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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-12387

TENNECO AUTOMOTIVE INC.
(Exact name of registrant as specified in its charter)

DELAWARE 76-0515284
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)

500 NORTH FIELD DRIVE, LAKE FOREST, ILLINOIS 60045
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 482-5000

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.

Common Stock, par value $.01 per share: 37,587,631 shares as of April 30, 2001.

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2

TABLE OF CONTENTS

PAGE
----

PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Tenneco Automotive Inc. and Consolidated Subsidiaries
--
Report of Independent Public Accountants............. 4
Statements of Income (Loss).......................... 5
Balance Sheets....................................... 6
Statements of Cash Flows............................. 7
Statements of Changes in Shareholders' Equity........ 8
Statements of Comprehensive Income (Loss)............ 9
Notes to Financial Statements........................ 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 21
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................ 31
PART II--OTHER INFORMATION
Item 1. Legal Proceedings................................. *
Item 2. Changes in Securities and Use of Proceeds......... *
Item 3. Defaults Upon Senior Securities................... *
Item 4. Submission of Matters to a Vote of Security
Holders................................................ *
Item 5. Other Information................................. 32
Item 6. Exhibits and Reports on Form 8-K.................. 32

- ---------------
* No response to this item is included herein for the reason that it is
inapplicable or the answer to such item is negative.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Quarterly Report on Form 10-Q contains forward-looking statements
regarding, among other things, our prospects and business strategies. The words
"will," "believes," "should," "plans," "expects," and "estimates," and similar
expressions (and variations thereof), identify these forward-looking statements.
Although we believe that the expectations reflected in these forward-looking
statements are based on reasonable assumptions, these expectations may not prove
to be correct. Because these forward-looking statements are also subject to
risks and uncertainties, actual results may differ materially from the
expectations expressed in the forward-looking statements. Important factors that
could cause actual results to differ materially from the expectations reflected
in the forward-looking statements include:

- general economic, business and market conditions;

- the impact of consolidation among automotive parts suppliers and
customers on our ability to compete;

- operating hazards associated with our business;

- changes in consumer demand and preferences for automobiles and automotive
parts, as well as changes in automobile manufacturers' actual and
forecasted requirements for our products;

- changes in distribution channels or competitive conditions in the markets
and countries where we operate, including the impact of changes in
distribution channels for aftermarket products on our ability to increase
or maintain aftermarket sales;

- cyclicality of automotive production and sales;

- material substitution;

- labor disruptions at our facilities or at any of our significant
customers or suppliers;

2
3

- economic, exchange rate and political conditions in the foreign countries
where we operate or sell our products;

- customer acceptance of new products;

- new technologies that reduce the demand for certain of our products or
otherwise render them obsolete;

- our ability to realize our business strategy of improving operating
performance;

- capital availability or costs, including changes in interest rates,
market perceptions of the industries in which we operate or ratings of
securities;

- changes by the Financial Accounting Standards Board or the Securities and
Exchange Commission of authoritative generally accepted accounting
principles or policies;

- the impact of changes in and compliance with laws and regulations,
including environmental laws and regulations, and environmental
liabilities in excess of the amount reserved; and

- the occurrence or non-occurrence of circumstances beyond our control.

3
4

PART I.

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO TENNECO AUTOMOTIVE INC.:

We have reviewed the consolidated balance sheet of Tenneco Automotive Inc.
and consolidated subsidiaries as of March 31, 2001, and the related consolidated
statements of income and cash flows for the three-month period ended March 31,
2001. These financial statements are the responsibility of Tenneco Automotive
Inc.'s management.

We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to above for
them to be in conformity with accounting principles generally accepted in the
United States.

ARTHUR ANDERSEN LLP

Chicago, Illinois
April 23, 2001

4
5

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF INCOME (LOSS)
(UNAUDITED)

THREE MONTHS ENDED
MARCH 31,
--------------------------
2001 2000
---- ----
(MILLIONS EXCEPT SHARE
AND PER SHARE AMOUNTS)

REVENUES
Net sales and operating revenues.......................... $ 864 $ 878
----------- -----------
COSTS AND EXPENSES
Cost of sales (exclusive of depreciation shown below)..... 706 672
Engineering, research, and development.................... 13 15
Selling, general, and administrative...................... 101 106
Depreciation and amortization............................. 37 39
----------- -----------
857 832
----------- -----------
OTHER INCOME (EXPENSE)...................................... (1) 1
----------- -----------
INCOME BEFORE INTEREST EXPENSE, INCOME TAXES, AND MINORITY
INTEREST.................................................. 6 47
Interest expense (net of interest capitalized)............ 47 45
Income tax benefit........................................ (10) (1)
Minority interest......................................... -- 2
----------- -----------
NET INCOME (LOSS)........................................... $ (31) $ 1
=========== ===========
EARNINGS (LOSS) PER SHARE
Average shares of common stock outstanding--
Basic..................................................... 36,592,072 33,672,112
Diluted................................................... 36,751,022 33,904,365
Basic earnings (loss) per share of common stock............. $ (.84) $ .03
Diluted earnings (loss) per share of common stock........... $ (.84) $ .03
Cash dividends per share of common stock.................... $ -- $ .05

The accompanying notes to financial statements are an integral part of these
statements of income (loss).
5
6

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

BALANCE SHEETS
(UNAUDITED)

MARCH 31, DECEMBER 31,
2001 2000
--------- ------------
(MILLIONS)

ASSETS
Current assets:
Cash and temporary cash investments....................... $ 56 $ 35
Receivables--
Customer notes and accounts, net....................... 475 457
Other.................................................. 24 30
Inventories--
Finished goods......................................... 197 197
Work in process........................................ 89 83
Raw materials.......................................... 84 103
Materials and supplies................................. 39 39
Deferred income taxes..................................... 76 76
Prepayments and other..................................... 87 89
------- -------
1,127 1,109
Other assets:
Long-term notes receivable, net........................... 28 24
Goodwill and intangibles, net............................. 451 463
Deferred income taxes..................................... 111 94
Pension assets............................................ 42 41
Other..................................................... 146 150
------- -------
778 772
------- -------
Plant, property, and equipment, at cost..................... 1,802 1,852
Less--Reserves for depreciation and amortization.......... 838 847
------- -------
964 1,005
------- -------
$ 2,869 $ 2,886
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt (including current maturities of long-term
debt).................................................. $ 188 $ 92
Trade payables............................................ 465 464
Accrued taxes............................................. 17 16
Accrued interest.......................................... 47 35
Accrued liabilities....................................... 124 134
Other..................................................... 63 68
------- -------
904 809
------- -------
Long-term debt.............................................. 1,409 1,435
------- -------
Deferred income taxes....................................... 136 144
------- -------
Postretirement benefits..................................... 125 128
------- -------
Deferred credits and other liabilities...................... 33 26
------- -------
Commitments and contingencies
Minority interest........................................... 15 14
------- -------
Shareholders' equity:
Common stock.............................................. -- --
Premium on common stock and other capital surplus......... 2,740 2,738
Accumulated other comprehensive income (loss)............. (293) (239)
Retained earnings (accumulated deficit)................... (1,960) (1,929)
------- -------
487 570
Less--Shares held as treasury stock, at cost.............. 240 240
------- -------
247 330
------- -------
$ 2,869 $ 2,886
======= =======

The accompanying notes to financial statements are an integral part of these
balance sheets.
6
7

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CASH FLOWS
(UNAUDITED)

THREE MONTHS
ENDED
MARCH 31,
---------------
2001 2000
---- ----
(MILLIONS)

OPERATING ACTIVITIES
Net income (loss)........................................... $(31) $ 1
Adjustments to reconcile income to cash provided (used) by
operating activities
Depreciation and amortization............................. 37 39
Deferred income taxes..................................... (18) --
(Gain) loss on sale of assets, net........................ 2 --
Changes in components of working capital--
(Increase) decrease in receivables..................... (35) (71)
(Increase) decrease in inventories..................... (4) (13)
(Increase) decrease in prepayments and other current
assets................................................ (5) (4)
Increase (decrease) in payables........................ 16 50
Increase (decrease) in accrued taxes................... -- (11)
Increase (decrease) in accrued interest................ 13 17
Increase (decrease) in other current liabilities....... (6) (13)
Other..................................................... 2 1
---- ----
Net cash provided (used) by operating activities............ (29) (4)
---- ----
INVESTING ACTIVITIES
Net proceeds from sale of assets............................ -- 2
Expenditures for plant, property, and equipment............. (25) (34)
Investments and other....................................... (5) (4)
---- ----
Net cash provided (used) by investing activities............ (30) (36)
---- ----
NET CASH PROVIDED (USED) BEFORE FINANCING ACTIVITIES........ (59) (40)

FINANCING ACTIVITIES
Issuance of common and treasury stock....................... 3 --
Retirement of long-term debt................................ (5) --
Net increase (decrease) in short-term debt excluding current
maturities of long-term debt.............................. 78 13
Dividends (common).......................................... -- (2)
---- ----
Net cash provided (used) by financing activities............ 76 11
---- ----
Effect of foreign exchange rate changes on cash and
temporary cash investments................................ 4 (2)
---- ----
Increase (decrease) in cash and temporary cash
investments............................................... 21 (31)
Cash and temporary cash investments, January 1.............. 35 84
---- ----
Cash and temporary cash investments, March 31 (Note)........ $ 56 $ 53
==== ====
Cash paid during the period for interest.................... $ 34 $ 29
Cash paid during the period for income taxes (net of
refunds).................................................. $ 8 $ 15

NOTE: Cash and temporary cash investments include highly liquid investments with
a maturity of three months or less at the date of purchase.

The accompanying notes to financial statements are an integral part of these
statements of cash flows.

7
8

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)

THREE MONTHS ENDED MARCH 31,
----------------------------------------------
2001 2000
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
(MILLIONS EXCEPT SHARE AMOUNTS)

COMMON STOCK
Balance January 1.................................. 37,797,256 $ -- 34,970,485 $ --
Issued pursuant to benefit plans................. 814,406 -- 306,446 --
---------- ------- ---------- -------
Balance March 31................................... 38,611,662 -- 35,276,931 --
========== ------- ========== -------
PREMIUM ON COMMON STOCK AND OTHER CAPITAL SURPLUS
Balance January 1.................................. 2,738 2,721
Premium on common stock issued pursuant to
benefit plans................................. 2 --
------- -------
Balance March 31................................... 2,740 2,721
------- -------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance January 1.................................. (239) (179)
Other comprehensive income (loss)................ (54) (28)
------- -------
Balance March 31................................... (293) (207)
------- -------
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Balance January 1.................................. (1,929) (1,880)
Net income (loss)................................ (31) 1
Dividends on common stock........................ -- (2)
------- -------
Balance March 31................................... (1,960) (1,881)
------- -------
LESS--COMMON STOCK HELD AS TREASURY STOCK, AT COST
Balance January 1 and March 31..................... 1,298,498 240 1,298,373 240
========== ------- ========== -------
Total.............................................. $ 247 $ 393
======= =======

The accompanying notes to financial statements are an integral part of these
statements of changes in shareholders' equity.
8
9

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

THREE MONTHS ENDED MARCH 31,
-------------------------------------------------------------
2001 2000
----------------------------- -----------------------------
ACCUMULATED ACCUMULATED
OTHER OTHER
COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE
INCOME INCOME INCOME INCOME
------------- ------------- ------------- -------------
(MILLIONS)

NET INCOME (LOSS)............................. $(31) $ 1
---- ----
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
CUMULATIVE TRANSLATION ADJUSTMENT
Balance January 1........................... $(237) $(176)
Translation of foreign currency
statements............................. (54) (54) (28) (28)
----- -----
Balance March 31............................ (291) (204)
----- -----
ADDITIONAL MINIMUM PENSION LIABILITY
ADJUSTMENT
Balance January 1 and March 31.............. (2) (3)
----- -----
Balance March 31.............................. $(293) $(207)
===== ---- ===== ----
Other comprehensive income (loss)............. (54) (28)
---- ----
COMPREHENSIVE INCOME (LOSS)................... $(85) $(27)
==== ====

The accompanying notes to financial statements are an integral part
of these statements of comprehensive income (loss).
9
10

TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

(1) In our opinion, the accompanying unaudited financial statements contain
all adjustments (consisting of normal recurring adjustments) necessary to
present fairly Tenneco's financial position, results of operations, cash flows,
changes in shareholders' equity, and comprehensive income for the periods
indicated. The unaudited interim consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles.

