MERITORPARTSXPRESS.COM SHOPMERITOR.COM STOCK PRICE: $26.21 COMPANY INVESTORS PRODUCTS APPLICATIONS TECHNOLOGY SUPPLIERS SUPPORT Home / Sustainability SUSTAINABILITY Sustainability has been part of our company culture. It is who we are and what we do. The COVID-19 pandemic created a moment in our history unlike any other. With so many personally afflicted and the economic and social repercussions unknown, Meritor took actions to protect our employees while still serving our role in society as a critical part of the supply chain. Even during the national shutdowns, we ran limited production in certain facilities to keep trucks on the road and provide products for the manufacturing of emergency vehicles. To protect our employees, we developed a comprehensive Safe Start plan that included policies pertaining to preventative measures in entry and common areas, heat mapping to identify areas that required modifications, personal protective equipment (PPE), wellness checks, visual indicators and the addition of social distance coaches and a chief safety compliance officer. We took necessary precautions to safeguard Meritor’s employees – in each of our manufacturing plants, labs, distribution centers and offices. Meritor took actions to protect our employees while still serving our role in society as a critical part of the supply chain.” – Jay Craig Executive Chairman of the Board of Directors Our history dates back to 1909, and we have weathered many major world events. Each of these has left an imprint on the future as the pandemic undoubtedly will, but we adapted to this crisis as we have to others and emerged stronger as a company. As a result, we are now better prepared with an operating environment that allows us to do our jobs, serve our customers, and protect each other. Meritor is here to perform our role in the critical commercial vehicle industry next to our customers who are building the trucks and trailers, fire & rescue vehicles, and buses and military fleets that keep the world moving. Although the pandemic required a great deal of management attention in 2020, we were able to make excellent progress with our many sustainability initiatives. Through 110 years of innovation, sustainability has been part of our company culture. It is who we are and what we do – designing, engineering and building superior products with improved fuel efficiency, cleaner emissions, lighter weight and increased safety, with less waste. As global transportation accelerates into a future increasingly shaped by electrification, we are moving toward a higher level of sustainability. As demand and desire grow to improve air quality, conserve natural resources and increase fuel efficiency and safety, our products are evolving to meet customers’ needs in diverse regions of the world. As a manufacturing company, we understand the importance of our actions. As a global team, we are dedicated to making a difference. Jay Craig Executive Chairman of the Board of Directors A MESSAGE TO THE MERITOR TEAM As we navigate these uncharted roads, it is easy to move so quickly from task to task that we don’t take the time to recognize great effort. I want to make sure that we stop to thank people and acknowledge that the level of commitment, dedication and professionalism demonstrated over the past year was extraordinary. There has never been a time in our company’s history when we were required to shut down the vast majority of our manufacturing plants within weeks of each other, beginning in Europe, then India, Brazil, and finally North America. To do this efficiently and safely in the middle of a pandemic required collaboration, sacrifice and teamwork. These are the characteristics that Meritor employees everywhere are known for and were exemplified during this process. Although the future may look different than the past, we will adapt like we have to every other crisis we have faced and emerge stronger as a company.” – Chris Villavarayan Chief Executive Officer and President Our operations teams in every plant took care of our customers and of each other. I have heard from many that these were the toughest weeks in memory. When it became clear that our plants would need to stop running temporarily, many employees worked long hours in scheduling and production to ensure that all final shipments to customers were out the door first. We then transitioned to the shutdown process amidst concern about the disease as we watched its impact rise, even among our family, friends, and co-workers. While most of our truck production was down, we continued to run segments of our operations to support certain industrial customers and aftermarket channels. We did our part to maintain important elements of the defense and specialty infrastructure and to keep trucks on the road so they could deliver goods needed by people around the world. Although the future may look different than the past, we will adapt like we have to every other crisis we have faced and emerge stronger as a company. Chris Villavarayan Chief Executive Officer and President Meritor, Inc. is a leading global supplier of drivetrain, mobility, braking, aftermarket and electric powertrain solutions for commercial vehicle and industrial markets. With more than a 110-year legacy of providing innovative products that offer superior performance, effciency and reliability, the company serves commercial truck, trailer, off-highway, defense, specialty and aftermarket customers around the world. Meritor is based in Troy, Mich., United States, and is made up of more than 8,600 diverse employees who apply their knowledge and skills in manufacturing facilities, engineering centers, joint ventures, distribution centers and global offces in 19 countries. Meritor common stock is traded on the New York Stock Exchange under the ticker symbol MTOR. INDUSTRY REVOLUTION ENVIRONMENT, HEALTH & SAFETY MANUFACTURING HIGHLIGHTS HUMAN CAPITAL SOCIAL RESPONSIBILITY WE RUN TOGETHER CORPORATE GOVERNANCE Meritor’s brand is well-established globally and reflects a broad and growing portfolio of high-quality products for various applications. For more than a century, our products have evolved to meet the changing needs of customers in major regions of the world. As technology has advanced, we have become an innovation partner for our customers. From concept to launch, we work closely together to ensure we are designing reliable and high-quality products that meet or exceed expectations. As customers have responded to air quality and fuel efficiency regulations, our portfolio has evolved to include products that are more fuel efficient, lighter weight, safer, more durable and more reliable. Technologies under development include: Superfast ratios that will reduce engine RPMs to 1,000 or lower on cruising speeds, improving fuel efficiency over current systems Dis-engageable tandem axles that deliver significant fuel economy benefits, particularly when additional torque is