Tenneco Inc. CEO Gregg M Sherrill bought 20000 shares on 8-12-2008 at $15.41
Our company, Tenneco Inc., is one of the world's largest producers of automotive emission control and ride control products and systems. Our company serves both original equipment vehicle manufacturers ("OEMs") and the repair and replacement markets, or aftermarket, worldwide. As used herein, the term "Tenneco", "we", "us", "our", or the "Company" refers to Tenneco Inc. and its consolidated subsidiaries.
Tenneco was incorporated in Delaware in 1996. In 2005, we changed our name from Tenneco Automotive Inc. back to Tenneco Inc. The name Tenneco better represents the expanding number of markets we serve through our commercial and specialty vehicle businesses. Building a stronger presence in these markets complements our core businesses of supplying ride control and emission control products and systems for light vehicles to automotive original equipment and aftermarket customers worldwide. Our common stock continues to trade on the New York Stock Exchange under the symbol "TEN".
CORPORATE GOVERNANCE AND AVAILABLE INFORMATION
We have established a comprehensive corporate governance plan for the purpose of defining responsibilities, setting high standards of professional and personal conduct and assuring compliance with such responsibilities and standards. As part of its annual review process, the Board of Directors monitors developments in the area of corporate governance. Listed below are some of the key elements of our corporate governance plan.
For more information about these matters, see our definitive Proxy Statement for the Annual Meeting of Stockholders to be held May 6, 2008.
INDEPENDENCE OF DIRECTORS
- Eight of our nine directors are independent under the New York Stock Exchange ("NYSE") listing standards.
- Independent directors are scheduled to meet separately in executive session after every regularly scheduled Board of Directors meeting.
- We have a lead independent director, Mr. Paul T. Stecko.
- All members meet the independence standards for audit committee membership under the NYSE listing standards and applicable Securities and Exchange Commission ("SEC") rules.
- One member of the Audit Committee, Mr. Charles Cramb, has been designated by the Board as an "audit committee financial expert," as defined in the SEC rules, and the remaining members of the Audit Committee satisfy the NYSE's financial literacy requirements. Mr. Dennis Letham also meets the requirements to be considered a financial expert under SEC rules.
- The Audit Committee operates under a written charter which governs its duties and responsibilities, including its sole authority to appoint, review, evaluate and replace our independent auditors.
- The Audit Committee has adopted policies and procedures governing the pre-approval of all audit, audit-related, tax and other services provided by our independent auditors.
COMPENSATION/NOMINATING/G OVERNANCE COMMITTEE
- All members meet the independence standards for compensation and nominating committee membership under the NYSE listing standards.
- The Compensation/Nominating/G overnance Committee operates under a written charter that governs its duties and responsibilities, including the responsibility for executive compensation.
- In December 2005, an Executive Compensation Subcommittee was formed which has the responsibility to consider and approve equity based compensation for our executive officers which is intended to qualify as "performance based compensation" under Section 162(m) of the Internal Revenue Code of 1986, as amended.
CORPORATE GOVERNANCE PRINCIPLES
- We have adopted Corporate Governance Principles, including qualification and independence standards for directors.
STOCK OWNERSHIP GUIDELINES
- We have adopted Stock Ownership Guidelines to align the interests of our executives with the interests of stockholders and promote our commitment to sound corporate governance.
- The Stock Ownership Guidelines apply to the independent directors, the Chairman and Chief Executive Officer, all Executive Vice Presidents and all Senior Vice Presidents.
COMMUNICATION WITH DIRECTORS
- The Audit Committee has established a process for confidential and anonymous submission by our employees, as well as submissions by other interested parties, regarding questionable accounting or auditing matters.
- Additionally, the Board of Directors has established a process for stockholders to communicate with the Board of Directors, as a whole, or any independent director.
CODES OF BUSINESS CONDUCT AND ETHICS
- We have adopted a Code of Ethical Conduct for Financial Managers, which applies to our Chief Executive Officer, Chief Financial Officer, Controller and other key financial managers. This code is filed as Exhibit 14 to this report.
- We also operate under a Statement of Business Principles that applies to all directors, officers and employees and includes provisions ranging from restrictions on gifts to conflicts of interests. All salaried employees are required to affirm in writing their acceptance of these principles.
RELATED PARTY TRANSACTIONS POLICY
- We have adopted a Policy and Procedure for Transactions With Related Persons, under which our Audit Committee must generally pre-approve transactions involving more than $120,000 with our directors, executive officers, five percent or greater stockholders and their immediate family members.
