<PAGE>   1
 
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
 
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
                         COMMISSION FILE NUMBER 1-13093
                            ------------------------
 
                            MERITOR AUTOMOTIVE, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                            <C>
                   DELAWARE                                      38-3354643
       (STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NO.)
 
             2135 WEST MAPLE ROAD                                48084-7186
                TROY, MICHIGAN                                   (ZIP CODE)
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (248) 435-1000
                            ------------------------
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 
<TABLE>
<CAPTION>
             TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED
             -------------------                 -----------------------------------------
<S>                                            <C>
          Common Stock, $1 Par Value                      New York Stock Exchange
     (including the associated Preferred
            Share Purchase Rights)
</TABLE>
 
       SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:  NONE
                            ------------------------
 
     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.  Yes [X]  No [ ]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K  [X]
 
     The aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant on November 30, 1998 was approximately $1.22
billion.
 
     69,076,028 shares of the registrant's Common Stock, par value $1 per share,
were outstanding on November 30, 1998.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
(1) Certain information contained in the Annual Report to Shareowners of the
    registrant for the fiscal year ended September 30, 1998 is incorporated by
    reference into Part I, Part II and Part IV.
(2) Certain information contained in the Proxy Statement for the Annual Meeting
    of Shareowners of the registrant to be held on February 10, 1999 is
    incorporated by reference into Part III.
 
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<PAGE>   2
 
                                     PART I
 
ITEM 1.  BUSINESS.
 
     Meritor Automotive, Inc. (the "Company" or "Meritor"), headquartered in
Troy, Michigan, is a leading global supplier of a broad range of components and
systems for use in commercial, specialty and light vehicles. The Company was
incorporated in Delaware in May 1997 in connection with the September 30, 1997
distribution by Rockwell International Corporation, a Delaware corporation and
Meritor's former parent company ("Rockwell"), to Rockwell shareowners on a pro
rata basis of all of the issued and outstanding shares of the Company (the
"Distribution"). In the Distribution, Rockwell shareowners received one share of
Company Common Stock for every three shares of Rockwell Common Stock owned on
September 17, 1997, the record date for the Distribution. Prior to the
Distribution, Rockwell transferred substantially all of its operations, assets
and liabilities related to the automotive businesses then owned and operated by
Rockwell (the "Automotive Business") (including liabilities relating to former
operations) to the Company or to subsidiaries of the Company. As used herein,
the terms "Company" or "Meritor" include subsidiaries and predecessors unless
the context indicates otherwise.
 
     Whenever an item of this Annual Report on Form 10-K refers to information
under specific captions of the 1998 Annual Report to Shareowners of the Company
(the "1998 Annual Report") or to information in the Proxy Statement for the
Annual Meeting of Shareowners of the Company to be held on February 10, 1999
(the "1999 Proxy Statement"), the information is incorporated in that item by
reference.
 
     References in this Annual Report on Form 10-K to the Company's being a
leading supplier or the world's leading supplier, and other similar statements
as to the Company's relative market position, are based principally on
calculations made by the Company based on information collected by the Company,
including Company and industry sales data obtained from internal and available
external sources, as well as Company estimates. In addition to such quantitative
data, the Company's statements are based on other competitive factors such as
the Company's technological capabilities, its research and development efforts
and innovations and the quality of its products and services, in each case
relative to that of its competitors in its addressed markets.
 
     Meritor serves a broad range of original equipment manufacturer ("OEM")
customers worldwide, including truck OEMs, light vehicle OEMs, semi-trailer
producers and off-highway and specialty vehicle manufacturers. Its ten largest
customers accounted for approximately 60% of total fiscal 1998 sales. The
Company operates 46 manufacturing facilities around the world. Sales outside
North America accounted for approximately 38% of total sales in fiscal 1998.
 
     The Company serves its customers worldwide through Heavy Vehicle Systems
("HVS") and Light Vehicle Systems ("LVS"). HVS, which had fiscal 1998 sales of
approximately $2.36 billion, supplies drivetrain systems and components to OEMs
as well as to the aftermarket, including axles, brakes, transmissions, clutches
and drivelines, for heavy-duty and medium-duty trucks, trailers, off-highway
equipment, buses and coaches, as well as other specialty and military vehicles.
LVS, which had fiscal 1998 sales of approximately $1.48 billion, supplies
electromechanical and other components and systems, including roof, door, access
control, suspension and seat adjusting systems and wheel products for passenger
cars, light trucks and sport utility vehicles.
 
                                        1
<PAGE>   3
 
     The Company's sales by product class for the three fiscal years ended
September 30, 1998 were as follows:
 
<TABLE>
<CAPTION>
                                                                  FISCAL YEAR
                                                              ENDED SEPTEMBER 30,
                                                           --------------------------
                                                            1998      1997      1996
                                                           ------    ------    ------
                                                                 (IN MILLIONS)
<S>                                                        <C>       <C>       <C>
Heavy Vehicle Systems:*
  Truck and Trailer Products.............................  $1,759    $1,441    $1,360
  Off-Highway, Specialty and Military Vehicle Products...     602       516       467
Light Vehicle Systems....................................   1,475     1,352     1,317
                                                           ------    ------    ------
          Total..........................................  $3,836    $3,309    $3,144
                                                           ======    ======    ======
</TABLE>
 
---------------
* HVS sales include aftermarket sales of $313 million in 1998, $290 million in
  1997 and $261 million in 1996.
 
     The following tables depict HVS and LVS sales by product and geographic
region for the fiscal year ended September 30, 1998:
 
                             1998 SALES BY PRODUCT
 
<TABLE>
<S>                                                             <C>
Heavy Vehicle Systems:
  Truck and Trailer Axles and Brakes........................     39%
  Off-Highway, Specialty and Military Vehicle Products......     16
  Transmissions, Clutches, Drivelines and Other.............      6
Light Vehicle Systems:
  Door Systems..............................................     13
  Roof Systems..............................................     10
  Access Control Systems....................................      5
  Suspension Systems........................................      5
  Wheel Products............................................      4
  Seat Adjusting Systems....................................      2
                                                                ---
          Total.............................................    100%
                                                                ===
</TABLE>
 
                        1998 SALES BY GEOGRAPHIC REGION
 
<TABLE>
<CAPTION>
                                     HEAVY VEHICLE SYSTEMS    LIGHT VEHICLE SYSTEMS    COMBINED
                                     ---------------------    ---------------------    --------
<S>                                  <C>                      <C>                      <C>
North America......................           77%                      39%                62%
Europe.............................           16                       48                 29
South America......................            5                        9                  6
Asia/Pacific.......................            2                        4                  3
</TABLE>
 
     Meritor began operations separate from Rockwell on October 1, 1997 and,
accordingly, does not have an operating history as an independent company prior
to that date. The combined financial information included or incorporated by
reference in this Annual Report on Form 10-K as of and for periods prior to
September 30, 1997 may not necessarily be indicative of the results of
operations, financial position and cash flows of the Company had it been a
separate, independent company during these periods. The consolidated financial
statements for periods after September 30, 1997 are those of the Company and its
subsidiaries.
 
INDUSTRY TRENDS
 
     The automotive industry is experiencing several significant trends that
present opportunities and challenges to industry suppliers. These trends, which
influence the Company's business strategies, include the
 
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<PAGE>   4
 
globalization of OEMs and their suppliers, increased outsourcing by OEMs,
increased demand for modules and systems by OEMs and the consolidation of
suppliers worldwide.
 
     As OEMs expand geographically to access new markets, they are able to
achieve significant cost savings and enhanced product quality and consistency by
sourcing from the most capable full-service global suppliers. OEMs and suppliers
also have the opportunity to take advantage of economies of scale through global
sourcing of components and systems and by designing platforms that can be used
in different geographic markets, but still be adapted to local preferences.
 
