Tenneco in major restructuring

Lake Forest, Ill.-based Tenneco (NYSE: TEN), which makes emission control systems for vehicles, announced today that it plans to cut 1,100 jobs worldwide and close five facilities. The move comes amid the global credit crunch and a shift to more fuel efficient vehicles that has taken a toll on the auto industry.

The company, which has more than 80 facilities around the world, said it will close four North American manufacturing plants, restructure another manufacturing plant in North America, and close its Dunsborough, Western Australia, engineering operation.

Tenneco expects to record up to $60 million in charges related to the restructuring, including approximately $44 million in cash. The company said $25 million in charges will be recorded in the fourth quarter, with the remainder to be recorded through 2009.

"These changes will occur over time. They're not all implemented as of today," Jim Spangler, a spokesman for Tenneco, told the Cleantech Group.

Tenneco plans to eliminate 500 salaried positions and 600 hourly positions, but the company did not say how many people will be laid off in each country that's affected.

"I think it's fair to say that it is worldwide, and it does reach all of our operations globally."

Tenneco has 26 facilities in North America, including operations in the U.S., Canada and Mexico. The company has already targeted its Evansville, Ind., original equipment emission control facility for closure, as well as its Milan, Ohio, elastomer plant.

The company said it expects to close at least more emission control plant in the U.S., along with a ride control facility. One other emission control plant in North America will be restructured. The company said the unnamed locations will be announced in the near future.

Automakers have been hard hit by a shift this year from consumers in the U.S. who are now looking for smaller cars instead of the bigger SUVs that many car makers had been manufacturing in large numbers (see Cleantech cars advance as old guard stumbles).

Detroit's Big Three have announced a number of cuts recently, and there have been reports of merger talks between General Motors (NYSE: GM) and Chrysler. Chrysler is controlled by private equity firm Cerberus Capital Management, which acquired 80 percent of the automaker from Germany's Daimler in 2007.

Today, GM reported an 11 percent drop in third quarter worldwide sales, citing reduced demand in the U.S. and Western Europe.

Spangler said only about 25 percent of Tenneco's original equipment revenues are from the Big Three. Tenneco has a diverse customer list, but two of the Big Three lead the pack.

"GM is our largest, and a portion of that is outside of North America," said Spangler. "Ford Motor Co. is our second, and about half of their revenues, with Volvo, is outside of North America." Chrysler comes in at No. 8 on Tenneco's list of its largest customers.

Tenneco said its long-term growth prospects remain strong, driven primarily by tightening emissions regulations worldwide. The company also said it holds a strong position in growing economies like Brazil, Russia, India and China.

In addition to the closures, Tenneco said its restructuring will includes operational and administrative cutbacks across its operations. The company estimates that the restructuring will result in $64 million in annualized cost savings.

Tenneco, which has 21,000 employees around the world, expects to complete the restructuring by the end of 2009.