EQUITY AWARD POLICY
- We have adopted a written policy to be followed for all issuances by our company of compensatory awards in the form of our common stock or any derivative of the common stock.
PERSONAL LOANS TO EXECUTIVE OFFICERS AND DIRECTORS
- We comply with and operate in a manner consistent with the legislation outlawing extensions of credit in the form of a personal loan to or for our directors or executive officers.
Our Internet address is www.tenneco.com. We make our proxy statements, annual report to stockholders, annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as filed with or furnished to the SEC, available free of charge on our Internet website as soon as reasonably practicable after submission to the SEC. Securities ownership reports on Forms 3, 4 and 5 are also available free of charge on our website as soon as reasonably practicable after submission to the SEC. The contents of our website are not, however, a part of this report.
Our Audit Committee, Compensation/Nominating/G overnance Committee and Executive Compensation Subcommittee Charters, Corporate Governance Principles, Stock Ownership Guidelines, Audit Committee policy regarding accounting complaints, Code of Ethical Conduct for Financial Managers, Statement of Business Principles, Policy and Procedures for Transactions with Related Persons, Equity Award Policy, policy for communicating with the Board of Directors and Audit Committee policy regarding the pre-approval of audit, non- audit, tax and other services are available free of charge on our website at www.tenneco.com. In addition, we will make a copy of any of these documents available to any person, without charge, upon written request to Tenneco Inc., 500 North Field Drive, Lake Forest, Illinois 60045, Attn: General Counsel. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K and applicable NYSE rules regarding amendments to or waivers of our Code of Ethical Conduct for Financial Managers and Statement of Business Principles by posting this information on our website at www.tenneco.com.
CEO AND CFO CERTIFICATIONS
In 2007 our chief executive officer provided to the NYSE and the Chicago Stock Exchange the annual CEO certification regarding our compliance with the corporate governance listing standards of those exchanges. In addition, our chief executive officer and chief financial officer filed with the Securities and Exchange Commission all required certifications regarding the quality of our disclosures in our fiscal 2007 SEC reports. There were no qualifications to these certifications.
For information concerning our operating segments, geographic areas and major products or groups of products, see Note 11 to the consolidated financial statements of Tenneco Inc. and Consolidated Subsidiaries included in Item 8. The following tables summarize for each of our operating segments for the periods indicated: (i) net sales and operating revenues; (ii) earnings before interest expense, income taxes and minority interest ("EBIT"); and (iii) expenditures for plant, property and equipment. You should also read "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Item 7 for information about certain costs and charges included in our results.
We design, manufacture and sell automotive emission control and ride control systems and products, with 2007 revenues of $6.2 billion. We serve both original equipment manufacturers and replacement markets worldwide through leading brands, including Monroe(R), Rancho(R), Clevite(R) Elastomers, and Fric Rot(TM) ride control products and Walker(R), Fonos(TM), and Gillet(TM) emission control products.
As an automotive parts supplier, we produce individual component parts for vehicles as well as groups of components that are combined as modules or systems within vehicles. These parts, modules and systems are sold globally to most leading OEMs and throughout all aftermarket distribution channels.
OVERVIEW OF AUTOMOTIVE PARTS INDUSTRY
The automotive parts industry is generally separated into two categories:
(1) "original equipment" or "OE" sales, in which parts are sold in large quantities directly for use by OEMs; and (2) "aftermarket" sales, in which parts are sold as replacement parts in varying quantities to a wide range of wholesalers, retailers and installers. In the OE market, parts suppliers are generally divided into tiers -- "Tier 1" suppliers, who provide their products directly to OEMs, and "Tier 2" or "Tier 3" suppliers, who sell their products principally to other suppliers for combination into the other suppliers' own product offerings.
Demand for automotive parts in the OE market is generally a function of the number of new vehicles produced, which in turn is a function of prevailing economic conditions and consumer preferences. In 2007, the number of light vehicles (i.e. passenger cars and light trucks) produced was 15.0 million in North America, 29.4 million in Europe, South America and India and 26.3 million in Asia Pacific. Worldwide new light vehicle production is forecasted to increase to 73.4 million units in 2008 from approximately 70.7 million units in 2007. Although OE demand is tied to planned vehicle production, parts suppliers also have the opportunity to grow through increasing their product content per vehicle, by further penetrating business with existing customers and by gaining new customers and markets. Companies with global presence and advanced technology, engineering, manufacturing and support capabilities, such as our company, are, we believe, well positioned to take advantage of these opportunities.
