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Tenneco to restructure
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July 21, 1998: 2:30 p.m. ET
Manufacturer plans layoffs, considers selling non-core units, posts strong 2Q
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NEW YORK (CNNfn) - In announcing lower-than-expected earnings Tuesday, Tenneco Inc. unveiled plans to strengthen its core business units and drive down costs through company-wide layoffs.
Tenneco, manufacturer of automotive parts, Hefty trash bags and Baggie food storage bags, said it has not yet determined the number of jobs that will be eliminated. But company executives confirmed they will mostly come from administrative and staff support.
Tenneco blamed the General Motors strike, uncertainty in the paper business and the continued instability in Asian markets for contributing to the soft market and for the resulting uncertainty in the company's projected year-end results. The strike is expected to reduce Tenneco's operating income by $5 million per month and hurt earnings per share by 2 cents per month, he said
"These announcements are the latest steps in Tenneco's five-year transformation," said Chairman Dana Mead. "We are now at a point in our evolution where we must again ensure that the company is structured to provide the greatest value to our shareowners."
Tenneco of Greenwich, Conn., is a former conglomerate that exited the oil and gas business several years ago. At the time, the company unloaded shipbuilding and farm equipment operations and moved its corporate headquarters from Houston.
The company's $100 million cost-cutting program comes on the heels of other initiatives that have slashed costs by $1 billion over the past three years.
The latest restructuring plan, however, may be a day late and a dollar short for Wall Street.
Lehman Brothers analyst Joel Tiss Tuesday reduced 1998 earnings expectations for Tenneco to $2.75 per share, down from the $2.90 per share he previously had forecast.
Tiss said other estimates may be revised, but for now he said he is leaving unchanged his estimate that Tenneco will make $3.25 per share next year.
Separately, Tenneco Tuesday announced second-quarter net income of $137 million, or 81 cents a share, compared with year-ago profit of $104 million, or 61 cents a share.
Analysts had expected earnings of 82 cents per share, according to First Call estimates.
Revenues reached $2 billion, up from $1.9 billion last year.
Wall Street reacted favorably to the report, sending Tenneco (TEN) shares up 2-1/16, or 6 percent, to 36-1/4 on the New York Stock Exchange Tuesday afternoon.
The company also said it will move aggressively forward with previously announced plans to separate its containerboard packaging business from its specialty packaging unit.
The company is considering a possible sale, spinoff, merger or initial public offering of the businesses.
"We believe the timing is now right to capture the value of this business, especially in light of industry consolidation and the anticipated improvement in longer-term market conditions," Mead said.
The containerboard business, with four mills, 70 facilities and 1 million acres of U.S. timberland, has annual sales of $1.5 billion.
That compares with Tenneco's $3.2 billion automotive business and its $4 billion packaging business.
Tenneco has 50,000 employees worldwide. 
--from staff and wire reports
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Tenneco
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