We design, manufacture and sell automotive emission control and ride control systems and products, with 2008 revenues of $5.9 billion. We serve both original equipment manufacturers (OEMs) and replacement markets worldwide through leading brands, including Monroe ® , Rancho ® , Clevite ® Elastomers, and Fric Rot ™ ride control products and Walker ® , Fonos ™ , and Gillet ™ emission control products.

As a parts supplier, we produce individual component parts for vehicles as well as groups of components that are combined as modules or systems within vehicles. These parts, modules and systems are sold globally to most leading OEMs and throughout all aftermarket distribution channels.

Overview of Automotive Parts Industry and Adjacent Markets
The automotive parts industry is generally separated into two categories: (1) “original equipment” or “OE” sales, in which parts are sold in large quantities directly for use by OEMs; and (2) “aftermarket” sales, in which parts are sold as replacement parts in varying quantities to a wide range of wholesalers, retailers and installers. In the OE market, parts suppliers are generally divided into tiers — “Tier 1” suppliers, that provide their products directly to OEMs, and “Tier 2” or “Tier 3” suppliers, that sell their products principally to other suppliers for combination into the other suppliers’ own product offerings.

Demand for automotive parts in the OE market is generally a function of the number of new vehicles produced, which in turn is a function of prevailing economic conditions and consumer preferences. In 2008, the number of light vehicles produced was 12.7 million in North America, 28.8 million in Europe, South America and India and 26.6 million in Asia Pacific. The term “light vehicles” is comprised of two groups: (1) passenger cars and (2) light trucks. When we refer to “light trucks,” we are including sport-utility vehicles (SUV), crossover vehicles (CUV), pick-up trucks, vans and multi-purpose passenger vehicles. Worldwide new light vehicle production is forecasted to decrease to 59.8 million units in 2009 from approximately 68.1 million units in 2008. Although OE demand is tied to planned vehicle production, parts suppliers also have the opportunity to grow through increasing their product content per vehicle, by further penetrating business with existing customers and by gaining new customers and markets. Companies with global presence and advanced technology, engineering, manufacturing and support capabilities, such as our company, are, we believe, better positioned to take advantage of these opportunities.

These same competitive advantages have enabled suppliers such as us to serve customers beyond the light vehicle market. Certain automotive parts suppliers now find themselves being asked to develop and produce components and integrated systems for the commercial market of medium- and heavy-duty trucks, buses, and non-road equipment as well as the recreational segment for two-wheelers and all-terrain vehicles. Tenneco foresees this market diversification as a source of future growth.

Demand for aftermarket products is driven by general economic conditions, the quality of OE parts, the number of vehicles in operation, the age of the vehicle fleet, vehicle usage and the average useful life of vehicle parts. Although more vehicles are on the road than ever before, the aftermarket has experienced longer replacement cycles due to the improved quality of OE parts and increases in average useful lives of automotive parts as a result of technological innovation. In addition, the current global economic crisis has negatively impacted aftermarket sales. Suppliers are increasingly being required to deliver innovative aftermarket products that upgrade the performance or safety of a vehicle’s original components to drive aftermarket demand.

Industry Trends
Currently, we believe several significant existing and emerging trends are dramatically impacting the automotive industry and the other markets we serve. As the dynamics of the automotive industry and our other markets change, so do the roles, responsibilities and relationships of its participants. Key trends that we believe are affecting parts suppliers include:

General Economic Factors and Production Levels
The current global financial crisis has materially and negatively impacted our business and our customers’ businesses in the U.S. and globally. These disruptions in financial markets and recent restrictions on liquidity are adversely impacting the availability and cost of incremental credit for many companies.

Overall negative economic conditions, including the deterioration of global financial markets, downturns in the real estate and mortgage markets and a weakening job market, have led to slowed economic growth in the U.S., and more recently Europe and the rest of the world. Such conditions have negatively impacted consumer confidence, resulting in delayed purchases of durable consumer goods such as automobiles. Purchases of our customers’ products have been further limited by their customers’ inability to obtain adequate financing for such purchases. There has also been a shift in the North American market away from light trucks, which tend to be higher margin products for our customers and us, to more fuel-efficient passenger cars. These changes have negatively impacted our product sales and profitability.

A number of companies in the automotive industry are, and over the last several years have been, facing severe financial difficulties. General Motors, Ford and Chrysler have all announced significant restructuring actions in an effort to improve profitability and remain solvent. The North American automotive manufacturers are burdened with substantial structural and embedded costs, such as facility overhead as well as pension and healthcare costs, that have caused them to seek government financing and even risk bankruptcy. Automakers in other markets in the world are also experiencing financial difficulties from a weakened economy, tightening credit markets, and reduced demand for their products. The automotive supply base in turn has also been faced with severe cash flow problems as a result of the significantly lower production levels of light vehicles, increases in certain raw material, commodity and energy costs and restricted access to additional liquidity through the capital markets.

Increasing Environmental Standards
OE manufacturers and their parts suppliers are designing products and developing materials to respond to increasingly stringent environmental requirements, a growing diesel market and the demand for better fuel economy. Government regulations adopted over the past decade require substantial reductions in vehicle tailpipe emissions, longer warranties on parts of a vehicle’s pollution control equipment and additional equipment to control fuel vapor emissions. Some of these regulations also mandate more frequent emission inspections for the existing fleet of vehicles. Manufacturers have responded by focusing their efforts towards technological development to minimize pollution. As a leading supplier of emission control systems with strong technical capabilities, we believe we are well positioned operationally to benefit from more rigorous environmental standards. For example, we developed the diesel particulate filter to meet stricter air quality regulations in Europe. Our diesel particulate filters are produced in both Europe on the Mercedes Benz Sprinter and E-class and North America on the GM Duramax, Ford Super Duty, Dodge Ram and International Truck and Engine Corporation (Navistar) medium duty. Our particulate filter and De-NOx converter can reduce particulate emissions by up to 90 percent and nitrogen oxide emissions by up to 85 percent. We also have numerous development contracts with North American, European and Asian light and medium-duty truck manufacturers for our selective catalytic reduction (SCR) systems. In addition, we are actively working on development of a non-road emission aftertreatment system for multiple manufacturers, in order to meet Tier 4 environmental regulations. In China, we have development contracts for complete turnkey SCR systems, including the ELIM-NOx ™ urea dosing technology which we acquired in 2007. Several customers have also purchased prototypes of our hydrocarbon injector, acquired with the ELIM-NOx ™ technology, for the purpose of actively regenerating diesel particulate filters and Lean NOx Traps through hydrocarbon injection directly into the exhaust system.