Demand for aftermarket products is driven by the quality of OE parts, the number of vehicles in operation, the age of the vehicle fleet, vehicle usage and the average useful life of vehicle parts. Although more vehicles are on the road than ever before, the aftermarket has experienced longer replacement cycles due to improved quality of OE parts and increases in average useful lives of automotive parts as a result of technological innovation. Suppliers are increasingly being required to deliver innovative aftermarket products that upgrade the performance or safety of a vehicle's original components to drive aftermarket demand.
Currently, we believe several significant existing and emerging trends are dramatically impacting the automotive industry. As the dynamics of the automotive industry change, so do the roles, responsibilities and relationships of its participants. Key trends that we believe are affecting automotive parts suppliers include:
INCREASING ENVIRONMENTAL STANDARDS
Automotive parts suppliers and OE manufacturers are designing products and developing materials to respond to increasingly stringent environmental requirements, a growing diesel market and the demand for better fuel economy. Government regulations adopted over the past decade require substantial reductions in automobile tailpipe emissions, longer warranties on parts of an automobile's pollution control equipment and additional equipment to control fuel vapor emissions. Some of these regulations also mandate more frequent emission inspections for the existing fleet of vehicles. Manufacturers have responded by focusing their efforts towards technological development to minimize pollution. As a leading supplier of emission control systems with strong technical capabilities, we believe we are well positioned to benefit from more rigorous environmental standards. For example, we developed the diesel particulate filter to meet stricter air quality regulations in Europe. Diesel particulate filters are produced in both Europe on the Mercedes Benz Sprinter and E-class and North America on the GM Duramax, Ford Super Duty, Dodge Ram and ITEC Medium duty. Our particulate filter and De-NOx converter can reduce particulate emissions by up to 90 percent and nitrogen oxide emissions by up to 85 percent. We also have numerous development contracts with North American, European and Asian light and medium-duty truck manufacturers for our selective catalytic reduction (SCR) systems. In addition, we are actively working on development of a non-road emission aftertreatment system for multiple manufacturers, in order to meet Tier 4 environmental regulations. In China, we have development contracts for complete turnkey SCR systems, including the Elim- NOx urea dosing technology which we acquired in 2007. Several customers have also purchased prototypes of our hydrocarbon injector, acquired with the ELIM- NOx technology, for the purpose of actively regenerating diesel particulate filters and Lean NOx Traps through hydrocarbon injection directly into the exhaust system.
INCREASING TECHNOLOGICALLY SOPHISTICATED CONTENT
As consumers continue to demand competitively priced vehicles with increased performance and functionality, the number of sophisticated components utilized in vehicles is increasing. By replacing mechanical functions with electronics and by integrating mechanical and electronic functions within a vehicle, OE manufacturers are achieving improved emission control, improved safety and more sophisticated features at lower costs.
Automotive parts customers are increasingly demanding technological innovation from suppliers to address more stringent emission and other regulatory standards and to improve vehicle performance. To develop innovative products, systems and modules, we have invested $114 million for 2007, $88 million for 2006 and $83 million for 2005, net of customer reimbursements, into engineering, research and development and we continuously seek to take advantage of our technology investments and brand strength by extending our products into new markets and categories. For example, we were the first supplier to develop and commercialize a diesel particulate filter that can virtually eliminate carbon and hydrocarbon emissions with minimal impact on engine performance.
We have expanded our competence in diesel particulate filters in Europe and are winning business in North America on these same applications. In addition, we supply Volvo, Audi, Ford and Mercedes Benz with a computerized electronic suspension system that we co-developed with Ohlins Racing AB. As other examples, we are sponsoring funded University Research for advanced technologies for both emission control and ride control, and we are participating in the HyTRAN consortium in Europe for the development of practical fuel cell reformers and auxiliary power units.
Our customers reimburse us for engineering, research, and development costs on some platforms when we prepare prototypes and incur costs before platform awards. Our engineering, research and development expense for 2007, 2006, and 2005 has been reduced by $72 million, $61 million, and $51 million, respectively, for these reimbursements.
