Tenneco Business report FY2008
Business Highlights
Financial overview
Factor
(1) North America
-Revenues from the North American operations decreased $271 million in 2008 compared to 2007. Higher aftermarket sales were more than offset by lower North American OE revenues.
-The Company's total North American OE revenues, excluding substrate sales and currency, decreased 9% in 2008 compared to 2007.
-North American OE emission control revenues were down $259 million in 2008. Excluding substrate sales and currency, revenues were down $106 million compared to FY2007. This decrease was primarily due to a 16% year-over-year decline in industry production volumes, including a temporary stop of production on the Toyota Tundra, as well as significant reduction in customer light truck production which included the Ford Super Duty and F150, GMT 900 and the Chevrolet Trailblazer and GMC Envoy.
-North American OE ride control revenues for 2008 were down $21 million from the prior year or down $16 million excluding unfavorable currency. Revenues of $84 million from its newly acquired Kettering, Ohio ride-control operations helped offset the significantly lower light truck production.
(2) Other markets
-The European, South American and Indian segment's revenues increased $21 million or 1% in 2008 compared to last year. Total Europe OE revenues were $1,966 million, down 1% from last year. Excluding favorable currency and substrate sales, total European OE revenue was down 4%.
-Europe OE emission control revenues decreased 5% to $1,487 million from $1,569 million in the prior year. Excluding substrate sales and a favorable impact of $54 million due to currency, Europe OE emission control revenues decreased 8% from 2007, primarily due to lower volumes on the Opel Astra and Vectra, the BMW 3 Series and Volvo. Improved volumes on the BMW 1 series, VW Golf, the new Jaguar XF, and the Ford Mondea and C-Max helped partially offset the emission control decrease.
-Europe OE ride control revenues of $479 million in 2008 were up 12% year-over-year. Excluding currency, revenues increased by 6% in 2008 due to favorable volumes on the Suzuki Splash, VW Passat and Transporter, Ford Focus, the new Mazda 2 and Mercedes C-class. Also benefiting 2008 Europe OE ride control revenues were $18 million from the acquired suspension business of Gruppo Marzocchi. European aftermarket revenues decreased $5 million in 2008 compared to last year.
-South American and Indian revenues were $389 million during 2008, compared to $333 million in the prior year. Stronger OE and aftermarket sales and currency appreciation drove this increase.
-Revenues from its Asia Pacific segment decreased $18 million to $528 million in 2008 compared to $546 million in 2007. Excluding the impact of substrate sales and currency, revenues decreased to $377 million from $394 million in the prior year. Asian revenues for 2008 were $342 million, down 3% from last year. Although overall China OE production was up slightly, GM, Volkswagen, Ford and Brilliance, its largest customers in this region, all took unplanned downtime during the year. Revenues for Australia were down $8 million, to $186 million in 2008 compared to $194 million in the prior year. Excluding substrate sales and favorable currency of $6 million, Australian revenue was down $2 million versus 2007.
Acquisition
-In May 2008, the company finalized a purchase agreement with Delphi Automotive Systems LLC to acquire certain ride control assets and inventory at Delphi''s Kettering, Ohio facility. The Company agreed to pay approximately $10 million for existing ride control components inventory and approximately $9 million for certain machinery and equipment. The Company will also lease a portion of the Kettering facility from Delphi. The Company also acquired valuable excess manufacturing assets, which it intends to use to continue growing its OE ride control business globally. The Company entered into a long-term supply agreement with General Motors to continue supplying passenger car shock and strut business to General Motors from the Kettering facility. (From a press release on May 30, 2008)
-In September 2008, the Company acquired the suspension business of Gruppo Marzocchi, an Italy-based worldwide leading supplier of suspension technology for the two-wheeler market.
Contracts
-In February 2008, the Company was awarded by Ford Motor the new hot-end emission control products on vehicles launching in model-year 2009 and 2010. The Company will supply components (including catalytic converters) that make up the "hot end" of the exhaust system for the Ford F-150, Ford Expedition, Lincoln Navigator and the Ford Econoline vehicles. The Company was also awarded additional emission control content on the gasoline version of the F250/F350 Super-Duty. Its Elkhart (Indiana), Seward (Nebraska), Cambridge (Ontario in Canada), Ligonier (Indiana), Marshall (Michigan) and Kansas City (Missouri) facilities will be involved in manufacturing components or final assembly.(From a press release on Feb. 11, 2008)
-In March 2008, the Company announced that its patented Kinetic suspension technology is featured on the 2008 Toyota LandCruiser 200. Toyota has launched its suspension technology, known as the Kinetic Dynamic Suspension System (KDSS), as standard on all five LandCruiser models except on the GXL turbo-diesel where it is offered as an option. The KDSS system is designed to provide outstanding vehicle stability for the LandCruiser SUV, for both on- and off-road performance.(From a press release on March 20, 2008)
-In April 2008, the Company expanded its business in North America with Toyota Motor Engineering & Manufacturing North America, Inc. with the launch of emission control business on the 2008 Toyota Sequoia. For the Sequoia the Company is supplying the full exhaust system. Manufacturing for the Sequoia is taking place at Tenneco's US facilities in Smithville, Tenn., and Evansville, Ind. The Company announced that, in 2007, the company won $200 million in new business with five Japanese vehicle manufacturers. The $200 million in new business includes the Sequoia business just announced. (From a press release on April 29, 2008)
-In August 2008, the Company was awarded new ride control business from Volvo(Ford). The Company will supply its Continuously Controlled Electronic Suspension (CES) shock absorbers as optional components of the Interactive Vehicle Dynamic Control Four-C Chassis on the new Volvo XC60. The Company developed the system together with Ohlins Racing. The Company manufactures the CES shock absorbers at its Ermua, Spain facility.