Increasing Technologically Sophisticated Content
As consumers continue to demand competitively priced vehicles with increased performance and functionality, the number of sophisticated components utilized in vehicles is increasing. By replacing mechanical functions with electronics and by integrating mechanical and electronic functions within a vehicle, OE manufacturers are achieving improved emission control, improved safety and more sophisticated features at lower costs.

OEMs are increasingly demanding technological innovation from suppliers to address more stringent emission and other regulatory standards and to improve vehicle performance. To develop innovative products, systems and modules, we have invested $127 million for 2008, $114 million for 2007 and $88 million for 2006, net of customer reimbursements, into engineering, research and development and we continuously seek to take advantage of our technology investments and brand strength by extending our products into new markets and categories. For example, we were the first supplier to develop and commercialize a diesel particulate filter that can virtually eliminate carbon and hydrocarbon emissions with minimal impact on engine performance.

We have expanded our competence in diesel particulate filters in Europe and are winning business in North America on these same applications. In addition, we supply Volvo, Audi, Ford and Mercedes Benz with a computerized electronic suspension system that we co-developed with Öhlins Racing AB. As other examples, we are sponsoring funded University Research for advanced technologies for both emission control and ride control, and we are participating in the HyTRAN consortium in Europe for the development of practical fuel cell reformers and auxiliary power units.

Our customers reimburse us for engineering, research, and development costs on some platforms when we prepare prototypes and incur costs before platform awards. Our engineering, research and development expense for 2008, 2007, and 2006 has been reduced by $120 million, $72 million, and $61 million, respectively, for these reimbursements.

Enhanced Vehicle Safety
Vehicle safety continues to gain increased industry attention and play a critical role in consumer purchasing decisions. As such, OEMs are seeking out suppliers with new technologies, capabilities and products that have the ability to advance vehicle safety. Continued research and development by select automotive suppliers in roll-over protection systems, smart airbag systems, braking electronics and safer, more durable materials has dramatically advanced the market for safety products and its evolving functional demands. Those suppliers that are able to enhance vehicle safety through innovative products and technologies have a distinct competitive advantage with the consumer, and thus their OEM customers. In the Aftermarket, Tenneco has promoted the “Safety Triangle” of Steering-Stopping-Stability to educate consumers of the detrimental effect of worn shock absorbers on vehicle steering and stopping distances. We further strengthened this message with the introduction of Monroe ® branded brakes as an Aftermarket product offering during 2007. Also during 2007, the new Federal Motor Vehicle Safety Standard (FMVSS) 126 was introduced for electronic stability control (ESC) systems, making those systems mandatory by 2012. We believe that this legislation will encourage more vehicle manufacturers to specify products like Continuously Controlled Electronic Suspension (CES) and Kinetic.

Outsourcing and Demand for Systems and Modules
OEMs have been steadily moving towards outsourcing automotive parts and systems to simplify the vehicle assembly process, lower costs and reduce vehicle development time. Outsourcing allows OEMs to take advantage of the lower cost structure of the parts suppliers and to benefit from multiple suppliers engaging in simultaneous development efforts. Furthermore, development of advanced electronics has enabled formerly independent vehicle components to become “interactive,” leading to a shift in demand from individual parts to fully integrated systems. As a result, automotive parts suppliers offer OEMs component products individually, as well as in a variety of integrated forms such as modules and systems:

• “Modules” are groups of component parts arranged in close physical proximity to each other within a vehicle. Modules are often assembled by the supplier and shipped to the OEM for installation in a vehicle as a unit. Integrated shock and spring units, seats, instrument panels, axles and door panels are examples.

• “Systems” are groups of component parts located throughout a vehicle which operate together to provide a specific vehicle functionality. Emission control systems, anti-lock braking systems, safety restraint systems, roll control systems and powertrain systems are examples.

This shift in demand towards fully integrated systems has created the role of the Tier 1 systems integrator. These systems integrators increasingly have the responsibility to execute a number of activities, such as design, product development, engineering, testing of component systems and purchasing from Tier 2 suppliers. We are an established Tier 1 supplier with many years of product integration experience. We have modules or systems for various vehicle platforms in production worldwide and modules or systems for additional platforms under development. For example, we supply ride control modules for the GM Chevy Silverado, GM Sierra and the VW Transporter and emission control systems for the Ford Super Duty, Toyota Tundra, Chrysler Dodge Ram, Ford Focus, and the GM Acadia, Enclave and Outlook.

Global Reach of OE Customers
OEMs are increasingly requesting suppliers to provide parts on a global basis to support global vehicle platforms. Also, as the customer base of OEMs has consolidated and emerging markets have become more important to achieving growth, suppliers must be prepared to provide products any place in the world.

• Growing Importance of Emerging Markets:   Because the North American and Western European automotive markets are relatively mature, OEMs are increasingly focusing on emerging markets for growth opportunities, particularly the so-called BRIC economies of Brazil, Russia, India, and China, and Eastern Europe. This increased OE focus has, in turn, increased the growth opportunities in the aftermarkets in these regions.

• Governmental Tariffs and Local Parts Requirements:   Many governments around the world require vehicles sold within their country to contain specified percentages of locally produced parts. Additionally, some governments place high tariffs on imported parts.

• Location of Production Closer to End Markets:   OEMs and parts suppliers have relocated production globally on an “onsite” basis that is closer to end markets. This international expansion allows suppliers to pursue sales in developing markets and take advantage of relatively lower labor costs.

With facilities around the world, including the key regions of North America, South America, Europe and Asia, we can supply our customers on a global basis.