Our consolidated financial statements include all majority-owned
subsidiaries. We carry investments in 20 percent to 50 percent owned companies
at cost plus equity in undistributed earnings and cumulative translation
adjustments from date of acquisition since we have the ability to exert
significant influence over operating and financial policies.

We have reclassified prior year's financial statements where appropriate to
conform to 2001 presentations.

(2) Over the past several years we have adopted plans to restructure
portions of our operations. These plans were approved by the Board of Directors
and were designed to reduce operational and administrative overhead costs
throughout the business. Charges to income related to these plans are recorded
in the period in which the plans are finalized and approved, while actions
necessary to affect these restructuring plans occur over future periods in
accordance with established plans.

As of March 31, 2001, we had completed the restructuring actions related to
the 1999 plan, with the exception of certain headcount reductions and related
severance payments for a distribution facility in Europe. The 1999 plan involved
closing a ride control manufacturing facility and an exhaust plant in Europe,
closing or downsizing four European aftermarket distribution centers, closing a
North American exhaust manufacturing facility plus employee reductions of
approximately 780. As of March 31, 2001, over 750 employees had been terminated
under the 1999 plan. We will be substantially complete with these restructuring
activities by the middle of 2001.

In the fourth quarter of 2000, our Board of Directors approved a
restructuring plan to further reduce administrative and operational overhead
costs. We recorded a pre-tax charge related to the plan of $46 million, $32
million after tax, or $.92 per diluted common share. Within the statement of
income (loss), $13 million of the pre-tax charge is reflected in cost of sales,
while $33 million is included in selling, general, and administrative expenses.
The charge is comprised of $24 million of severance and related costs for
salaried employment reductions worldwide and $22 million for the reduction of
manufacturing and distribution capacity in response to long-term market trends.
The 2000 plan involved closing a North American aftermarket exhaust distribution
facility and ride control manufacturing plant in our Asian market, as well as
the consolidation of some exhaust manufacturing facilities in Europe. In
addition, the plan involves the elimination of about 700 positions. We wrote
down the assets at the locations to be closed to their fair value, less costs to
sell. We estimated the market value of buildings using external real estate
appraisals. As a result of the single purpose nature of the machinery and
equipment to be disposed of, fair value was estimated to be scrap value less
costs to dispose in most cases. We do not expect that cash proceeds on the sale
of these assets will be significant. As of March 31, 2001, approximately 330
employees had been terminated under the 2000 plan primarily in North America and
Europe in sales, engineering and salaried plant. All restructuring actions are
being completed in accordance with our established plan. We expect to complete
all restructuring activities related to this plan by the end of the first
quarter of 2002.

Also in the fourth quarter of 2000, we recorded other charges of $15
million, $10 million after tax, or $.29 per diluted common share. These charges
relate to a strategic decision to reduce some of the aftermarket parts we offer
and to relocation expenses incurred associated with the restructuring plans. The
aftermarket parts were written down to their estimated scrap value less costs to
sell.

10
11
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

In the first quarter of 2001, our Board of Directors approved a
restructuring plan in response to increasingly difficult industry conditions. On
January 31, 2001, we announced plans to eliminate up to 405 salaried positions
worldwide. This reduction included the immediate elimination of 215 positions.
We recorded pre-tax charges related to the restructuring of $11 million, $8
million after tax, or $.21 per diluted common share. Within the statement of
income (loss), $2 million of the pre-tax charge is reflected in cost of sales,
while $9 million is included in selling, general, and administrative expenses.
These charges are comprised of $8 million for severance and related costs for
salaried employment reductions worldwide and $3 million for costs related to
closing a testing facility in North America. We also incurred $1 million for
other restructuring related costs and expenses such as relocation and moving
costs that could not be accrued as part of the restructuring reserve. As of
March 31, 2001, we had eliminated about 345 positions in connection with the
2001 plan. We estimate that we will complete these restructuring activities no
later than the first quarter 2002. All workforce reductions will be done in
compliance with all legal and contractual requirements including obligations to
consult with worker committees, union representatives and others.

Amounts related to activities that are part of the restructuring plans are
as follows:

DECEMBER 31, 2000 2001 2001 IMPACT OF MARCH 31, 2001
RESTRUCTURING RESTRUCTURING CASH EXCHANGE RESTRUCTURING
RESERVE CHARGE PAYMENTS RATES RESERVE
----------------- ------------- -------- --------- --------------

Severance........................ $23 $ 8 $(11) $ (2) $18
Asset Impairment................. -- 1 -- -- 1
Facility exit costs.............. 3 2 -- (1) 4
--- --- ---- ---- ---
$26 $11 $(11) $ (3) $23
=== === ==== ==== ===

In addition to these announced actions, we continue to evaluate additional
cost reduction initiatives for 2001, which would require review and approval by
the Board of Directors and could result in additional restructuring charges.
Also, we currently estimate that we will incur about $6 million of expense
during the remainder of 2001 with respect to restructuring-related costs and
expenses that could not be accrued as part of the restructuring reserve.

(3) We are party to various legal proceedings arising from our operations.
We believe that the outcome of these proceedings, individually and in the
aggregate, will have no material effect on our financial position or results of
operations.

(4) We and some of our subsidiaries and affiliates are parties to
environmental proceedings. We expense or capitalize, as appropriate,
expenditures for ongoing compliance with environmental regulations that relate
to current operations. We expense expenditures that relate to an existing
condition caused by past operations and that do not contribute to current or
future revenue generation. We record liabilities when environmental assessments
indicate that remedial efforts are probable and the costs can be reasonably
estimated. Estimates of the liability are based upon currently available facts,
existing technology, and presently enacted laws and regulations taking into
consideration the likely effects of inflation and other societal and economic
factors. We consider all available evidence including prior experience in
remediation of contaminated sites, other companies' cleanup experience and data
released by the United States Environmental Protection Agency or other
organizations. These estimated liabilities are subject to revision in future
periods based on actual costs or new information. Where future cash flows are
fixed or reliably determinable, we have discounted the liabilities. All other
environmental liabilities are recorded at their undiscounted amounts. We
evaluate recoveries separately from the liability and, when they are assured,
recoveries are recorded and reported separately from the associated liability in
our financial statements.

11
12
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

As of March 31, 2001, we continue to be designated as a potentially
responsible party in four Superfund sites. We have estimated our share of the
remediation costs for these sites to be approximately $1 million in the
aggregate. In addition to the Superfund sites, we may have the obligation to
remediate current or former facilities, and we estimate our share of remediation
costs at these facilities to be approximately $26 million. For both the
Superfund sites and the current and former facilities, we have established
reserves that we believe are adequate for these costs. Although we believe our
estimates of remediation costs are reasonable and are based on the latest
available information, the cleanup costs are estimates and are subject to
revision as more information becomes available about the extent of remediation
required. At some sites, we expect that other parties will contribute to the
remediation costs. In addition, at the Superfund sites, the Comprehensive
Environmental Response, Compensation and Liability Act provides that our
liability could be joint and several, meaning that we could be required to pay
in excess of our share of remediation costs. Our understanding of the financial
strength of other potentially responsible parties has been considered, where
appropriate, in our determination of our estimated liability.

As we previously disclosed, we undertook a third-party evaluation of
estimated environmental remediation costs at one of our facilities beginning in
2000. The evaluation was initiated as a result of testing that indicated the
potential underground migration of some contaminants beyond our facility
property. We have completed and analyzed the results of our evaluation of
off-site contamination migration from that facility and as a result we have
increased the environmental remediation reserve we had for this facility by $5
million through a charge to income in the first quarter 2001. We also increased
our estimate of environmental remediation reserves for three other locations by
a total of $1 million in the first quarter of 2001. Additionally, in the first
quarter of 2001, we reached an agreement with a third party to assume
responsibility for remediation of a location at which we previously shared
responsibility. In exchange, we received cash and a note for a total of $4
million, the estimate of the third party's share of the total remediation
liability. We increased our environmental liability estimate for this location
by $4 million as a result. These amounts are reflected in our estimation of
remediation costs described above. We believe that these potential costs, as
well as the costs associated with our current status as a potentially
responsible party in the Superfund sites, or as a liable party at our current or
former facilities, will not be material to our consolidated financial position
or results of operations.

(5) In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes new
accounting and reporting standards requiring that all derivative instruments,
including derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at their fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting treatment. This statement cannot
be applied retroactively and is effective for all fiscal years beginning after
June 15, 2000. We adopted this statement effective January 1, 2001, and it did
not have a significant impact on our financial position or results of
operations.

In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101,"Revenue Recognition". This SAB
provides guidance on the recognition, presentation, and disclosure of revenue in
the financial statements and is effective no later than the fourth quarter of
fiscal years beginning after December 15, 1999. The SAB draws on the existing
accounting rules and defines the basic criteria that must be met before we can
record revenue. The impact of adopting SAB 101 did not have a significant effect
on our results of operations or financial position.

12
13
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

In May 2000, the FASB's Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 00-14, Accounting for Certain Sales Incentives. This
issue addresses the recognition, measurement, and income statement
classification of various types of sales incentives, including discounts,
coupons, rebates, and free products. Consequently, beginning January 1, 2001, we
classified some incentives that were previously shown in selling, general, and
administrative expense as a reduction in revenues. As a result of the change,
revenue was $3 million lower in the first quarter of 2001, with an offsetting
decline in selling, general, and administrative expenses. We have restated prior
year results for comparability, resulting in a reduction in net sales of $4
million for the quarter ended March 31, 2000, with an offsetting reduction in
selling, general, and administrative expense.

(6) We entered into an agreement during the third quarter of 2000 to sell
an interest in some of our trade accounts receivable to a third party. In the
first quarter of 2001, we recognized a loss of $1 million on these sales of
trade accounts, representing the discount from book values at which these
receivables were sold to the third party. The discount rate varies based on
funding cost incurred by the third party, and it averaged 6.5 percent during the
first three months of this year. We retained ownership of the remaining interest
in the pool of receivables not sold to the third party. We valued this retained
interest based on the recoverable value of the receivable pool, which
approximated book value.

