LAKE FOREST, Ill.—In the months before the COVID-19 pandemic brought down North American auto production, Tenneco already was navigating financial challenges. It suffered a blow to revenues and profits from the 2019 labor strike at General Motors. And it experienced a decline in business from the softening market in China last year, exacerbated by the crash of that nation's economy when it shut down early this year because of the coronavirus.
The global pandemic has added a new level of challenges, however. In response to the lost revenues, the company said in April it will trim its 2020 capital spending plans of $610 million or more to less than $400 million. The salaries of its executive team will be cut in half for the second quarter, and overall salary costs will be reduced by 25 percent for the quarter.
The situation is further complicating Tenneco's desire to spin off its divisions into two new independent companies: a powertrain company tentatively named New Tenneco and a ride-performance and aftermarket company called DRiV.
That plan had been envisioned to take effect in mid-2020 but was delayed in January, before the pandemic took hold. Tenneco CEO Brian Kesseler told analysts in February the spinoff is still in development, but that he wanted to see improvements before moving ahead, including better working capital and reduced debt.
The delay also has triggered an option agreement with Tenneco's largest shareholder, the corporate raider Carl Icahn, allowing him to gain more influence as a shareholder. Icahn may now be planning to exert more pressure on Tenneco's management and direction.