Global Rationalization of OE Vehicle Platforms
OEMs are increasingly designing “global platforms.” A global platform is a basic mechanical structure of a vehicle that can accommodate different features and is in production and/or development in more than one region. Thus, OEMs can design one platform for a number of similar vehicle models. This allows manufacturers to realize significant economies of scale through limiting variations across items such as steering columns, brake systems, transmissions, axles, exhaust systems, support structures and power window and door lock mechanisms. We believe that this shift towards standardization will have a large impact on automotive parts suppliers, who should experience a reduction in production costs as OEMs reduce variations in components. We also expect parts suppliers, once the market recovers, to benefit from higher production volumes per platform and greater economies of scale, as well as reduced total investment costs for molds, dies and prototype development. Light vehicle platforms of over one million units are expected to grow from 35 percent to 49 percent of global OE production from 2008 to 2013.

Extended Product Life of Automotive Parts
The average useful life of automotive parts — both OE and replacement — has been steadily increasing in recent years due to innovations in products and technologies. The longer product lives allow vehicle owners to replace parts of their vehicles less often. As a result, although more vehicles are on the road than ever before, the global aftermarket has not grown as fast as the number of vehicles on the road. Accordingly, a supplier’s future viability in the aftermarket will depend, in part, on its ability to reduce costs and leverage its advanced technology and recognized brand names to maintain or achieve additional sales. As a Tier 1 OE supplier, we believe we are well positioned operationally to leverage our products and technology into the aftermarket.

Changing Aftermarket Distribution Channels
From 1998 to 2008, the number of retail automotive parts stores increased significantly while the number of jobber stores declined more than 14 percent in North America. Major automotive aftermarket retailers, such as AutoZone and Advance Auto Parts, are attempting to increase their commercial sales by selling directly to automotive parts installers in addition to individual consumers. These installers have historically purchased from their local warehouse distributors and jobbers, who are our more traditional customers. This enables the retailers to offer the option of a premium brand, which is often preferred by their commercial customers, or a standard product, which is often preferred by their retail customers. We believe we are well positioned to respond to this trend in the aftermarket because of our focus on cost reduction and high-quality, premium brands.

Contracting Supplier Base
Over the past few years, automotive suppliers have been consolidating in an effort to become more global, have a broad integrated product and service offering, and gain economies of scale in order to remain competitive amidst growing pricing pressures and increased outsourcing opportunities from the OEMs. One industry consultant projected in 2007 that the number of automotive supplier companies will decrease from 5,600 in 2000 to 2,800 by 2015. We believe that this industry trend will be accelerated by the current economic crisis which is putting additional pressure on automotive suppliers that do not have the size or breadth of operations or the financial profile to survive the severe downturn. A supplier’s viability in this market will depend, in part, on its ability to maintain and increase operating efficiencies and provide value-added services.

Analysis of Revenues
The table below provides, for each of the years 2008 through 2006, information relating to our net sales and operating revenues, by primary product lines and customer categories.

(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 for a discussion of substrate sales.

Brands
In each of our operating segments, we manufacture and market leading brand names. Monroe ® ride control products and Walker ® exhaust products are two of the most recognized brand names in the automotive parts industry. We emphasize product value differentiation with these and other key brands such as Monroe Sensa-Trac ® and Reflex ® (shock absorbers and struts), Quiet-Flow ® (mufflers), DynoMax ® (performance exhaust products), Rancho ® (ride control products for the high performance light truck market), Clevite ® Elastomers (elastomeric vibration control components), Marzocchi ™ (forks and suspensions for the two-wheeler market) and Lukey (performance exhaust and filters). In Europe, our Gillet ™ brand is recognized as a leader in developing highly engineered exhaust systems for OE customers.

Customers
We have developed long-standing business relationships with our customers around the world. In each of our operating segments, we work together with our customers in all stages of production, including design, development, component sourcing, quality assurance, manufacturing and delivery. With a diverse mix of OE and aftermarket products and facilities in major markets worldwide, we believe we are well-positioned to meet customer needs. We believe we have a strong, established reputation with customers for providing high-quality products at competitive prices, as well as for timely delivery and customer service.

Worldwide we serve more than 37 different OEMs, and our products or systems are included on eight of the top 10 passenger car models produced for sale in Europe and eight of the top 10 light truck models produced for sale in North America for 2008. During 2008, our OE customers included:

The following customers accounted for 10 percent or more of our net sales in any of the last three years.

As of December 31, 2008, we had net receivables due from General Motors, Ford and Chrysler in North America that totaled $142 million. Of this amount, $26 million was sold by our U.S. securitization program.

During 2008, our aftermarket customers were comprised of full-line and specialty warehouse distributors, retailers, jobbers, installer chains and car dealers. These customers included such wholesalers and retailers as National Auto Parts Association (NAPA), Advance Auto Parts, Uni-Select and O’Reilly Automotive in North America and Temot, Group Auto Union, Mekonomen Grossist and Auto Distribution International in Europe. We believe we have a balanced mix of aftermarket customers, with our aftermarket sales accounting for 19 percent of our net sales for 2008. During 2008, our top 10 aftermarket customers accounted for 41 percent of our net aftermarket sales.

Competition
We operate in highly competitive markets. Customer loyalty is a key element of competition in these markets and is developed through long-standing relationships, customer service, high quality value-added products and timely delivery. Product pricing and services provided are other important competitive factors.

In both the OE market and aftermarket, we compete with the vehicle manufacturers, some of which are also customers of ours, and numerous independent suppliers. In the OE market, we believe that we rank among the top two suppliers in the world for both emission control and ride control products and systems for light vehicles. In the aftermarket, we believe that we are the market share leader in the supply of both emission control and ride control products for light vehicles in the markets we serve throughout the world.

Seasonality
Our business is somewhat seasonal. OE manufacturers’ production requirements have historically been higher in the first two quarters of the year as compared to the last two quarters. Production requirements tend to decrease in the third quarter due to plant shutdowns for model changeovers. In addition, we believe this seasonality is due, in part, to consumer demand for new vehicles softening during the holiday season and as a result of the winter months in North America and Europe. Also, the major North American OEMs generally close their production facilities for the last two weeks of the year. Our aftermarket business also experiences seasonality. Demand for aftermarket products increases during the Spring as drivers prepare for the Summer driving season. Although seasonality does impact our business, actual results may vary from the above trends due to global and local economic dynamics as well as the timing of platform launches and other production related events.