(7) Earnings (loss) per share of common stock outstanding were computed as
follows:

THREE MONTHS ENDED
MARCH 31,
--------------------------
2001 2000
---- ----
(MILLIONS EXCEPT SHARE AND
PER SHARE AMOUNTS)

Basic Earnings Per Share--
Net income (loss)......................................... $ (31) $ 1
=========== ===========
Average shares of common stock outstanding................ 36,592,072 33,672,112
=========== ===========
Earnings per average share of common stock................ $ (.84) $ .03
=========== ===========
Diluted Earnings Per Share--
Net income (loss)......................................... $ (31) $ 1
=========== ===========
Average shares of common stock outstanding................ 36,592,072 33,672,112
Effect of dilutive securities:
Restricted stock....................................... -- 47,274
Stock options.......................................... -- 30,291
Performance shares..................................... 158,950 154,688
----------- -----------
Average shares of common stock outstanding including
dilutive securities.................................... 36,751,022 33,904,365
=========== ===========
Earnings per average share of common stock................ $ (.84) $ .03
=========== ===========

(8) We are a global manufacturer with two geographic reportable segments:
North America and Europe. Each segment manufactures and distributes ride control
and emission control products primarily for the automotive industry. We have not
aggregated individual operating segments within these reportable segments. We
evaluate segment performance based primarily on income before interest expense,
income taxes, and minority interest. Products are transferred between segments
and geographic areas on a basis intended to reflect as nearly as possible the
"market value" of the products.

13
14
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

The following table summarizes certain Tenneco segment information:

SEGMENT
-------------------------------------------------------------
RECLASS
NORTH AMERICA EUROPE OTHER & ELIMS CONSOLIDATED
------------- ------ ----- ------- ------------
(MILLIONS)

AT MARCH 31, 2001, AND FOR THE THREE MONTHS
THEN ENDED
Revenues from external customers............ $ 435 $349 $ 80 $ -- $ 864
Intersegment revenues....................... 3 11 2 (16) --
Income (loss) before interest, income taxes,
and minority interest..................... (3) 8 1 -- 6
Total assets................................ 1,178 967 676 48 2,869
AT MARCH 31, 2000, AND FOR THE THREE MONTHS
THEN ENDED
Revenues from external customers............ $ 510 $294 $ 74 $ -- $ 878
Intersegment revenues....................... 3 9 3 (15) --
Income (loss) before interest, income taxes,
and minority interest..................... 34 12 1 -- 47
Total Assets................................ 1,195 961 845 (40) 2,961

(9) Supplemental guarantor condensed financial statements are presented
below:

Basis of Presentation

We issued senior subordinated notes due 2009 as a component of a plan to
realign our debt in connection with the 1999 spin-off of our packaging business.
All of our existing and future material domestic wholly-owned subsidiaries (the
"Guarantor Subsidiaries") fully and unconditionally guarantee the notes on a
joint and several basis. We have not presented separate financial statements and
other disclosures concerning each of the Guarantor Subsidiaries because
management has determined that such information is not material to the holders
of the notes. Therefore, the Guarantor Subsidiaries are combined in the
presentation below.

These condensed consolidating financial statements are presented on the
equity method. Under this method our investments are recorded at cost and
adjusted for our ownership share of a subsidiary's cumulative results of
operations, capital contributions and distributions, and other equity changes.
You should read the condensed consolidating financial statements of the
Guarantor Subsidiaries in connection with our consolidated financial statements
and related notes of which this note is an integral part.

Distributions

There are no significant restrictions on the ability of the Guarantor
Subsidiaries to make distributions to us.

14
15
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

STATEMENT OF INCOME (LOSS)

FOR THE THREE MONTHS ENDED MARCH 31, 2001
----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- ------- ------------
(MILLIONS)

REVENUES
Net sales and operating revenues--
External.......................... $327 $537 $ -- $ -- $864
Affiliated companies.............. 18 14 -- (32) --
---- ---- ---- ---- ----
345 551 -- (32) 864
---- ---- ---- ---- ----
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)......... 286 452 -- (32) 706
Engineering, research, and
development....................... 6 7 -- -- 13
Selling, general, and
administrative.................... 61 40 -- -- 101
Depreciation and amortization........ 20 17 -- -- 37
---- ---- ---- ---- ----
373 516 -- (32) 857
---- ---- ---- ---- ----
OTHER INCOME, NET...................... 6 (7) -- -- (1)
INCOME (LOSS) BEFORE INTEREST EXPENSE,
INCOME TAXES, MINORITY INTEREST, AND
EQUITY IN NET INCOME OF AFFILIATED
COMPANIES............................ (22) 28 -- -- 6
Interest expense--
External (net of interest
capitalized).................... -- 3 44 -- 47
Affiliated companies (net of
interest income)................ 32 1 (33) -- --
Income tax expense (benefit)......... (11) 10 -- (9) (10)
Minority interest.................... -- -- -- -- --
---- ---- ---- ---- ----
(43) 14 (11) 9 (31)
Equity in net income (loss) of
affiliated companies.............. 8 -- (20) 12 --
---- ---- ---- ---- ----
NET INCOME (LOSS)...................... $(35) $ 14 $(31) $ 21 $(31)
==== ==== ==== ==== ====

15
16
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

STATEMENT OF INCOME (LOSS)

FOR THE THREE MONTHS ENDED MARCH 31, 2000
----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- ------- ------------
(MILLIONS)

REVENUES
Net sales and operating revenues--
External.......................... $419 $459 $ -- $ -- $878
Affiliated companies.............. 19 19 -- (38) --
---- ---- ---- ---- ----
438 478 -- (38) 878
---- ---- ---- ---- ----
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)......... 333 377 -- (38) 672
Engineering, research, and
development....................... 8 7 -- -- 15
Selling, general, and
administrative.................... 58 48 -- -- 106
Depreciation and amortization........ 20 19 -- -- 39
---- ---- ---- ---- ----
419 451 -- (38) 832
---- ---- ---- ---- ----
OTHER INCOME, NET...................... 1 -- -- -- 1
---- ---- ---- ---- ----
INCOME (LOSS) BEFORE INTEREST EXPENSE,
INCOME TAXES, MINORITY INTEREST, AND
EQUITY IN NET INCOME OF AFFILIATED
COMPANIES............................ 20 27 -- -- 47
Interest expense--
External (net of interest
capitalized).................... (1) 3 43 -- 45
Affiliated companies (net of
interest income)................ 24 3 (27) -- --
Income tax expense (benefit)......... (3) 8 (5) (1) (1)
Minority interest.................... -- 2 -- -- 2
---- ---- ---- ---- ----
-- 11 (11) 1 1
Equity in net income (loss) of
affiliated companies.............. 10 -- 12 (22) --
---- ---- ---- ---- ----
NET INCOME (LOSS)...................... $ 10 $ 11 $ 1 $(21) $ 1
==== ==== ==== ==== ====

16
17
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

BALANCE SHEET

MARCH 31, 2001
----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- ------- ------------
(MILLIONS)

ASSETS
Current assets:
Cash and temporary cash
investments...................... $ 6 $ 50 $ -- $ -- $ 56
Receivables......................... 201 376 21 (99) 499
Inventories......................... 154 255 -- -- 409
Deferred income taxes............... 73 3 79 (79) 76
Prepayments and other............... 37 50 -- -- 87
------ ------ ------ ------- ------
471 734 100 (178) 1,127
------ ------ ------ ------- ------
Other assets:
Investment in affiliated
companies........................ 311 -- 2,200 (2,511) --
Notes and advances receivable from
affiliates....................... 2,300 33 3,398 (5,731) --
Long-term notes receivable, net..... 16 12 -- -- 28
Goodwill and intangibles, net....... 318 133 -- -- 451
Deferred income taxes............... 93 18 78 (78) 111
Pension assets...................... 22 20 -- -- 42
Other............................... 63 55 28 -- 146
------ ------ ------ ------- ------
3,123 271 5,704 (8,320) 778
------ ------ ------ ------- ------
Plant, property, and equipment, at
cost................................ 853 949 -- -- 1,802
Less--Reserves for depreciation and
amortization..................... 431 407 -- -- 838
------ ------ ------ ------- ------
422 542 -- -- 964
------ ------ ------ ------- ------
$4,016 $1,547 $5,804 $(8,498) $2,869
====== ====== ====== ======= ======
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt (including current
maturities of long-term debt):
Short-term
debt-non-affiliated......... $ -- $ 27 $ 161 $ -- $ 188
Short-term debt-affiliated..... 14 -- 10 (24) --
Trade payables...................... 130 412 -- (77) 465
Accrued taxes....................... 51 25 -- (59) 17
Other............................... 106 92 46 (10) 234
------ ------ ------ ------- ------
301 556 217 (170) 904
Long-term debt-non-affiliated......... -- 18 1,391 -- 1,409
Long-term debt-affiliated............. 1,798 11 3,922 (5,731) --
Deferred income taxes................. 147 60 27 (98) 136
Postretirement benefits and other
liabilities......................... 128 12 -- 18 158
Commitments and contingencies
Minority interest..................... -- 15 -- -- 15
Shareholders' equity.................. 1,642 875 247 (2,517) 247
------ ------ ------ ------- ------
$4,016 $1,547 $5,804 $(8,498) $2,869
====== ====== ====== ======= ======

17
18
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

BALANCE SHEET

DECEMBER 31, 2000
----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- ------- ------------
(MILLIONS)

ASSETS
Current assets:
Cash and temporary cash
investments....................... $ 8 $ 27 $ -- $ -- $ 35
Receivables.......................... 199 379 21 (112) 487
Inventories.......................... 158 264 -- -- 422
Deferred income taxes................ 73 3 -- -- 76
Prepayments and other................ 36 53 -- -- 89
------ ------ ------ ------- ------
474 726 21 (112) 1,109
------ ------ ------ ------- ------
Other assets:
Investment in affiliated companies... 324 -- 2,306 (2,630) --
Notes and advances receivable from
affiliates........................ 2,343 14 3,469 (5,826) --
Long-term notes receivable, net...... 11 13 -- -- 24
Goodwill and intangibles, net........ 321 142 -- -- 463
Deferred income taxes................ 75 18 22 (21) 94
Pension assets....................... 22 19 -- -- 41
Other................................ 65 60 25 -- 150
------ ------ ------ ------- ------
3,161 266 5,822 (8,477) 772
------ ------ ------ ------- ------
Plant, property, and equipment, at
cost................................. 854 998 -- -- 1,852
Less--Reserves for depreciation and
amortization...................... 423 424 -- -- 847
------ ------ ------ ------- ------
431 574 -- -- 1,005
------ ------ ------ ------- ------
$4,066 $1,566 $5,843 $(8,589) $2,886
====== ====== ====== ======= ======
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt (including current
maturities of long-term debt).....
Short-term debt--non-affiliated...... $ -- $ 28 $ 64 $ -- 92
Short-term debt--affiliated.......... -- 1 10 (11) --
Trade payables....................... 179 393 1 (109) 464
Accrued taxes........................ 26 12 -- (22) 16
Other................................ 109 104 33 (9) 237
------ ------ ------ ------- ------
314 538 108 (151) 809
Long-term debt-non-affiliated.......... -- 20 1,415 -- 1,435
Long-term debt-affiliated.............. 1,753 4 4,069 (5,826) --
Deferred income taxes.................. 159 63 (78) -- 144
Postretirement benefits and other
liabilities.......................... 126 6 (1) 23 154
Commitments and contingencies
Minority interest...................... -- 14 -- -- 14
Shareholders' equity................... 1,714 921 330 (2,635) 330
------ ------ ------ ------- ------
$4,066 $1,566 $5,843 $(8,589) $2,886
====== ====== ====== ======= ======

18
19
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

STATEMENT OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2001
----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- ------- ------------
(MILLIONS)

OPERATING ACTIVITIES
Net cash provided (used) by operating
activities............................ $(134) $ 91 $ 14 $-- $(29)
----- ---- ---- --- ----
INVESTING ACTIVITIES
Net proceeds from sale of assets........ -- -- -- -- --
Expenditures for plant, property, and
equipment............................. (6) (19) -- -- (25)
Investments and other................... (4) (1) -- -- (5)
----- ---- ---- --- ----
Net cash provided (used) by investing
activities............................ (10) (20) -- -- (30)
----- ---- ---- --- ----
FINANCING ACTIVITIES
Issuance of common and treasury stock... -- -- 3 -- 3
Retirement of long-term debt............ -- -- (5) -- (5)
Net increase (decrease) in short-term
debt excluding current maturities of
long-term debt........................ -- 1 77 -- 78
Intercompany dividends and net increase
(decrease) in intercompany
obligations........................... 142 (53) (89) -- --
Dividends (common)...................... -- -- -- -- --
----- ---- ---- --- ----
Net cash provided (used) by financing
activities............................ 142 (52) (14) -- 76
----- ---- ---- --- ----
Effect of foreign exchange rate changes
on cash and temporary cash
investments........................... -- 4 -- -- 4
----- ---- ---- --- ----
Increase (decrease) in cash and
temporary cash investments............ (2) 23 -- -- 21
Cash and temporary cash investments,
January 1............................. 8 27 -- -- 35
----- ---- ---- --- ----
Cash and temporary cash investments,
March 31 (Note)....................... $ 6 $ 50 $ -- $-- $ 56
===== ==== ==== === ====

NOTE: Cash and temporary cash investments include highly liquid investments with
a maturity of three months or less at the date of purchase.