ENHANCED VEHICLE SAFETY
Vehicle safety continues to gain increased industry attention and play a critical role in consumer purchasing decisions. As such, OEMs are seeking out suppliers with new technologies, capabilities and products that have the ability to advance vehicle safety. Continued research and development by select automotive suppliers in roll-over protection systems, smart airbag systems, braking electronics and safer, more durable materials has dramatically advanced the market for safety products and its evolving functional demands. Those suppliers who are able to enhance vehicle safety through innovative products and technologies have a distinct competitive advantage with the consumer, and thus their OEM customers. In the Aftermarket, Tenneco has promoted the "Safety Triangle" of Steering-Stopping-Stabili ty to educate consumers of the detrimental effect of worn shock absorbers on vehicle steering and stopping distances. We further strengthened this message with the introduction of Monroe(R) branded brakes as an Aftermarket product offering during 2007. Also during 2007, the new Federal Motor Vehicle Safety Standard (FMVSS) 126 was introduced for electronic stability control (ECS) systems, making those systems mandatory by 2012. We believe that this legislation will encourage more vehicle manufacturers to specify products like CES and Kinetic, and we are sponsoring University Research to establish the synergistic impact of our technologies to ECS systems.
OUTSOURCING AND DEMAND FOR SYSTEMS AND MODULES
OE manufacturers have been steadily moving towards outsourcing automotive parts and systems to simplify the vehicle assembly process, lower costs and reduce vehicle development time. Outsourcing allows OE manufacturers to take advantage of the lower cost structure of the automotive parts suppliers and to benefit from multiple suppliers engaging in simultaneous development efforts. Furthermore, development of advanced electronics has enabled formerly independent vehicle components to become "interactive," leading to a shift in demand from individual parts to fully integrated systems. As a result, automotive parts suppliers offer OE manufacturers component products individually, as well as in a variety of integrated forms such as modules and systems:
- "Modules" are groups of component parts arranged in close physical proximity to each other within a vehicle. Modules are often assembled by the supplier and shipped to the OEM for installation in a vehicle as a unit. Integrated shock and spring units, seats, instrument panels, axles and door panels are examples.
- "Systems" are groups of component parts located throughout a vehicle which operate together to provide a specific vehicle function. Emission control systems, anti-lock braking systems, safety restraint systems, roll control systems and powertrain systems are examples.
This shift in demand towards fully integrated systems has created the role of the Tier 1 systems integrator. These systems integrators increasingly have the responsibility to execute a number of activities, such as design, product development, engineering, testing of component systems and purchasing from Tier 2 suppliers. We are an established Tier 1 supplier with more than ten years of product integration experience. We have modules or systems for various vehicle platforms in production worldwide and modules or systems for additional platforms under development. For example, we supply ride control modules for the GM Chevy Silverado, GM Sierra and the VW Transporter and the emission control system for the Ford Super Duty, Toyota Tundra, Chrysler Dodge Ram, Ford Focus, and the GM Acadia, Enclave and Outlook.
GLOBAL REACH OF OE CUSTOMERS
OEMs are increasingly requesting suppliers to provide parts on a global basis to support global vehicle platforms. Also, as the customer base of OEMs has consolidated and emerging markets have become more important to achieving growth, suppliers must be prepared to provide products any place in the world.
- Growing Importance of Emerging Markets: Because the North American and Western European automotive markets are relatively mature, OE manufacturers are increasingly focusing on emerging markets for growth opportunities, particularly the so-called BRIC economies, including Brazil, Russia, India, China and Eastern Europe. This increased OE focus has, in turn, increased the growth opportunities in the aftermarkets in these regions.
- Governmental Tariffs and Local Parts Requirements: Many governments around the world require that vehicles sold within their country contain specified percentages of locally produced parts. Additionally, some governments place high tariffs on imported parts.
- Location of Production Closer to End Markets: OE manufacturers and parts suppliers have relocated production globally on an "onsite" basis that is closer to end markets. This international expansion allows suppliers to pursue sales in developing markets and take advantage of relatively lower labor costs.
With facilities around the world, including the key regions of North America, South America, Europe and Asia, we can supply our customers on a global basis.