     OEMs are responding to global competitive pressures to improve quality and
reduce manufacturing costs and related capital investments by outsourcing
products which they historically have engineered and manufactured internally.
Outsourcing enables OEMs to focus on their core design, assembly and marketing
capabilities. In markets addressed by LVS, this increased outsourcing trend has
extended not only to components, but to entire modules and systems, requiring
suppliers to provide a higher level of engineering, design, electromechanical
and systems integration expertise in order to remain competitive. Increased
outsourcing by light vehicle OEMs has produced higher overall per vehicle sales
by independent suppliers. Such increased outsourcing can result in supplier
sales growth independent of the overall automotive industry growth trend.
 
     OEMs also are reducing their total number of suppliers and are more
frequently entering into supply arrangements with the most capable global
suppliers. Increasingly, the criteria for selection include not only quality,
cost and responsiveness, but also certain full-service capabilities, including
design and engineering. This trend and the globalization trend described above
have contributed to the consolidation of automotive suppliers into larger, more
efficient and more capable companies.
 
BUSINESS STRATEGIES
 
     Meritor has developed leadership market positions as it has grown into a
global supplier of a broad range of components and systems for use in
commercial, specialty and light vehicles worldwide. Meritor seeks to enhance its
leadership positions and capitalize on its existing customer, product and
geographic strengths, as well as the industry trends described above, and to
increase its sales, earnings and profitability by employing the following
business strategies:
 
     Continuously Improve Core Business Processes.  The Company is continuously
seeking to improve its core business processes, through investment in
information technology and capital equipment, rationalization of production
among facilities, deintegration of non-core processes, establishment of flexible
assembly sites and simplification and increased commonality of products. The
goal of these actions is to reduce product costs, improve product quality and
lower required asset investment levels, which should result in reduced product
development times and more flexibility to meet customer needs.
 
     Capitalize on Customer Outsourcing Activities.  A significant growth
strategy of the Company is to provide lower cost and higher quality products to
customers in connection with their increasing outsourcing activities. Management
believes truck and trailer OEMs in Europe will increasingly outsource in order
to achieve cost and efficiency advantages. The Company works closely with
current and prospective customers worldwide to identify and implement mutually
beneficial outsourcing opportunities. The Company has sought and will continue
to seek to utilize its broad product line and its design, engineering and
manufacturing expertise by expanding its sales of higher value modules and
systems. The Company will seek to utilize its leadership positions in the supply
of electromechanical systems to light vehicle OEMs and its ability to provide
drivetrain systems to truck and specialty vehicle OEMs to capitalize on this
anticipated customer demand.
 
     Leverage Geographic Strengths.  Geographic expansion to meet the global
sourcing needs of customers and to address new markets will continue to be an
important element of the Company's growth strategy. Management believes
opportunities exist to increase further the Company's presence in the North
American light vehicle markets, where its sales of light vehicle products
increased from approximately $466 million in fiscal 1997 to approximately $576
million in fiscal 1998. The Company also believes there are opportunities to
increase sales to heavy-duty and medium-duty commercial vehicle OEMs in Europe,
building on established
 
                                        3
<PAGE>   5
 
customer relationships with their North American affiliates and the Company's
existing manufacturing presence in Europe. Emerging markets such as the
Asia-Pacific region and South America could also present growth opportunities if
demand for commercial, specialty and light vehicles increases in these areas. In
evaluating opportunities in these emerging markets, the Company will continue to
assess the economic situation in these regions and its potential effect on the
Company's businesses and served markets.
 
     Introduce New Systems and Technologies.  Meritor plans to continue
investing in new technologies, including electronics, and product development.
Meritor also plans to continue working closely with its customers to develop and
implement design, engineering, manufacturing and quality improvements. The
Company will draw upon the engineering resources of its Technical Center in
Troy, Michigan and its engineering centers of expertise in the United States,
Brazil, Canada, France, Germany and the United Kingdom, as well as its ongoing
relationship with the Rockwell Science Center. See "Research and Development."
 
     Management believes that its strategy of continuing to introduce new and
improved systems and technologies will be an important factor in its efforts to
achieve its growth objectives.
 
     Expand Aftermarket Business.  Meritor intends to pursue growth of its
aftermarket business, which historically has generated higher profit margins
than those associated with original equipment sales. The Company's fiscal 1998
aftermarket sales were $313 million, representing sales of components and
services principally to HVS North American customers. The Company will seek to
expand its aftermarket business by utilizing its advanced distribution center in
Florence, Kentucky, and by leveraging its existing aftermarket channels with new
products, both those manufactured by the Company and those manufactured by
others and sold by the Company under distribution agreements.
 
     On December 7, 1998, the Company signed a definitive agreement to acquire
the assets and assume substantially all of the liabilities of Euclid Industries.
Euclid is a leading North American supplier and manufacturer of aftermarket
replacement parts for a wide range of medium- and heavy-duty vehicles and has
been a major participant in the North American heavy-duty aftermarket. The
transaction is expected to close in December 1998, subject to receipt of
necessary regulatory approvals.
 
     Selectively Pursue Strategic Opportunities.  The Company regularly
evaluates various strategic and business development opportunities, including
license agreements, marketing arrangements, joint ventures, acquisitions and
dispositions. The Company intends to continue selectively to pursue alliances
and acquisitions that would allow it to gain access to new customers and
technologies, penetrate new geographic markets and enter new product markets,
and to review the prospects of its existing businesses to determine whether any
of them should be modified, sold or otherwise discontinued. See
"Products -- Heavy Vehicle Systems -- Truck and Trailer Products -- Truck Axles"
and "-- Brakes" below for information on agreements by the Company to purchase
the heavy truck axle manufacturing operations of Volvo Truck Corporation and the
heavy vehicle braking business of LucasVarity plc. See "-- Expand Aftermarket
Business" above for information on an agreement by the Company to acquire Euclid
Industries.
 
PRODUCTS
 
     Meritor designs, develops, manufactures, markets, distributes, sells,
services and supports a broad range of products for use in commercial, specialty
and light vehicles. In addition to sales to the OEM market, the Company provides
its truck and trailer products and off-highway and specialty products to OEMs,
dealers, distributors, fleets and other end-users in the aftermarket. Principal
products of the Company include the following:
 
  Heavy Vehicle Systems
 
     Truck and Trailer Products
 
     Truck Axles.  Meritor is one of the world's leading independent suppliers
of axles for heavy-duty commercial vehicles. The Company's five axle
manufacturing facilities located in the United States, Brazil, England and Italy
produce axles for heavy-duty and medium-duty commercial vehicles. The Company's
extensive truck axle product line includes a wide range of drive and non-drive
front steer axles and single and tandem rear drive axles, which can include
driver-controlled differential lock for extra traction, aluminum
                                        4
<PAGE>   6
 
carriers to reduce weight and pressurized filtered lubrication systems for
longer life. The Company's front steer and rear drive axles can be equipped with
the Company's cam, wedge or air disc brakes, automatic slack adjusters and
anti-lock braking systems.
 
     On December 4, 1998, Meritor and Volvo Truck Corporation signed a
definitive agreement under which Meritor will acquire Volvo's heavy truck axle
manufacturing operations based in Lindesberg, Sweden, for a purchase price of
approximately $135 million in cash, $44 million of which is deferred. Under the
terms of the agreement, Meritor will become the primary supplier of heavy duty
axles for Volvo's global heavy truck operations. The transaction is expected to
close in December 1998, subject to receipt of regulatory approvals and other
customary closing conditions. Meritor believes that this acquisition will
enhance its position as a global leader in commercial axle production.
 
     Brakes.  The Company is a leading independent supplier of air brakes to
heavy-duty and medium-duty commercial vehicle manufacturers in North America.
Through four manufacturing facilities located in the United States, Canada,
England and Italy the Company manufactures a broad range of foundation air
brakes as well as automatic slack adjusters for brake systems. The Company's
foundation air brake products include cam drum brakes, which offer improved
lining life and tractor/trailer interchangeability, air disc brakes, which
provide fade resistant braking for demanding applications, and wedge drum
brakes, which are lightweight and provide automatic internal wear adjustment.
 