19
20
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

STATEMENT OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2000
----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- ------- ------------
(MILLIONS)

OPERATING ACTIVITIES
Net cash provided (used) by operating
activities............................ $ 8 $(12) $-- $-- $ (4)
---- ---- --- --- ----
INVESTING ACTIVITIES
Net proceeds from sale of assets........ 2 -- -- -- 2
Expenditures for plant, property, and
equipment............................. (13) (21) -- -- (34)
Investments and other................... (2) (2) -- -- (4)
---- ---- --- --- ----
Net cash provided (used) by investing
activities............................ (13) (23) -- -- (36)
---- ---- --- --- ----
FINANCING ACTIVITIES
Issuance of common and treasury stock... -- -- -- -- --
Retirement of long-term debt............ -- -- -- -- --
Net increase (decrease) in short-term
debt excluding current maturities of
long-term debt........................ 34 (24) 3 -- 13
Intercompany dividends and net increase
(decrease) in intercompany
obligations........................... (39) 40 (1) -- --
Dividends (common)...................... -- -- (2) -- (2)
---- ---- --- --- ----
Net cash provided (used) by financing
activities............................ (5) 16 -- -- 11
---- ---- --- --- ----
Effect of foreign exchange rate changes
on cash and temporary cash
investments........................... -- (2) -- -- (2)
---- ---- --- --- ----
Increase (decrease) in cash and
temporary cash investments............ (10) (21) -- -- (31)
Cash and temporary cash investments,
January 1............................. 28 56 -- -- 84
---- ---- --- --- ----
Cash and temporary cash investments,
March 31 (Note)....................... $ 18 $ 35 $-- $-- $ 53
==== ==== === === ====

NOTE:Cash and temporary cash investments include highly liquid investments with
a maturity of three months or less at the date of purchase.

(The preceding notes are an integral part of the foregoing financial
statements.)

20
21

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS FROM OPERATIONS

NET SALES AND OPERATING REVENUES

THREE MONTHS
ENDED
MARCH 31,
------------
2001 2000 CHANGE
---- ---- ------
(MILLIONS)

North America............................................... $435 $510 (15)%
Europe...................................................... 349 294 19%
Rest of World............................................... 80 74 8%
---- ----
$864 $878 (2)%
==== ====

Results for 2000 have been reclassified for comparability to reflect the
reclassification of certain sales incentives. This reclassification is made in
accordance with the provisions of the FASB's Emerging Issues Task Force May 2000
consensus on Issue No. 00-14, Accounting for Certain Sales Incentives. Effective
January 1, 2001, we changed the way we classify some sales incentives in
accordance with the consensus reached by the EITF. The impact of this
reclassification on first quarter 2000 results was a reduction in net sales of
$4 million with an offsetting reduction in selling, general, and administrative
expense.

Revenues from our North American operations declined $75 million in the
first quarter of 2001 compared to last year's first quarter reflecting lower
sales generated from both the original equipment and aftermarket businesses. OE
revenues declined 15 percent to $324 million in the first three months of this
year due to significant OE production cut backs in both the light and heavy-duty
vehicle segments as vehicle manufacturers lowered inventories in the face of a
slowing economy. Vehicle manufacturers' production volumes dropped 17 percent
for light vehicle while heavy-duty vehicle production declined 47 percent
compared to one year ago. OE exhaust revenues were down 11 percent in the
quarter, while OE ride control revenues declined 24 percent. Lower volumes on
existing platforms more than offset the growth in revenues from new business.
Exhaust revenues also rose $12 million as a result of rising precious metal
prices that were passed through to our OE exhaust customers. Lower ride control
volumes, especially in our heavy-duty elastomer business resulted in a decline
in OE ride control revenues. Aftermarket revenues for North America were $111
million in first three months of 2001, representing a decline of 13 percent
compared to the same period in the prior year. The North American aftermarket
continued to be severely depressed affecting industry volumes and prices.
Aftermarket exhaust revenues declined 14 percent in the first quarter, while our
aftermarket ride control revenues dropped nearly 13 percent compared to a year
ago. Lower volumes accounted for $12 million of the reduction in aftermarket
revenues, while negative price adjustments that were initiated during 2000
contributed the majority of the rest of the decline in revenues. We have
implemented price increases on some products in North America that will begin to
offset the impact of price reductions implemented in 2000.

Our European segment's revenues increased $55 million in the first three
months of 2001 compared to last year's first quarter due primarily to a 36
percent increase in OE revenues, which were $275 million for the quarter.
Contributing to the OE revenue increase were stronger exhaust and ride control
volumes in both our new and existing programs which added $57 million of
additional revenue in the first quarter. For the first three months of 2001,
revenues have increased $32 million as a result of rising precious metal and
steel prices that we have passed through to our OE customers. The devaluation of
European currencies compared to the U.S. dollar resulted in a reduction in OE
revenues of $16 million in the first quarter of this year. Excluding these
currency impacts, European OE revenues would have increased 44 percent in the
first quarter of 2001 compared to the first quarter of 2000. European
aftermarket sales were $74 million in the first three months of this year
compared to $92 million in last year's first quarter. This 20 percent decline
resulted from the continued softness of the aftermarket industry combined with
declining exhaust replacement rates due primarily to the increasing use of
stainless steel. Price increases that relate to our global aftermarket pricing

21
22

strategy began to show favorable results in the first quarter of 2001
contributing some positive revenue growth and helping to partially offset the
impact from lower volumes. Negatively impacting European aftermarket revenue
growth was the depreciation of European currencies, which reduced revenues by $6
million.

Revenues from our operations in the rest of the world, specifically South
America, Australia and Asia, increased $6 million in the first quarter of 2001
despite nearly $9 million of negative foreign currency adjustments impacting the
quarter's results. Excluding these currency impacts, total revenues for the rest
of the world would have increased 20 percent compared to the same quarter last
year while revenues from South American operations would have increased 21
percent and revenues from Australian operations would have increased 4 percent.
The increase in revenues for 2001 is primarily due to strong volume growth,
especially in South America and Asia. The launch of several new OE programs,
primarily in South America, and growth in existing programs in all these markets
increased volumes. In Asia, volumes are increasing as we ramp up a new OE
exhaust manufacturing facility in Shanghai.

EARNINGS BEFORE INTEREST EXPENSE, INCOME TAXES, AND MINORITY INTEREST ("EBIT")

We reported EBIT of $6 million for the first quarter of 2001, compared to
$47 million for the same quarter last year. Reported results for 2001 include
restructuring and other charges that have an effect on comparability of EBIT
results between the years. To provide enhanced comparability, we have separately
identified these costs and charges by segment in the following table, and will
discuss our results in the following section using a comparison of "2001
Operating Units Results" to the "2000 Reported Results" for each segment.

THREE MONTHS ENDED MARCH 31,
--------------------------------------------------
2001 2000
-------------------------------------- --------
RESTRUCTURING OPERATING
REPORTED AND OTHER UNITS REPORTED
RESULTS CHARGES RESULTS RESULTS CHANGE
-------- ------------- --------- -------- --------
(MILLIONS)

North America.............................. $(3) $ 9 $ 6 $34 (82)%
Europe..................................... 8 8 16 12 33%
Rest of World.............................. 1 3 4 1 300%
--- --- --- ---
$ 6 $20 $26 $47 (45)%
=== === === ===

In the preceding table, amounts reported as restructuring and other charges
for 2001 include $11 million related to the 2001 restructuring plan, $1 million
for other restructuring related costs and expenses such as relocation and moving
costs that could not be accrued as part of the restructuring reserve, $6 million
for environmental remediation activities, principally in Europe, and $2 million
related to costs associated with the amendment of certain terms of our senior
credit facility. For further details of these costs see the sections listed as
"Restructuring Charges", "Environmental and Other Matters" and "Liquidity and
Capital Resources--Capitalization" later in this Management's Discussion and
Analysis.

EBIT for North American operations declined to $6 million in the first
quarter 2001 from $34 million one year ago as weaker sales volumes in both our
OE and aftermarket segments impacted our earnings in the first three months of
the year. A drop in both the light and heavy-duty vehicle production volumes and
a decline in the higher margin elastomer business combined to reduce EBIT for
the North American OE business by over $9 million. Further contributing to the
decline in EBIT in North American OE operations were unfavorable pricing
impacts, volume related operating inefficiencies, inventory shrinkage, and
foreign currency impacts. The decline in North American aftermarket EBIT was due
to aftermarket industry weaknesses, which affected volumes, pricing and bad
debt. Lower volumes resulted in reduced EBIT of $6 million while unfavorable
pricing lowered EBIT by $3 million. Lower selling, general, and administrative
expenses and cost savings generated from our restructuring efforts of $6 million
helped partially offset some of the negative impacts on aftermarket EBIT in the
quarter.

Our European segment's EBIT improved 33 percent to $16 million in the first
quarter of 2001. Significantly improved performance in the OE exhaust business
in Europe contributed to the increased EBIT

22
23

in the quarter due to stronger sales from new products, lower manufacturing
costs, and savings from restructuring initiatives. The improvement in the OE
ride control business was offset by the impact of foreign currency movements in
Europe. Our European aftermarket operations had mixed results despite continued
weaknesses in the overall industry, as the aftermarket exhaust business had
improved EBIT this quarter while ride control EBIT declined consistent with the
trends in the industry.

EBIT for the company's operations in the rest of the world increased by $3
million in the first three months of 2001 compared to the same three months one
year ago, despite the impact from the devaluation of foreign currencies
principally in Australia. Increased OE and aftermarket volumes as well as
increased aftermarket pricing contributed to the improvement. Our South American
operations contributed most of the improvement in EBIT for the first quarter.

EBIT AS A PERCENTAGE OF REVENUE

The following table shows EBIT as a percentage of revenue by segment. The
EBIT percentage for the first quarter 2001 is calculated after excluding the
"restructuring and other charges" described previously.