OE manufacturers are increasingly designing "global platforms." A global platform is a basic mechanical structure of a vehicle that can accommodate different features and is in production and/or development in more than one region. Thus, OE manufacturers can design one platform for a number of similar vehicle models. This allows manufacturers to realize significant economies of scale through limiting variations across items such as steering columns, brake systems, transmissions, axles, exhaust systems, support structures and power window and door lock mechanisms. We believe that this shift towards standardization will have a large impact on automotive parts suppliers, who should experience a reduction in production costs as OE manufacturers reduce variations in components. We also expect parts suppliers to experience higher production volumes per platform and greater economies of scale, as well as reduced total investment costs for molds, dies and prototype development. Light vehicle platforms of over one million units are expected to grow from 34 percent to 45 percent of global OE production from 2007 to 2012.
EXTENDED PRODUCT LIFE OF AUTOMOTIVE PARTS
The average useful life of automotive parts -- both OE and replacement -- has been steadily increasing in recent years due to innovations in products and technologies. The longer product lives allow vehicle owners to replace parts of their vehicles less often. As a result, although more vehicles are on the road than ever before, the global aftermarket has not grown as fast as the number of vehicles on the road. Accordingly, a supplier's future viability in the aftermarket will depend, in part, on its ability to reduce costs and leverage its advanced technology and recognized brand names to maintain or achieve additional sales. As a Tier 1 OE supplier, we believe we are well positioned to leverage our products and technology into the aftermarket.
CHANGING AFTERMARKET DISTRIBUTION CHANNELS
From 1997 to 2007, the number of retail automotive parts stores increased significantly while the number of jobber stores declined more than 16 percent in North America. Major automotive aftermarket retailers, such as AutoZone and Advance Auto Parts, are attempting to increase their commercial sales by selling directly to automotive parts installers in addition to individual consumers. These installers have historically purchased from their local warehouse distributors and jobbers, who are our more traditional customers. This enables the retailers to offer the option of a premium brand, which is often preferred by their commercial customers, or a standard product, which is often preferred by their retail customers. We believe we are well positioned to respond to this trend in the aftermarket because of our focus on cost reduction and high- quality, premium brands.
CONTRACTING SUPPLIER BASE
Over the past few years, automotive suppliers have been consolidating in an effort to become more global, have a broad integrated product and service offering, and gain economies of scale in order to remain competitive amidst growing pricing pressures and increased outsourcing opportunities from the OEMs. One industry consultant projects that the number of automotive supplier companies will decrease from 5,600 in 2000 to 2,800 by 2015. A supplier's viability in this market will depend, in part, on its ability to maintain and increase operating efficiencies and provide value-added services.
GREGG SHERRILL -- Mr. Sherrill was named the Chairman and Chief Executive Officer of Tenneco in January 2007. Mr. Sherrill joined us from Johnson Controls Inc., where he served since 1998, most recently as President, Power Solutions. From 2002 to 2003, Mr. Sherrill served as the Vice President and Managing Director of Europe, South Africa and South America for Johnson Controls' Automotive Systems Group. Prior to joining Johnson Controls, Mr. Sherrill held various engineering and manufacturing assignments over a 22-year span at Ford Motor Company, including Plant Manager of Ford's Dearborn, Michigan engine plant and Director of Supplier Technical Assistance. Mr. Sherrill became a director of our company in January 2007.
HARI N. NAIR -- Mr. Nair was named our Executive Vice President and President -- International effective March 2007. Previously, Mr. Nair served as Executive Vice President and Managing Director of our business in Europe, South America and India. Before that, he was Senior Vice President and Managing Director -- International. Prior to December 2000, Mr. Nair was the Vice President and Managing Director -- Emerging Markets. Previously, Mr. Nair was the Managing Director for Tenneco Automotive Asia, based in Singapore and responsible for all operations and development projects in Asia. He began his career with the former Tenneco Inc. in 1987, holding various positions in strategic planning, marketing, business development, quality and finance. From July 2006 until January 2007 during our search for our new Chief Executive Officer, he served as a member of our interim management committee known as the Office of the Chief Executive. Prior to joining Tenneco, Mr. Nair was a senior financial analyst at General Motors Corp. focusing on European operations.
KENNETH R. TRAMMELL -- Mr. Trammell was promoted to Executive Vice President and Chief Financial Officer in January 2006. Mr. Trammell was named our Senior Vice President and Chief Financial Officer in September 2003, having served as our Vice President and Controller from September 1999. From April 1997 to November 1999 he served as Corporate Controller of Tenneco Inc. He joined Tenneco Inc. in May 1996 as Assistant Controller. From July 2006 until January 2007 during our search for our new Chief Executive Officer, he served as a member of our interim management committee known as the Office of the Chief Executive. Before joining Tenneco Inc., Mr. Trammell spent 12 years with the international public accounting firm of Arthur Andersen LLP, last serving as a senior manager.
