Brian Kesseler is co-CEO of Tenneco. In today’s Q&A, Kesseler talks about Tenneco’s acquisition of Federal-Mogul, and what the combined company will look like going forward.
AMN: The Tenneco acquisition of Federal-Mogul closed on Oct. 1. In announcing the closing, it was stated that there will be a planned separation of the combined businesses into two independent, publicly traded companies. Can you share some of the specifics with us about the two new businesses?
Kesseler: The acquisition makes it possible for us to create two product-focused, purpose-built industry leaders in their respective markets. The first is one of the world’s largest pure-play powertrain companies serving OE markets worldwide. The second is an aftermarket and ride performance company with one of the largest global multi-line, multi-brand aftermarket portfolios as well as the world’s largest OE ride performance and braking business.
We expect to separate the combined businesses into two independent, publicly traded companies in late 2019. I will serve as CEO of the aftermarket and ride performance company, and Roger Wood, a Tenneco board member and former president and CEO of Dana Holding Corporation, will be CEO of the powertrain technology company, which will keep the Tenneco name.
AMN: What made Federal-Mogul an attractive acquisition for Tenneco. What unique qualities does the acquisition add to the mix?
Kesseler: This was a transformational opportunity to create long-term value for our shareholders and customers by bringing greater scale and strategic and financial flexibility to two independent, product-focused companies.
The new powertrain company – comprising the Federal-Mogul Powertrain and Tenneco Clean Air businesses – will be extremely well positioned to deliver innovative engineered solutions that address fuel economy, power output and criteria pollution requirements for gasoline, diesel and electrified powertrains. The future aftermarket and ride performance company will bring together several of the transportation industry’s truly iconic brands, including Monroe, Walker, MOOG, Fel-Pro, Wagner, Ferodo, and Champion. This company also will be the largest OE supplier in the ride performance and braking categories. These great brands, and their leading OE pedigrees, are already leaders in their respective categories, and will be even stronger together.
AMN: Will all the aftermarket brands that were acquired be maintained, or is there some overlap in certain categories? If so, which brands overlap and what will happen as a result?
Kesseler: There is actually very little overlap. In fact, the brands are extraordinarily complementary. Consider the around-the-wheel category, for example: No other aftermarket supplier will be able to match our offering of brands and corresponding repair solutions – MOOG control arms, ball joints, tie rod ends, idler arms, wheel hub assemblies and related steering components; Wagner brake pads, rotors, hardware and hydraulics; and, of course, Monroe shock absorbers, struts and Quick-Strut assemblies.
The new aftermarket and ride performance company also offers complete engine to tailpipe coverage: Champion spark plugs, filters, batteries and other service products; Fel-Pro gaskets, which cover engine, transmission and exhaust needs; and Walker catalytic converters, mufflers, exhaust assemblies, tubing, and much more.
AMN: How will this acquisition and the resulting separation affect the front lines of our industry – the professionals who repair and maintain vehicles?
Kesseler: Thanks for this question, because the needs of front-line service businesses of all sizes were a key consideration for our executive team and board.
The success of the automotive and commercial vehicle aftermarkets depends on the vitality of general-repair shops, tire dealers and a broad range of service specialists. Each of these businesses is facing new challenges brought on by increased vehicle complexity, a more diverse car parc, rising consumer expectations, and a shortage of skilled front-line technicians.
Answering these demands requires a stronger partnership between shops, their local parts providers and leading industry suppliers – suppliers with deep insight into OE technologies, extensive R&D resources, trusted brands, best-in-class application coverage, products that help ensure a quality repair, and strong warranties that protect the shop and the end-consumer.
Tenneco’s Monroe and Walker brands have historically delivered on each of these promises. And so have many of Federal-Mogul Motorparts’ brands like MOOG, Wagner, Fel-Pro, and Champion. As a result, our new aftermarket and ride performance company will be ideally positioned to be the full-line partner that can help service businesses succeed in an increasingly dynamic marketplace.
AMN: Can you tell us what the official names for both businesses will be post-separation, and where both businesses will be based?
Kesseler: The new aftermarket and ride performance company will receive a new name, while the clean air and powertrain technology company will retain the Tenneco name. Both new companies will be re-branded with new logos and identities, which we expect to be unveiled early in 2019. The corporate headquarters for the new aftermarket and ride performance company will be in Lake Forest, Illinois, and the new Tenneco powertrain company will be based in Northville, Michigan.
AMN: In terms of growth, where will the primary focus for the Aftermarket and Ride Performance business be over the next several years – North America, China, emerging markets?
Kesseler: We expect to grow in all markets by aligning the significant value of our combined aftermarket portfolio and ride control business with the changing needs of our customers in each region. In North America, Europe and other “mature” markets, we see significant opportunities to help channel partners and service businesses grow their respective shares in each of several categories. In emerging markets, including the Asia Pacific region, both Tenneco and Federal-Mogul Motorparts have built strong foundations for growth by introducing and expanding the presence of leading global brands such as Monroe, Walker, MOOG, AE engine parts, Ferodo and Jurid brakes, and Payen gaskets. We anticipate strong growth in these regions as their comparatively young vehicle populations enter the aftermarket service cycle.
AMN: What will become of the investments Federal-Mogul has made in tech training of late, with its Garage Gurus program and regional training centers?
Kesseler: Both Tenneco and Federal-Mogul Motorparts have historically been strong proponents of automotive vocational education programs as well as highly accessible, effective, ongoing technical training.
The combination of Tenneco Service Solutions and Garage Gurus will offer unique training and support capabilities with the best technical content platform in the industry. We’re all about giving you the information and support you need, where and when you need it, helping shops and other aftermarket businesses not only attract and retain talented technicians, but also continually master important new diagnostic and repair skills as the technology on vehicles entering the bays will continue to evolve.