THREE MONTHS ENDED
MARCH 31,
--------------------
2001 2000
---- ----

North America............................................... 1% 7%
Europe...................................................... 5% 4%
Rest of World............................................... 5% 1%
Total Tenneco Automotive............................. 3% 5%

In North America, EBIT as a percentage of revenue decreased by 6 percent.
Production cuts by vehicle manufacturers plus declines in higher margin
elastomer sales contributed to the lower margins. Volume related operating
inefficiencies and negative currency impacts added to the decline, despite
improvements in selling, general, and administrative expenses and other costs in
our North American operations. In Europe, EBIT margins gained in the first
quarter as significant improvements in OE exhaust operations were somewhat
offset by costs associated with the Polish ride control plant start-up, reserves
for bad debt, currency impacts and lower aftermarket volumes. EBIT as a
percentage of revenue for the rest of the world grew in the first quarter of
this year even with currency impacts. Excluding the currency impacts, EBIT
margin for the rest of the world would have increased to 6 percent in the first
quarter 2001. Stronger volumes and favorable pricing changes, plus continued
efforts to lower operating costs, all contributed to these better margins.

INTEREST EXPENSE, NET OF INTEREST CAPITALIZED

We reported interest expense of $47 million during the first quarter of
2001 compared to $45 million during the same period in 2000. The increase in
total interest expense is primarily due to higher short-term borrowings and less
interest capitalized, offset by the impact from slightly more favorable interest
rates. See more detailed explanations on our debt structure in "Liquidity and
Capital Resources--Capitalization" later in this Management's Discussion and
Analysis.

INCOME TAXES

For the first quarter, income taxes were a $10 million benefit in 2001 and
a $1 million benefit in 2000. The effective tax rate for the first quarter of
2001 was 25 percent compared to 36 percent in the first quarter of 2000.

EARNINGS PER SHARE

We reported a loss in earnings per diluted common share of $.84 for the
first three months of 2001. First quarter 2000 earnings per diluted common share
were positive at $.03. Included in results for the first quarter 2001 are the
impacts from charges related to our restructuring plans, environmental
remediation activities and the costs related to the amendment of certain terms
of the senior credit facility. The cumulative negative

23
24

effect of these items on earnings per diluted common share was a reduction of
$.40. The majority of the impact was comprised of the restructuring charge for
the 2001 plan and the environmental costs which impacted earnings per share by
$.21 and $.12, respectively. You should also read Note 7 in the "Notes to
Financial Statements" for more detailed information on earnings per share.

RESTRUCTURING CHARGES

Over the past several years we have adopted plans to restructure portions
of our operations. These plans were approved by the Board of Directors and were
designed to reduce operational and administrative overhead costs throughout the
business. Charges to income related to these plans are recorded in the period in
which the plans are finalized and approved, while actions necessary to affect
these restructuring plans occur over future periods in accordance with
established plans.

As of March 31, 2001, we had completed the restructuring actions related to
the 1999 plan, with the exception of certain headcount reductions and related
severance payments for a distribution facility in Europe. The 1999 plan involved
closing a ride control manufacturing facility and an exhaust plant in Europe,
closing or downsizing four European aftermarket distribution centers, closing a
North America exhaust manufacturing facility plus employee reductions of
approximately 780. As of March 31, 2001, over 750 employees had been terminated
under the 1999 plan. We will be substantially complete with these restructuring
activities by the middle of 2001.

In the fourth quarter of 2000, our Board of Directors approved a
restructuring plan to further reduce administrative and operational overhead
costs. We recorded a pre-tax charge related to the plan of $46 million, $32
million after tax, or $.92 per diluted common share. Within the statement of
income (loss), $13 million of the pre-tax charge is reflected in cost of sales,
while $33 million is included in selling, general, and administrative expenses.
The charge is comprised of $24 million of severance and related costs for
salaried employment reductions worldwide and $22 million for the reduction of
manufacturing and distribution capacity in response to long-term market trends.
The 2000 plan involved closing a North American aftermarket exhaust distribution
facility and a ride control manufacturing plant in our Asian market, as well as
the consolidation of some exhaust manufacturing facilities in Europe. In
addition, the plan involves the elimination of about 700 positions. We wrote
down the assets at the locations to be closed to their fair value, less costs to
sell. We estimated the market value of buildings using external real estate
appraisals. As a result of the single purpose nature of the machinery and
equipment to be disposed of, fair value was estimated to be scrap value less
costs to dispose in most cases. We do not expect that cash proceeds on the sale
of these assets will be significant. As of March 31, 2001, approximately 330
employees had been terminated under the 2000 plan primarily in North America and
Europe in sales, engineering and salaried plant. All restructuring actions are
being completed in accordance with our established plan. We expect to complete
all restructuring activities related to this plan by the end of the first
quarter of 2002.

In the first quarter of 2001, our Board of Directors approved a
restructuring plan in response to increasingly difficult industry conditions. On
January 31, 2001, we announced plans to eliminate up to 405 salaried positions
worldwide. This reduction included the immediate elimination of 215 positions.
We recorded pre-tax charges related to the restructuring of $11 million, $8
million after tax, or $.21 per diluted common share. Within the statement of
income (loss), $2 million of the pre-tax charge is reflected in costs of sales
while $9 million is included in selling, general, and administrative expenses.
These charges are comprised of $8 million for severance and related costs for
salaried employment reductions worldwide and $3 million for costs related to
closing a testing facility in North America. We also incurred $1 million for
other restructuring related costs and expenses such as relocation and moving
costs that could not be accrued as part of the restructuring reserve. As of
March 31, 2001, we had eliminated about 345 positions in connection with the
2001 plan. We estimate that we will complete these restructuring activities no
later than the first quarter 2002.

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25

All workforce reductions will be done in compliance with all legal and
contractual requirements including obligations to consult with worker
committees, union representatives and others.

Amounts related to activities that are part of the restructuring plans are
as follows:

Severance........................ $23 $ 8 $(11) $(2) $18
Asset Impairment................. -- 1 -- -- 1
Facility exit costs.............. 3 2 -- (1) 4
--- --- ---- --- ---
$26 $11 $(11) $(3) $23
=== === ==== === ===

CHANGES IN ACCOUNTING PRINCIPLES

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities". This statement establishes new
accounting and reporting standards requiring that all derivative instruments,
including derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting treatment. This statement cannot
be applied retroactively and is effective for all fiscal years beginning after
June 15, 2000. We adopted this statement effective January 1, 2001 and it did
not have a significant impact on our financial position or results of
operations.

In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition". This SAB
provides guidance on the recognition, presentation, and disclosure of revenue in
the financial statements and is effective no later than the fourth quarter of
fiscal years beginning after December 15, 1999. The SAB draws on the existing
accounting rules and defines the basic criteria that must be met before we can
record revenue. The impact of adopting SAB 101 did not have a significant effect
on our results of operations or financial position.

In May 2000, the Emerging Issues Task Force ("EITF") of the FASB reached a
consensus on Issue No. 00-14, Accounting for Certain Sales Incentives. This
issue addresses the recognition, measurement, and income statement
classification of various types of sales incentives, including discounts,
coupons, rebates, and free products. Consequently, beginning January 1, 2001, we
classified some incentives that were previously shown in selling, general, and
administrative expense as a reduction in revenues. As a result of the change,
revenue was $3 million lower in the first quarter of 2001, with an offsetting
decline in selling, general, and administrative expenses. We have restated prior
year results for comparability, resulting in a reduction in net sales of $4
million for the quarter ended March 31, 2000, with an offsetting reduction in
selling, general, and administrative expense.

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26

LIQUIDITY AND CAPITAL RESOURCES

CAPITALIZATION

MARCH 31, DECEMBER 31,
2001 2000
--------- ------------

Short-term debt and current portion of long-term debt....... $ 188 $ 92
Long-term debt.............................................. 1,409 1,435
------ ------
Total debt.................................................. 1,597 1,527
------ ------
Total minority interest..................................... 15 14
Common shareholders' equity................................. 247 330
------ ------
Total capitalization........................................ $1,859 $1,871
====== ======

The company's debt to capitalization ratio was 86 percent at March 31, 2001
and 82 percent as of December 31, 2000. The increase in the ratio was
attributable to higher short-term debt outstanding as well as the decline in
shareholders' equity. The first quarter decline in shareholders' equity results
from both the translation of foreign balance sheets into U.S. dollars, where the
strength of the dollar resulted in translation adjustments of $54 million, and
our recorded net loss of $31 million.

Short-term debt, which includes the current portion of long-term
obligations and borrowings by foreign subsidiaries as well as our revolving
credit facility, increased by $96 million during the first three months of 2001.
This increase resulted from higher borrowings of $77 million during the quarter
under our revolving credit facility and a $19 million increase in the amount of
long-term debt that will mature in one year or less. Total borrowings
outstanding under our revolving credit facility were $89 million as of March 31,
2001 and $12 million as of December 31, 2000. Long-term debt includes borrowings
under financing arrangements entered into to facilitate the debt realignment
described below, approximately $16 million of debt that was not retired in the
cash tender and exchange offers associated with the 1999 spin-off of our
packaging business and other long term obligations such as capitalized leases.

As part of the realignment of debt that was required in order to complete
the spin-off of the packaging business in 1999, we entered into a $1.55 billion
committed senior secured financing arrangement with a syndicate of banks and
other financial institutions. The company entered into an agreement to amend
this facility on October 20, 2000 to (i) relax the financial covenant ratios
beginning in the fourth quarter of 2000, (ii) exclude up to $80 million of cash
charges and expenses related to cost reduction initiatives from the calculation
of consolidated earnings before interest, taxes, depreciation and amortization
("EBITDA") for our financial ratios through 2001 and (iii) make certain other
technical changes. In exchange for these amendments, we agreed to certain
interest rate increases, lowered our capital expenditure limits and paid an
aggregate fee of about $3 million.

As a result of significant reductions in North American vehicle production
levels announced by our original equipment customers since the fourth quarter of
last year, as well as an accelerated weakening of the global aftermarket, we
entered into a second amendment of our senior credit facility on March 22, 2001.
The second amendment revised the financial covenant ratios we are required to
maintain for each of the fiscal quarters ending in 2001. The second amendment
also reduced the limitation on 2001 capital expenditures from $225 million to
$150 million, and required that net cash proceeds from all significant,
non-ordinary course asset sales be used to prepay the senior term loans. In
exchange for these amendments, we agreed to a 25 basis point increase in
interest rates on the senior term loans and our revolving credit facility and
paid an aggregate fee of about $3 million to consenting lenders. We incurred
legal, advisory and other costs related to the amendment process of
approximately $2 million. The amendment also provides for the continued
availability of the full amount of the $500 million revolving credit facility.
Excluding the $89 million of outstanding borrowings and $51 million of letters
of credit, we had $360 million available for borrowing under the revolving
credit facility at March 31, 2001. Based on our current projections for 2001, we
believe that we will be able to meet the revised financial covenant ratios and
adhere to the limitation on capital expenditures.