     Through its 50%-owned joint venture with WABCO Automotive Products
("WABCO"), a wholly-owned subsidiary of American Standard, Inc., the Company is
the leading supplier of anti-lock braking systems ("ABS") and a supplier of
other electronic and pneumatic control systems for North American heavy-duty
commercial vehicles. Through the joint venture the Company also supplies
hydraulic ABS to the North American medium-duty truck market.
 
     In 1995, federal regulations were adopted requiring that new heavy-duty and
medium-duty vehicles sold in the United States be equipped with ABS. Under these
regulations truck-tractors were required to be ABS equipped effective in March
1997, and ABS was required on all trailers, single-unit trucks and buses with
air brakes manufactured after March 1, 1998. In addition, ABS will be required
on all trucks and buses with hydraulic brakes manufactured after March 1, 1999.
 
     On November 22, 1998, the Company signed a definitive agreement to acquire
the heavy vehicle braking systems ("HVBS") business of LucasVarity plc for $390
million in cash. The products of LucasVarity's HVBS business include air drum
and disc brakes, hydraulic brakes, wheel end components and aftermarket
products, which complement the Company's brake system products. The transaction
is expected to close in January 1999, subject to receipt of regulatory approvals
and other customary closing conditions. The Company believes that the
acquisition will enhance its position as a leading provider of brakes in Europe
and will enable it to provide North American OEM and aftermarket customers with
a comprehensive offering of drivetrain products.
 
     Trailer Products.  Meritor believes it is the world's leading manufacturer
of heavy-duty trailer axles, with leadership positions in North America and in
Europe. The Company's trailer axles are available in over 40 models in
capacities from 20,000 to 30,000 pounds for virtually all heavy trailer
applications and are available with the Company's broad range of brake products,
including ABS. In addition, the Company supplies trailer air suspension
products, for which it has strong market positions in Europe and growing market
presence in North America.
 
     Transmissions.  The Company introduced its transmission product line in
1989, enabling it to supply a complete drivetrain system to heavy-duty
commercial vehicle manufacturers in North America. The Company's range of
transmission models includes its Engine Synchro Shift(TM) transmission for
heavy-duty trucks that is designed to reduce gear shifting effort for drivers
and reduce wear on clutches and other drivetrain components in a cost efficient
manner by synchronizing engine speed to road speed shifts without use of the
clutch. See "Item 3. Legal Proceedings" for information with respect to a patent
infringement lawsuit filed against the Company by Eaton Corporation and an
adverse judgment in the case.
 
     Clutches, Drivelines and Other Products.  Meritor also supplies universal
joints and driveline components, as well as clutches, including diaphragm-spring
clutches. The Company believes that its Permalube(TM)
                                        5
<PAGE>   7
 
universal joint is currently the only permanently lubricated universal joint
used in the high mileage on-highway market. The Company also supplies
Tripmaster(R) on-board computers (which provide trip and vehicle diagnostics) to
truck OEMs and fleet operators.
 
     Off-Highway, Specialty and Military Vehicle Products
 
     Off-Highway Vehicle Products.  The Company supplies heavy-duty axles,
brakes and drivelines for use in numerous off-highway vehicle applications,
including construction, material handling, agriculture, mining and forestry, in
North America, South America, Europe and China. These products are designed to
tolerate high tonnages and operate under extreme conditions.
 
     Specialty Vehicle Products.  The Company supplies axles, brakes and
transfer cases for use in buses, coaches and recreational, fire and other
specialty vehicles in North America and Europe, and is the leading supplier of
bus and coach axles and brakes in North America.
 
     Military Vehicle Products.  The Company supplies axles, brakes, brake
system components including ABS, trailer products, transfer cases and drivelines
for use in medium-duty and heavy-duty military tactical wheeled vehicles,
principally in North America.
 
  Light Vehicle Systems
 
     Roof Systems.  Meritor is one of the world's leading independent suppliers
of sunroofs and roof systems products, including its Golde(R) brand sunroofs,
for use in passenger cars, light trucks and sport utility vehicles. The Company
has roof system manufacturing facilities in North America, Europe and the
Asia-Pacific region. Meritor's North American sunroof sales increased in fiscal
1997 and 1998, reflecting increased demand in North America. However, demand for
sunroofs in the European light vehicle market decreased in fiscal 1997 and 1998
due to increasing popularity of air conditioning. This trend, which may
continue, had a negative impact on the Company's European sales in those
periods.
 
     Door Systems.  The Company is the world's leading supplier of manual and
power window regulators and a leading supplier of integrated door modules and
systems. In fiscal 1998, the Company manufactured approximately 29.2 million
window regulators at plants in North America, South America, Europe and the
Asia-Pacific region for light vehicle and heavy-duty commercial vehicle
manufacturers. The Company's wide range of power and manual door system products
utilize numerous technologies and offer the Company's own electric motors, which
are designed for individual applications and to maximize operating efficiency
and reduce noise levels.
 
     Access Control Systems.  Meritor supplies manual and power activated latch
systems to light vehicle and heavy-duty commercial vehicle manufacturers, with
leadership market positions in Europe and a growing market presence in North
America and the Asia-Pacific region. The Company's access control products
include modular and integrated door latches, actuators, trunk and hood latches
and fuel flap locking devices. The Company manufactured approximately 22.4
million latches and 23.1 million actuators in fiscal 1998 in access control
systems manufacturing facilities in North America, Europe and the Asia-Pacific
region.
 
     Seat Adjusting Systems.  The Company supplies manual and power seat
adjusting systems for passenger cars, light trucks and sport utility vehicles,
principally in North America. The Company's seat adjusting system products,
first introduced in 1994, feature systems with integrated electronic memory and
electric motors manufactured by the Company which are designed with speed and
power capabilities to meet the specific requirements of each vehicle platform.
 
     Suspension Products.  Through its 57%-owned joint venture with Mitsubishi
Steel Mfg. Co., the Company is one of the leading independent suppliers of
products used in suspension systems for passenger cars, light trucks and sport
utility vehicles in North America. The Company's suspension system products,
which are manufactured at three facilities in the United States and Canada,
include coil springs, stabilizer bars and torsion bars. This business has
experienced significant sales growth over the past five years as light vehicle
OEMs have increased their outsourcing of suspension system products and the
light vehicle market has grown.
 
                                        6
<PAGE>   8
 
     Wheel Products.  Meritor is a leading supplier of wheel products to the
light vehicle OEM market, principally in North and South America. The Company's
wheel manufacturing facilities in Brazil and Mexico produced approximately 13.0
million wheels in fiscal 1998.
 
CUSTOMERS; SALES AND MARKETING
 
     Meritor has numerous customers worldwide and has developed long-standing
business relationships with many of these customers. The Company markets and
sells its products principally to OEMs. In North America, the Company also
markets its truck and trailer products directly to dealers, fleets and other
end-users, who may designate the components and systems of a particular supplier
for installation in the vehicles they purchase from OEMs. Most of the Company's
sales to OEMs, consistent with industry practice, are made through open purchase
orders, which do not require the purchase of a minimum number of products and
typically may be canceled by the customer on reasonable notice without penalty.
The Company also sells products to certain customers under long-term
arrangements that require the Company to provide annual cost reductions (through
price reductions or other cost benefits for the OEMs) by certain percentages
each year. If the Company were unable to generate sufficient production cost
savings in the future to offset such price reductions, the Company's gross
margins could be adversely affected. In addition to sales to the OEM market, the
Company provides its truck and trailer products and off-highway and specialty
products to OEMs, dealers and distributors in the aftermarket.
 
     The Company is dependent upon large OEM customers with substantial
bargaining power, including with respect to price and other commercial terms.
Although the Company believes that it generally enjoys good relations with its
OEM customers, loss of all or a substantial portion of the Company's sales to
any of its large volume customers for whatever reason (including, but not
limited to, loss of contracts, reduced or delayed customer requirements or
strikes or other work stoppages affecting production by such customers) could
have a significant adverse effect on the Company's financial results.
Daimler-Benz A.G. (which owns Mercedes-Benz A.G. and Freightliner Corporation,
including the heavy truck business formerly owned by Ford Motor Company which
was acquired by Freightliner) accounted for approximately 16% of total sales of
the Company for fiscal 1998. Daimler-Benz A.G. and Chrysler Corporation merged
on November 12, 1998, and together they accounted for approximately 23% of the
Company's total fiscal 1998 sales.
 
