Specialist
Former director at Tenneco Inc
Agenda
- Trends and developments in the automotive parts manufacturing industry, focusing on Tenneco (NYSE: TEN)
- Demand trends across its portfolio amid continuing recovery in end markets
- Near-term headwinds including inflationary pressure, supply chain disruptions and electrification
- Medium-to-long-term outlook, including shift to electrification
Questions
1.
What 2-3 key trends or developments have you been following in the automotive parts manufacturing industry?
2.
What is your perspective on the industry’s growth pace and how do you expect it to grow in 2022? Do you have any growth expectations over the next 3-5 years?
3.
You discussed the clean air business and that not returning to 2019 levels even on a more extended view. What assumptions are driving that? What level do you think it will reach, compared to 2019, as things normalise and shape up?
4.
What are your views on Tenneco’s product portfolio? Have you seen any changes in the competitive trends in light of some of the more difficult end markets? How is the company currently positioned in each of its product segments vs peers?
5.
Could you expand on the lost customers? What happened and why did Tenneco lose out there?
6.
How would you characterise Tenneco’s adaptation to the loss of customers? Given the competitive pressure it’s been exposed to, how would you rank the company’s exposure to some of the SUV [sport utility vehicle] and light truck platforms compared to peers?
7.
What are your thoughts on Tenneco’s product innovation efforts? You mentioned the implementation of electrification. How is the company approaching electrification?
8.
You mentioned the ride performance has made some solid investments and it seems as if that could be supported in the transition. Exhaust isn’t supportive of an electric transition. Could you outline the electric valve idea?
9.
Are there any other products in Tenneco’s portfolio that you would highlight as supported or challenged and non-existent, thinking longer term around electrification? Do you think Tenneco will be well-positioned, especially now as OEMs [original equipment manufacturers] are accelerating this push and consumers are more excited about electric?
10.
What supply chain challenges has the industry seen? What impact has Tenneco seen on its own supply chain?
11.
How is the steel piece evolving and do you see capacity being invested in? You mentioned the mothballed mills and reduced capacity. How is Tenneco reacting to that? Is the company working with partners and does it have any kind of priority with its partners? What is your outlook for when supply may normalise or capacity may go up?
12.
What could be the drawbacks of different grades of steel? Is the issue around quality or customer receptiveness?
13.
What are your thoughts on commodities such as nickel, platinum and palladium? How have those commodities trended and what is the pricing impact on Tenneco?
14.
What is Tenneco’s ability to pass through the higher costs of materials? Thinking about the inflated prices, whether in logistics or steel and given the contracts in place with OEMs, what levers are at the company’s disposal to offset some of the other inflationary pressures?
15.
Where does the industry go from here? Inflation and production cuts have obviously created a huge shift in the industry and it’s not only Tenneco that’s dealing with this. How are parts suppliers going back to the OEMs and dealing with these contracts in place? What is their ability to manage or survive in a high-inflationary environment like we’re seeing today?
16.
Are there examples of any tier 1s collaborating with OEMs, in this environment, successfully? Have there been discussions in terms of getting out of contracts, changing them early or even just approaching, when the contract is up, how that will change in the next cycle?
17.
Do you have a general idea of where Tenneco is in the life of its OE [original equipment] contracts?
18.
How is Tenneco dealing with the shortage of drivers and the cost of fuel? As you mentioned, obviously with the volatile demand, there’s a need for expedited freight. Do you see a light at the end of the tunnel or any levers that Tenneco is using to manage logistics?
19.
What are your thoughts around the Ukraine-Russia conflict? The price of gas has gone up significantly. What exposure does Tenneco have to this situation? What implications should we monitor for Tenneco, whether on the supply chain side or something else?
20.
Tenneco also has revenues coming from Poland and Germany. This doesn’t compare to China or the US, but I presume Poland has been impacted significantly with people coming over from Ukraine. Are there any risks to keep an eye out for, or not so much?
21.
Does Tenneco have any more runway in terms of managing OPEX? We talked about operational efficiency and cost controls, which is obviously a major focus for the company right now. Are there any low-hanging fruit or bigger adjustments that you think it needs to focus on?
22.
How should we think about Tenneco’s potential growth and profitability profile over the next few years?
23.
What is your M&A outlook for Tenneco, given Apollo’s February 2022 announcement that it was taking the company private? Are there obvious or attractive targets that might make sense for Tenneco to look for, whether on the electrification side or otherwise? Regarding the plan to spin out the OE and aftermarket businesses, are there parts of its portfolio that make sense to divest?
24.
What is the best- and worst-case scenario for Tenneco over the next 12-18 months?
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