Tenneco is withdrawing its first-quarter and full-year financial guidance issued on 20 February, 2020 and will provide additional updates during its first-quarter 2020 earnings call.
The supplier also announced it has temporarily suspended or reduced certain operations across the Americas, EMEA and most of the APAC regions in response to governmental requirements and production suspensions taken by many of its customers.
Where the company is continuing operations, Tenneco has taken significant measures to protect the health and safety of its team members in accordance with recommendations from health officials. In particular, the company is taking precautions at each location to implement rigorous cleaning and sanitation protocols; to perform wellness checks on employees; and to implement changes within the plant to comply with social distancing requirements.
Industry demand estimates for the remainder of 2020 continue to be extremely fluid, says the supplier, however, all current estimates point to the second quarter as the most severely impacted in the end markets Tenneco serves. With the continuing evolution of the Covid-19 response actions and their effects on customer demand, it is implementing incremental cost reductions and actions to further optimise cash performance. These include:
- For Q2, overall salary costs will be reduced at least 25% through a combination of unpaid furloughs, net pay decreases and available temporary support programmes in all regions Tenneco undertakes business. Additionally, the executive leadership team (the CEO’s direct staff) will reduce their salaries by 50% and the CEO will not take a salary in this period
- After Q2, overall salary costs will be reduced by at least 10% from the original levels for the remainder of 2020. The company intends the more senior levels of the organisation will receive 80-85% of their base salary in Q3 and move to 90% in Q4
- The supplier intends to reduce its salaried workforce in specific business support functions in Q2
- Capital expenditures in 2020 will be reduced to less than US$400m. This is a reduction from previous guidance of 2020 expenditures between US$610m-US$650m and 2019 expenditures, which were greater than $700 million
- The company will be deferring or delaying other cash outlays as necessary and practical
- The Tenneco Board of Directors annual retainer fees will be reduced by 25% for the remainder of 2020
Tenneco continues to evaluate each of the announced government assistance programmes in every country in which the supplier operates and will continue to identify additional opportunities that can benefit team members in their local jurisdictions.
“Tenneco has been taking action to mitigate the financial impact of the Covid-19 pandemic on customer demand from the very beginning through short term plant closures, deferment of discretionary spending and the reduction of capital expenditures,” said Tenneco CEO, Brian Kesseler.
“The continuing near term deterioration in demand in our end markets necessitates further difficult decisions. These steps, together with the continued execution of our Accelerate plan introduced earlier this year, will allow us to return to full operations more efficiently when demand returns and allow us to continue on the path to building a stronger Tenneco.
“We remain in close communication with our customers to evaluate their near and mid-term demand changes and will modify our plans accordingly to effectively navigate the balance of 2020. We will communicate more specifics related to these current actions as part of our first quarter 2020 earnings call.”
Among the Tenneco locations continuing operations, the supplier’s production facilities in China are coming back online. Some of Tenneco’s plants and product-lines serving non-automotive and industrial customers and certain of the company’s Motorparts facilities remain operational after being designated as essential businesses by local governments to supply aftermarket products for the transportation industry.
In addition, the supplier recently announced Tenneco is supporting General Motors’ ventilator project and will supply components to be used in the initiative to increase production for this vital medical equipment.
“I want to thank our 78,000 global team members who continue to support our company and our customers during this critical time,” added Kesseler. “We’re also proud to be able to help supply those in need of medical assistance.
“We will continue to identify other assistance opportunities with our customers and the local communities within which our teams and their families live and work.”
As of 31 March, 2020, Tenneco had cash balances of around US$700m.