BRENT J. BAUER -- Mr. Bauer joined Tenneco Automotive in August 1996 as a Plant Manager and was named Vice President and General Manager -- European Original Equipment Emission Control in September 1999. Mr. Bauer was named Vice President and General Manager -- European and North American Original Equipment Emission Control in July 2001. Currently, Mr. Bauer serves as the Senior Vice President and General Manager -- North American Original Equipment Emission Control. Prior to joining Tenneco, he was employed at AeroquipVickers Corporation for 20 years in positions of increasing responsibility serving most recently as Director of Operations.
TIMOTHY E. JACKSON -- Mr. Jackson joined us as Senior Vice President and General Manager -- North American Original Equipment and Worldwide Program Management in June 1999. He served in this position until August 2000, at which time he was named Senior Vice President -- Global Technology. From 2002 to 2005, Mr. Jackson served as Senior Vice President -- Manufacturing, Engineering, and Global Technology. In July 2005, Mr. Jackson was named Senior Vice President -- Global Technology and General Manager, Asia Pacific. In March 2007, he was named our Chief Technology Officer. Mr. Jackson joined us from ITT Industries where he was President of that company's Fluid Handling Systems Division. With over 20 years of management experience, 14 within the automotive industry, he was also Chief Executive Officer for HiSAN, a joint venture between ITT Industries and Sanoh Industrial Company. Mr. Jackson has also served in senior management positions at BF Goodrich Aerospace and General Motors Corporation.
ALAIN MICHAELIS -- Mr. Michaelis joined Tenneco in July 2007 as Senior Vice President, Global Supply Chain Management & Manufacturing. He is responsible for the company's worldwide purchasing, logistics and material management functions, as well as our global manufacturing programs. Mr. Michaelis returned to Tenneco after working for three years at Wolseley PLC, where he served as the Supply Chain Director for Europe. Before that, Mr. Michaelis worked for Tenneco since 1996, serving as the Executive Director for Exhaust Operations in Europe, as well as holding operations and logistics positions for South America & Asia and the United States. He began his career in London at Ove Arup Partnership as a design engineer.
RICHARD P. SCHNEIDER -- Mr. Schneider was named as our Senior Vice President -- Global Administration in 1999 and is responsible for the development and implementation of human resources programs and policies and employee communications activities for our worldwide operations. Prior to 1999, Mr. Schneider served as our Vice President -- Human Resources. He joined us in 1994 from International Paper Company where, during his 20 year tenure, he held key positions in labor relations, management development, personnel administration and equal employment opportunity.
DAVID A. WARDELL -- Mr. Wardell joined Tenneco in May 2007 as Senior Vice President, General Counsel and Corporate Secretary. He is responsible for managing the company's worldwide legal affairs including corporate governance. Prior to joining Tenneco, Mr. Wardell was associated with Abbott Laboratories where he held several positions of increasing responsibility, most recently being named Associate General Counsel, Pharmaceutical Products Group Legal Operations in 2005. Before joining Abbott Laboratories, Mr. Wardell spent over ten years in the legal department of Bristol-Myers Squibb Company, where he spent six years living and working in London, England providing legal support to various business units in Europe, Middle East and Africa. Mr. Wardell started his legal career as a New York County Assistant District Attorney.
NEAL A. YANOS -- Mr. Yanos was named our Senior Vice President and General Manager -- North American Original Equipment Ride Control and North American Aftermarket in May 2003. He joined our Monroe ride control division as a process engineer in 1988 and since that time has served in a broad range of assignments including product engineering, strategic planning, business development, finance, program management and marketing, including Director of our North American original equipment GM/VW business unit and most recently as our Vice President and General Manager -- North American Original Equipment Ride Control from December 2000. From July 2006 until January 2007 during our search for our new Chief Executive Officer, he served as a member of our interim management committee known as the Office of the Chief Executive. Before joining our company, Mr. Yanos was employed in various engineering positions by Sheller Globe Inc. from 1985 to 1988.
PAUL D. NOVAS -- Mr. Novas was named our Vice President and Controller in July 2006. Mr. Novas served as Vice President, Finance and Administration for Tenneco Europe from January 2004 until July 2006 and as Vice President and Treasurer of Tenneco from November 1999 until January 2004. Mr. Novas joined Tenneco in 1996 as assistant treasurer responsible for corporate finance and North American treasury operations. Prior to joining Tenneco, Mr. Novas worked in the treasurer's office of General Motors Corporation for ten years.