The senior secured credit facility, as amended on March 22, 2001, consists
of: (i) a $500 million revolving credit facility with a final maturity date of
November 4, 2005; (ii) a $406 million term loan with a

26
27

final maturity date of November 4, 2005; (iii) a $270 million term loan with a
final maturity date of November 4, 2007; and (iv) a $270 million term loan with
a final maturity date of May 4, 2008. A portion of each term loan is payable in
quarterly installments beginning September 30, 2001. Borrowings under the
facility bear interest at an annual rate equal to, at the borrower's option,
either (i) the London Interbank Offering Rate plus a margin of 325 basis points
for the revolving credit facility and the term loan maturing November 4, 2005,
375 basis points for the term loan maturing November 4, 2007 and 400 basis
points for the term loan maturing May 4, 2008; or (ii) a rate consisting of the
greater of the JP Morgan Chase prime rate or the Federal Funds rate plus 50
basis points, plus a margin of 225 basis points for the revolving credit
facility and the term loan maturing November 4, 2005, 275 basis points for the
term loan maturing November 4, 2007 and 300 basis points for the term loan
maturing May 4, 2008. Under the provisions of the senior credit facility
agreement, the interest margins for borrowings under the revolving credit
facility and the term loan maturing November 4, 2005 may be adjusted based on
the consolidated leverage ratio (consolidated indebtedness divided by
consolidated EBITDA as defined in the senior credit facility agreement) measured
at the end of each quarter.

The amended senior credit facility agreement requires that the company
maintain: (i) a consolidated leverage ratio (consolidated indebtedness divided
by consolidated EBITDA) not greater than 6.00 at the end of the first quarter of
2001 and not greater than 6.25, 6.00 and 5.50 at the end of the second, third
and fourth quarters of 2001, respectively: (ii) a consolidated interest coverage
ratio (consolidated EBITDA divided by consolidated cash interest paid) of at
least 1.40 for the first quarter of 2001 and at least 1.35, 1.40 and 1.55 for
the second, third and fourth quarters of 2001, respectively; and (iii) a fixed
charge coverage ratio (consolidated EBITDA less consolidated capital
expenditures, divided by consolidated cash interest paid) greater than .60 for
the first quarter of 2001 and greater than .55, .65 and .80 for the second,
third and fourth quarters of 2001, respectively. As of March 31, 2001 we were in
compliance with the financial covenant ratios required under the amended senior
credit facility.

The senior credit facility agreement also contains restrictions on our
operations that are customary for similar facilities, including limitations on:
(a) incurring additional liens; (b) sale and leaseback transactions; (c)
liquidations and dissolutions (d) incurring additional indebtedness or
guarantees; (e) capital expenditures; (f) dividends; (g) mergers and
consolidations; and (h) prepayments and modifications of subordinated and other
debt instruments. Compliance with these requirements and restrictions is a
condition for any incremental borrowings under the senior credit facility
agreement and failure to meet these requirements enables the lenders to require
repayment of any outstanding loans. As of March 31, 2001, we were in compliance
with these requirements.

The company's outstanding debt also includes $500 million of 11 5/8 percent
Senior Subordinated Notes due 2009. The senior subordinated debt indenture
requires that we, as a condition to incurring certain types of indebtedness not
otherwise permitted, initially maintain an interest coverage ratio of not less
than 2.00. Under the terms of the indenture, the minimum interest coverage ratio
increases to 2.25 beginning on October 15, 2001. The indenture also contains
restrictions on our operations, including limitations on: (1) incurring
additional indebtedness or liens; (2) dividends; (3) distributions and stock
repurchases; (4) investments; and (5) mergers and consolidations. All of our
existing and future material domestic wholly owned subsidiaries fully and
unconditionally guarantee these notes on a joint and several basis. There are no
significant restrictions on the ability of the subsidiaries that have guaranteed
these notes to make distributions to us.

We believe that cash flows from operations, combined with available
borrowing capacity described above and assuming that we maintain compliance with
the requirements of our loan agreement, will generally be sufficient to meet our
future capital requirements for the following year. Our ability to meet the
financial covenants in 2001 and beyond depends upon a number of operational and
economic factors, many of which are beyond our control. Factors that could
impact our compliance with the financial covenants include the rate at which
consumers continue to buy new vehicles and the rate at which they continue to
repair vehicles already in service. Persistently lower North American vehicle
production levels, further weakening in the global aftermarket beyond our
expectation, or an unanticipated reduction in vehicle production levels in
Europe, could impact our ability to meet our financial covenant ratios. In the
event that we are unable to meet these revised financial covenants, we would
consider several options to meet our cash flow needs. These options
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28

could include further renegotiations with our senior credit lenders, additional
cost reduction or restructuring initiatives, sales of assets or capital stock,
or other alternatives to enhance our financial and operating position. Should we
be required to further amend our bank agreements to meet our financial covenants
beyond 2001, we believe we can negotiate these amendments at a reasonable cost.

DIVIDENDS ON COMMON STOCK

During 2000, the company paid quarterly dividends of $.05 per common share.
These dividend payments totaled $2 million in the first quarter of 2000 and $7
million for the entire year. On January 10, 2001, the Company announced that the
Board of Directors had eliminated the quarterly dividend on the company's stock.
The board took the action in response to current industry conditions,
significantly greater than anticipated production volume reductions by original
equipment manufacturers and continued softness in the global light vehicle
aftermarket.

CASH FLOWS

THREE MONTHS ENDED
MARCH 31,
--------------------
2001 2000
---- ----

Cash provided (used) by:
Operating activities...................................... $(29) $ (4)
Investing activities...................................... (30) (36)
Financing activities...................................... 76 11

OPERATING ACTIVITIES

As of March 31, 2001 and March 31, 2000 cash flows from operating
activities represented uses of cash of $29 million and $4 million, respectively.
Lower earnings in the first quarter 2001 was a key driver of the increased use
in cash. In addition, while our working capital did increase during the quarter
as it typically does at this time as we prepare for the key selling period, it
did not increase to the levels it has in the past. We have continued to focus on
improving working capital and as a result the changes in working capital in the
current quarter were more favorable than they were one year ago. Reduced
accounts receivable and inventory balances plus better management of our
payables made a favorable impact on cash flows in this year's first quarter
compared to last year's first quarter. Working capital, adjusted for receivables
that were sold as of March 31, 2001, was $100 million lower than it was as of
March 31, 2000. During the first quarter of this year, the company increased the
size of the U.S. receivables securitization program by $3 million and reduced
our European program by a similar amount.

INVESTING ACTIVITIES

Cash used for investing activities was $6 million lower in the first
quarter of 2001 compared to the same period a year ago due to lower expenditures
for property, plant and equipment. Capital expenditures were $25 million in the
first three months of 2001, down from $34 million in the first three months of
last year.

FINANCING ACTIVITIES

Cash provided by financing activities was $76 million in the first quarter
of 2001 compared to $11 million in the first quarter of 2000. The increase in
the first three months of this year is attributable to greater short-term
borrowings during the period of $77 million. First quarter 2000 includes a $13
million increase in short-term debt, offset by a $2 million dividend payment to
our common shareholders.

INTEREST RATE RISK

The company's financial instruments that are sensitive to market risk for
changes in interest rates are its debt securities. The company primarily uses a
revolving credit facility to finance its short-term capital requirements and
pays a current market rate of interest on these borrowings. Longer-term capital
requirements were financed with long-term obligations with original maturity
dates ranging from six to ten years.

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29

Under the terms of the senior credit facility agreement, the company was
required to hedge its exposure to floating interest rates within 180 days
following the 1999 spin-off of the packaging business so that at least 50
percent of the long-term debt would be fixed for a period of at least three
years. In February 2000, $250 million of floating rate long-term debt was hedged
with three-year, floating to fixed interest rate swaps. In April 2000, an
additional $50 million of floating rate long-term debt was hedged with
three-year, floating to fixed interest rate swaps. The hedges that were executed
fully satisfied the interest rate-hedging requirement of the senior credit
facility agreement. At March 31, 2001, the company had approximately $816
million in long-term debt obligations that have fixed interest rates until at
least January 2003, and approximately $593 million in long-term debt obligations
that have variable interest rates based on a current market rate of interest.

It is estimated that the fair value of the Company's long-term debt at
March 31, 2001 was about 62 percent of its book value. A one percentage point
increase or decrease in interest rates would increase or decrease the annual
interest expense that is recognized in the income statement and the cash that is
paid for interest costs by about $8 million, or approximately $5 million on an
after tax basis.

OUTLOOK

In late fourth quarter 2000, several of the company's major North American
original equipment customers began announcing significant reductions in
scheduled vehicle production levels. Based on these reductions, we anticipate
that the North American original equipment manufacturer build rate for light
vehicles in 2001 will be down from 2000 levels in the range of 10 percent to 12
percent and that weaknesses in the heavy-duty truck market will continue through
2001 and into 2002. We also expect that the European original equipment build
rate will remain at approximately 20 million, essentially flat with 2000 levels.
The global aftermarket exhibited a further weakening of demand for replacement
parts during the latter portion of last year. We anticipate that there will be
further declines in the global aftermarket industry in the range of 6 percent to
10 percent in 2001.

Based on anticipated vehicle production levels our global original
equipment customer book of business is currently $2,430 million, $2,507 million
and $2,667 million for 2001, 2002 and 2003, respectively. When we refer to our
book of business, we mean revenues for original equipment manufacturer programs
that have been formally awarded to us as well as programs which we are highly
confident will result in revenues based on either informal customer indications
consistent with past practices and/or our status as supplier for the existing
program and relationship with the customer. This book of business is subject to
increase or decrease due to changes in customer requirements, customer and
consumer preferences, and the number of vehicles actually produced by our
customers. In addition, it is based on our anticipated pricing for the
applicable program over its life. However, we are under continuing pricing
pressure from our OE customers. See "Cautionary Statement for Purposes of the
"Safe Harbor" Provisions of the Private Securities Litigation Reform Act of
1995".

EURO CONVERSION

The European Monetary Union resulted in the adoption of a common currency,
the "euro," among eleven European nations. The euro is being adopted over a
three-year transition period beginning January 1, 1999. In October 1997, we
established a cross-functional Euro Committee, comprised of representatives of
the Company's operational divisions as well as its corporate offices. That
Committee had two principal objectives: (1) to determine the impact of the euro
on our business operations, and (2) to recommend and facilitate implementation
of those steps necessary to ensure that the company would be fully prepared for
the euro's introduction. As of January 1, 1999, we implemented those euro
conversion procedures that it had determined to be necessary and prudent to
adopt by that date, and we are on track to becoming fully "euro ready" on or
before the conclusion of the three-year euro transition period. We believe that
the costs associated with transitioning to the euro will not be material to our
financial position or results of operations.

ENVIRONMENTAL AND OTHER MATTERS

We and some of our subsidiaries and affiliates are parties to environmental
proceedings. We expense or capitalize, as appropriate, expenditures for ongoing
compliance with environmental regulations that relate to current operations. We
expense expenditures that relate to an existing condition caused by past
operations and

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30

that do not contribute to current or future revenue generation. We record
liabilities when environmental assessments indicate that remedial efforts are
probable and the costs can be reasonably estimated. Estimates of the liability
are based upon currently available facts, existing technology, and presently
enacted laws and regulations taking into consideration the likely effects of
inflation and other societal and economic factors. We consider all available
evidence including prior experience in remediation of contaminated sites, other
companies' cleanup experience and data released by the United States
Environmental Protection Agency or other organizations. These estimated
liabilities are subject to revision in future periods based on actual costs or
new information. Where future cash flows are fixed or reliably determinable, we
have discounted the liabilities. All other environmental liabilities are
recorded at their undiscounted amounts. We evaluate recoveries separately from
the liability and, when they are assured, recoveries are recorded and reported
separately from the associated liability in our financial statements.

