a significant disruption in the supply of a key component due to a work stoppage at one of our suppliers could result in shutting down manufacturing facilities, which could have a material adverse effect on our business.

We have a significant number of facilities and operations outside the United States, including investments and joint ventures in developing countries. During fiscal year 2020,2021, approximately 4146 percent of our sales from continuing operations were generated outside of the United States. Our strategy to grow in emerging markets may put us at risk due to the risks inherent in operating in such markets. Our international operations are subject to a number of risks inherent in operating abroad, including, but not limited to:

There can be no assurance that these risks will not have a material adverse impact on our ability to increase or maintain our foreign sales or on our financial condition or results of operations.

We conduct certain of our operations through joint ventures, many of which act as our suppliers, pursuant to the terms of the agreements that we entered into with our partners. We may share management responsibilities and information with one or

The success and timing of any future divestitures and acquisitions will depend on a variety of factors, many of which are not within our control. If we engage in acquisitions, we may finance these transactions by borrowing or issuing additional debt or equity securities. The additional debt from any such acquisitions, if consummated, could increase our debt to capitalization ratio. In addition, the ultimate benefit of any acquisition would depend on our ability to successfully integrate the acquired entity or assets into our existing business and to achieve any projected synergies. There is also no assurance that the total costs associated with any current or future restructuring will not exceed our estimates, or that we will be able to achieve the intended benefits of these restructurings.

TheIn recent years, the U.S. government has adopted a new approach to trade policy and in some cases has attempted to renegotiate or terminate certain existing bilateral or multi-lateral trade agreements. It has also imposed tariffs on certain foreign goods, including steel and certain commercial vehicle parts, which have begun to result

Our current senior secured revolving credit facility matures in June 2024. Upon expiration of this facility, we will require a new or renegotiated facility (which may be smaller and have less favorable terms than our current facility) or other financing arrangements. 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, and there is no guarantee that we will be able to access additional capital.

On November 10, 2020,15, 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, reduce our access to capital markets and result in lower trading prices for our securities.

Our liquidity could also be adversely impacted if our suppliers were to suspend normal trade credit terms and require more accelerated payment terms, including payment in advance or payment on delivery of purchases. If this were to occur, we would be dependent on other sources of financing to bridge the additional period between payment of our suppliers and receipt of payments from our customers.

Disruptions in the financial markets, including the bankruptcy, insolvency or restructuring of certain financial institutions, and the lack of liquidity generally could impact the availability and cost of incremental credit for many companies and may adversely affect the availability of credit already arranged. Such disruptions could adversely affect the U.S. and world economy,

In addition, disruptions in the capital and credit markets could adversely affect our ability to draw on our senior secured revolving credit facility or our U.S. accounts receivable securitization facility. Our access to funds under the facilities is dependent on the ability of the banks that are parties to the facilities to meet their funding commitments. Those banks may not be able to meet their funding commitments to us if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests from Meritor and other borrowers within a short period of time. Longer-term disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation, reduced alternatives, or failures of significant financial institutions could adversely affect our access to liquidity needed for our business. Any disruption could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged.

Our ability to borrow under our existing financing arrangements depends on our compliance with covenants in the related agreements, including covenants in our senior secured revolving credit facility that require compliance with certain financial ratios as of the end of each fiscal quarter. To the extent that we are unable to maintain compliance with these requirements or the financial ratio covenants due to one or more of the various risk factors discussed herein or otherwise, our ability to borrow, and our liquidity, would be adversely impacted.

 If an amendment or waiver is needed (in the event we do not comply with one of these covenants) and not obtained, we would be in violation of that covenant, and the lenders would have the right to accelerate the obligations upon the vote of the lenders holding more than 50% of outstanding loans thereunder. A default under the senior secured revolving credit facility could also constitute a default under our outstanding convertible notes, as well as our U.S. receivables facility, and could result in the acceleration of these obligations. In addition, a default under our senior secured revolving credit facility could result in a cross-default or the acceleration of our payment obligations under other financing agreements. If our obligations under our senior secured revolving credit facility and other financing arrangements are accelerated as described above, our assets and cash flow may be insufficient to fully repay these obligations, and the lenders under our senior secured revolving credit facility could institute foreclosure proceedings against our assets.

Our business is subject to liabilities with respect to environmental, health and safety matters. In addition, we are required to comply with federal, state, local and foreign laws and regulations governing the protection of the environment and health and safety, and we could be held liable for damages arising out of exposure to hazardous substances or other environmental or natural resource damages. Environmental, health and safety laws and regulations are complex, change frequently and tend to be increasingly stringent. As a result, our future costs to comply with such laws and regulations may increase significantly. There is also an inherent risk of exposure to warranty and product liability claims, as well as product recalls, in the commercial vehicle industry if our products fail to perform to specifications or are alleged to cause property damage, injury or death.

