The impending breakup of Tenneco Inc. is unlikely to damage its fast-growing automotive division.
Tenneco Chairman Dana Mead has offered few details about the proposed split-up of a once-vast conglomerate that had interests in shipbuilding, chemicals and oil-and-gas exploration.
However, Mead said he does not expect to break the automotive division into pieces. If Tenneco's board agrees to spin off the automotive operation, Mead predicted that it would be more nimble than its parent, which he called 'an unwieldy, slow-growth conglomerate.'
Tenneco Automotive claims to have become the world's largest producer of exhausts and suspension components.
It ranks No. 52 on the Automotive News Europe list of top global original-equipment suppliers.
Tenneco has joined a growing list of conglomerates that have unloaded their automotive operations.
Rockwell International Corp. last year spun off its automotive business into Meritor Automotive Inc.; ITT Corp. has been selling off its automotive businesses; and AlliedSignal Inc. has sold off most of its automotive operations.
No prospective buyer for Tenneco Automotive has made any public announcement. However, one UK analyst, who declined to be named, said Tenneco's exhaust operations 'are not a particularly attractive business, either for North American or European buyers.'
Tenneco almost bought ITT Automotive's brake-and-chassis division, but negotiations fell through last month. 'ITT is a good company with good assets and good technology,' Mead said. But 'it did not meet our criteria for an acquisition at that size and that price.'
Last year, Tenneco Automotive began a cost-cutting drive to eliminate 1,000 jobs worldwide. Last month, Mead announced a new
$100 million cost-cutting campaign. During the next year, Tenneco Automotive will be expected to deliver one-third of those savings. That is in addition to $80 million in cuts that Tenneco Automotive must deliver this year.
'This is not a major slash-and-burn drill,' Mead said. 'It is a focused effort to identify overhead costs and find efficiencies.'
Tenneco Automotive reported second-quarter operating income of $130 million, down slightly from
$131 million a year earlier.
Analyst Joel Tiss of Lehman Brothers, a brokerage firm based in New York, is 'neutral' on Tenneco's stock. Tiss is not convinced that the company's spin-off strategy will succeed.
'You get the feeling these guys are just lurching from one announcement to another announcement,' Tiss said, referring to the reorganizations and spin-off plans. 'How about just running the company?'