     On September 18, 1998, the Company and Freightliner entered into a
multi-year extension of their existing drivetrain supply agreement. The
agreement provides that the Company's products, which are already standard on
some Freightliner models, will become standard on several additional models. The
agreement includes front steer and rear drive axles, air brakes, automatic slack
adjusters, clutches, transmissions, ABS, on-board diagnostic computing systems
and aftermarket parts. As a result of this contract, the Company expects that
Freightliner will account for more of the Company's sales in fiscal 1999 than it
did in fiscal 1998.
 
     Except as noted above with respect to the North American market for
heavy-duty trucks, the Company generally competes for new business from OEMs
both at the beginning of the development of new vehicle platforms and upon the
redesign of existing platforms. New platform development generally begins two to
four years prior to start-up of production. Once a supplier has been designated
to supply products to a new platform, an OEM will generally continue to purchase
those products from the supplier for the life of the platform, which typically
lasts four to six years.
 
COMPETITION
 
     The Company operates in a highly competitive environment. Principal
competitive factors are price, quality, service, product performance, design and
engineering capabilities, new product innovation and timely delivery. The
Company competes worldwide with a number of United States and international
manufacturers that are both larger and smaller than the Company in terms of
resources and market shares. In addition, certain OEMs manufacture for their own
use products of the type supplied by the Company. In North America, the major
competitors of HVS are Eaton Corporation and Dana Corporation. LVS has numerous
competitors across its various product lines worldwide.
 
                                        7
<PAGE>   9
 
RAW MATERIALS AND SUPPLIES
 
     The Company believes it has adequate sources for the supply of raw
materials and components for its manufacturing needs with suppliers located
around the world. The Company does, however, concentrate its purchases of
certain raw materials and parts over a limited number of suppliers and is
dependent upon the ability of its suppliers to meet performance and quality
specifications and delivery schedules. Although the Company historically has not
experienced any significant difficulties in obtaining an adequate supply of raw
materials and components necessary for its manufacturing operations, the loss of
a significant supplier or the inability of a supplier to meet performance and
quality specifications or delivery schedules could have an adverse effect on the
Company.
 
JOINT VENTURES
 
     As the automotive industry has become more globalized, joint ventures and
other cooperative arrangements have become an important element of the business
strategies of the Company. The Company currently has interests in 13 joint
ventures with operations in the United States, Australia, Brazil, Canada, China,
India, Japan, Mexico and Turkey. In accordance with generally accepted
accounting principles, operating results of the seven joint ventures more than
50% owned are consolidated in the financial statements of the Company. Joint
ventures of the Company include its 50%-owned joint venture with WABCO for the
manufacture and supply of ABS systems for heavy-duty commercial vehicles and its
57%-owned joint venture with Mitsubishi Steel Mfg. Co. for the manufacture and
supply of suspension products for passenger cars, light trucks and sport utility
vehicles.
 
ACQUISITIONS AND DISPOSITIONS
 
     Meritor regularly considers various strategic and business opportunities,
including license agreements, marketing arrangements and acquisitions, and
reviews the prospects of its existing businesses to determine whether any of
them should be modified, sold or otherwise discontinued. Although no assurance
can be given as to whether or when any acquisitions or dispositions will be
consummated, if agreement with respect to any acquisitions were to be reached,
the Company could finance such acquisitions by issuance of additional debt or
equity securities. The additional debt from any acquisitions, if consummated,
would increase the Company's debt to capitalization ratio. See
"Products -- Heavy Vehicle Systems -- Truck and Trailer Products -- Truck Axles"
and "-- Brakes" above for information on agreements by the Company to purchase
the heavy truck axle manufacturing operations of Volvo Truck Corporation and the
heavy vehicle braking business of LucasVarity plc. See "Business
Strategies -- Expand Aftermarket Business" above for information on an agreement
by the Company to acquire Euclid Industries.
 
     The industry in which the Company operates is experiencing significant
consolidation among suppliers, due in part to globalization and increased
outsourcing of product engineering and manufacturing by OEMs, and in part to
OEMs more frequently awarding long-term, sole-source or preferred supplier
contracts to the most capable global suppliers, thereby reducing the total
number of suppliers from whom components and systems are purchased. The Company
will consider acquisitions as a means of further expansion, but cannot predict
whether its participation, or lack of participation, in industry consolidation
will ultimately be beneficial to the Company.
 
RESEARCH AND DEVELOPMENT
 
     The Company has significant research, development, engineering and product
design capabilities. The Company spent approximately $54 million, $54 million
and $51 million in fiscal 1998, 1997 and 1996, respectively, on research and
development. At September 30, 1998, the Company employed approximately 608
professional engineers and scientists. Pursuant to a transitional services
agreement entered into with Rockwell in connection with the Distribution,
Rockwell's Science Center continues to provide assistance to the Company in the
development of various technological and product advancements.
 
                                        8
<PAGE>   10
 
PATENTS AND TRADEMARKS
 
     Numerous United States and foreign patents and patent applications are
owned or licensed by the Company in its manufacturing operations and other
activities. While in the aggregate the patents and licenses of the Company are
considered important to the operation of its business, management does not
consider them of such importance that the loss or termination of any one of them
would materially affect the Company. See "Item 3. Legal Proceedings."
 
     The Company's name, its registered trademark "Meritor" and its symbol are
important to its business. Other significant trademarks owned by the Company
include Golde(R) (sunroofs), Fumagalli(TM) (wheels) and ROR(TM) (trailer axles).
Under the terms of the Distribution Agreement (the "Distribution Agreement")
entered into with Rockwell in connection with the Distribution, the Company may
continue to apply the "Rockwell" brand name to its products until September 30,
2007.
 
EMPLOYEES
 
     At September 30, 1998, the Company had approximately 16,900 full-time
employees. Approximately 3,688 Company employees in the United States and Canada
are covered by collective bargaining agreements. The Company believes its
relationship with unionized employees is satisfactory. No significant work
stoppages have occurred in the past five years.
 
ENVIRONMENTAL MATTERS
 
     In connection with the Distribution, the Company assumed all liabilities in
respect of environmental matters related to current and former operations of the
Automotive Business.
 
     Federal, state and local requirements relating to the discharge of
substances into the environment, the disposal of hazardous wastes, and other
activities affecting the environment have had and will continue to have an
impact on the manufacturing operations of the Company. Thus far, compliance with
environmental requirements and resolution of environmental claims have been
accomplished without material effect on the Company's liquidity and capital
resources, competitive position or financial statements.
 
     Meritor has been designated as a potentially responsible party at three
Superfund sites, excluding sites as to which the Company's records disclose no
involvement or as to which the Company's potential liability has been fully
determined. Management estimates the total reasonably possible costs the Company
could incur for the remediation of Superfund sites at September 30, 1998 to be
approximately $16 million, of which $10 million had been accrued.
 
     Various other lawsuits, claims, and proceedings have been asserted against
the Company alleging violation of federal, state and local environmental
protection requirements, or seeking remediation of alleged environmental
impairments, principally at previously disposed of properties. For these
matters, management has estimated the total reasonably possible costs the
Company could incur at September 30, 1998 to be approximately $39 million. The
Company had recorded environmental accruals for these matters of $14 million.
 
     At September 30, 1998, there were no receivables from third parties related
to environmental matters.
 
     Based on its assessment and after consulting with David W. Greenfield,
Esq., General Counsel of the Company, management believes that the Company's
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 the Company's liquidity and capital resources, competitive
position or financial statements. Management cannot assess the possible effect
of compliance with future requirements.
 
GEOGRAPHIC INFORMATION
 
     The Company conducts operations in the United States and in 14 foreign
countries. Approximately 44% of Meritor's total assets and 38% of sales for the
year ended September 30, 1998 were outside North America, primarily in France,
the United Kingdom, Germany, Brazil and Italy. Selected financial information by
major
                                        9
<PAGE>   11
 
geographic area for the three years ended September 30, 1998 is contained in
Note 19 of Notes to Consolidated Financial Statements in the 1998 Annual Report.
 