Restructuring
-In the fourth quarter of 2008, the Company launched a global restructuring program, planning to generate annual savings of about $58 million once fully implemented by the end of 2009. The plan includes for example;
(1) Permanently elimination 1,100 jobs worldwide, which is in addition to 1,150 jobs eliminated in 2008.
(2) Closing three North American manufacturing plants and an engineering facility in Australia.
| (in million USD) | FY2008 | FY2007 | Rate of change (%) |
Factors |
| Sales | 5,916 | 6,184 | (4.3) | See Below |
| EBIT | (3) | 252 | - |
Factor
(1) North America
-Revenues from the North American operations decreased $271 million in 2008 compared to 2007. Higher aftermarket sales were more than offset by lower North American OE revenues.
-The Company's total North American OE revenues, excluding substrate sales and currency, decreased 9% in 2008 compared to 2007.
-North American OE emission control revenues were down $259 million in 2008. Excluding substrate sales and currency, revenues were down $106 million compared to FY2007. This decrease was primarily due to a 16% year-over-year decline in industry production volumes, including a temporary stop of production on the Toyota Tundra, as well as significant reduction in customer light truck production which included the Ford Super Duty and F150, GMT 900 and the Chevrolet Trailblazer and GMC Envoy.
-North American OE ride control revenues for 2008 were down $21 million from the prior year or down $16 million excluding unfavorable currency. Revenues of $84 million from its newly acquired Kettering, Ohio ride-control operations helped offset the significantly lower light truck production.
(2) Other markets
-The European, South American and Indian segment's revenues increased $21 million or 1% in 2008 compared to last year. Total Europe OE revenues were $1,966 million, down 1% from last year. Excluding favorable currency and substrate sales, total European OE revenue was down 4%.
-Europe OE emission control revenues decreased 5% to $1,487 million from $1,569 million in the prior year. Excluding substrate sales and a favorable impact of $54 million due to currency, Europe OE emission control revenues decreased 8% from 2007, primarily due to lower volumes on the Opel Astra and Vectra, the BMW 3 Series and Volvo. Improved volumes on the BMW 1 series, VW Golf, the new Jaguar XF, and the Ford Mondea and C-Max helped partially offset the emission control decrease.
-Europe OE ride control revenues of $479 million in 2008 were up 12% year-over-year. Excluding currency, revenues increased by 6% in 2008 due to favorable volumes on the Suzuki Splash, VW Passat and Transporter, Ford Focus, the new Mazda 2 and Mercedes C-class. Also benefiting 2008 Europe OE ride control revenues were $18 million from the acquired suspension business of Gruppo Marzocchi. European aftermarket revenues decreased $5 million in 2008 compared to last year.
-South American and Indian revenues were $389 million during 2008, compared to $333 million in the prior year. Stronger OE and aftermarket sales and currency appreciation drove this increase.
-Revenues from its Asia Pacific segment decreased $18 million to $528 million in 2008 compared to $546 million in 2007. Excluding the impact of substrate sales and currency, revenues decreased to $377 million from $394 million in the prior year. Asian revenues for 2008 were $342 million, down 3% from last year. Although overall China OE production was up slightly, GM, Volkswagen, Ford and Brilliance, its largest customers in this region, all took unplanned downtime during the year. Revenues for Australia were down $8 million, to $186 million in 2008 compared to $194 million in the prior year. Excluding substrate sales and favorable currency of $6 million, Australian revenue was down $2 million versus 2007.
Acquisition
-In May 2008, the company finalized a purchase agreement with Delphi Automotive Systems LLC to acquire certain ride control assets and inventory at Delphi''s Kettering, Ohio facility. The Company agreed to pay approximately $10 million for existing ride control components inventory and approximately $9 million for certain machinery and equipment. The Company will also lease a portion of the Kettering facility from Delphi. The Company also acquired valuable excess manufacturing assets, which it intends to use to continue growing its OE ride control business globally. The Company entered into a long-term supply agreement with General Motors to continue supplying passenger car shock and strut business to General Motors from the Kettering facility. (From a press release on May 30, 2008)
-In September 2008, the Company acquired the suspension business of Gruppo Marzocchi, an Italy-based worldwide leading supplier of suspension technology for the two-wheeler market.
