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Meritor Transmission Lawsuit Costs Eaton $500M

TROY, MI — Five hundred million dollars. That’s how much truck component maker, Eaton, has agreed to pay rival ZF Meritor to settle the back-and-forth legal tussle over each company’s automated mechanical transmissions.

ZF Meritor is a joint venture between a Meritor subsidiary, ZF Friedrichshafen AG and Meritor Transmission. Meritor will receive $209-million of the settlement if ZF Friedrichshafen AG approves the agreement.

"This is an important outcome for Meritor that delivers significant benefits to the company, our shareholders and our customers.  We are successfully putting this lawsuit behind us as we continue to execute on our plan to drive value for all shareholders," said Meritor's Chairman and CEO, Ike Evans.

Meritor said it will use the $209-million from the settlement to pre-fund the next three years of mandatory pension contributions in its United States and United Kingdom pension plans.

"With the proceeds from the Eaton lawsuit deployed to pre-fund pension contributions, the company now expects to achieve this target in the second half of calendar year 2015," Meritor said in a statement.

ZF Meritor and Meritor Transmission have agreed to dismiss all pending antitrust litigation with Eaton and Meritor expects to receive proceeds from the settlement in mid-July.

Alexander Cutler, Eaton’s chairman and CEO, commented: "It is in the best interests of Eaton shareholders to settle this matter. The settlement results in a permanent resolution of the matter and removes the uncertainty of a trial and a lengthy appeal process."

The legal battle has been ongoing since 2006, when ZF Meritor and Meritor Transmission filed an antitrust lawsuit accusing Eaton of engaging in anticompetitive conduct.

In 2009 a U.S. District Court jury has ruled in favor of ZF Meritor and Meritor Transmission, saying that Eaton engaged in exclusionary and anticompetitive conduct in the sale and marketing for heavy-duty truck transmissions. 

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