     The Company's international operations are subject to a number of risks
inherent in operating abroad, including, but not limited to, risks with respect
to currency exchange rate fluctuations, local economic and political conditions,
disruptions of capital and trading markets, restrictive governmental actions
(such as restrictions on transfer of funds and trade protection measures,
including export duties and quotas and customs duties and tariffs), changes in
legal or regulatory requirements, import or export licensing requirements,
limitations on the repatriation of funds, difficulty in obtaining distribution
and support, nationalization, the laws and policies of the United States
affecting trade, foreign investment and loans, and tax laws. There can be no
assurance that these factors will not have a material adverse impact on the
Company's ability to increase or maintain its foreign sales or on its financial
condition or results of operations.
 
     The Company enters into foreign currency forward exchange contracts to
manage risks associated with currency exchange rate fluctuations that could
affect foreign currency commitments entered into in the ordinary course of
business. The Company has not experienced nor does it anticipate any material
adverse effect on its results of operations or financial condition related to
these foreign currency forward exchange contracts. The Company has not entered
into foreign currency forward exchange contracts for other purposes, and the
Company's financial condition and results of operations could be affected
(negatively or positively) by currency fluctuations.
 
     On January 1, 1999, the Euro will become the common currency of eleven
countries of the European Union. During a three-year transition period, the
present national currencies of these eleven countries will become sub-units of
the Euro at fixed exchange rates. The European Union's current plans call for
the transition period to be completed by July 1, 2002, at which time the Euro
will become the sole legal tender in participating countries.
 
     The Company is engaged in business in some of the countries that will
participate in the European Monetary Union, and sales for fiscal 1998 in these
countries were approximately 21% of the Company's total sales. In addition, the
Company enters into foreign currency forward exchange contracts with respect to
several of the existing currencies that will be subsumed into the Euro, and has
borrowings in several of the participating currencies primarily under its bank
revolving credit arrangements. The Company has analyzed the potential effects of
the Euro conversion on competitive conditions, information technology and other
systems, currency risks, financial instruments and contracts, and has examined
the tax and accounting consequences of Euro conversion, and believes that the
conversion will not have a material adverse effect on its business, operations
and financial condition.
 
     The Company has begun making the necessary adjustments to accommodate the
conversion, including modifications to its information technology systems and
programs, pricing schedules and financial instruments. The Company expects that
all necessary actions will be completed within budget and in a timely manner,
and that the costs associated with the conversion to the Euro will not be
material.
 
SEASONALITY; CYCLICALITY
 
     The Company may experience seasonal variations in the demand for its
products to the extent automotive vehicle production fluctuates. Historically,
such demand has been somewhat lower in the Company's first and fourth fiscal
quarters (the fourth and third calendar quarters, respectively) when OEM plants
may close during model changeovers and vacation and holiday periods.
 
     In addition, the industry in which the Company operates has been
characterized historically by periodic fluctuations in overall demand for
trucks, passenger cars and other vehicles for which the Company supplies
products, resulting in corresponding fluctuations in demand for products of the
Company. Cycles in the major automotive industry markets of North America and
Europe are not necessarily concurrent or related. The cyclical nature of the
automotive industry is outside the control of the Company and cannot be
predicted with certainty. The Company has sought and will continue to seek to
expand its operations globally to mitigate the effect of periodic fluctuations
in demand of the automotive industry in one or more particular countries.
 
                                       10
<PAGE>   12
 
     The following table sets forth vehicle production in principal markets
served by the Company for the last five fiscal years:
 
<TABLE>
<CAPTION>
                                                            FISCAL YEAR ENDED SEPTEMBER 30,
                                                          ------------------------------------
                                                          1994    1995    1996    1997    1998
                                                          ----    ----    ----    ----    ----
<S>                                                       <C>     <C>     <C>     <C>     <C>
Heavy Vehicles (in thousands):
  North America, Heavy-Duty Trucks......................   215     243     203     201     245
  North America, Medium-Duty Trucks.....................   125     150     125     138     141
  North America, Trailers...............................   271     327     266     252     316
  Europe, Trailers......................................    77      86      91      81     108
Light Vehicles (in millions):
  North America.........................................  14.9    15.0    15.1    15.2    15.4
  South America.........................................   1.9     1.7     1.8     2.1     2.1
  Europe................................................  13.1    14.0    14.5    15.2    16.1
  Asia-Pacific (calendar year data).....................  15.2    15.2    16.6    17.1    15.6
</TABLE>
 
---------------
Source: Automotive industry publications and management estimates.
 
YEAR 2000 READINESS DISCLOSURE
 
     The Company initiated a Company-wide year 2000 project to determine whether
the Company's information technology ("IT") and non-IT systems are year 2000
compliant and to identify and implement the remedial actions necessary to effect
compliance. None of the Company's other IT projects have been delayed
significantly due to the year 2000 project. The year 2000 project also includes
assessment of compliance at the supplier and service provider level in order to
minimize supply disruptions (see "Raw Materials and Supplies" above for
information on the Company's dependence on obtaining adequate supplies of raw
materials and components to support its manufacturing needs). In addition,
certain of the Company's locations are implementing Enterprise Resource Planning
systems. The Company anticipates that these systems will be in place in early
1999 and will be year 2000 compliant. Because the Company's customer base is
diverse, fewer resources of the project have been directed to the area of
customer compliance.
 
     The project is divided into four major sections: business and engineering,
factory floor, IT infrastructure (hardware and software) and supply chain. Each
section involves three phases: phase one -- identification of risks; phase
two -- defining the scope of necessary corrections, preparation of related plans
and cost estimates and development of contingency plans; and phase
three -- implementation of decisions to repair, replace or retire the systems in
question.
 
     The consulting firm of Keane, Inc. was engaged to coordinate the year 2000
project for all four major sections and to provide more direct assistance with
respect to the business and engineering section and the IT infrastructure
section. In addition, the Company engaged outside consultants to assist in risk
identification, analysis and remediation planning for factory floor operations
and to assist in implementing repair and remediation projects at local sites.
 
     The business and engineering section of the project includes manufacturing,
financial applications and remediation projects, critical core business system
validation testing, aftermarket systems and supplemental systems. The factory
floor section includes shop floor controls and facility systems. The IT
infrastructure section includes PC/LAN hardware, software and peripherals;
mainframe, midrange and UNIX systems; engineering workstations; and
telecom/global carriers. The supply chain section includes formal communication
with the Company's significant customers, suppliers and critical service
providers. The Company estimates that all four areas will be year 2000 compliant
by June 30, 1999, with follow-up reviews scheduled through the remainder of
1999.
 
                                       11
<PAGE>   13
 
     The following chart summarizes the status of completion by section for each
phase of the project at September 30, 1998.
 
<TABLE>
<CAPTION>
                                                        APPROXIMATE PERCENTAGE COMPLETED
                                                        --------------------------------
                                                        PHASE 1     PHASE 2     PHASE 3
                                                        --------    --------    --------
<S>                                                     <C>         <C>         <C>
Business/Engineering..................................    100       55-100 *     15-90 *
Factory floor.........................................    100        40-80 *      15
IT infrastructure.....................................    100       40-100 *      25
Supply chain..........................................  45-100 *     20-60 *      0-8  *
</TABLE>
 
---------------
* Percentage of completion varies by location and by separate project within
  each section.
 
     The Company is in the initial stage of developing contingency plans
designed to minimize any adverse effects that would result if timely compliance
were not achieved, either internally or at the third party level. The planning
process will include identification of the areas of the Company's business and
suppliers with the greatest potential for non-compliance, and arrangements for
alternate suppliers, backup systems or stockpiling of components in the affected
areas. The Company expects to complete its analysis and have contingency
arrangements in place by September 30, 1999.
 
