The Auto Channel
The Largest Independent Automotive Research Resource
The Largest Independent Automotive Research Resource
Official Website of the New Car Buyer

Weak Automotive Aftermarket Will Reduce Tenneco 4Q Earnings

5 January 1999

Weak Automotive Aftermarket Will Substantially Reduce Tenneco 4Q Earnings; Original Equipment and Specialty Packaging Businesses Remain Strong

    GREENWICH, Conn.--Jan. 5, 1999--Tenneco's fourth quarter 1998 earnings will be substantially below consensus estimates, primarily due to weak performance in the company's automotive aftermarket business, and a number of charges taken to position the automotive business in support of future strategic initiatives, Chairman and Chief Executive Officer Dana G. Mead said today. But results from Tenneco Automotive's original equipment business and Tenneco Packaging's specialty packaging businesses remain strong and will essentially meet expectations.
    The aftermarket has experienced considerable consolidation among Tenneco's customers in North America and Europe, he said, freeing up inventory and delaying product purchases by Tenneco customers. Combined with an unseasonably warm winter worldwide and continued softness in the South American and Asian economies, these factors are expected to reduce Tenneco's fourth quarter operating income by $25 million to $30 million from current estimates, Mead said.
    Tenneco has responded in a number of ways, Mead said. As part of its previously announced restructuring and cost reduction programs, the company is rationalizing manufacturing and distribution capacity and reducing headcount - actions that will lower the company's aftermarket business breakeven point. Further, the company is offering new premium products at the top end of its aftermarket line and introducing flanker products to provide a fuller range of more competitive product offerings.
    In addition to results in the aftermarket, one-time charges in the automotive business related to bad debts; costs related to customer acquisition activity and marketing; and pricing adjustments in the original equipment business are expected to reduce operating income by $50 million to $60 million. These actions are necessary as Tenneco positions this business to support future strategic initiatives.
    Fourth quarter 1998 earnings in Tenneco's other businesses - automotive original equipment and packaging - are essentially in line with projections. One modest variation is that price erosion in containerboard during the fourth quarter will depress operating income in the $5 million to $10 million range.
    Further, an overall tax rate of approximately 42 percent for the quarter, and finance and data center costs, will lower earnings per share by $0.12 to $0.14 cents from the year ago quarter.
    The pre-tax restructuring charges of $95 million to $105 million announced in October also are being taken in the fourth quarter 1998.
    Tenneco's overall 1999 outlook remains positive. "The steps we have taken in the aftermarket, which are lowering our breakeven point, balancing our manufacturing systems with demand, and gaining new customers, should position us for the aftermarket rebound," Mead said. "Retail trends indicate that sales of Tenneco products are increasing and beginning to open up inventory channels. The original equipment business continues to grow significantly as we introduce more of our parts on more platforms amid a good outlook for vehicle production in North America and Europe and recovery in Asia.
    "In the containerboard business, December box shipments from Tenneco facilities were at a record level," Mead said, "and the outlook for the business is rapidly improving. Our specialty packaging business remains strong with new product introductions, growing markets and cost savings realized by our acquisition integration efforts."
    Finally, Mead said, "we announced last year that we are looking at a wide variety of options for separating Tenneco's paperboard business and identifying strategic alternatives for our automotive and specialty packaging businesses. These efforts remain on track as we continue to intensively explore a range of alternatives with a number of parties. We hope to be in a position to make further announcements soon."

    Tenneco is an $8 billion global manufacturing company headquartered in Greenwich, Conn., with 50,000 employees worldwide. Tenneco Automotive is one of the world's largest producers and marketers of ride control and exhaust systems and products, which are sold under the Monroe(R) and Walker(R) global brand names. Among its products are Sensa-Trac(R) shocks and struts, Rancho(R) shock absorbers, Walker(R) Quiet-Flow(tm) mufflers and DynoMax(tm) performance exhaust products, and Monroe(R) Clevite(tm) vibration control components. Tenneco Packaging is among the world's leading and most diversified packaging companies. Among its products are Hefty(R) trash bags, Hefty OneZip(R) and Baggies(R) food storage bags, E-Z Foil(R) single-use aluminum cookware and Hexacomb(R) paper honeycomb products.

    For more information about Tenneco, visit the Tenneco website at http://www.tenneco.com.


Several statements in this press release are forward looking and are identified by the use of forward looking words and phrases, such as "expected," "outlook," "will," "future strategic initiatives," "should," "remains," "continues," "trends," "be in a position. These forward looking statements are based on the Company's current expectations. Because forward looking statements involve risks and uncertainties, the Company's plans, actions and actual results could differ materially. Among the factors that could cause plans, actions and results to differ materially from current expectations are: (i) the general political, economic and competitive conditions in markets and countries where the Company and its subsidiaries operate, including currency fluctuations and other risks associated with operating in foreign countries; (ii) governmental actions, including the ability to receive regulatory approvals and the timing of such approvals; (iii) changes in capital availability or costs; (iv) results of analysis regarding strategic alternatives; (v) changes in consumer demand and prices, including decreases in demand for the Company's products and the resulting negative impact on the Company's revenues and margins from such products; (vi) the cost of compliance with changes in regulations, including environmental regulations; (vii) workforce factors such as strikes or labor interruptions; (vii) material substitutions and increases in the costs of the Company's raw materials; (ix) the Company's ability to integrate operations of acquired businesses quickly and in a cost-effective manner; (x) new technologies; (xi) the ability of the Company and those with whom it conducts business to timely resolve the Year 2000 issue (relating to potential equipment and computer failures by or at the change of the century), unanticipated costs of, problems with, or delays in resolving the Year 2000 issue, and the costs and impacts if the Year 2000 issue is not timely resolved; (xii) changes by the Financing Accounting Standards Board or other accounting regulatory bodies of authoritative generally accepted accounting principles or polices; and (xiii) the timing and occurrence (or non-occurrence) of transactions and events which may be subject to circumstances beyond the Company's control.