LAKE FOREST, Ill.—Tenneco Inc. took an $88 million hit to its fourth-quarter revenue as a result of the United Automobile Workers strike at General Motors, the supplier reported Feb 20. The company also faces a first-quarter headwind from the coronavirus outbreak.
The ride control and emissions systems supplier said revenue decreased 3.2 percent to $4.1 billion, in part because of the strike, which stretched 40 days from the third quarter into the fourth. GM is Tenneco's largest customer. The company said industry light-vehicle production declined 5 percent in the quarter.
Tenneco's fourth-quarter net loss—which included noncash, nonrecurring items of about $230 million—more than doubled to $293 million. Adjusted earnings before interest, taxes, depreciation and amortization fell 23 percent to $314 million.
The GM strike negatively impacted earnings by $27 million in the fourth quarter, Tenneco said. The company said last quarter that it expected the GM labor stoppage to have a total negative impact on EBITDA of about $35 million.
The strike impacted several other suppliers in the fourth quarter, including American Axle, Nemak, Lear Corp. and Aptiv.
Full-year results, 2020 outlook
For all of 2019, revenue rose 48 percent to $17.45 billion, which included the first full year of revenues from Federal-Mogul, the company Tenneco acquired in 2018.
The company recorded net loss of $314 million for 2019, compared with net income of $55 million the year before, while adjusted EBITDA grew 36 percent to $1.4 billion.
Tenneco said uncertainty surrounding the impact of the coronavirus resulted in a wider-than-usual range for its 2020 forecast for revenue and EBITDA. The coronavirus was first discovered in the automotive hub of Wuhan, China, and since has killed more than 2,000 and infected nearly 75,000 people worldwide.
The supplier's 2020 financial outlook assumes that the equivalent of four full weeks of production will be lost in China in the first quarter, which would represent a negative impact of about $150 million on value-add revenue, and $50 million on EBITDA.
Tenneco said it expects 2020 revenue in a range of $16.7 billion to 17.1 billion and adjusted EBITDA between $1.3 billion and $1.45 billion.
Separation plan, cost reductions
Tenneco plans to separate into two publicly traded companies—one from its aftermarket and ride-performance business DRiV and a new Tenneco, based on its powertrain technology.
The company said previously that market conditions could affect its ability to complete a separation in the mid-year 2020 time range.
Once the separation is implemented, DRiV's aftermarket parts, shock absorbers, suspension systems and brake parts will remain in Tenneco's location in Lake Forest. The powertrain parts unit of Tenneco will move into a new $23 million, 100,000-sq.-ft. headquarters in the Detroit suburb of Northville.
Tenneco said in its statement that following the separation, full-year 2019 revenues for the DRiV company would equal $5.9 billion, and revenues for the new Tenneco would be $11.5 billion.
Tenneco said it's implementing a two-year cost reduction program, Accelerate, that is expected to deliver an annual run-rate cost savings of $200 million, working capital improvement of $250 million and capital-expenditure improvements of $100 million.
Tenneco ranked No. 26 on the Automotive News list of the top 100 global suppliers, with worldwide sales to auto makers of $10 billion in 2018.