With respect to environmental liabilities, we have been designated as a potentially responsible party at ten Superfund sites (excluding sites as to which our records disclose no involvement or as to which our liability has been finally determined). In addition to the Superfund sites, various other lawsuits, claims and proceedings have been asserted against us alleging violations of U.S. and foreign federal, state and local environmental protection requirements or seeking remediation of alleged environmental impairments. We establish reserves for these liabilities when we determine that the company has a probable obligation and we can reasonably estimate it, but the process of estimating environmental liabilities is complex and dependent on evolving physical and scientific data at the site, uncertainties as to remedies and technologies to be used, and the outcome of discussions with regulatory agencies. The actual amount of costs or damages for which we may be held responsible could materially exceed our current estimates because of these and other uncertainties which make it difficult to predict actual costs

We have a significant amount of long-lived assets and goodwill on our Consolidated Balance Sheet. Under U.S. generally accepted accounting principles, long-lived assets, excluding goodwill, are required to be reviewed for impairment whenever adverse events or changes in circumstances indicate a possible impairment. If business conditions or other factors cause our operating results and cash flows to decline, we may be required to record non-cash impairment charges. Goodwill must be evaluated for impairment at least annually. If the carrying value of our reporting units exceeds their current fair value, the goodwill is considered impaired and is reduced to fair value via a non-cash charge to earnings. Events and conditions that could result in impairment in the value of our long-lived assets and goodwill include changes impacting the industries in which we operate, particularly the impact of any downturn in the global economy, as well as competition and advances in technology, adverse changes in the regulatory environment, or other factors leading to reduction in expected long-term sales or operating results. If the value of long-lived assets or goodwill is impaired, our earnings and financial condition could be adversely affected.

In accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 740 "Income Taxes," each quarter we determine the probability of the realization of deferred tax assets using significant judgments and estimates with respect to, among other things, historical operating results, expectations of future earnings and tax planning strategies. If we determine in the future that there is not sufficient positive evidence to support the valuation of these assets, due to the risk factors described herein or other factors, we may be required to adjust the valuation allowance to reduce our deferred tax assets. Such a reduction could result in material non-cash expenses in the period in which the valuation allowance is adjusted and could have a material adverse effect on our results of operations and financial condition. In addition, future changes in laws or regulations could have a material impact on the company's overall tax position.

 

Our overall effective tax rate is equal to our total tax expense as a percentage of our total earnings before tax. However, tax expenses and benefits are determined separately for each tax paying component (an individual entity) or group of entities that is consolidated for tax purposes in each jurisdiction. Losses in certain jurisdictions that have valuation allowances against their deferred tax assets provide no current financial statement tax benefit unless required under the intra-period allocation requirements of FASB ASC Topic 740.,740, "Income Taxes" ("ASC Topic 740"). As a result, changes in the mix of projected earnings between jurisdictions, among other factors, could have a significant impact on our overall effective tax rate.

ASC Topic 740 defines the confidence level that a tax position must meet in order to be recognized in the financial statements. This topic requires that the tax effects of a position be recognized only if it is "more-likely-than-not" to be sustained based solely on its technical merits as of the reporting date. The more-likely-than-not threshold represents a positive assertion by management that a company is entitled to the economic benefits of a tax position. If a tax position is not considered more likely than not to be sustained based solely on its technical merits, no benefits of the position are to be recognized. Moreover, the more-likely-than-not threshold must continue to be met in each reporting period to support continued recognition of a benefit. In the event that the more-likely-than-not threshold is not met, we would be required to change the relevant tax position, which could have an adverse effect on our results of operations and financial condition.

Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as amended, limit the ability of a corporation that undergoes an "ownership change" to use its tax attributes, such as net operating losses and tax credits. In general, an "ownership change" occurs if shareholders owning five percent or more (applying certain look-through rules) of an issuer's outstanding common stock, collectively, increase their ownership percentage by more than fifty percentage points within any three-year period over such shareholders' lowest percentage ownership during this period. If we were to issue new shares of stock, such new shares could contribute to such an "ownership change" under U.S. tax law. Moreover, not every event that could contribute

Not applicable.

The name, age, positions and offices held with Meritor and principal occupations and employment during the past five years of each of our executive officers as of November 12, 2020,17, 2021, are as follows:

Production volumes in fiscal year 2020 significantly decreased2021 increased from the production levels experienced in fiscal year 2019.2020. We expect fiscal 20212022 Heavy-Duty Truck production volumes to increase compared with the levels experienced in fiscal year 2020.2021.

During fiscal year 2020,2021, production volumes in Western Europe significantly decreasedincreased from the production levels experienced in fiscal year 2019.2020. We expect fiscal year 20212022 production volumes to increase comparedremain consistent with the levels experienced in fiscal year 2020.2021.

During fiscal year 2020,2021, production volumes in South America decreasedsignificantly increased from the levels experienced in fiscal year 2019.2020. We expect fiscal year 2022 production volumes to remain consistent with the levels experienced in fiscal year 2021.

During fiscal year 2021, production volumes in China remained consistent with the levels experienced in fiscal year 2020. We expect fiscal year 2022 production volumes in China to remain consistent with the levels experienced in fiscal year 2021.

During fiscal year 2021, production volumes in India significantly increased from the levels experienced in fiscal year 2020. We expect fiscal year 2022 production volumes in India to increase from the levels experienced in fiscal year 2020.2021.

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

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