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5. Tenneco Inc. Business Report FY ended 2015

Factors
1) Net Sales
-The Company's net sales for the fiscal year ended December 31, 2015 was USD 8,209 million, a 2.5% decrease from the previous year. Excluding the negative effect of foreign currency exchange rates and substrate sales, sales increased by 4.9% from 2014. The increase in sales came from increased passenger vehicle sales volumes in North America, Europe, India, and China as well as increased aftermarket sales in North and South America. The introduction of new platforms in Europe, China, and Japan further increased sales, though the gains were partially offset by lower sales of commercial and industrial vehicles in South America and China.

2) Clean Air segment sales
-In the fiscal year ended December 31, 2015, sales for the Company's Clean Air segment decreased by 1.5% to USD 5,723 million. In North America, gains from higher aftermarket and light vehicle sales were partially offset by lower commercial vehicle sales and an unfavorable product mix. Increased sales in the combined Europe, South America, and India region were driven by increased overall sales in Europe and partially offset by lower overall sales in South America and lower aftermarket volumes in Europe. Sales increased in the Asia Pacific region due to stronger light vehicle production in China and new programs in China and Japan. All three regions suffered a negative impact from foreign currency exchange rates, which specifically caused a loss in the combined Europe, South America, and India region.

3) Ride Performance segment sales
-Sales for the Company's Ride Performance segment in the fiscal year ended December 31, 2015 totaled USD 2,486 million, a 4.7% decrease from the previous year. North America had lower sales due to lower light vehicle and commercial vehicle volumes, despite higher aftermarket sales. The combined Europe, South America, and India region had increased sales due to stronger sales in Europe across all markets. The Asia Pacific region had increased sales due to higher light vehicle production in China, which was partially offset by decreased sales in Australia. In all three regions, foreign currency exchange rates had a negative effect on sales.

Contracts

Clean Air
-In response to Volkswagen's announcement to temporarily halt the sale of diesel vehicles in the U.S., the Company confirmed that it supplies VW's MQB platform globally, which includes the Jetta, Beetle and Golf in North America. In North America, the Company supplies emissions control components on the gasoline engine version of these vehicles, and mufflers and tailpipes on versions with diesel engines. The Company does not supply hot-end emissions control components on these diesel engines. (From a press release on September 21, 2015)

-The Company announced that it is supplying clean air technologies on the 2015 Chevrolet Colorado and GMC Canyon midsize truck platforms. The Company is supplying the entire exhaust system for both the 4- and 6-cylinder truck engine platforms. The Company also supplies the converter and muffler on both engine platforms, as well as the resonator on the 6-cylinder engine. Product engineering and testing for the Colorado/Canyon exhaust system was conducted at the Company's global clean air engineering center in Grass Lake, Michigan, U.S. The converters are produced at a manufacturing facility in Port Elizabeth, South Africa, with final assembly at the Company's Smithville, Tennessee facility. (From a press release on July 28, 2015)

Ride Control
-The Company announced that Ford has selected the Company's Dual Mode technology for its 2016 Ford Focus RS. Dual Mode, part of the Monroe Intelligent Suspension portfolio, uses an intelligent valve in the shock absorber that opens or closes to provide firmer damping for increased road holding when desired. The driver can switch between standard or sport settings via a dashboard button. The Company's Dual Mode technology will be installed on the front and rear dampers of the Focus RS. (From a press release on September 16, 2015)

-The Company announced that Ford has chosen its high-performance damper technology for the new Ford Focus and Ford C-MAX, both of which are built on Ford's C-Car global platform. The Company's Multi-Tuned Valve (MTV) is a cost-effective twin tube valve system that provides a wide range of tuning options. MTV offers improved shock absorber performance and durability compared to conventional valves, and enables the optimum balance between body control and driver comfort. (From a press release on April 15, 2015)

Outlook

-The Company expects that its total sales will grow approximately 5% excluding the impact of currency. The increase will be caused by stronger light vehicle volumes, the ramp up of recently launched programs, added content on commercial vehicle programs, and growth in the aftermarket segment. In addition, growth is expected to accelerate in 2017 and 2018 due to new light vehicle regulations.

-In the fiscal year ended December 31, 2015, USD 17 million was invested towards the research, design, and development of new products and processes. USD 111 million was invested towards efforts in the application of existing products and processes to vehicle platforms. The remaining USD 18 million was invested in improvements to current products and processes.

R&D Facilities

-The Company's Clean Air segment operates five engineering and technical facilities while its Ride Performance segment has seven engineering and technical facilities. In addition, both segments share three technical centers.

R&D Activities

-The Company announced its participation in Project EVE (Innovative Engineering of Ground VEhicles with Integrated Active Chassis Systems). EVE is an EU-funded project that will develop high-tech ground vehicle systems. The project partners will develop new vehicle components that target improvements in safety, energy efficiency and driving comfort. The development will also include new hardware subsystems for brakes, active suspension and tire pressure control for on-road and off-road mobility. A unique network-distributed vehicle testing program for integrated chassis systems will be set-up between all partners. The consortium consists of 11 institutions and companies, including SKF's Automotive Development Centre in Goteborg, Sweden. Project EVE is part of the European Commission's Horizon 2020 research and innovation program. (From a press release on March 31, 2015)

Product Development

Products displayed at IAA Frankfurt Motor Show 2015
-The Company will showcase its latest technologies at the 2015 Frankfurt Motor Show:
Clean Air

• Liquid urea selective catalytic reduction (SCR) aftertreatment systems with mixing components to ensure consistent performance in diesel engine exhaust systems
• Gasoline particulate filters for gasoline direct injection engines
• Electronic backpressure variable control valves for low-pressure exhaust gas recirculation (EGR) systems in diesel engines and acoustic tuning purposes in gasoline engines

Ride Performance

• CVSA2 continuously variable semi-active suspension damping for premium luxury and sports cars
• Dual Mode adaptive suspension for small and medium vehicle segments

(From a press release on August 27, 2015)

Gasoline particulate filters
-The Company announced that it is leveraging its expertise in diesel particulate filter technology to develop gasoline particulate filters for 2017 model year light vehicles. These filters are designed for gasoline direct injection (GDI) engines to reduce particulate emissions in compliance with the Euro 6c emissions regulation, which takes effect in September 2017. (From a press release on March 31, 2015)

Outlook

-The Company expects to invest between USD 300 million and USD 330 million in capital expenditures for the fiscal year ending December 31, 2016.

Investments outside U.S.

<Mexico>
-The Company announced that it has expanded its ride performance manufacturing operations in Celaya, Mexico. The expansion will help accommodate new business growth for the Company's North American light vehicle customers, while supporting future growth opportunities in the Mexico and Latin American markets. The Celaya facility produces shock absorbers and other ride control products for light vehicles and commercial trucks. The USD 9 million facility expansion will add more than 10,000 square meters of new warehouse and office space, two new manufacturing lines and a reconfiguration of existing production space. The Company expects to hire approximately 150 employees in the coming year to accommodate the additional growth. (From a press release on March 24, 2015)