     The Company currently estimates that the aggregate cost of the year 2000
project will be approximately $26 million. This amount excludes employee expense
and computer equipment and upgrades that would have been purchased regardless of
the year 2000 project. During fiscal 1998 and fiscal 1997, the Company spent
$10.2 million and $0.7 million, respectively, on the project. In fiscal 1998,
approximately $6.6 million of expenditures related to business and engineering
systems and IT infrastructure and approximately $3.6 million was expended in
relation to the factory floor. These costs are being expensed as incurred and
are being funded through operating cash flows. They do not include costs that
may be incurred as a result of failure of third parties, including suppliers, to
become year 2000 compliant, or costs to implement contingency plans.
 
     The Company currently estimates that the costs incurred in connection with
the Enterprise Resource Planning systems will be approximately $35 million,
including costs of internal employees dedicated to the project. The Company
anticipates that approximately $30 million of the total costs will be
capitalized and amortized over five years.
 
     Incomplete or untimely resolution of the year 2000 issue by the Company,
key suppliers, customers and other parties could have a material adverse effect
on the Company's results of operations, financial condition and cash flows. The
year 2000 project is expected to reduce significantly the Company's level of
uncertainty about year 2000 issues. The Company believes that completed and
planned modifications and conversions of its internal IT and non-IT systems will
allow it to be year 2000 compliant in a timely manner. However, due to the
general uncertainty inherent with year 2000 compliance, the Company is unable to
determine at this time whether the consequences of year 2000 failures by third
parties will have a material impact on the Company.
 
CAUTIONARY STATEMENT
 
     This Annual Report on Form 10-K contains statements relating to future
results of the Company (including certain projections and business trends) that
are "forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from those projected as
a result of various risks and uncertainties, including but not limited to global
economic and market conditions, such as the demand for commercial, specialty and
light vehicles for which the Company supplies products; risks inherent in
operating abroad; OEM program delays; demand for and market acceptance of new
and existing products; successful development of new products; reliance on major
OEM customers; labor relations of the Company, its customers and suppliers; and
competitive product and pricing pressures, as well as other risks and
uncertainties, including those detailed herein and from time to time in other
filings of the Company with the Securities and Exchange Commission. See also
"Customers; Sales and Marketing," "Competition," "Raw Materials and Supplies,"
"Acquisitions and Dispositions," "Geographic Information," "Seasonality;
 
                                       12
<PAGE>   14
 
Cyclicality" and "Year 2000 Readiness Disclosure" in this Annual Report on Form
10-K, and Chief Financial Officer's Review -- Management's Discussion and
Analysis in the 1998 Annual Report.
 
ITEM 2.  PROPERTIES.
 
     At September 30, 1998, the Company operated 46 manufacturing facilities
throughout the United States and in Europe, Brazil, Canada, Mexico, Australia
and the Far East. It also had 19 engineering facilities, sales offices,
warehouses and service centers. These facilities had an aggregate floor space of
approximately 11 million square feet, substantially all of which is in use. Of
this floor space, approximately 90% was owned by the Company and approximately
10% was leased. There are no major encumbrances (other than financing
arrangements which in the aggregate are not material) on any of the Company's
plants or equipment. In the opinion of management, the Company's properties have
been well maintained, are in sound operating condition and contain all equipment
and facilities necessary to operate at present levels. A summary of floor space
of these facilities at September 30, 1998 is as follows:
 
<TABLE>
<CAPTION>
                                                            OWNED         LEASED
LOCATION                                                  FACILITIES    FACILITIES    TOTAL
--------                                                  ----------    ----------    ------
                                                            (IN THOUSANDS OF SQUARE FEET)
<S>                                                       <C>           <C>           <C>
United States...........................................    4,431           256        4,687
Canada..................................................      691            38          729
Europe..................................................    2,956           276        3,232
Asia-Pacific............................................      272           525          797
Latin America...........................................    1,441            15        1,456
                                                            -----         -----       ------
          Total.........................................    9,791         1,110       10,901
                                                            =====         =====       ======
</TABLE>
 
ITEM 3.  LEGAL PROCEEDINGS.
 
     On July 17, 1997 Eaton Corporation filed suit against Rockwell in the U.S.
District Court in Wilmington, Delaware, asserting infringement of Eaton's U.S.
Patent No. 4850236, which covers certain aspects of heavy-duty truck
transmissions, by the Company's Engine Synchro Shift(TM) transmission for
heavy-duty trucks, and seeking damages and injunctive relief. Meritor was joined
as a defendant on June 11, 1998, and trial in this matter began on June 23,
1998. On July 1, 1998, the jury rendered a verdict in favor of Eaton, finding
that Meritor had infringed Eaton's patent and awarding compensatory damages in
the amount of $1.25 million, and a judgment was entered on July 17, 1998.
Because the jury found the infringement to be willful, the judge in the case has
discretion to increase the damages to an amount up to three times the amount of
the award. Eaton's request for a permanent injunction is pending. A separate
trial has been scheduled for February 8-10, 1999, with respect to the Company's
allegations of inequitable conduct by Eaton in obtaining its patent, and the
judge is not expected to take action with respect to Eaton's request for a
permanent injunction or the damage issue until after this trial is completed.
Meritor is evaluating the jury's verdict and the judgment and is considering
further actions, including post-trial motions and an appeal to the United States
Court of Appeals for the Federal Circuit. Based on advice of M. Lee Murrah,
Esq., Assistant General Counsel of the Company, management believes the
Company's truck transmissions do not infringe Eaton's patent. The Company
intends to continue to defend this suit vigorously.
 
     Various other lawsuits, claims and proceedings have been or may be
instituted or asserted against Rockwell or the Company or their respective
subsidiaries relating to the conduct of the Company's business, including those
pertaining to product liability, intellectual property, environmental, safety
and health, and employment matters.
 
     Although the outcome of litigation cannot be predicted with certainty and
some lawsuits, claims or proceedings may be disposed of unfavorably to the
Company, based on its evaluation of matters which are pending or asserted and
after consulting with David W. Greenfield, Esq., General Counsel of the Company,
management believes the disposition of such matters will not have a material
adverse effect on the Company's financial statements.
 
                                       13
<PAGE>   15
 
     Pursuant to the terms of the Distribution Agreement, the Company assumed
responsibility for all litigation (including environmental proceedings) against
Rockwell or its subsidiaries in respect of the Automotive Business.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
     No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1998.
 
ITEM 4A.  EXECUTIVE OFFICERS OF THE COMPANY.
 
     The name, age, positions and offices held with the Company and principal
occupations and employment during the past five years of each of the executive
officers of the Company as of December 18, 1998 are as follows:
 
     LARRY D. YOST, 60 -- Chairman of the Board and Chief Executive Officer of
Meritor since May 1997; Acting President, Light Vehicle Systems since January
1998. Senior Vice President, President, Automotive and Acting President, Heavy
Vehicle Systems of Rockwell (electronic controls and communications) from March
1997 to September 1997; President, Heavy Vehicle Systems of Rockwell from
November 1994 to March 1997; Senior Vice President, Operations of Allen-Bradley
Company, LLC (automation), a subsidiary of Rockwell, prior to November 1994.
 
     GARY L. COLLINS, 52 -- Senior Vice President, Human Resources of Meritor
since August 1997. Vice President -- Human Resources and Government Relations,
Automotive of Rockwell from September 1991 to September 1997.
 
     GLENN J. EGGERT, 55 -- Senior Vice President, Operations of Meritor since
September 1998. Senior Vice President -- Operations, Heavy Vehicle Systems of
Meritor from September 1997 to September 1998; Vice President -- Operations,
Heavy Vehicle Systems of Rockwell from May 1996 to September 1997; Vice
President -- Operations, Industrial Controls Group of Allen-Bradley Company, LLC
(automation), a subsidiary of Rockwell, from 1990 to April 1996.
 
     DAVID W. GREENFIELD, 48 -- Senior Vice President, General Counsel and
Secretary of Meritor since May 1997. Associate General Counsel of Rockwell from
July 1995 to September 1997; Assistant General Counsel of Rockwell prior to July
1995.
 