Traditionally, during recessionary times such as these, OE sales decline due to reduced consumer demand for automobiles and other capital goods; and aftermarket sales increase as consumers forego purchases and choose instead to keep their vehicles longer, spending on repair and maintenance services. By participating in both the OE and aftermarket segments, we are insulated from these cycles to some extent. However, because of the severe economic downturn we are seeing now, the counter-cyclical nature of our aftermarket business is not yielding the same benefits as in the past. More so than in previous recessions, customers have decreased their spending, impacting not just our OE business but also our aftermarket business.

Emission Control Systems
Vehicle emission control products and systems play a critical role in safely conveying noxious exhaust gases away from the passenger compartment and reducing the level of pollutants and engine exhaust noise to an acceptable level. Precise engineering of the exhaust system — from the manifold that connects an engine’s exhaust ports to an exhaust pipe, to the catalytic converter that eliminates pollutants from the exhaust, to the muffler — leads to a pleasant, tuned engine sound, reduced pollutants and optimized engine performance.

We design, manufacture and distribute a variety of products and systems designed to reduce pollution and optimize engine performance, acoustic tuning and weight, including the following:

• Catalytic converters and diesel oxidation catalysts — Devices consisting of a substrate coated with precious metals enclosed in a steel casing used to reduce harmful gaseous emissions, such as carbon monoxide;

• Diesel Particulate Filters (DPFs) — Devices to eliminate particulate matter emitted from diesel engines;

• Burner systems — Devices which actively combust fuel and air inside the exhaust system to create extra heat for DPF regeneration, or for improved efficiency of SCR systems;

• Hydrocarbon vaporizers and injectors — Devices to add fuel to a diesel exhaust system in order to regenerate diesel particulate filters or Lean NOx traps;

• Lean NOx traps — Devices which reduce Nitrogen Oxide (NOx) emissions from diesel powertrains using capture and store technology;

• Selective Catalytic Reduction (SCR) systems — Devices which reduce NOx emissions from diesel powertrains using injected reductants such as AdBLue ™ or Diesel Exhaust Fuel (DEF);

• Mufflers and resonators — Devices to provide noise elimination and acoustic tuning;

• Exhaust manifolds — Components that collect gases from individual cylinders of a vehicle’s engine and direct them into a single exhaust pipe;

• Pipes — Utilized to connect various parts of both the hot and cold ends of an exhaust system;

• Hydroformed assemblies — Forms in various geometric shapes, such as Y-pipes or T-pipes, which provide optimization in both design and installation as compared to conventional pipes; and

• Hangers and isolators — Used for system installation and noise and vibration elimination.

We entered the emission control product line in 1967 with the acquisition of Walker Manufacturing Company, which was founded in 1888. With the acquisition of Heinrich Gillet GmbH & Co. in 1994, we also became one of Europe’s leading OE emission control systems suppliers. When the term “Walker” is used in this document, it refers to our subsidiaries and affiliates that produce emission control products and systems.

We supply our emission control offerings to over 41 vehicle-makers for use on over 180 vehicle models, including 7 of the top 10 passenger cars produced for sale in Europe and 6 of the top 10 light trucks produced for sale in North America in 2008. We also supply OE EC products to heavy-duty and specialty vehicle manufacturers including Harley-Davidson, BMW Motorcycle, Daimler Trucks, and International Truck and Engine (Navistar).

With respect to catalytic converters, we buy the substrate coated with precious metals, or sometimes the completed catalytic converter, from a third party or directly from the OEM, use them in our manufacturing process and sell them as part of the completed system. This often occurs at the direction of the OEMs. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information on our sales of these products.

In the aftermarket, we manufacture, market and distribute replacement mufflers for virtually all North American, European, and Asian makes of light vehicles under brand names including Quiet-Flow ® , TruFit ® and Aluminox Pro ™ , in addition to offering a variety of other related products such as pipes and catalytic converters (Walker Perfection ® ). We also serve the specialty exhaust aftermarket, where our key offerings include Mega-Flow ™ exhaust products for heavy-duty vehicle applications and DynoMax ® high performance exhaust products. We continue to emphasize product value differentiation with other aftermarket brands such as Thrush ® and Fonos ™ .

The following table provides, for each of the years 2008 through 2006, information relating to our sales of emission control products and systems for certain geographic areas:

Ride Control Systems
Superior ride control is governed by a vehicle’s suspension system, including its shock absorbers and struts. Shock absorbers and struts help maintain vertical loads placed on a vehicle’s tires to help keep the tires in contact with the road. A vehicle’s ability to steer, brake and accelerate depends on the contact between the vehicle’s tires and the road. Worn shocks and struts can allow excess weight transfer from side to side, which is called “roll,” from front to rear, which is called “pitch,” and up and down, which is called “bounce.” Variations in tire-to-road contact can affect a vehicle’s handling and braking performance and the safe operation of a vehicle. Shock absorbers are designed to control vertical loads placed on tires by providing resistance to vehicle roll, pitch and bounce. Thus, by maintaining the tire to road contact, ride control products are designed to function as safety components of a vehicle, in addition to providing a comfortable ride.

We design, manufacture and distribute a variety of ride control products and systems. Our ride control offerings include:

• Shock absorbers — A broad range of mechanical shock absorbers and related components for light- and heavy-duty vehicles. We supply both twin-tube and monotube shock absorbers to vehicle manufacturers and the aftermarket;

• Struts — A complete line of struts and strut assemblies for light vehicles;

• Vibration control components (Clevite ® Elastomers) — Generally rubber-to-metal bushings and mountings to reduce vibration between metal parts of a vehicle. Our offerings include a broad range of suspension arms, rods and links for light- and heavy-duty vehicles;

• Kinetic ® Suspension Technology — A suite of roll control, near equal wheel loading systems ranging from simple mechanical systems to complex hydraulic systems featuring proprietary and patented technology. The Kinetic ® Suspension Technology was incorporated on the Citroen World Rally Car that was featured in the World Rally Championship 2003, 2004 and 2005. Additionally, the Kinetic ® Suspension Technology was incorporated on the Lexus GX 470 sport utility vehicle which resulted in our winning the PACE Award;

• Advanced suspension systems — Electronically adjustable shock absorbers and suspension systems that change performance based on vehicle inputs such as steering and braking; and

• Other — We also offer other ride control products such as load assist products, springs, steering stabilizers, adjustable suspension systems, suspension kits and modular assemblies.

