Who's No.1?

Tenneco Inc. says for the first time it expects to occupy the No.1 slot for OEM exhaust systems in North America in 2007, bolstered by a raft of new vehicle programs soon to launch.

Currently, Tenneco claims to be the No.1 OEM and aftermarket exhaust supplier in Europe, China and Australia, as well as No.1 for aftermarket exhaust in North America.

But the dominant player in North American OEM exhaust has been ArvinMeritor Inc. In 2001, the Troy, MI, supplier claimed the top ranking with 31% of the regional market. ArvinMeritor also claimed to be No.1 in Europe at the time, with 20% of OEM exhaust.

Likewise, at the time of its merger with Meritor Inc. in July 2000, Arvin Industries Inc. claimed the lead for light-vehicle OEM exhaust. Meanwhile, Tenneco, of Lake Forest, IL, has been growing steadily its OEM exhaust revenues since it became a standalone auto supplier in November 1999. Its aftermarket exhaust sales are down slightly for the period.

Later this year and into 2007, Tenneco says it will begin producing OE exhaust systems for at least three new pickups: the all-new Toyota Tundra, Ford Super Duty models (gasoline and diesel) and General Motors Corp. medium-duty trucks powered by the Duramax turbodiesel.

In addition, Tenneco will supply exhaust systems in 2007 in North America for a new cross/utility vehicle and for a Japanese OEM platform.

Gaining the top spot is a source of considerable pride for Tenneco, says Brent Bauer, senior vice president and general manager-North American original equipment emissions control.

Bauer discussed the market-share shifts in a presentation at Tenneco's newly expanded exhaust engineering facility in Grass Lake, MI. “We've never been No.1 before in North America for OE exhaust, and this is very exciting for us,” he says.

Much of the growth, Bauer says, stems from stricter emissions regulations that are taking effect in multiple markets, particularly the U.S. and Europe.

As the regulations demand lower emissions, auto makers look to exhaust specialists for answers, such as new particulate filters for diesel engines.

ArvinMeritor concedes, with qualification, it may lose its hold on the top slot for North American OE exhaust in 2007.

“While we have not completed our market-share landscape analysis, it is conceivable Tenneco will overtake us as the No.1 market-share leader for the cold end,” an ArvinMeritor spokeswoman says.

The “hot end” for an exhaust system begins at (and may include) the exhaust manifold and extends to the first joint after the last catalytic converter or diesel particulate filter. The “cold end” extends from that point to the tailpipe.

Tallying exact market positions, however, is not as easy as it sounds. ArvinMeritor refers to the cold end of the exhaust system when it discusses North American market share, while Tenneco refers to full systems, including hot and cold ends.

In addition, ArvinMeritor excludes medium-duty trucks in its tally; Tenneco, on the other hand, includes them.

ArvinMeritor also claims its market share based on units sold, while Tenneco uses exhaust-system revenues.

In 2005, both companies agree ArvinMeritor was the No.1 OE exhaust supplier for North America for the hot and cold ends, based on units sold. This year, the race is so close, both companies say it is too early to identify a winner.

But ArvinMeritor has an ace in the hole: significant sales through two 50-50 joint ventures. Arvin Sango has plants in Indiana and California and supplies 75% of the exhaust systems used by Toyota Motor Mfg. in North America.

Meanwhile, ArvinMeritor Sejong in Alabama produces all of the exhaust systems used by Hyundai Motor Mfg. at its new plant in Montgomery, AL.

Factor in that additional revenue as Toyota and Hyundai ramp up North American vehicle production, and the market-share picture looks more upbeat for ArvinMeritor.

“When we consider the total consolidated and unconsolidated business for ArvinMeritor, we actually will be far ahead as the No.1 leader in OE exhaust systems on the cold end in North America,” the spokeswoman says. “We have two very successful JVs serving North America.”

Beyond Tenneco and ArvinMeritor, other exhaust players include Faurecia SA, Eberspacher Group, Bosal International and Delphi Corp.

Tenneco earned $58 million on revenues of $4.4 billion in 2005, up from $15 million earned on $4.2 billion in 2004 sales. Its largest OEM customer is GM (16.7%).

CEO Search

Tenneco is seeking a new chief executive after President and CEO Mark Frissora resigned in July to take the top job at car rental company Hertz Corp. Frissora had been Tenneco CEO since 1999.