Tenneco Goes Green - Tenneco Automotive emissions control product plans - Brief Article

Automotive Industries,  Feb, 2000  by Marjorie Sorge

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New emissions control and safety products are aimed at paying down debt, and boosting share price, after going public.

Tenneco Automotive's battle cry could be "Go Green" As global environmental regulations evolve and become more stringent, this supplier of emissions control and ride control systems sees dollars flying to its bottom line.

Company President Mark Frissora says Tenneco has a strong emissions product portfolio that will help automakers meet coming environmental standards. That, combined with new safety features, is the core of Frissora's strategy to make Wall Street sit up and take notice after Tenneco Automotive went public last November.

Frissora hopes these new products will attract new investors and help Tenneco pay down its $1.6 billion in debt "For every $100 million we pay off we generate about a $3 share price improvement," he says.

Reducing debt and acquiring small $25 to $50 million companies with patented environmental and safety technologies is the Frissora plan to boost what he says is Tenneco's undervalued stock price.

The strategy is sound -- as long as the products are there.

"We see exciting growth with SULEV (super ultra-low emissions vehicles)," he says. That's because California's SULEV standard, now being phased in, may force some automakers to add another catalytic converter to their exhaust emissions systems. The new hardware would increase Tenneco's content by $100 per vehicle, Frissora says. Its current content in this area is $120.

"Growing environmental issues and concerns demand changes," says Greg Janicki, vice president of CSM Worldwide, a supplier consulting firm in Farmington Hills, Mich. "Any supplier that can take advantage of that quickly will benefit." But, he points out lots of companies are working on similar programs so maintaining a competitive advantage for any length of time is impossible.

"When a supplier brings a technology to an OEM, it must already be working on what is the next best bread slicer," Janicki adds.

For example, he notes that DaimlerChrysler has studied a way to use a small substrate to replace the larger canned substrate in the exhaust manifold.

Other suppliers are working on loss-air-gap technology, which uses two layers of stainless steel with an air gap to boost catalyst efficiency.

Meanwhile, Denso also has a new substrate for converters. "If it dramatically improves emissions with the same technology, then Denso has an advantage," Janicki reckons, "because the engine and exhaust system don't have to be redesigned."

Tougher European Stage IV emission regs, which go into effect in 2005 and are roughly as stringent as the upcoming U.S. Tier 2 and California LEV II standards, will also benefit Tenneco, Frissora says. To meet those laws, an exhaust pre-heater must be added to the exhaust system, he says. This unit speeds catalyst lightoff in the critical 20 seconds after engine starting, when exhaust emissions are greatest. Volvo and Mercedes will use Tenneco's heated catalyst system in some 2004 model year vehicles, increasing Tenneco's content in the range of $160 to $240 per vehicle.

Today, its exhaust system content averages $225 per vehicle, including the manifold, muffler, catalytic converter, pipe and resonator. That jumps to $475 in 2004 and includes the manifold, muffler, two catalytic converters, pipe, resonator and heat exchanger.

On the ride control side, Tenneco has developed a kinetic suspension system, which the company says prevents SUVs from rolling over, stops the vehicle 25 to 30 percent faster and increases fire life. "NHTSA is forcing the OEMs to put warning labels on SUVs," Frissora points out, "so this is helping us gain business with them." The anti-roll technology increases Tenneco's content to $1,000 per vehicle, up from the $40 when providing only shock absorbers. And regarding shocks, the company is also working on a so-called "green" damper unit that uses no oil

Automakers in Europe, Asia and North America are interested in the anti-roll technology. "We have firm contracts with what were the Big Three," Frissora says, adding that it should be on vehicles in 2002 to 2003.

Tenneco is also launching the kinetic system in the aftermarket as a retro fit kit. The pricetag is $700 to $1,000 and Frissom hopes about five percent of the 12 million SUV drivers on the road today will buy it.

COPYRIGHT 2000 Cahners Publishing Company
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