Parts maker Tenneco may consider acquisitions to support its growing revenue base, but would not jeopardise its goal of reaching an investment grade credit rating, executives have said.
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Tenneco also remains committed to the replacement parts market, a slower-growth business other large US suppliers have exited in recent years, they told Reuters.
“We look at anything that is consistent and helps to leverage our core competencies in the aftermarket,” Timothy Donovan, executive vice president of strategy and business development and general counsel, told the news agency. “When the right one comes along … we would look long and hard at it.”
Reuters noted that the list of potential US assets on the market has grown lengthy with Delphi, Visteon, ArvinMeritor and Dana all aiming to shed some businesses, including replacement parts.
“A lot of the (automaker) suppliers for the last several years have been getting out of the aftermarket because they see it as a distraction,” chief financial officer Ken Trammell told Reuters. “We see it as really a competitive strength.”
Acquisitions would need to have a neutral impact on Tenneco’s credit ratings, Trammell reportedly said. Pushing that credit rating to an investment grade would improve customer ties and reduce borrowing costs sharply, he said.
Tenneco has focused on reducing the substantial debt it had when it became a standalone company in 1999 and has avoided cash crunches that forced other US auto parts makers into bankruptcy in the past two years, Reuters noted.
Tenneco had revenue of about $4.4 billion in 2005, roughly 75% from sales to vehicle manufacturers and the rest from replacement parts. It expects revenue from automaker customers alone of $3.5 billion in 2006, rising to $4.5 billion in 2007 as new business comes into production, the report added.