     THOMAS J. JOYCE, 51 -- Vice President and Treasurer of Meritor since May
1997. Vice President, Investor and Community Relations of Rockwell from May 1989
to September 1997.
 
     SUSAN P. KAMPE, 41 -- Senior Vice President and Chief Information Officer
of Meritor since September 1997. Vice President -- Information Technology, Heavy
Vehicle Systems of Rockwell from August 1996 to September 1997; Director of
Global Information Systems and Services, Safety Restraints Business of
Allied-Signal Automotive (automotive component supplier) from August 1994 to
August 1996; Manager, Manufacturing Systems, North America of ITT Automotive,
Inc. (automotive component supplier) prior to August 1994.
 
     THOMAS A. MADDEN, 45 -- Senior Vice President and Chief Financial Officer
of Meritor since May 1997. Vice President and Senior Vice President -- Finance,
Automotive of Rockwell from March 1997 to September 1997; Vice President,
Corporate Development of Rockwell from September 1996 to March 1997; Vice
President -- Finance & Administration, Light Vehicle Systems of Rockwell from
May 1996 to September 1996; Vice President -- Finance & Administration,
Automotive of Rockwell from October 1994 to May 1996; Assistant Controller of
Rockwell prior to October 1994.
 
     PRAKASH R. MULCHANDANI, 54 -- Senior Vice President and President, Heavy
Vehicle Systems of Meritor since January 1998. Senior Vice President and
President, Worldwide Truck and Trailer Systems of Meritor from September 1997 to
December 1997; President -- Worldwide Truck and Trailer Systems, Heavy Vehicle
Systems of Rockwell from April 1996 to September 1997; President -- North
American Truck Systems, Automotive of Rockwell from June 1994 to April 1996;
General Manager -- Trailer Products, Automotive of Rockwell prior to June 1994.
                                       14
<PAGE>   16
 
     S. CARL SODERSTROM, 45 -- Senior Vice President, Engineering, Quality and
Procurement of Meritor since February 1998. Vice President, Engineering and
Quality, Heavy Vehicle Systems of Meritor from September 1997 to February 1998;
Vice President, Engineering and Quality, Heavy Vehicle Systems of Rockwell from
October 1996 to September 1997; Director of Development -- Operator Interface
and Logic Division of Allen-Bradley Company, LLC (automation), a subsidiary of
Rockwell, from 1993 to October 1996.
 
     DIANE M. STELFOX, 41 -- Vice President and Controller of Meritor since
September 1998. Assistant Controller of Meritor from January 1998 to September
1998; Controller -- Body Systems N.A. of ITT Automotive, Inc. (automotive
component supplier) from 1995 to 1997; Controller -- Aftermarket N.A. of ITT
Automotive from 1992 to 1995.
 
     RODNEY J. WALTER, 47 -- Senior Vice President, Business Development and
Communications of Meritor since September 1997. Vice President -- Business
Development, Heavy Vehicle Systems of Rockwell from June 1995 to September 1997;
Director -- Business Development of Rockwell prior to June 1995.
 
     There are no family relationships, as defined in Item 401 of Regulation
S-K, between any of the above executive officers. No officer of the Company was
selected pursuant to any arrangement or understanding between him or her and any
person other than the Company. All executive officers are elected annually.
 
                                    PART II
 
ITEM 5.  MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
     The Company's Common Stock, par value $1 per share, is listed on the New
York Stock Exchange and trades under the symbol "MRA." On December 14, 1998,
there were 52,325 shareowners of record of the Company's Common Stock. The high
and low sale prices for each quarter in fiscal year 1998 were as follows:
 
<TABLE>
<CAPTION>
                      QUARTER ENDED                        HIGH        LOW
                      -------------                        ----        ---
<S>                                                        <C>         <C>
December 31, 1997........................................  $25 1/4     $20 11/16
March 31, 1998...........................................   27 3/16     19 1/8
June 30, 1998............................................   28 3/8      21 7/8
September 30, 1998.......................................   24          15
</TABLE>
 
     The Company's Common Stock began trading "regular way" on the New York
Stock Exchange on October 1, 1997. Prior to the Distribution, the Company's
Common Stock traded on a "when-issued" basis from September 15, 1997 to
September 30, 1997.
 
     Four quarterly cash dividends, each in the amount of 10.5 cents per share
of Common Stock, were declared and paid in fiscal 1998. Prior to the
Distribution, the Company paid a cash dividend to Rockwell, then the Company's
sole shareowner, in the amount of $359.4 million.
 
     On July 1, 1998, the Company issued 370 and 185 shares of Common Stock to
Donald R. Beall and Martin D. Walker, respectively, non-employee directors of
the Company, pursuant to the terms of the Company's Directors Stock Plan, in
lieu of cash payment of all or a portion of the quarterly retainer fees for
board service. The issuance of these securities was exempt from registration
under the Securities Act of 1933, as amended, as a transaction not involving a
public offering under Section 4(2) of the Act.
 
ITEM 6.  SELECTED FINANCIAL DATA.
 
     See the information in the table captioned Selected Financial Data in the
1998 Annual Report.
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
 
     See the discussion and analysis under the caption Chief Financial Officer's
Review -- Management's Discussion and Analysis in the 1998 Annual Report.
 
                                       15
<PAGE>   17
 
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
     See Chief Financial Officer's Review -- Management's Discussion and
Analysis -- Quantitative and Qualitative Disclosures About Market Risk in the
1998 Annual Report.
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
     See Consolidated Balance Sheet, Statement of Consolidated Income, Statement
of Consolidated Cash Flows, Statement of Consolidated Shareowners' Equity, Notes
to Consolidated Financial Statements, and Independent Auditors' Report in the
1998 Annual Report.
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
 
     None.
 
                                    PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
 
     See the information under the captions Election of Directors and
Information as to Nominee for Director and Continuing Directors in the 1999
Proxy Statement. No nominee for director was selected pursuant to any
arrangement or understanding between the nominee and any person other than the
Company pursuant to which such person is or was to be selected as a director or
nominee. See also the information with respect to executive officers of the
Company under Item 4a of Part I.
 
ITEM 11.  EXECUTIVE COMPENSATION.
 
     See the information under the captions Compensation of Directors, Executive
Compensation and Retirement Benefits in the 1999 Proxy Statement.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
     See the information under the captions Voting Securities and Ownership by
Management of Equity Securities in the 1999 Proxy Statement.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
     See the information under the caption Certain Transactions and Other
Relationships in the 1999 Proxy Statement.
 
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
 
     (a) Financial Statements, Financial Statement Schedules and Exhibits.
 
     (1) Financial Statements (all financial statements listed below are those
of the Company and its consolidated subsidiaries and are incorporated by
reference in Item 8 from the 1998 Annual Report):
 
        Consolidated Balance Sheet, September 30, 1998 and 1997.
 
        Statement of Consolidated Income, years ended September 30, 1998, 1997
        and 1996.
 
        Statement of Consolidated Cash Flows, years ended September 30, 1998,
        1997 and 1996.
 
        Statement of Consolidated Shareowners' Equity, years ended September 30,
        1998, 1997 and 1996.
 
        Notes to Consolidated Financial Statements.
 
        Independent Auditors' Report.
                                       16
<PAGE>   18
 
     (2) Financial Statement Schedule for the years ended September 30, 1998,
1997 and 1996.
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Independent Auditors' Report................................  S-1
Schedule II -- Valuation and Qualifying Accounts............  S-2
</TABLE>
 
     Schedules not filed with this Annual Report on Form 10-K are omitted
because of the absence of conditions under which they are required or because
the information called for is shown in the financial statements or related
notes.
 