not required Single-piston air disc brakes and industry-leading dual-piston brakes with active and positive pad retraction to reduce rolling friction at cruising speeds Active lubrication management which removes lubrication from the gearing and axle at cruising speeds reducing parasitic losses and increasing fuel economy Composite drivelines made of carbon fiber that significantly increase fuel economy, reduce weight, and increase payload capability Advanced data collection and analysis to evaluate metrics such as lube health, maintenance timing and automatic tire inflation on truck and trailer, and pad sensing on brakes BLUE HORIZON We created the Blue Horizon™ brand to represent a revolution in commercial vehicle transportation. The product pipeline we are bringing to market has the potential to transform the value we deliver to customers. Meritor Blue Horizon is a symbol of that value. It represents the company’s emerging platform of advanced technologies centered on electric powertrain, efficiency and connectivity systems. Blue Horizon products will include integrated electrified solutions for Class 4-8 commercial vehicles across multiple vocations, including pick-up and delivery, drayage/terminal tractors, transit and school buses, as well as linehaul and other heavy-duty applications. As the demand grows to reduce CO2 emissions globally, the commercial vehicle industry is responding with battery electric vehicles. As part of this strategic transformation, we have designed and developed several innovative products that support the trend toward electrification. ePowertrain Solutions Integrate the electric motor into differential or wheel ends Reduce weight, cost and space required eBrakes Optimize electric vehicles with regenerative braking Lower weight, cost and improve packaging for air and hydraulic brake platforms Precision Gearing Improves efficiency through greater power density gear design Suspensions eCarrier or in-wheel motor solutions for independent suspension electric vehicles Meritor’s expanding range of next-generation technologies includes comprehensive solutions for standard axles, remote-mount configurations or fully electric powertrain systems. Our 14Xe™ ePowertrain 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™ ePowertrain is designed for scalability and can be adapted to fit various powertrain needs based on the vehicle application and duty cycle. This year, we announced an expansion of our electric drivetrain solutions by introducing the 12Xe™ ePowertrain for Class 4, 5, 6 and 7 applications and the 17Xe™ ePowertrain for heavyduty 4x2 and 6x2 trucks. Blue Horizon represents the company’s emerging platform of advanced technologies centered on electric drivetrain, efficiency and connectivity systems. These products will include integrated electrified solutions for Class 4-8 commercial vehicles across multiple vocations, including pick-up and delivery, drayage/terminal tractors, transit and school buses, as well as linehaul and other heavy-duty applications. The value that these innovative products are bringing to the market is already being acknowledged. We were recognized as a PACEpilot Honoree by Automotive News for our solutions to power Class 4-8 trucks and buses with electric powertrains instead of diesel-based systems, in addition to receiving Diesel Progress’ Achievement of the Year and Electric Application of the Year awards. To help us achieve our objectives in this important area, we acquired all outstanding common shares of Transportation Power, Inc. in 2020, 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 Power has focused exclusively on developing electric drive solutions since its inception in 2010. Representing the first Class 8 production contract for electric drivetrains in the industry, Meritor 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. Meritor 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 2021. We believe we will be the first supplier to begin production of electric powertrains for Class 8 electric vehicles. Meritor’s Blue Horizon™ brand represents a revolution in commercial vehicle transportation. As interest and adoption of electrification increases in the commercial vehicle industry, Meritor is working with customers around the world. Recently we announced new production contracts to supply Meritor’s 14Xe™ electric powertrain for Autocar’s refuse vehicles, Lion Electric’s 8T tractor, and Volta Trucks’ fully-electric, 16-ton commercial vehicle, the Volta Zero, designed for inner city parcel and freight distribution. With our growing number of production contracts, we are confident that Meritor’s electric powertrain represents game-changing technology for commercial vehicles. Our research, development, engineering and product design capabilities, and highly talented engineers and scientists, are driving these innovations. We have advanced technical centers in North America, South America, Europe and Asia Pacific (primarily in India and China). Backed by years of experience as a leading manufacturer and innovator, Meritor Blue Horizon is uniquely positioned to deliver electric, efficient, and connectivity solutions to meet the needs of companies today with a commitment to being the leader in developing the advanced technologies of tomorrow. Meritor’s 14Xe ePowertrain is the only electric powertrain for Class 8 trucks ready for production. We are proud to be the first to bring the industry a zero emission, best-in-class, premium solution.” – John Nelligan, Senior Vice President and President, Truck, Americas RUN ON LESS SHOWS HOW FAR ELECTRIC TRUCKING HAS COME IN 2021 Meritor takes its long-standing leadership position in the commercial vehicle industry seriously. With the growing urgency to reduce carbon emissions globally, we want to be part of the solution as the industry begins to adopt electric commercial vehicles. Therefore, we have agreed to be one of three title sponsors of the third Run on Less event, an on-road, real-world demonstration for commercial battery electric trucks facilitated by the Rocky Mountain Institute (RMI) and North American Council for Freight Efficiency (NACFE). Run on Less will demonstrate how efficiency technologies improve the bottom line for fleets and benefit the environment by reducing greenhouse gas emissions. Throughout the year, it will showcase the current state of the technology and highlight the opportunity to accelerate adoption of zero-emissions freight movement. In 2021, Run on Less will focus on electric trucking, with 10 dedicated trucks and their drivers reporting real-time data to show the current state of electric trucking technology in the freight industry. The Run on Less—Electric (RoL-E) demonstration vehicles will include electric vans, medium-duty box trucks, and heavy-duty trucks moving freight in a variety of conditions and geographic areas. In an effort to increase electric truck adoption and deployment, RoL-E will help