We supply our ride control offerings to over 38 vehicle-makers for use on over 145 vehicle models, including 6 of the top 10 passenger cars produced for sale in Europe and 7 of the top 10 light truck models produced for sale in North America for 2008. We also supply OE ride control products and systems to a range of heavy-duty and specialty vehicle manufacturers including Volvo Truck, Scania, International Truck and Engine (Navistar), and PACCAR.

In the ride control aftermarket, we manufacture, market and distribute replacement shock absorbers for virtually all North American, European and Asian makes of light vehicles under several brand names including Gas Matic ® , Sensa-Trac ® , Monroe Reflex ® and Monroe Adventure ® , as well as Clevite ® Elastomers for elastomeric vibration control components. We also sell ride control offerings for the heavy-duty, off-road and specialty aftermarket, such as our Gas-Magnum ® shock absorbers for the North American heavy-duty category.

We entered the ride control product line in 1977 with the acquisition of Monroe Auto Equipment Company, which was founded in 1916, and introduced the world’s first modern tubular shock absorber in 1930. When the term “Monroe” is used in this document it refers to our subsidiaries and affiliates that produce ride control products and systems.

The following table provides, for each of the years 2008 through 2006, information relating to our sales of ride control equipment for certain geographic areas:

Financial Information About Geographic Areas
Refer to Note 12 of the consolidated financial statements of Tenneco Inc. included in Item 8 of this report for financial information about geographic areas.

Sales, Marketing and Distribution
We have separate and distinct sales and marketing efforts for our OE and aftermarket businesses.

For OE sales, our sales and marketing team is an integrated group of professionals, including skilled engineers and program managers, who are organized by customer and product type (e.g., ride control and emission control). Our sales and marketing team provides the appropriate mix of operational and technical expertise needed to interface successfully with the OEMs. Our new business “capture process” involves working closely with the OEM platform engineering and purchasing teams. Bidding on OE automotive platforms typically encompasses many months of engineering and business development activity. Throughout the process, our sales team, program managers and product engineers assist the OE customer in defining the project’s technical and business requirements. A normal part of the process includes our engineering and sales personnel working on customers’ integrated product teams, and assisting with the development of component/system specifications and test procedures. Given that the OE business involves long-term production contracts awarded on a platform-by-platform basis, our strategy is to leverage our engineering expertise and strong customer relationships to obtain platform awards and increase operating margins.

For aftermarket sales and marketing, our sales force is generally organized by customer and region and covers multiple product lines. We sell aftermarket products through four primary channels of distribution: (1) the traditional three-step distribution system of full-line warehouse distributors, jobbers and installers; (2) the specialty two-step distribution system of specialty warehouse distributors that carry only specified automotive product groups and installers; (3) direct sales to retailers; and (4) direct sales to installer chains. Our aftermarket sales and marketing representatives cover all levels of the distribution channel, stimulating interest in our products and helping our products move through the distribution system. Also, to generate demand for our products from end-users, we run print and television advertisements and offer pricing promotions. We were one of the first parts manufacturers to offer business-to-business services to customers with TA-Direct, an on-line order entry and customer service tool. In addition, we maintain detailed web sites for each of Walker ® , Monroe ® , Rancho ® , DynoMax ® , Monroe brake brands and our heavy-duty products.

Manufacturing and Engineering
We focus on achieving superior product quality at the lowest operating costs possible and generally use state-of-the-art manufacturing processes to achieve that goal. Our manufacturing strategy centers on a lean production system designed to reduce overall costs, while maintaining quality standards and reducing manufacturing cycle time. In addition, we have implemented Six Sigma in our processes to minimize product defects and improve operational efficiencies. We deploy new technology to differentiate our products from our competitors’ and to achieve higher quality and productivity. We continue to adapt our capacity to customer demand, both expanding capabilities in growth areas as well as reallocating capacity away from demand segments in decline.

Emission Control
Our consolidated businesses operate 11 emission control manufacturing facilities in the U.S. and 41 emission control manufacturing facilities outside of the U.S. We operate 12 of these international manufacturing facilities through joint ventures in which we own a controlling interest. We operate five emission control engineering and technical facilities worldwide and share two other such facilities with our ride control operations. In addition, three joint ventures in which we hold a non-controlling interest operate a total of three manufacturing facilities outside the U.S.

Within each of our emission control manufacturing facilities, operations are organized by component (e.g., muffler, catalytic converter, pipe, resonator and manifold). Our manufacturing systems incorporate cell-based designs, allowing work-in-process to move through the operation with greater speed and flexibility. We continue to invest in plant and equipment to stay competitive in the industry. For instance, in our Smithville, Tennessee, OE manufacturing facility, we have developed a muffler assembly cell that utilizes laser welding. This allows for quicker change-over times in the process as well as less material used and less weight for the product. There is also a reduced cycle time compared to traditional joining and increased manufacturing precision for superior durability and performance. In 2007, we introduced the Measured and Matched Converter technique in North America. This allows us to maintain the optimum GBD (Gap Bulk Density) in our converter manufacturing operations with Tenneco proprietary processing. This process, coupled with cold spinning of the converter body, versus traditional cone to can welding, allows for more effective use of material through reduced welding, lower cost, and better performance of the product.