As of March 31, 2001, the company continues to be designated as a
potentially responsible party in four Superfund sites. We have estimated our
share of the remediation costs for these sites to be approximately $1 million in
the aggregate. In addition to the Superfund sites, we may have the obligation to
remediate current or former facilities, and we estimate our share of remediation
costs at these facilities to be approximately $26 million. For both the
Superfund sites and the current and former facilities, we have established
reserves that we believe are adequate for these costs. Although we believe our
estimates of remediation costs are reasonable and are based on the latest
available information, the cleanup costs are estimates and are subject to
revision, as more information becomes available about the extent of remediation
required. At some sites, we expect that other parties will contribute to the
remediation costs. In addition, at the Superfund sites, the Comprehensive
Environmental Response, Compensation and Liability Act provides that our
liability could be joint and several, meaning that we could be required to pay
in excess of our share of remediation costs. Our understanding of the financial
strength of other potentially responsible parties has been considered, where
appropriate, in our determination of our estimated liability.

As we previously disclosed, we undertook a third-party evaluation of
estimated environmental remediation costs at one of our facilities beginning in
2000. The evaluation was initiated as a result of testing that indicated the
potential underground migration of some contaminants beyond our facility
property. We have completed and analyzed the results of our evaluation of
off-site contamination migration from that facility and as a result we have
increased the environmental remediation reserve we had for this facility by $5
million through a charge to income in the first quarter 2001. We also increased
our estimate of environmental remediation reserves for three other locations by
a total of $1 million in the first quarter of 2001. Additionally, in the first
quarter of 2001 we reached an agreement with a third party to assume
responsibility for remediation of a location at which we previously shared
responsibility. In exchange, we received cash and a note for a total of $4
million, the estimate of the third party's share of the total remediation
liability. We increased our environmental liability estimate for this location
to $4 million as a result. These amounts are reflected in our estimation of
remediation costs described above. We believe that these potential costs, as
well as the costs associated with our current status as a potentially
responsible party in the Superfund sites, or as a liable party at our current or
former facilities, will not be material to our consolidated financial position
or results of operations.

EMPLOYEE STOCK OWNERSHIP PLANS

We have established Employee Stock Ownership Plans (401(k) Plans) for the
benefit of our employees. Under the plans, participants may elect to defer up to
16 percent of their salary through contributions to the plan, which are invested
in selected mutual funds or used to buy our common stock. Through December 31,
2000, the company matched qualified employee contributions of up to 8 percent of
the employee's salary with a contribution matching 100 percent of each
employee's contribution. Beginning January 1, 2001 this match was reduced to 75
percent of each employee's contribution up to 8 percent of the employee's
salary. These matching contributions are made in common stock and vest
immediately. We incurred costs of approximately $3 million in the first quarter
of both 2001 and 2000 for these matching contributions.

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31

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For information regarding our exposure to interest rate risk, see the
caption entitled "Interest Rate Risk" in "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations," which is
incorporated herein by reference.

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32

PART II

OTHER INFORMATION

ITEM 5. OTHER INFORMATION

We held our annual stockholders' meeting on May 8, 2001 to consider and
vote on two separate proposals: (i) a proposal to elect M. Kathryn Eickhoff,
Frank Macher, Roger Porter, David B. Price, Jr. and Dennis Severance as
directors of our company for a term expiring at our next annual stockholders'
meeting, and (ii) a proposal to ratify our selection of Arthur Andersen LLP as
our independent accountants for the year ending December 31, 2001. The meeting
proceeded and all proposals were approved by the requisite vote of the holders
of our outstanding common stock. The following sets forth the vote results with
respect to these proposals at the meeting:

ELECTION OF DIRECTORS

VOTES FOR VOTES WITHHELD
--------- --------------

M. Kathryn Eickhoff.................. 31,955,572 951,597
Frank Macher......................... 31,315,750 1,591,419
Roger Porter......................... 31,987,830 919,339
David B. Price, Jr. ................. 32,006,275 900,894
Dennis Severance..................... 32,006,451 900,718

RATIFICATION OF ARTHUR ANDERSEN LLP

VOTES FOR VOTES AGAINST VOTES ABSTAIN
- --------- ------------- -------------

32,260,653 526,119 120,397

As previously announced, on March 22, 2001, we entered into an agreement
with our senior lenders to amend certain provisions of our senior credit
facility. Information concerning the amendments is included in this Quarterly
Report under Item 2, "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

In addition, Mark Andrews, a director of our company, retired effective at
the annual meeting and the number of directors constituting our entire Board was
reduced from nine to eight.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits. The exhibits filed with this report are listed on the Exhibit
Index following the signature page of this report, which is incorporated herein
by reference.

(b) Reports on Form 8-K. We filed the following Current Reports on Form 8-K
during the quarter ended March 31, 2001:

Current Report on Form 8-K dated January 31, 2001, including pursuant to Item 5
certain information pertaining to (i) the elimination of up to 405 salaried
positions and (ii) the results of our operations for the fourth quarter and full
year 2000.

Current Report on Form 8-K dated March 22, 2001, including pursuant to Item 5
certain information pertaining to amendment of our senior credit facility.

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33

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934,
Tenneco Automotive Inc. has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.

TENNECO AUTOMOTIVE INC.

By: /s/ MARK A. MCCOLLUM
------------------------------------
Mark A. McCollum
Senior Vice President and
Chief Financial Officer
Dated: May 14, 2001

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34

INDEX TO EXHIBITS
TO
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED MARCH 31, 2001

EXHIBIT
NUMBER DESCRIPTION
------- -----------

2 -- None.
3.1(a) -- Restated Certificate of Incorporation of the registrant
dated December 11, 1996 (incorporated herein by reference
from Exhibit 3.1(a) of the registrant's Annual Report on
Form 10-K for the year ended December 31, 1997, File No.
1-12387).
3.1(b) -- Certificate of Amendment, dated December 11, 1996
(incorporated herein by reference from Exhibit 3.1(c) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1997, File No. 1-12387).
3.1(c) -- Certificate of Ownership and Merger, dated July 8, 1997
(incorporated herein by reference from Exhibit 3.1(d) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1997, File No. 1-12387).
3.1(d) -- Certificate of Designation of Series B Junior Participating
Preferred Stock dated September 9, 1998 (incorporated herein
by reference from Exhibit 3.1(d) of the registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998, File No. 1-12387).
3.1(e) -- Certificate of Elimination of the Series A Participating
Junior Preferred Stock of the registrant dated September 11,
1998 (incorporated herein by reference from Exhibit 3.1(e)
of the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998, File No. 1-12387).
3.1(f) -- Certificate of Amendment to Restated Certificate of
Incorporation of the registrant dated November 5, 1999
(incorporated herein by reference from Exhibit 3.1(f) of the
registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, File No. 1-12387).
3.1(g) -- Certificate of Amendment to Restated Certificate of
Incorporation of the registrant dated November 5, 1999
(incorporated herein by reference from Exhibit 3.1(g) of the
registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, File No. 1-12387).
3.1(h) -- Certificate of Ownership and Merger merging Tenneco
Automotive Merger Sub Inc. with and into the registrant,
dated November 5, 1999 (incorporated herein by reference
from Exhibit 3.1(h) of the registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, File No.
1-12387).
3.1(i) -- Certificate of Amendment to Restated Certificate of
Incorporation of the registrant dated May 9, 2000
(incorporated herein by reference from Exhibit 3.1(i) of the
registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000, File No. 1-12387).
3.2(a) -- By-laws of the registrant, as amended March 14, 2000
(incorporated herein by reference from Exhibit 3.2(a) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1999, File No. 1-12387).
3.3 -- Certificate of Incorporation of Tenneco Global Holdings Inc.
("Global"), as amended (incorporated herein by reference to
Exhibit 3.3 to the registrant's Registration Statement on
Form S-4, Reg. No. 333-93757).
3.4 -- By-laws of Global (incorporated herein by reference to
Exhibit 3.4 to the registrant's Registration Statement on
Form S-4, Reg. No. 333-93757).
3.5 -- Certificate of Incorporation of TMC Texas Inc. ("TMC")
(incorporated herein by reference to Exhibit 3.5 to the
registrant's Registration Statement on Form S-4, Reg. No.
333-93757).
3.6 -- By-laws of TMC (incorporated herein by reference to Exhibit
3.6 to the registrant's Registration Statement on Form S-4,
Reg. No. 333-93757).

34
35

EXHIBIT
NUMBER DESCRIPTION
------- -----------

3.7 -- Amended and Restate Certificate of Incorporation of Tenneco
International Holding Corp. ("TIHC") (incorporated herein by
reference to Exhibit 3.7 to the registrant's Registration
Statement on Form S-4, Reg. No. 333-93757).
3.8 -- Amended and Restated By-laws of TIHC (incorporated herein by
reference to Exhibit 3.8 to the registrant's Registration
Statement on Form S-4, Reg. No. 333-93757).
3.9 -- Certificate of Incorporation of Clevite Industries Inc.
("Clevite"), as amended (incorporated herein by reference to
Exhibit 3.9 to the registrant's Registration Statement on
Form S-4, Reg. No. 333-93757).
3.10 -- By-laws of Clevite (incorporated herein by reference to
Exhibit 3.10 to the registrant's Registration Statement on
Form S-4, Reg. No. 333-93757).
3.11 -- Amended and Restated Certificate of Incorporation of the
Pullman Company ("Pullman") (incorporated herein by
reference to Exhibit 3.11 to the registrant's Registration
Statement on Form S-4, Reg. No. 333-93757).
3.12 -- By-laws of Pullman (incorporated herein by reference to
Exhibit 3.12 to the registrant's Registration Statement on
Form S-4, Reg. No. 333-93757).
3.13 -- Certificate of Incorporation of Tenneco Automotive Operating
Company Inc. ("Operating") (incorporated herein by reference
to Exhibit 3.13 to the registrant's Registration Statement
on Form S-4, Reg. No. 333-93757).
3.14 -- By-laws of Operating (incorporated herein by reference to
Exhibit 3.14 to the registrant's Registration Statement on
Form S-4, Reg. No. 333-93757).
4.1(a) -- Rights Agreement dated as of September 8, 1998, by and
between the registrant and First Chicago Trust Company of
New York, as Rights Agent (incorporated herein by reference
from Exhibit 4.1 of the registrant's Current Report on Form
8-K dated September 24, 1998, File No. 1-12387).
4.1(b) -- Amendment No. 1 to Rights Agreement, dated March 14, 2000,
by and between the registrant and First Chicago Trust
Company of New York, as Rights Agent (incorporated herein by
reference from Exhibit 4.1(b) of the registrant's Annual
Report on Form 10-K for the year ended December 31, 1999,
File No. 1-12387).
4.1(c) -- Amendment No. 2 to Rights Agreement, dated February 5, 2001,
by and between the registrant and First Union National Bank,
as Rights Agent (incorporated herein by reference from
Exhibit 4.1(b) of the registrant's Post-Effective Amendment
No. 3 dated February 26, 2001, to its Registration Statement
on Form 8-A dated September 17, 1998).
4.2(a) -- Indenture, dated as of November 1, 1996, between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.1 of the
registrant's Registration Statement on Form S-4,
Registration No. 333-14003).
4.2(b) -- First Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between registrant
and The Chase Manhattan Bank, as Trustee (incorporated
herein by reference from Exhibit 4.3(b) of the registrant's
Annual Report on Form 10-K for the year ended December 31,
1996, File No. 1-12387).
4.2(c) -- Second Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(c) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12387).
4.2(d) -- Third Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(d) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12387).