fleets, charging infrastructure companies, utility companies, and policymakers better understand the current benefits and challenges of hauling freight with electric trucks. Different from previous Run on Less events, the technology on the trucks in RoL-E will be at an earlier stage of development and deployment. The goal is to showcase equipment that is representative of the truck builders’ plans. Run on Less Electric (RoL-E) represents the third year that Meritor has sponsored this important event. Supply chain disruptions during the pandemic have shown all of us how essential freight movement is to our daily lives. We also know that this industry has an important journey ahead to decarbonize. The surest road to the zero-emissions goods movement, and a 1.5° C future, is with batterypowered vehicles.” – Jules Kortenhorst, CEO, Rocky Mountain Institute (RMI) Recognized leader on global energy issues and climate change ENVIRONMENT Environment, Health and Safety (EH&S) risk management is a prerequisite for commercial success and forms an integral part of our business strategy. Meritor’s commitments are guided by our EH&S Policy, which is global in scope and covers all company entities, affiliates and consolidated joint ventures. Our environmental policies are reviewed and approved by senior management. We are committed to complying with all applicable environmental, health and safety laws and regulations, and are building a performance-based culture that encourages employees to strive for best practices in EH&S performance. Meritor is also committed to monitoring environmental performance, creating environmental awareness, and regularly reporting on environmental issues. EH&S responsibility and performance are relevant factors in employment, retention, compensation and business decisions. We provide our employees with regular training on EH&S issues. EH&S coordinators at each facility report to their plant manager. Their responsibilities are managed within the operations team of the respective business unit, ultimately reporting to the senior vice president and president of that segment. The operations team works closely with our legal group’s environmental compliance experts to ensure we are aware of the latest trends in environmental compliance and sustainability. More than 60 percent of our manufacturing and distribution facilities are compliant with ISO 14001 certification. In addition to systematic management of environmental risks under normal operations, ISO certification also requires the adoption and regular verification of emergency plans and procedures and related staff training. These procedures define roles, responsibilities and responses when tackling emergency situations to protect people and the environment. The environmental certification maintenance process includes a series of external third-party audits, carried out by accredited bodies. The audit process requires annual surveillance monitoring with certification renewal every three years. Furthermore, all manufacturing plants and distribution sites are required to perform an internal audit annually to verify the performance of their environmental management systems and to document their processes. Ensuring compliance with environmental regulation is a core competency of our environmental management system. SUPPLY CHAIN MANAGEMENT More than 60 percent of our manufacturing and distribution facilities are in compliance with ISO 14001 certification. Meritor’s EH&S policy confirms our commitment to consider impacts in our work with suppliers to mutually address safety and sustainability concerns. We have a formal policy requiring all suppliers to certify their compliance with applicable laws against human trafficking and slavery. Our buyers are required to be trained to comply with laws against human trafficking and slavery, including steps to ensure that our suppliers are aware of, and agree to comply with this policy. We will audit suppliers which we have reason to believe may be engaged in any activity that would violate applicable laws. We have also implemented a conflict minerals compliance program and a policy intended to promote responsible sourcing of tin, tantalum, tungsten and gold (3TG) from the Democratic Republic of Congo and surrounding region, where revenues from the extraction of natural resources have historically funded armed conflict and human rights abuses. The conflict mineral policy ensures that all materials and products provided to us meet or exceed all applicable environmental laws and regulations of the jurisdictions in which the supplier does business. Suppliers must meet the same requirements that our customers demand of us. We encourage all suppliers to install environmental systems in their facilities that are compliant to ISO 14001. Meritor has been a fully validated Tier II member of the Customs Trade Partnership Against Terrorism (C-TPAT) program since 2006. This membership includes all our manufacturing facilities in the United States and Mexico. C-TPAT is a U.S. Customs-led security program that strengthens the overall global supply chain and border security. It confirms that our international supply chain security program meets certain compliance levels. Benefits include reduced levels of inspections and clearance times and eligibility for expedited release programs. C-TPAT participation is an industry requirement and Meritor requires our supply base to participate and support the program. In addition, Meritor has policies that prohibit facilitation payments, as well as bribery and corruption. Under these policies, facilitation payments are defined as amounts paid to a government employee to expedite or secure performance of a routine, non-discretionary governmental action, such as obtaining visas, permits and licenses, police protection or utility services in a foreign country. Bribery and corruption are defined as any offer, promise, gift, or payment of money or anything else value, whether directly or indirectly, to a government official or a participant in a private commercial transaction to improperly induce that person to affect any act or decision, to do or omit to do any act in violation of their duty, or to secure an improper advantage in a manner that will assist ADP or any of its subsidiaries or divisions, or any of its associates, agents, or anyone else to obtain or retain business. We consider our suppliers an extension of our team and recognize the following certified diverse classifications: minority, woman, veteran-owned and small business. Meritor is also a long-time member of the EPA SmartWay program which helps companies advance supply chain sustainability by measuring, benchmarking and improving freight transportation efficiency. HEALTH AND SAFETY Employee safety is our top priority. We strive to achieve incident-free operations through continuous improvement processes, guided by Meritor’s EH&S Policy, and managed through our Health and Safety