By David Bailey

DETROIT (Reuters) - ArvinMeritor Inc (ARM.N: Quote, Profile, Research) said on Tuesday it plans to spin off its car parts business from its larger trucking group in a move to improve the focus of each unit, boosting the company's shares 5 percent.

The truck business, with annual sales of $4.2 billion, will continue to be called ArvinMeritor. The car parts unit, with annual sales of $2.2 billion, will be spun off to shareholders under the name Arvin Innovation Inc.

The plan comes eight years after Arvin and Meritor merged to form an auto and truck parts supplier with annual sales of $7.5 billion with a broader focus, that can better compete in what was a consolidating industry.

In separating the operations, investors can choose between "two more focused entities," KeyBanc Capital Markets analyst Brett Hoselton said in a note to clients.

"ArvinMeritor will essentially become a global commercial vehicle pure play, while Arvin Innovation will become a global light vehicle pure play.."

ArvinMeritor hopes to complete the split within a year. The plan does not require shareholder approval, although it needs certain tax rulings and regulatory approvals, it said. It will provide more financial details on the proposal later in May.

"In the end, we will have two multibillion-dollar companies that are market-leading companies ... with stronger competitive positions because there will be clarity and a focus in the businesses," ArvinMeritor Chief Executive Chip McClure said.

ArvinMeritor's board approved the plan to go forward with a spin-off on Monday. The company also will review the spin-off plan with unions in North America and Europe, although unions represent a relatively small share of its workers worldwide.