     (3) Exhibits
 
<TABLE>
<S>      <C>
  3-a-1  Restated Certificate of Incorporation of the Company, filed
         as Exhibit 4.1 to the Company's Registration Statement on
         Form S-8 (Registration No. 333-35403), is incorporated by
         reference.
  3-b-1  By-laws of the Company, filed as Exhibit 4.2 to the
         Company's Registration Statement on Form S-8 (Registration
         No. 333-35403), is incorporated by reference.
  4-a-1  Rights Agreement, dated as of September 8, 1997, by and
         between the Company and First Chicago Trust Company of New
         York, as Rights Agent, filed as Exhibit 4.3 to the Company's
         Registration Statement on Form S-8 (Registration No.
         333-35403), is incorporated by reference.
  4-b-1  Indenture, dated as of April 1, 1998, between the Company
         and The Chase Manhattan Bank as trustee, filed as Exhibit 4
         to the Company's Registration Statement on Form S-3
         (Registration No. 333-49777), is incorporated by reference.
*10-a-1  The Company's 1997 Long-Term Incentives Plan, filed as
         Exhibit 10-a-1 to the Company's Annual Report on Form 10-K
         for the fiscal year ended September 30, 1997 (File No.
         1-13093) ("1997 Form 10-K"), is incorporated by reference.
*10-a-2  Form of Restricted Stock Agreement under the Company's 1997
         Long-Term Incentives Plan, filed as Exhibit 10-a-2 to the
         1997 Form 10-K, is incorporated by reference.
*10-a-3  Form of Option Agreement under the Company's 1997 Long-Term
         Incentives Plan, filed as Exhibit 10(a) to the Company's
         Quarterly Report on Form 10-Q for the quarterly period ended
         March 31, 1998 (File No. 1-13093), is incorporated by
         reference.
*10-b-1  The Company's Directors Stock Plan, filed as Exhibit 10-b-1
         to the 1997 Form 10-K, is incorporated by reference.
*10-b-2  Form of Restricted Stock Agreement under the Company's
         Directors Stock Plan, filed as Exhibit 10-b-2 to the 1997
         Form 10-K, is incorporated by reference.
*10-b-3  Form of Option Agreement under the Company's Directors Stock
         Plan, filed as Exhibit 10(b) to the Company's Quarterly
         Report on Form 10-Q for the quarterly period ended March 31,
         1998 (File No. 1-13093), is incorporated by reference.
*10-c-1  The Company's Incentive Compensation Plan, filed as Exhibit
         10-c-1 to the 1997 Form 10-K, is incorporated by reference.
*10-d-1  Copy of resolution of the Board of Directors of the Company,
         adopted on September 8, 1997, providing for its Deferred
         Compensation Policy for Non-Employee Directors, filed as
         Exhibit 10-d-1 to the 1997 Form 10-K, is incorporated by
         reference.
*10-e-1  The Company's Deferred Compensation Plan.
 10-f-1  Credit Agreement dated as of August 21, 1997 among the
         Company, the lenders from time to time party to the
         agreement, Morgan Guaranty Trust Company of New York, as
         Administrative Agent, and NBD Bank, as Documentation Agent,
         filed as Exhibit 10.5 to the Company's Registration
         Statement on Form 10 (File No. 1-13093), is incorporated by
         reference.
</TABLE>
 
                                       17
<PAGE>   19
<TABLE>
<S>      <C>
 10-g-1  Distribution Agreement dated as of September 30, 1997 by and
         between Rockwell and the Company, filed as Exhibit 2.1 to
         the Company's Current Report on Form 8-K dated October 10,
         1997, is incorporated by reference.
 10-h-1  Employee Matters Agreement dated as of September 30, 1997 by
         and between Rockwell and the Company, filed as Exhibit 2.2
         to the Company's Current Report on Form 8-K dated October
         10, 1997, is incorporated by reference.
 10-i-1  Tax Allocation Agreement dated as of September 30, 1997 by
         and between Rockwell and the Company, filed as Exhibit 2.3
         to the Company's Current Report on Form 8-K dated October
         10, 1997, is incorporated by reference.
 12      Computation of Ratios of Earnings to Fixed Charges for the
         Twelve Months Ended September 30, 1998.
 13      Portions of the 1998 Annual Report to Shareowners.
 21      List of Subsidiaries of the Company.
 23-a    Consent of M. Lee Murrah, Esq., Assistant General Counsel of
         the Company.
 23-b    Consent of David W. Greenfield, Esq., Senior Vice President,
         General Counsel and Secretary of the Company.
 23-c    Independent auditors' consent.
 24      Power of Attorney authorizing certain persons to sign this
         Annual Report on Form 10-K on behalf of certain directors
         and officers of the Company.
 27      Financial Data Schedule.
</TABLE>
 
---------------
* Management contract or compensatory plan or arrangement.
 
     (b) Reports on Form 8-K.
 
     The Company filed a Current Report on Form 8-K, dated August 6, 1998,
filing as exhibits under Item 7 the consents of M. Lee Murrah, Esq., and David
W. Greenfield, Esq., to references to them in the Prospectus Supplement, dated
August 6, 1998, to the Prospectus, dated June 4, 1998, in Registration No.
333-49777.
 
                                       18
<PAGE>   20
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                          MERITOR AUTOMOTIVE, INC.
 
                                          By
                                            ------------------------------------
                                                    David W. Greenfield
                                               Senior Vice President, General
                                                           Counsel
                                                       and Secretary
 
Dated: December 18, 1998
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on the 18th day of December, 1998 by the following
persons on behalf of the registrant and in the capacities indicated.
 
<TABLE>
<C>                                                      <S>
                   Larry D. Yost*                        Chairman of the Board and Chief Executive
                                                           Officer (principal executive officer) and
                                                           Director
 
              Joseph B. Anderson, Jr.*                   Director
 
                  Donald R. Beall*                       Director
 
                  John J. Creedon*                       Director
 
                  Charles H. Harff*                      Director
 
                  Harold A. Poling*                      Director
 
                  Martin D. Walker*                      Director
 
                  Thomas A. Madden*                      Senior Vice President and Chief Financial
                                                           Officer (principal financial officer)
 
                  Diane M. Stelfox*                      Vice President and Controller
                                                           (principal accounting officer)
 
                        *By:
  ------------------------------------------------
       David W. Greenfield, Attorney-in-fact**
 
                         **By authority of powers of attorney filed herewith
</TABLE>
 
                                       19
<PAGE>   21
 
                          INDEPENDENT AUDITORS' REPORT
 
To the Board of Directors and Shareowners
  of Meritor Automotive, Inc.
Troy, Michigan
 
     We have audited the consolidated and combined financial statements of
Meritor Automotive, Inc. and subsidiaries (formerly the automotive businesses of
Rockwell International Corporation -- see Note 1) as of September 30, 1998 and
1997, and for each of the three years in the period ended September 30, 1998,
and have issued our report thereon dated November 11, 1998; such financial
statements and report are included in your 1998 Annual Report to Shareowners and
are incorporated herein by reference. Our audits also included the financial
statement schedule of Meritor Automotive, Inc. and subsidiaries, listed in Item
14(a)(2). This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
 
DELOITTE & TOUCHE LLP
 
Detroit, Michigan
November 11, 1998
 
                                       S-1
<PAGE>   22
 
                                                                     SCHEDULE II
 
                            MERITOR AUTOMOTIVE, INC.
 
                       VALUATION AND QUALIFYING ACCOUNTS
             FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
 
<TABLE>
<CAPTION>
                                                  BALANCE AT    CHARGED TO                  BALANCE AT
                                                  BEGINNING     COSTS AND                     END OF
                  DESCRIPTION                     OF YEAR(A)     EXPENSES     DEDUCTIONS     YEAR(A)
                  -----------                     ----------    ----------    ----------    ----------
                                                                     (IN MILLIONS)
<S>                                               <C>           <C>           <C>           <C>
Year ended September 30, 1998:
  Allowance for doubtful accounts...............    $11.6         $ 3.2          $1.0(b)      $13.8
Year ended September 30, 1997:
  Allowance for doubtful accounts...............     16.9           2.3           7.6(b)       11.6
Year ended September 30, 1996:
  Allowance for doubtful accounts...............     10.1          10.5           3.7(b)       16.9
</TABLE>
 
---------------
(a) Includes allowances for trade and other long-term receivables.
 
(b) Uncollectible accounts written off.
 
                                       S-2