Management Systems. Plant managers globally have responsibility for health and safety management system compliance, implementing safety procedures and tracking safety metrics. Meritor’s health and safety policies apply to all employees and contractors. Plant safety reports are published at the end of each month and shared with Jay Craig, Meritor’s executive chairman, and Chris Villavarayan, CEO and president. At Meritor, we track the lost time incident rate as well as the total recordable case rate on a company-wide basis. These statistics offer important safety information and are tracked per 200,000 labor hours worked. In fiscal year 2020, 25 out of our 45 measured facilities had no recordable incidents. We attribute this to the diligence of our employees and the safety programs and equipment at our global operations to protect them. To continually improve the safety rate, we will maintain diligence through employee training and education, reducing certain behaviors that are known to create safety issues and maximizing risk identification and hazard assessment. To reinforce Meritor’s commitment to safety, we have increased our safety target for the M2022 planning period (FY20-FY22). The overall case rate target for 2022 is 0.55 per 200,000 hours worked, an improvement from the 0.65 target in our M2019 plan. Our ultimate goal is zero injuries. MERITOR EMPLOYEES “GET THEIR SAFETY GAME ON” Meritor’s manufacturing plants are getting their safety game on! That is the theme of a campaign designed to keep safety top-of-mind and reduce or eliminate injuries. The campaign focuses on activities that help employees keep their Mind on Task, one of the SafeStart® principles. The centerpiece is the “Run With The Bull Bowl,” a friendly intracompany competition in which sites can earn points for achieving certain safety goals. Each plant will compete for top honors by: Improving the plant’s recordable injury rate Submitting safety suggestions Completing personal safety game plans This campaign is part of a broader initiative that has reinforced safety as a top priority throughout the company, resulting in a dramatic decline in recordable incidents and an industry-leading safety record. Ethnicity % (US Only) 2016 2017 2018 2019 2020 Lost Time Incidence Rate 0.15 0.16 0.20 0.11 0.19 Total Recordable Case Rate 0.76 0.48 0.74 0.59 0.57 In fiscal year 2017, we achieved a total recordable case rate of 0.48 injuries per 200,000 hours, which we believe is world class for an industrial company like Meritor. In 2018, we achieved a total recordable case rate of 0.74 injuries per 200,000 hours, slightly above our M2019 target of 0.65 due in large part to the 15-percent increase in hours worked in our manufacturing facilities. High production required the onboarding of many new employees in a short timeframe. Even with the significant increase in hours, 14 out of our 40 measured facilities had no recordable incidents during fiscal year 2018. We attribute this to the diligence of our employees and the safety programs and equipment at our global operations to protect them. To continually improve the safety rate, we will maintain diligence through employee training and education, reducing certain behaviors that are known to create safety issues and continue to maximize risk identification and hazard assessment. To reinforce Meritor’s commitment to safety, we have increased our safety target for the M2022 planning period (FY20-FY22). The overall case rate target for 2022 is 0.55 per 200,000 hours worked, an improvement from the 0.65 target in 2019. Our ultimate goal is zero injuries. QUALITY MANAGEMENT Meritor was honored with the coveted Daimler Supplier Award for outstanding performance in quality. At Meritor, quality is of utmost importance. Our quality policy states: We are passionate about quality, integrity and we strive to exceed customer expectations by: Placing product safety first Listening to the voice of our customers in all aspects of our business Practicing continuous improvement to achieve zero defects Partnering with suppliers to maximize value Meritor is focused on establishing a zero-defect culture. Although a zero-defect quality culture has been part of the automotive industry for some time, this level of performance expectation is a growing trend within the trucking industry – and our customers are demanding it. By building quality into our processes and delivering consistently lower parts per million (PPMs) at a competitive cost, we set ourselves apart from competitors. Meritor conducts product risk assessments through the Design Failure Mode and Effect Analysis (DFMEA) process within engineering and the Process Failure Mode and Effect Analysis (PFMEA) process within manufacturing, which are required steps in the design and development process at Meritor. In addition, external quality system audits are performed at a minimum on an annual basis at each of our production facilities. A number of our locations are also subject to regular safety audits by key customers. We also utilize error proofing processes when possible to regularly test our emergency response procedures and eliminate production issues that may impact product safety. Meritor also has a dedicated customer call center where product issues are reported, tracked and analyzed so that we can continually monitor the safety performance of our products. Incidents are thoroughly investigated and evaluated for corrective action by the Product Safety and Compliance Committee. We are also subject to federal public reporting requirements for product safety issues. As part of our M2022 plan, we set an overall quality target of less than 20 parts per million (“PPM”). We believe achieving this will further differentiate us in the commercial vehicle industry. Thirty-two of Meritor’s facilities are certified to quality management systems standards. Twelve sites are ISO 9001 certified, 19 sites have IATF 16949 certification and one site has both certifications. PRODUCT SAFETY PROGRAM As part of Meritor’s quality product safety program, we are committed to ensuring the safety of our products. Employees receive regular training on product safety. Oversight of the program is the responsibility of the Product Safety and Compliance Committee, a cross functional team of senior management and subject matter experts. We were proud to receive the coveted Daimler Supplier Award for outstanding performance in quality. During a peak North America commercial vehicle market in 2019, Meritor supplied Daimler with 1.3 million axles, brakes and drivelines – all with high quality and a low defect rate based on parts per million. In addition: Six of our manufacturing plants were also recognized with Masters of Quality Awards from Daimler Trucks North America Four manufacturing facilities received the PACCAR 10PPM achievement Meritor’s Aftermarket distribution center in Florence, Kentucky received John Deere’s Consistent Best Performer