In an effort to further improve our OE customer service and position ourselves as a Tier-1 OE systems supplier, we have been developing some of our emission control manufacturing operations into “just-in-time” or “JIT” systems. In this system, a JIT facility located close to our OE customer’s manufacturing plant receives product components from both our manufacturing operations and independent suppliers, and then assembles and ships products to the OEMs on an as-needed basis. To manage the JIT functions and material flow, we have advanced computerized material requirements planning systems linked with our customers’ and supplier partners’ resource management systems. We have three emission control JIT assembly facilities in the United States and 21 throughout the rest of the world.

Our engineering capabilities include advanced predictive design tools, advanced prototyping processes and state-of-the-art testing equipment. These technological capabilities make us a “full system” integrator to the OEMs, supplying complete emission control systems from the manifold to the tailpipe, to provide full emission and noise control. We have expanded our engineering capabilities with the acquisition of Combustion Component Associates’s ELIM-NOx ™ mobile emission technology that includes urea and hydrocarbon injection, and electronic controls and software for selective catalytic reduction. We have also developed advanced predictive engineering tools, including KBM&E (Knowledge Based Manufacturing & Engineering). The innovation of our KBM&E (which we call TEN-KBM&E) is a modular toolbox set of CAD embedded applications for manufacturing and engineering compliant design. The encapsulated TEN-KBM&E content is driven by an analytical method which continuously captures and updates the knowledge of our main manufacturing and engineering processes.

Ride Control
Our consolidated businesses operate eight ride control manufacturing facilities in the U.S. and 23 ride control manufacturing facilities outside the U.S. We operate two of these international facilities through joint ventures in which we own a controlling interest. We operate seven engineering and technical facilities worldwide and share two other such facilities with our emission control operations.

Within each of our ride control manufacturing facilities, operations are organized by product (e.g., shocks, struts and vibration control products) and include computer numerically controlled and conventional machine centers; tube milling and drawn-over-mandrel manufacturing equipment; metal inert gas and resistance welding; powdered metal pressing and sintering; chrome plating; stamping; and assembly/test capabilities. Our manufacturing systems incorporate cell-based designs, allowing work-in-process to move through the operation with greater speed and flexibility.

As in the emission control business, in an effort to further improve our OE customer service and position us as a Tier 1 OE module supplier, we have been developing some of our manufacturing operations into JIT systems. We have three JIT ride control facilities outside the U.S.

In designing our shock absorbers and struts, we use advanced engineering and test capabilities to provide product reliability, endurance and performance. Our engineering capabilities feature advanced computer-aided design equipment and testing facilities. Our dedication to innovative solutions has led to such technological advances as:

• Adaptive damping systems — adapt to the vehicle’s motion to better control undesirable vehicle motions;

• Electronically adjustable suspensions — change suspension performance based on a variety of inputs such as steering, braking, vehicle height, and velocity; and

• Air leveling systems — manually or automatically adjust the height of the vehicle.

Conventional shock absorbers and struts generally compromise either ride comfort or vehicle control. Our innovative grooved-tube, gas-charged shock absorbers and struts provide both ride comfort and vehicle control, resulting in improved handling, reduced vibration and a wider range of vehicle control. This technology can be found in our premium quality Sensa-Trac ® shock absorbers. We further enhanced this technology by adding the SafeTech ™ fluon banded piston, which improves shock absorber performance and durability. We introduced the Monroe Reflex ® shock absorber, which incorporates our Impact Sensor ™ device. This technology permits the shock absorber to automatically switch in milliseconds between firm and soft compression damping when the vehicle encounters rough road conditions, thus maintaining better tire-to-road contact and improving handling and safety. We have also developed an innovative computerized electronic suspension system, which features dampers developed by Tenneco and electronic valves designed by Öhlins Racing AB. The continuously controlled electronic suspension (“CES”) ride control system is featured on Audi, Volvo, Ford and Mercedes Benz vehicles.

Quality Control
Quality control is an important part of our production process. Our quality engineers establish performance and reliability standards in the product’s design stage, and use prototypes to confirm that the component/system can be manufactured to specifications. Quality control is also integrated into the manufacturing process, with shop operators being responsible for quality control of their specific work product. In addition, our inspectors test work-in-progress at various stages to ensure components are being fabricated to meet customers’ requirements.

We believe our commitment to quality control and sound management practices and policies is demonstrated by our successful participation in the International Standards Organization/Technical Specifications certification process (“ISO/TS”). ISO/TS certifications are semi-annual or annual audits that certify that a company’s facilities meet stringent quality and business systems requirements. Without ISO or TS certification, we would not be able to supply our products for the aftermarket or the OE market, respectively, either locally or globally. Of those manufacturing facilities where we have determined that TS certification is required to service our customers or would provide us with an advantage in securing additional business, 96 percent have achieved TS 16949:2002 certification. For strategic reasons, we have no immediate plans to certify the remaining plants. Of those manufacturing facilities where we have determined that ISO 9000 certification is required or would provide us with an advantage in securing additional business, all have achieved ISO 9000 certification.

Business Strategy
We strive to strengthen our global market position by designing, manufacturing, delivering and marketing technologically innovative emission control and ride control products and systems for OEMs and the aftermarket. We work toward achieving a balanced mix of products, markets and customers by capitalizing on emerging economic trends, specific regional preferences and changing customer requirements. We target both mature and developing markets for not just light vehicles, but also for commercial and specialty vehicles. We further enhance our operations by focusing on operational excellence in all functional areas.

The key components of our business strategy are described below:

Sharply Reduce Costs to Help Counteract the Current Global Economic Crisis
We are aggressively responding to the current global economic crisis and the resulting significantly reduced production levels by executing comprehensive global restructuring and cost-reduction initiatives. In the fourth quarter of 2008, we launched a global restructuring program that we estimate will generate annual savings of about $58 million once fully implemented by the end of 2009. The restructuring program, which has a payback period of less than one year, includes actions to permanently reduce our fixed cost base and actions to flex our costs in the current economic environment, such as:

• Permanently eliminating 1,100 jobs worldwide, which is in addition to 1,150 jobs previously eliminated in 2008;

• Closing three North American manufacturing plants and an engineering facility in Australia;

• Suspending matching contributions to employee 401 (k) programs; and

• Cutting spending on information technology, sales and marketing programs.