Contracts
-In February 2008, the Company was awarded by Ford Motor the new hot-end emission control products on vehicles launching in model-year 2009 and 2010. The Company will supply components (including catalytic converters) that make up the "hot end" of the exhaust system for the Ford F-150, Ford Expedition, Lincoln Navigator and the Ford Econoline vehicles. The Company was also awarded additional emission control content on the gasoline version of the F250/F350 Super-Duty. Its Elkhart (Indiana), Seward (Nebraska), Cambridge (Ontario in Canada), Ligonier (Indiana), Marshall (Michigan) and Kansas City (Missouri) facilities will be involved in manufacturing components or final assembly.(From a press release on Feb. 11, 2008)
-In March 2008, the Company announced that its patented Kinetic suspension technology is featured on the 2008 Toyota LandCruiser 200. Toyota has launched its suspension technology, known as the Kinetic Dynamic Suspension System (KDSS), as standard on all five LandCruiser models except on the GXL turbo-diesel where it is offered as an option. The KDSS system is designed to provide outstanding vehicle stability for the LandCruiser SUV, for both on- and off-road performance.(From a press release on March 20, 2008)
-In April 2008, the Company expanded its business in North America with Toyota Motor Engineering & Manufacturing North America, Inc. with the launch of emission control business on the 2008 Toyota Sequoia. For the Sequoia the Company is supplying the full exhaust system. Manufacturing for the Sequoia is taking place at Tenneco's US facilities in Smithville, Tenn., and Evansville, Ind. The Company announced that, in 2007, the company won $200 million in new business with five Japanese vehicle manufacturers. The $200 million in new business includes the Sequoia business just announced. (From a press release on April 29, 2008)
-In August 2008, the Company was awarded new ride control business from Volvo(Ford). The Company will supply its Continuously Controlled Electronic Suspension (CES) shock absorbers as optional components of the Interactive Vehicle Dynamic Control Four-C Chassis on the new Volvo XC60. The Company developed the system together with Ohlins Racing. The Company manufactures the CES shock absorbers at its Ermua, Spain facility.
Restructuring
-In the fourth quarter of 2008, the Company launched a global restructuring program, planning to generate annual savings of about $58 million once fully implemented by the end of 2009. The plan includes for example;
(1) Permanently elimination 1,100 jobs worldwide, which is in addition to 1,150 jobs eliminated in 2008.
(2) Closing three North American manufacturing plants and an engineering facility in Australia.
R&D
R&D Expenditure
R&D Structure
-In May 2007, the Company opened its first research and development center in China. This engineering center -- a joint venture between Shanghai Tractor and Engine Company (STEC), a subsidiary of Shanghai Automotive Industry Corp. (SAIC) -- will focus on emission control product design and development for its growing OE and aftermarket businesses in China and the Asia-Pacific region.
Technological Alliance
-In February 2009, the Company signed a joint agreement with GE Transportation to develop a proprietary SCR and aftertreatment technology designed to reduce and control diesel engine emissions for various transportation and other applications. The Company will collaborate with GE Transportation on the development and production of GE's Hydrocarbon-Selective Catalytic Reduction catalyst technology (HC-SCR), a diesel aftertreatment innovation aimed at reducing NOx emissions as effectively as urea-based SCR systems. Additionally, the Company will work with GE Transportation to further develop and integrate the HC-SCR technology into complete aftertreatment systems for both locomotive and off-highway vehicle markets. Once fully developed, this technology will also be offered to customers in the on-road, marine and stationary power markets.
| (In million USD) | FY2008 | FY2007 | FY2006 |
|
Total |
127 | 114 | 88 |
R&D Structure
-In May 2007, the Company opened its first research and development center in China. This engineering center -- a joint venture between Shanghai Tractor and Engine Company (STEC), a subsidiary of Shanghai Automotive Industry Corp. (SAIC) -- will focus on emission control product design and development for its growing OE and aftermarket businesses in China and the Asia-Pacific region.
Technological Alliance
-In February 2009, the Company signed a joint agreement with GE Transportation to develop a proprietary SCR and aftertreatment technology designed to reduce and control diesel engine emissions for various transportation and other applications. The Company will collaborate with GE Transportation on the development and production of GE's Hydrocarbon-Selective Catalytic Reduction catalyst technology (HC-SCR), a diesel aftertreatment innovation aimed at reducing NOx emissions as effectively as urea-based SCR systems. Additionally, the Company will work with GE Transportation to further develop and integrate the HC-SCR technology into complete aftertreatment systems for both locomotive and off-highway vehicle markets. Once fully developed, this technology will also be offered to customers in the on-road, marine and stationary power markets.
Investment Activities
Capital Expenditure
| (In million USD) | FY2008 | FY2007 | FY2006 |
|
North America |
108 | 106 | 100 |
| Europe, South America and India | 89 | 74 | 51 |
| Asia Pacific | 24 | 18 | 19 |
|
Total |
221 | 198 | 170 |