Award In China, we received the XCMG Excellent Supplier Award, Isuzu’s Excellent Quality Award, Caterpillar Award, and the Xuzhou City Mayor Quality Award And we were recognized with the Isuzu Quality Achievement Award for excellence in our facility in Japan GOVERNOR’S WORKPLACE SAFETY AWARDS RECOGNITION In 2020, Meritor’s Plainfield, Indiana site earned the Rising Star recognition in the 2020 Governor’s Workplace Safety Awards for positively impacting employee safety and demonstrating proactive measures to improve the plant’s safety and health culture. Meritor’s 275 employees in Plainfield remanufacture heavy-duty truck brakes and drivetrain components, working in a culture of safety built around training, capital investments and engagement activities. The site, which placed renewed focus on safety in 2016, has had only two recordable injuries since 2018 and ended fiscal year 2020 with a total recordable rate of 0.38. The annual Governor’s Workplace Safety Awards are a joint initiative among government, business and safety leaders including the Indiana Department of Labor on behalf of Gov. Eric J. Holcomb, the Indiana Chamber of Commerce and the Central Indiana Chapter of the American Society of Safety Engineers. AUTOMOTIVE AXLE LIMITED RECOGNIZED FOR ITS “SUPER SHOPFLOOR” Plainfeld, Indiana Remanufacturing Facility Meritor’s joint venture in Mysuru, India, Automotive Axles Ltd. (AAL), won the prestigious 2020 Super Shopfloor award from the popular magazine, The Machinist. A Super Shopfloor equates to a team who operates a shop floor with outstanding practices and conducts proactive improvements throughout the year. AAL competed with over 700 companies to win this award which involved maintaining 663,854 square feet of shop floor. This award showcases the team’s drive for excellence to deliver the highest level of safety in our products, processes and people. AAL is also noteworthy for its 18-month streak of zero reportable incidents and zero days lost. Meritor is located in 19 countries around the world with 31 manufacturing facilities, in addition to engineering centers, offices and distribution centers. In each of these locations, we strive to minimize negative environmental impacts. Through efficiency in our processes, the use of recyclable materials, and sustainable manufacturing and shipping practices, we are increasingly becoming more disciplined in the management of our operations so that we can contribute to the protection of our earth’s limited and precious resources. These highlights represent some of the ways we are approaching this most important imperative globally in our manufacturing plants. Added filtered circulation loop to wastewater filtration system eliminating need for liquid sludge pumping Implemented electric drill and tap operation to displace hydraulically powered systems Deployed paint mixing system to reduce residual waste and unused paint material Reduced non-hazardous special/industrial waste streams Curtailed bliss press operations during peak hours Replaced fluorescent light bulbs with LED lights Installed new cooling tower Redesigned environmentally safe battery charging area Installed automated water utilities for conservation Replaced solvent-based dip-coating system with electro-deposited water-based pigment system, reducing volatile organic compound (VOC) emissions Implemented coolant recycling program for spider cell robots Installed purified water stations to eliminate plastic waste (bottled water) Installed state-of-art air-to-water heat pump for CO2 reduction Changed radiators and roof-mounted heating elements to floor heating for better efficiency Installed air ventilation system with pre-heating/ pre-cooling to improve air quality and avoid energy loss Used water-based paint for axles to reduce CO2 emissions Filtered and reused hot air from manufacturing processes to heat air in plant Decommissioned air conditioning units using chlorofluorocarbons Replaced wet cut machines with dry gear cutting machines Replaced gear cutters with modern dry-cutting models Removed ammonia in manufacturing processes Recycled metals, cardboard, paper and plastics, burned general waste and hazardous special industrial waste for energy Converted wood waste into peat-free compost Introduced packaging improvements, reusable dunnage and recycling awareness programs Decreased number of transports of indirect material from suppliers to reduce CO2 emissions We believe in good environmental stewardship through the development of effcient products and the disciplined management of operations that respect our earth’s limited and precious resources.” – Tim Bowes Senior Vice President and President, Industrial and North America Aftermarket INVESTING IN OUR EMPLOYEES We believe that our ability to compete in the global market depends on 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 collaborated with leading world-class universities to identify and drive top talent to the company. Employment at Meritor includes: Financial and non-financial benefits Health and wellness benefits Personal development opportunities For new managers, we offer Management Essentials – a focused leadership program that emphasizes core management skills as well as targeted eLearning programs for continued growth Experienced managers can apply for our Leadership Fundamentals program – a 6-month program to build the necessary competencies to lead diverse teams and achieve business results For high-potential, director-level employees, we sponsor Leadership Edge – a 10-month program focused on developing advanced leadership skills and preparing mid-level managers for senior level positions For certain senior-level leaders, we offer the Summit which provides executive coaching and an opportunity to attend executive training sessions tailored to each individual’s background and career goals, participation in a MBA-level finance course, if appropriate, and mentorship opportunities with a member of Meritor’s Board of Directors We have established various development and training programs to help employees grow as we grow, and executed leadership development programs for managers, directors and senior leaders around the world. We are dedicated to investing in our employees and driving top talent to the company.” – Tim Bowes, Senior Vice President and President, Industrial and North America Aftermarket ORGANIZATIONAL CULTURE In 2020, we conducted a Glint engagement survey. Glint provides leadership with on-demand access to employee feedback, surfacing insights that help us focus on employee engagement issues across a global, diverse workforce. It is uniquely designed to overcome the typical barriers to action by guiding leaders and managers through the process of strengthening employee engagement and driving results. Meritor’s average score was a favorable 75, which when benchmarked against more than 50 companies, indicates a high level of employee satisfaction. In addition, through