We are also flexing our operations to address these market conditions, implementing temporary layoffs of hourly workers at our plants worldwide that are impacted by customers’ plant shutdowns. In North America, where customer production cuts have been the greatest, we have also initiated salaried employee furloughs. In Europe, we have eliminated all temporary positions and are working successfully with various works councils to pursue similar cost reduction efforts including reduced work hours. In addition, we have frozen 2009 salaries at 2008 levels, and implemented other salary control actions, and we have cut total compensation for our top 50 executives by more than 60% on average.

In addition, we are strategically reducing capital expenditures and engineering investments where possible without compromising our long-term growth prospects. We are eliminating or deferring regional expansion projects, cutting spending tied to delayed customer launches, redeploying assets where feasible, and eliminating all discretionary capital spending. We are focusing on developing technologies and capabilities tied to business launching within the next two to three years, except in those instances where the customer is paying upfront for engineering and advance technology developments on programs launching in 2012 and beyond. This has allowed us to continue all programs critical to our growth with limited near-term cash impact.

We are also focusing on generating cash flow through working capital improvements, particularly by reducing inventories and strengthening our management of payables and receivables.

Development and Commercialization of Advanced Technologies
We continue to identify and target new, fast-growing niche markets and commercialize new technologies for these markets as well as our existing markets. We focus on commercializing innovative, value-added products with an emphasis on highly engineered systems and complex assemblies and modules. By anticipating customer needs and preferences, we are continually capturing global market opportunities with our advanced technologies, and increasing our content per vehicle. As a result of increasing emissions standards requiring advanced aftertreatment products and systems, we believe available emission control content per light and commercial vehicles will continue to rise over the next several years. With our ELIM-NOx ™ technology, we offer an integrated Selective Catalytic Reduction (SCR) system to meet the increasingly stringent emissions regulations being introduced around the world. We also believe that consumers’ greater emphasis on automotive comfort, handling and safety could allow available ride control content per light vehicle to rise. We are selling Continuously Controlled Electronic Suspension (CES) shock absorbers to Volvo, Audi, Mercedes, VW, and Ford, among others, and engineered elastomers to manufacturers with unique needs.

Growth in Adjacent Markets
One of our goals is to apply our existing design, engineering and manufacturing capabilities to penetrate a variety of adjacent markets and to achieve growth in higher-margin businesses. For example, we are aggressively leveraging our technology and engineering leadership in emission and ride control into adjacent markets, such as the heavy-duty market for trucks, buses, agricultural equipment, construction machinery and other commercial vehicles. As an established leading supplier of heavy-duty ride control and elastomer products, we are already serving customers like Volvo Truck, Navistar (International Truck and Engine), Freightliner and PACCAR. We also see tremendous opportunity to expand our presence with our emission control products and systems in the heavy-duty market beyond North America and Europe into China and elsewhere. Also, we recently added the ride control products and technologies of Gruppo Marzocchi to our existing exhaust systems for two-wheelers obtained from the Gabilan Manufacturing acquisition. With our newly-formed relationship with Caterpillar as its global diesel emission control system integration supplier, we demonstrate our commitment to penetrate the market for off-road equipment.

Growth in Developing Economies
We continue to adjust our global footprint to follow our customers into growth regions around the world and capture our fair share of new business. Recently, we built or expanded several facilities in India, opened a second emissions control facility in St. Petersburg, Russia, and opened a new manufacturing plant in Korea. As OEMs have entered the fast-growing economies of Brazil, Russia, India, China, and Thailand, we have followed, building the capability to engineer and produce locally cutting-edge technologies and products and thus allowing us to capture new business in these markets.

Leverage Global Engineering and Advanced System Capabilities
Given the current economic crisis, we are strategically managing engineering investments without compromising our long-term growth prospects, by focusing on developing technologies and capabilities tied to business launching within the next two to three years. An exception to that are those instances where the customer is paying upfront for engineering and advance technology developments on programs launching in 2012 and beyond. This strategy allows us to continue all programs critical to our growth with minimal near-term cash impact. We continue our long tradition of developing highly engineered systems and complex assemblies and modules designed to provide value-added solutions to customers and increase vehicle content generally and thus, generate higher profit margins than individualized components. Integrating electronically many of our engineering and manufacturing facilities globally, we believe, has helped us to maintain our presence on top-selling vehicles. In addition, our just-in-time and in-line sequencing manufacturing and distribution capabilities have enabled us to be more responsive to our customers’ needs.

Expand Our Aftermarket Business
We manufacture and market leading, brand-name products to a diversified global aftermarket customer base. Monroe ® ride control products and Walker ® emission control products, which have been offered to consumers since the 1930s, are two of the most recognized brand-name products in the automotive parts industry. We believe our brand equity in the aftermarket is a key asset especially as customers consolidate and channels of distribution converge.

Additionally, we seek to strengthen our competitive position with OEMs. Our market knowledge, coupled with our leading aftermarket presence, strengthens our ties with our OE customer base and drives acceptance of our aftermarket products and technologies for use in original equipment vehicle manufacturing.

We continue to emphasize product value differentiation with our brands, including the: Monroe Reflex ® and Monroe Sensa-Trac ® lines of shock absorbers, Walker’s Quiet-Flow ® muffler, Rancho ® ride control products, DynoMax ® exhaust products, Walker Ultra ™ catalytic converters, Monroe ® Dynamics and Ceramics brakes, and in European markets, Walker ™ and Aluminox Pro ™ mufflers.

Our plans to grow and gain market share in the aftermarket business call for: adding new products, increasing the coverage to current brands, and offering our brands to, and increasing our aftermarket penetration of, new product segments. To this end, we introduced in North America a ride control line extension, the Quick Strut which is a complete module incorporating the spring and upper mount. This product results in a much easier and quicker installation that even do-it-yourself consumers and body-shop technicians can perform without the special tools and skills required previously. In addition, Monroe ® Dynamics and Ceramic Disc brake pads were introduced in the United States in 2006. A number of other opportunities are being explored to extend our existing well-known brands, such as Monroe ® , and our product line generally to segments not previously served.