35
36

EXHIBIT
NUMBER DESCRIPTION
------- -----------

4.2(e) -- Fourth Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(e) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12387).
4.2(f) -- Fifth Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(f) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12387).
4.2(g) -- Sixth Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(g) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12387).
4.2(h) -- Seventh Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(h) of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12387).
4.2(i) -- Eighth Supplemental Indenture, dated as of April 28, 1997,
to Indenture, dated as of November 1, 1996 between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.1 of the
registrant's Current Report on Form 8-K dated April 23,
1997, File No. 1-12387).
4.2(j) -- Ninth Supplemental Indenture, dated as of April 28, 1997, to
Indenture, dated as of November 1, 1996, between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.2 of the
registrant's Current Report on Form 8-K dated April 23,
1997, File No. 1-12387).
4.2(k) -- Tenth Supplemental Indenture, dated as of July 16, 1997, to
Indenture, dated as of November 1, 1996, between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.1 of the
registrant's Current Report on Form 8-K dated June 11, 1997,
File No. 1-12387).
4.2(l) -- Eleventh Supplemental Indenture, dated October 21, 1999, to
Indenture dated November 1, 1996 between The Chase Manhattan
Bank, as Trustee, and the registrant (incorporated herein by
reference from Exhibit 4.2(l) of the registrant's Annual
Report on Form 10-K for the year ended December 31, 1999,
File No. 1-12387).
4.3 -- Specimen stock certificate for Tenneco Automotive Inc.
common stock (incorporated herein by reference from Exhibit
4.3 of the registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999, File No. 1-12387).
4.4(a) -- Indenture dated October 14, 1999 by and between the
registrant and The Bank of New York, as trustee
(incorporated herein by reference from Exhibit 4.4(a) of the
registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, File No. 1-12387).
4.4(b) -- Supplemental Indenture dated November 4, 1999 among Tenneco
Automotive Operating Subsidiary Inc. (formerly Tenneco
Automotive Inc.), Tenneco International Holding Corp.,
Tenneco Global Holdings Inc., the Pullman Company and
Clevite Industries Inc. in favor of The Bank of New York, as
trustee (incorporated herein by reference from Exhibit
4.4(b) of the registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999, File No. 1-12387).

36
37

EXHIBIT
NUMBER DESCRIPTION
------- -----------

4.4(c) -- Subsidiary Guarantee dated as of October 14, 1999 from
Tenneco Automotive Operating Subsidiary Inc. (formerly
Tenneco Automotive Inc.), Tenneco International Holding
Corp., Tenneco Global Holdings Inc., the Pullman Company,
Clevite Industries Inc. and TMC Texas Inc. in favor of The
Bank of New York, as trustee (incorporated herein by
reference to Exhibit 4.4(c) to the registrant's Registration
Statement on Form S-4, Reg. No. 333-93757).
4.5(a) -- Credit Agreement, dated as of September 30, 1999, among the
registrant, the Lenders named therein, Commerzbank and Bank
of America, N.A., Citicorp USA, Inc. and The Chase Manhattan
Bank (incorporated herein by reference from Exhibit 4.5(a)
of the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-12387).
4.5(b) -- First Amendment to the Credit Agreement, dated October 20,
2000, among the registrant, The Chase Manhattan Bank and
Citicorp USA, Inc. (incorporated herein by reference from
Exhibit 4.1 to the registrant's Current Report on Form 8-K
dated October 24, 2000, File No. 1-12387).
4.5(c) -- Second Amendment to Credit Agreement, dated as of March 22,
2001, among the registrant, the lenders party thereto and
The Chase Manhattan Bank (incorporated by reference to
Exhibit 4.1 to the registrant's current report on Form 8-K
dated March 22, 2001, File No. 1-12387).
9 -- None.
10.1 -- Distribution Agreement, dated November 1, 1996, by and among
El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), the
registrant, and Newport News Shipbuilding Inc. (incorporated
herein by reference from Exhibit 2 of the registrant's Form
10, File No. 1-12387).
10.2 -- Amendment No. 1 to Distribution Agreement, dated as of
December 11, 1996, by and among El Paso Tennessee Pipeline
Co. (formerly Tenneco Inc.), the registrant, and Newport
News Shipbuilding Inc. (incorporated herein by reference
from Exhibit 10.2 of the registrant's Annual Report on Form
10-K for the year ended December 31, 1996, File No.
1-12387).
10.3 -- Debt and Cash Allocation Agreement, dated December 11, 1996,
by and among El Paso Tennessee Pipeline Co. (formerly
Tenneco Inc.), the registrant, and Newport News Shipbuilding
Inc. (incorporated herein by reference from Exhibit 10.3 of
the registrant's Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-12387).
10.4 -- Benefits Agreement, dated December 11, 1996, by and among El
Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), the
registrant, and Newport News Shipbuilding Inc. (incorporated
herein by reference from Exhibit 10.4 of the registrant's
Annual Report on Form 10-K for the year ended December 31,
1996, File No. 1-12387).
10.5 -- Insurance Agreement, dated December 11, 1996, by and among
El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), the
registrant, and Newport News Shipbuilding Inc. (incorporated
herein by reference from Exhibit 10.5 of the registrant's
Annual Report on Form 10-K for the year ended December 31,
1996, File No. 1-12387).
10.6 -- Tax Sharing Agreement, dated December 11, 1996, by and among
El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.),
Newport News Shipbuilding Inc., the registrant, and El Paso
Natural Gas Company (incorporated herein by reference from
Exhibit 10.6 of the registrant's Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
10.7 -- First Amendment to Tax Sharing Agreement, dated as of
December 11, 1996, among El Paso Tennessee Pipeline Co.
(formerly Tenneco Inc.), the registrant and Newport News
Shipbuilding Inc. (incorporated herein by reference from
Exhibit 10.7 of the registrant's Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).

37
38

EXHIBIT
NUMBER DESCRIPTION
------- -----------

10.8 -- Tenneco Automotive Inc. Executive Incentive Compensation
Plan (incorporated herein by reference from Exhibit 10.8 of
the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-12387).
10.9 -- Tenneco Automotive Inc. Change of Control Severance Benefits
Plan for Key Executives (incorporated herein by reference
from Exhibit 10.13 of the registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, File No.
1-12387).
10.10 -- Tenneco Automotive Inc. Stock Ownership Plan (incorporated
herein by reference from Exhibit 10.10 of the registrant's
Registration Statement on Form S-4, Reg. No. 333-93757).
10.11 -- Tenneco Automotive Inc. Key Executive Pension Plan
(incorporated herein by reference from Exhibit 10.15 of the
registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, File No. 1-12387).
10.12 -- Tenneco Automotive Inc. Deferred Compensation Plan
(incorporated herein by reference from Exhibit 10.16 of the
registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, File No. 1-12387).
10.13 -- Tenneco Automotive Inc. Supplemental Executive Retirement
Plan (incorporated herein by reference from Exhibit 10.17 of
the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-12387).
10.14 -- Release Agreement dated as of October 18, 1999 by and
between Dana G. Mead and Tenneco Management Company and
Modification of Release Agreement dated as of October 18,
1999 among Dana G. Mead, Tenneco Automotive Inc. and Tenneco
Management Company (incorporated herein by reference from
Exhibit 10.18 of the registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999, File No.
1-12387).
10.15 -- Release Agreement dated as of September 17, 1999 by and
between Robert T. Blakely and Tenneco Management Company and
Modification of Release Agreement dated as of September 17,
1999 among Robert T. Blakely, Tenneco Automotive Inc. and
Tenneco Management Company (incorporated herein by reference
from Exhibit 10.15 to the registrant's Annual Report on Form
10-K for the year ended December 31, 1999, File No.
1-12387).
10.16 -- Agreement, dated as of April 12, 1999, among the registrant,
Tenneco Management Company, Tenneco Packaging Inc. and Paul
T. Stecko (incorporated herein by reference from Exhibit
10.30 of the registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999, File No. 1-12387).
10.17 -- Human Resources Agreement by and between Tenneco Automotive
Inc. and Tenneco Packaging Inc. dated November 4, 1999
(incorporated herein by reference to Exhibit 99.1 to the
registrant's Current Report on Form 8-K dated November 4,
1999, File No. 1-12387).
10.18 -- Tax Sharing Agreement by and between Tenneco Automotive Inc.
and Tenneco Packaging Inc. dated November 3, 1999
(incorporated herein by reference to Exhibit 99.2 to the
registrant's Current Report on Form 8-K dated November 4,
1999, File No. 1-12387).
10.19 -- Amended and Restated Transition Services Agreement by and
between Tenneco Automotive Inc. and Tenneco Packaging Inc.
dated as of November 4, 1999 (incorporated herein by
reference from Exhibit 10.21 of the registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1999, File No. 1-12387).
10.20 -- Purchase Agreement among Salomon Smith Barney Inc., the
other Initial Purchasers as named therein and Tenneco Inc.
dated October 8, 1999 (incorporated herein by reference from
Exhibit 10.18 of the registrant's Registration Statement on
Form S-4, Reg. No. 333-93757).

38
39

EXHIBIT
NUMBER DESCRIPTION
------- -----------

10.21 -- Registration Rights Agreement among Tenneco Inc., the
Guarantors named therein, Salomon Smith Barney Inc. and the
other Initial Purchasers named therein dated October 14,
1999 (incorporated herein by reference from Exhibit 10.19 of
the registrant's Registration Statement on Form S-4, Reg.
No. 333-93757).
10.22 -- Assumption Agreement among Tenneco Automotive Operating
Company Inc., Tenneco International Holding Corp., Tenneco
Global Holdings Inc., The Pullman Company, Clevite
Industries Inc., TMC Texas Inc., Salomon Smith Barney Inc.
and the other Initial Purchasers listed in the Purchase
Agreement dated as of November 4, 1999 (incorporated herein
by reference from Exhibit 10.20 of the registrant's
Registration Statement on Form S-4, Reg. No. 333-93757).
10.23 -- Amendment No. 1 to Change in Control Severance Benefits Plan
for Key Executives (incorporated herein by reference from
Exhibit 10.23 to the registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 2000, File No. 1-12387).
10.24 -- Letter Agreement dated July 27, 2000 between the registrant
and Mark P. Frissora (incorporated herein by reference from
Exhibit 10.24 to the registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 2000, File No. 1-12387).
10.25 -- Letter Agreement dated July 27, 2000 between the registrant
and Mark A. McCollum (incorporated herein by reference from
Exhibit 10.25 to the registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 2000, File No. 1-12387).
10.26 -- Letter Agreement dated July 27, 2000 between the registrant
and Richard P. Schneider (incorporated herein by reference
from Exhibit 10.26 to the registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2000, File No.
1-12387).
10.27 -- Letter Agreement dated July 27, 2000 between the registrant
and Richard P. Sloan (incorporated herein by reference from
Exhibit 10.27 to the registrant's report on Form 10-K for
the year ended December 31, 2000, File No. 1-12387).
10.28 -- Letter Agreement dated July 27, 2000 between the registrant
and Timothy R. Donovan (incorporated herein by reference
from Exhibit 10.28 to the registrant's report on Form 10-K
for the year ended December 31, 2000, File No. 1-12387).
10.29 -- Distribution Agreement by and between the registrant and
Tenneco Packaging Inc. dated November 3, 1999 (incorporated
herein by reference to Exhibit 2 to the registrant's Current
Report on Form 8-K dated November 4, 1999, File No.
1-12387).
11 -- None.
*12 -- Computation of Ratio of Earnings to Fixed Charges.
*15 -- Letter Regarding Unaudited Interim Financial Information.
18 -- None.
19 -- None.
22 -- None.
23 -- None.
24 -- None.
99 -- None.

- ------------------------
* Filed herewith