this mechanism, we were able to receive detailed feedback from hourly and salaried employees that enabled us to develop improvement plans to increase employee morale in specific locations around the world. EMPLOYEE RETIREMENT READINESS We pride ourselves in offering programs that assist in securing our employees’ future retirement goals including 401(k) & HSA plans. We contribute approximately 50 percent of total contributions toward employee 401(k) retirement plans. Our auto-enrollment feature has been extremely successful with nearly 95 percent of employees participating. We have seen significant growth over the last several years in both the average participant contribution and the average participant balance. In 2017, the automatic escalation feature was incorporated into the Meritor 401(k) Savings Plan. Any eligible employees deferring between 1% and 5% of their pay are automatically enrolled in the automatic escalation feature of the plan. Deferral percentages are then increased by 1% for pre-tax, unless the employee chooses to opt out of this feature. Employees who are contributing over 6% can choose to enroll in this plan feature and set their own limits on deferral percentages. Currently, 45% of eligible employees are enrolled in this program, which has remained consistent on a year-over-year basis. DIVERSITY AND INCLUSION We recognize the value of different opinions and backgrounds in a global company and we are committed to recruiting and retaining a high-performing and diverse workforce. Meritor employee groups participate in activities that are part of an engaged, diverse work environment and a culture of diversity, inclusion and continuous learning of new concepts, skills and behaviors. We reject all forms of discrimination, specifically discrimination based on race, gender, sexual orientation, personal and social status, health, physical condition, disability, age, nationality, religious or personal beliefs or against other protected groups. Meritor’s diversity initiatives go beyond legal compliance through our diversity training, recruitment, mentoring, employee affinity groups and support of diverse organizations through the Meritor Trust. Employees have taken the initiative to form the Women’s Business Resource Group, African American Employee Resource Group, LGBTQ Business Resource Group and Veterans Business Resource Group which are supported by the company. We recently launched a formal diversity mentorship program for high-potential employees that pairs them with a senior executive to support their development. Actions to accelerate Meritor’s diversity recruiting initiatives include targeting universities with significant populations of racial minorities, building relationships with women and minority student-led organizations and attending diversity conferences. Human Resources leads our diverse People culture, as demonstrated by our Unconscious Bias training. We were named a Veteran Friendly employer by the Michigan Veterans Affairs agency for positive military veteran recruitment, training and retention practices, with veterans comprising approximately 5 percent of Meritor’s U.S. workforce. Meritor is represented by a diverse Board of Directors, which is responsible for overseeing our diversity initiatives. Women comprise nearly 25 percent of the executive team. Additionally, almost 34 percent of the organization based in the U.S. comes from ethnically diverse backgrounds. We believe diversity and inclusion is a competitive advantage that improves creativity, innovation, performance, and well-being of our employees.” – Darrell Whitney, Vice President and Chief Human Resources Officer MINORITY WORKFORCE U.S. Only (Salaried and Hourly) FY19 FY20 Executives 17% 17% Non Executives 18% 19% Hourly 40% 39% Total 31% 30% FEMALE WORKFORCE U.S. Only (Salaried and Hourly) FY19 FY20 Executives 17% 15% Non Executives 25% 25% Hourly 13% 12% Total 16% 17% Meritor is making a positive difference in people’s lives through charitable giving, employee contributions and volunteerism. We are supporting programs as diverse as training service dogs for military veterans’ workplace development and STEM education for individuals in underserved communities. The common thread is an alignment with our industry, business and employees. Our giving is primarily focused in the following areas: Diversity Industry Education Health and Human Services The annual Meritor Trust budget of $700,000 is distributed through five main channels: Single-year contributions Signature sponsorships University relations Local community contributions Company match Meritor has a long history of community support. Each year, we assess our contributions to ensure that we are providing support to organizations that make a real impact in people’s lives. We are proud of our employees and their unwavering passion to help others.” – Krista Sohm, Vice President and Chief Marketing & Communication Officer DIVERSITY AND INCLUSION As an employer, Meritor treats all employees and applicants for employment without discrimination. Meritor has made significant contributions to organizations that spearhead diversity initiatives from scholarships for women in engineering fields to the annual United Negro College Fund (UNCF) Walk for Education and the Michigan Armed Forces Hospitality Center, to name just a few. Focus: HOPE, whose mission is to provide meaningful work to underserved populations in Detroit, Michigan, has been Meritor’s signature charity for years. In just over five years, we have contributed more than $750,000 to Focus: HOPE. SUPPORTING MILITARY SERVICE MEMBERS AND VETERANS With more than a century of supplying drivetrains for tactical wheeled vehicles, we know the importance of supporting those who serve. Meritor has a long history of working with organizations that make a difference in the lives of veterans and their families. VETERAN THANKS MERITOR FOR BULL, THE SERVICE DOG Today, Jeffrey Terrian can walk into a shopping mall, ride an elevator and drive a car. Severe injuries have hampered the veteran, who served in the U.S. armed forces for more than 15 years, from doing the things that most people take for granted. Terrian credits Meritor and a service dog named Bull for helping to remake his life. Named after Meritor’s logo, the German shepherd went through more than two years of training at Guardian Angels Medical Service Dogs, Inc., a Florida-based nonprofit organization dedicated to rescuing, raising and training highly skilled service dogs for veterans. Bull was trained with a $20,000 grant from the Meritor Trust to monitor Terrian for signs of anxiety such as panic attacks and wake him from nighttime terrors resulting from his experiences in the military. INDUSTRY Impact Of Truck Driver Training Program Since 2016: 240 students trained, 90% completion, 94% employment More than 240 Detroit residents have found new jobs in the trucking industry since 2016, thanks to a