Execute Focused Transactions
In the past, we have successfully identified and capitalized on strategic acquisitions and alliances to achieve growth. Through these acquisitions and alliances, we have (1) expanded our product portfolio with complementary technologies; (2) realized incremental business from existing customers; (3) gained access to new customers; and (4) achieved leadership positions in geographic markets outside North America.

We signed exclusive licensing agreements for burner systems used in the regeneration of Diesel Particulate Filters (DPFs) with Woodward Governor Company and for vaporizer technologies with another company. These technologies, which complemented our array of existing emissions control products, enabled us to provide integrated aftertreatment systems as demanded by commercial vehicle manufacturers and others.

We developed a strategic alliance with Futaba, a leading exhaust manufacturer in Japan, and formed a joint venture based in Burnley, England. We also created an alliance with Hitachi (as successor to Tokico Ltd. following its acquisition of Tokico), a leading Japanese ride control manufacturer. These alliances help us grow our business with Japan-based OEMs by leveraging the geographical reach of each partner to serve global vehicle platforms of these OEMs.

We established a presence in Thailand through a joint venture that supplies exhaust components for GM and Isuzu. Our joint venture operations in Dalian and Shanghai positioned us as a leading exhaust supplier in the rapidly growing Chinese market. Also, we increased our China footprint and OEM coverage on emission control products and systems through two joint ventures, partnering with Eberspcher International GmbH to source luxury cars produced by BMW and Audi, and with Chengdu Lingchuan Mechanical Plant to supply various Ford platforms.

Our operations in China are being expanded through investments in both manufacturing and engineering facilities. We opened our first wholly-owned operation in China, an elastomer manufacturing facility in Suzhou. In addition, through an extension of our joint venture with Shanghai Tractor and Engine Company, a subsidiary of Shanghai Automotive Industry Corp., we established a local engineering center to develop automotive exhaust products. Finally, we increased our ownership stake in the Tenneco (Beijing) Ride Control System Company Limited (a joint venture with Beijing Automotive Industry Corp.) from 51 percent to 65 percent in 2006.

In September 2007, we acquired the mobile emissions business of Combustion Components Associates, Inc., a manufacturer of air pollution control technologies. The acquisition augmented Tenneco’s system integration capabilities and offerings related to Selective Catalyst Reduction (SCR) technologies designed to meet future, more stringent diesel emissions regulations for passenger cars, trucks, and other vehicles.

In May 2008, we acquired from Delphi Automotive System LLC certain ride control assets at Delphi’s Kettering, Ohio facility to allow us to grow our OE ride control business globally. This acquisition should allow us to diversify our ride control business in North America and elsewhere.

In September 2008, we acquired the suspension business of Gruppo Marzocchi, an Italy-based worldwide leading supplier of suspension technology for the two-wheeler market. This acquisition diversifies our business beyond light vehicles and brings us strong brands, leading products and advanced technology capabilities.

In February 2009, we signed a joint agreement with GE Transportation, a unit of General Electric Company, to develop a proprietary SCR and aftertreatment technology designed to reduce and control diesel engine emissions for various transportation and other applications. We will collaborate with GE Transportation on the development and production of GE’s Hydrocarbon-Selective Catalytic Reduction catalyst technology (HC-SCR), a diesel aftertreatment innovation aimed at reducing harmful nitrogen oxide (NOx) emissions as effectively as urea-based SCR systems. Additionally, we will work with GE Transportation to further develop and integrate the HC-SCR technology into complete aftertreatment systems for both locomotive and off-highway vehicle markets. Once fully developed, this technology will also be offered to customers in the on-road, marine and stationary power markets.

We intend to continue to pursue strategic alliances, joint ventures, acquisitions and other transactions that complement or enhance our existing products, technology, systems development efforts, customer base and/or global presence. We will align with companies that have proven products, proprietary technology, advanced research capabilities, broad geographic reach, and/or strong market positions to further strengthen our product leadership, technological edge, international reach or customer relationships.

Operational Excellence
We will continue to strive for operational excellence by optimizing our manufacturing and engineering footprint, enhancing our Six Sigma processes and Lean productivity tools, managing the complexities of our global supply chain to realize purchasing economies of scale while satisfying diverse and global requirements, and supporting our businesses with robust information technology systems. We will make investments in our operations and infrastructure as required to achieve our strategic goals. We will be mindful of the changing market conditions that might necessitate adjustments to our resources and manufacturing capacity around the world. We will remain committed to protecting the environment as well as the health and safety of our employees.

Environmental Matters
We estimate that we and our subsidiaries will make expenditures for plant, property and equipment for environmental matters of approximately $2 million in both 2009 and 2010.

For additional information regarding environmental matters, see Item 3, “Legal Proceedings,” Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Environmental and Other Matters,” and Note 13 to the consolidated financial statements of Tenneco Inc. included in Item 8.

Employees
As of December 31, 2008, we had approximately 21,000 employees of which approximately 53 percent were covered by collective bargaining agreements. European works councils cover 22 percent of our total employees, a majority of whom are also included under collective bargaining agreements. Several of our existing labor agreements in the United States and Mexico are scheduled for renegotiation in 2009. In addition, agreements are expiring in 2009 in Europe and South America covering plants in France, Portugal, the United Kingdom and Brazil. We regard our employee relations as satisfactory.

Other
The principal raw material that we use is steel. We obtain steel from a number of sources pursuant to various contractual and other arrangements. We believe that an adequate supply of steel can presently be obtained from a number of different domestic and foreign suppliers. For the past several years, we have experienced higher steel prices which we have addressed by evaluating alternative materials and processes, reviewing material substitution opportunities, increasing component and assembly outsourcing to low cost countries and aggressively negotiating with our customers to allow us to recover these higher costs from them. While the global economic crisis has reduced the pressure on raw material prices, market prices remain volatile.

We hold a number of domestic and foreign patents and trademarks relating to our products and businesses. We manufacture and distribute our products primarily under the Walker ® and Monroe ® brand names, which are well-recognized in the marketplace and are registered trademarks. The patents, trademarks and other intellectual property owned by or licensed to us are important in the manufacturing, marketing and distribution of our products.