unique partnership between Meritor and Focus: HOPE, one of the largest nonprofits in Detroit addressing the problems of hunger, economic disparity, inadequate education and racial divisiveness. Together, we developed a model that allows candidates to become work ready in eight weeks through a 160-hour truck driver career training program that typically includes four weeks of readiness training and four weeks of Commercial Driver License (CDL) Class A license training. These newly trained CDL drivers are then paired with fleets of all sizes to begin a new career – and a new life. The training advances Focus: HOPE’s mission of providing meaningful work for underserved populations in Detroit, as well as helping the trucking industry meet its need for qualified drivers. EDUCATION We recognize that introducing students to science, technology, engineering and math (STEM) subjects will ultimately drive innovation in the manufacturing industry, resulting in fulfilling careers and a positive impact on our communities. Our contributions from the Meritor Trust encourage an interest in STEM education at all levels, from elementary schools to technical colleges and universities. Some of our community work has included: Introducing more than 700 middle school students to the way STEM concepts are being applied to the real world by using streaming technology between the classroom and our York, South Carolina facility Sponsoring capstone projects, career days, mentoring and scholarships to introduce hundreds of college students each year to a variety of STEM career opportunities Training the next generation of America’s repair technicians through our longstanding involvement with SkillsUSA that attracts 300,000 students and instructors annually, which aims to improve the quality of America’s skilled workforce through structured technical and professional skills training MERITOR HOSTS HANDS-ON STEM EXPERIENCE FOR GIRL SCOUTS IN SOUTHEASTERN MICHIGAN Meritor celebrates National Introduce a Girl to Engineering Day with the Girl Scouts of Southeastern Michigan in February 2020. In 2020, Meritor hosted the Girl Scouts of Southeastern Michigan at its World Headquarters as part of the National Introduce a Girl to Engineering Day. A group of 20 girls grades 9-12 spent the day learning about careers in manufacturing and job-shadowing women in various roles and functions, including human resources, legal and engineering. As part of this event, mentors shared their experiences as women working in STEM careers and insight into their day-to-day responsibilities. Meritor has a longstanding commitment to encourage interest in STEM and has given more than $20,000 and significant volunteer time to serving this worthwhile organization. HEALTH AND HUMAN SERVICES Meritor is making a difference in people’s lives through contributions to non-profit organizations that deliver health and human services to those in need. From breast cancer awareness to disaster relief to food banks and homeless shelters, nearly half of all Meritor contributions are focused on individual health and well-being. Employees at our headquarters and in manufacturing locations around the world generously dedicate their time and offer financial contributions to those in need throughout the year. RunTogether focused on our employees, community and industry – with the goal of sharing stories that united us in 2020. Whatever the effort, big or small, there were many impactful stories to share. AFTERMARKET EMPLOYEE REPAIRS KIDS’ TOYS With toy stores and repair shops in Switzerland closed, one Meritor employee put his talents to good use, keeping the kids – and parents – in his neighborhood happy. He distributed a flyer in the neighborhood and will repair any child’s toy for free, charging only for material costs. "With the tools I have at home, such as a small CNC machine and a 3D printer, I can repair most of the toys," Jago Svensson said. "It's great to see the smiles on faces of children and parents when they get their toys back good as new." MERITOR PARTICIPATES IN USA CARES’ VIRTUAL 5K Meritor employees participated in the USA Cares Keep Your Distance Virtual 5K Run/Walk on April 22, and the company made a $2,000 donation to support the organization’s efforts to help veterans and military families during the coronavirus pandemic. Dozens of employees from Meritor sites across the United States ran or walked throughout the all-day event, often accompanied by their spouses and children. “Meritor has always valued the service of current and former armed forces personnel, and we’re proud to make a contribution and show our support during this difficult time,” said Krista Sohm, vice president and chief marketing and communication officer. BRITISH EMPLOYEE JOINS ROYAL VOLUNTARY SERVICE Michelle Wright, a Meritor employee in Redditch, United Kingdom, was among 750,000 volunteers in the Royal Voluntary Service who worked as responders for the National Health Service (NHS) to help fight the pandemic. Responders drove patients to and from hospital appointments, delivered medicines from pharmacies, made regular phone calls to check on people isolating at home and transported medical supplies and equipment for the NHS. “It’s important that during these times we offer as much love and support to our amazing NHS and all of its workers,” Wright said. “They’re putting their own lives at risk every day to keep our loved ones alive and healthy.” EMPLOYEE DELIVERS N95 MASKS TO MICHIGAN HOSPITALS Meritor donated N95 masks to the Henry Ford Health System in Macomb, Michigan, to support medical staffs. “Thank you to the doctors, nurses and healthcare professionals who are fighting the COVID-19 battle on the front lines,” said Alex Iordache, senior manager of Corporate Communication, who delivered the masks. CZECH EMPLOYEE DONATES MASKS TO HELP COMBAT COVID-19 Meritor employee Roman Mikulka applied a bit of know-how to the task of containing the disease in his hometown near the company’s Vrchlabi, Czech Republic site. Mikulka used 3D printing technology to produce a key part for face shields being donated to medical staff at a hospital in Trutnov, a town of 30,000 people. “I’m no hero, I just believe this is the right thing to do,” he said. “It’s simply a matter of trying to help in a small way.” Due to a shortage of face masks, Mikulka also printed more than 200 plastic folding tools that help people with the process of putting together do-it-yourself masks. Many of the masks were made from old clothing and, due to a shortage of rubber bands, people made lacing to hold them in place. “By using this tool, the fabric can be sewed directly without ironing – reducing time spent making the masks by 50 percent,” Mikulka said. Meritor is committed to good corporate governance. The foundations of our corporate governance principles and practices are an independent and engaged Board of Directors whose primary responsibility is to Meritor’s shareholders, our commitment to ethical behavior and standards of business conduct, our system of internal controls and internal audit, and accessibility of employees and shareowners to management and the board to report concerns about violations of ethical standards and other issues of business conduct. All employees, including our executive chairman, chief executive officer, chief financial officer, controller, and members of the Board of Directors are required to comply with corporate policies regarding standards of business conduct and conflicts of interest. These policies have been in place since the company’s inception. The purpose of these corporate policies is to ensure that we conduct business in a legal and ethical manner. They form the basis of a comprehensive process that includes compliance with all Meritor policies and procedures, training and certification and procedures for reporting violations and include such areas as conflicts of interest, protecting sensitive information, gifts and payments, export controls, environmental compliance and adherence to other laws and regulations applicable to the conduct of our business. All employees undergo training at the time of hire to familiarize them with our Standards of Business Conduct and Conflicts of Interest policies, and participate in periodic refresher courses to keep their knowledge up to date. Also, all salaried employees must certify annually as to their awareness of any conflicts of interest. Employees are obligated to report any conduct that they believe in good faith to be an actual or apparent violation of Meritor’s Standards of Business Conduct and Conflicts of Interest policies. Procedures are in place for the reporting of each such complaint to either the complainant’s supervisor, the employee Helpline, the Office of the General Counsel or the Business Standards Compliance Committee (composed of representatives of Internal Audit, Human Resources and Legal), and for subsequent investigation and resolution of each complaint. Reports can be made anonymously through the helpline, which is available in local languages 24 hours a day, 7 days a week. We believe that operating in an ethical manner, in compliance with the laws of the countries in which we operate, is crucial to our stability and long-term success." – Hannah Lim-Johnson, Senior Vice President, Chief Legal Officer and Corporate Secretary BOARD OF DIRECTORS Jay Craig Executive Chairman Meritor, Inc. Chris Villavarayan Chief Executive Officer and President Meritor, Inc. Steven Beringhause Former Chief Technology Officer of Sensata Tehnologies Holding PLC Jan A. Bertsch Retired Senior Vice President and Chief Financial Officer of Owens-Illinois, Inc. Rodger L. Boehm Retired Senior Partner of McKinsey & Company, Inc. Rhonda L. Brooks President of R. Brooks Advisor Ivor J. “Ike” Evans Former Executive Chairman, Chief Executive Officer and President of Meritor, Inc. Fazal Merchant Retired Co-CEO Tanium, Inc. William R. Newlin Chairman of Newlin Investment Company, LLC. Lead Independent Director of Meritor, Inc. Thomas L. Pajonas Former Chief Technology Officer of Sensata Tehnologies Holding PLC Lloyd G. Trotter Managing Partner of GenNx360 Capital Partners APPENDIX As we continue to work toward adoption of the standards promulgated by the Sustainability Accounting Standards Board (SASB) and the framework suggested by the Task Force on Climate-related Financial Disclosures (TCFD), the following table contains disclosure relevant to the SASB Auto Parts industry standard. SASB INDEX Disclosure Number Disclosure Name 2020 Response Energy Management TR-AP-130a.1.1 Total energy consumed in gigajoules (GJ) Approximately 1.2M GJ in FY2020 TR-AP-130a.1.2 Percentage grid electricity 100% in FY2020 TR-AP-130a.1.1 Percentage renewable energy 0% in FY2020 Waste Management TR-AP-150a.1 Total amount of waste in metric tons (MT) This infomation is being collected and will be reported for FY2021. TR-AP-130a.1.2 Percentage grid electricity TR-AP-130a.1.1 Percentage renewable energy Product Safety TR-AP-250a.1 Number of recalls issued, total units recalled Meritor had zero voluntary recalls and two (2) involuntary recalls in FY2020 that involved 1,883 and 32 units. Design for Fuel Efficiency TR-AP-410a.1 Revenue from products designed to increase fuel efficiency and/or reduce emissions Approximately $230 million in FY2020 Materials Sourcing TR-AP-440a.1 Description of the management of risks associated with the use of critical materials Meritor does not use any of the critical materials listed in the standard. Meritor has a policy and process to manage identified Conflict Minerals. Meritor 2020 Sustainability Report: Page 15 Materials Efficiency TR-AP-440b.1.1 Percentage of products sold that are recyclable This information is being collected and will be reported for FY2021. TR-AP-440b.1.2 Percentage calculated as the revenue from products sold that are recyclable divided by the revenue from all products sold TR-AP-440b.2.1 Percentage of input materials from recycled or remanufactured content TR-AP-440b.2.2 Percentage calculated as the weight of input materials consumed derived from recycled or remanufactured content divided by the total weight of all input materials consumed Competitive Behavior TR-AP-520a.1 Total amount of monetary losses as a result of legal proceedings associated with anticompetitive behavior regulations Monetary losses resulting from legal proceedings associated with anti competitive behavior regulations are described in Meritor’s public filings. Meritor provides regular training to employees on anticompetition matters. We are resolute in our commitment to take actions during the next decade that will improve the well-being of our employees, reduce our carbon footprint, uniquely design products that improve efficiency and support and strengthen communities.” – Carl Anderson, Senior Vice President and Chief Financial Officer ONTRAC CUSTOMER SERVICE United States/Canada: 1-866-668-7221 Mexico: +1 001-800-889-1984 OnTrac@Meritor.com AFTERMARKET CUSTOMER SERVICE United States: 1-888-725-9355 CustCareCntr.Florence@Meritor.com Canada: 1-800-387-3889 CustomerService.Brampton@Meritor.com Mexico: +52 (81) 8150-7580 Servicioaclientes@Meritor.com Brazil: +55 11 3684-6620 Duvidas.Tecnicas@Meritor.com Europe: +44 (0) 1527 50-3950 AftermarketEurope@Meritor.com WHO WE ARE About Meritor Meritor Today Run With The Bull Sustainability Careers INVESTORS Investors Overview Stock News Releases Corporate Governance WHAT WE DO Products Applications Technology SUPPORT Customer Support Literature Warranty Support Sales Tools Contact Us QUICK LINKS meritorpartsxpress.com shopmeritor.com meritorbullpen.com advantageplans.meritor.com meritorsavings.com Privacy Policy Canadian Privacy Policy Terms of Use CA Transparency Conflict Minerals UK Tax Strategy UK Gender Pay Gap France Gender Equality Index © 2021 Meritor, Inc. 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