MANAGEMENT DISCUSSION FROM LATEST 10K
We are one of the world's leading manufacturers of automotive emission control and ride control products and systems. We serve both original equipment (OE) vehicle designers and manufacturers and the repair and replacement markets, or aftermarket, globally through leading brands, including Monroe(R), Rancho(R), Clevite(R) Elastomers and Fric Rot(TM) ride control products and Walker(R), Fonos(TM), and Gillet(TM) emission control products. Worldwide we serve more than 39 different original equipment manufacturers, and our products or systems are included on eight of the top 10 passenger car models produced for sale in Europe and nine of the top 10 light truck and SUV models produced for sale in North America for 2007. Our aftermarket customers are comprised of full-line and specialty warehouse distributors, retailers, jobbers, installer chains and car dealers. We operate 80 manufacturing facilities worldwide and employ approximately 21,000 people to service our customers' demands.
Factors that are critical to our success include winning new business awards, managing our overall global manufacturing footprint to ensure proper placement and workforce levels in line with business needs, maintaining competitive wages and benefits, maximizing efficiencies in manufacturing processes, fixing or eliminating unprofitable businesses and reducing overall costs. In addition, our ability to adapt to key industry trends, such as a shift in consumer preferences to other vehicles in response to higher fuel costs and other economic and social factors, increasing technologically sophisticated content, changing aftermarket distribution channels, increasing environmental standards and extended product life of automotive parts, also play a critical role in our success. Other factors that are critical to our success include adjusting to industry and economic challenges such as increases in the cost of raw materials and our ability to successfully reduce the impact of any such cost increases through material substitutions, cost reduction initiatives and other methods.
We have a substantial amount of indebtedness. As such, our ability to generate cash -- both to fund operations and service our debt -- is also a significant area of focus for our company. See "Liquidity and Capital Resources" below for further discussion of cash flows.
Total revenues for 2007 were $6.2 billion, a 32 percent increase compared to 2006. Excluding the impact of currency and substrate sales, revenue was up $552 million, or 15 percent, driven primarily by volume ramp-ups on platform launches in North America, and higher OE revenues in Europe and Asia, more than offsetting lower aftermarket sales. In addition to the benefit of the new launches, our geographic balance and diverse customer base helped offset the overall North American industry production decline.
Gross margin for 2007 was 15.8 percent, down 2.3 percentage points from 18.1 percent in 2006. Higher substrate sales, which typically carry lower margins, driven by significant diesel platforms in North America and Europe, and a shift toward a lower percentage of revenue generated by higher margin aftermarket business negatively impacted overall gross margin. Also impacting gross margin were increased steel and other material costs, and reduced North American production volumes, all of which more than offset savings and improved efficiencies from Lean manufacturing, Six Sigma programs, cost recoveries and other cost reduction initiatives.
We reported selling, general, administrative and engineering expenses for 2007 of 8.3 percent of revenues, as compared to 9.8 percent of revenues for 2006. The improvement in this ratio was due to leveraging our higher revenues by tightly controlling selling, general and administrative spending while still making investments in engineering for next generation ride and emission control technologies.
Earnings before interest expense, taxes and minority interest ("EBIT") was $252 million for 2007, up $56 million from the $196 million reported in 2006. Global sales growth on OE platforms, benefits from the company's ongoing manufacturing efficiency programs, favorable currency and lower restructuring and aftermarket customer changeover costs more than offset higher material costs, reduced North American industry production volumes and softer global aftermarket conditions.
RESULTS FROM OPERATIONS
NET SALES AND OPERATING REVENUES FOR YEARS 2007 AND 2006
The following tables reflect our revenues for the years of 2007 and 2006. We present these reconciliations of revenues in order to reflect the trend in our sales in various product lines and geographic regions separately from the effects of doing business in currencies other than the U.S. dollar. We have not reflected any currency impact in the 2006 table since this is the base period for measuring the effects of currency during 2007 on our operations. We believe investors find this information useful in understanding period-to-period comparisons in our revenues.
Additionally, we show the component of our revenue represented by substrate sales in the following table. While we generally have primary design, engineering and manufacturing responsibility for OE emission control systems, we do not manufacture substrates. Substrates are porous ceramic filters coated with a catalyst -- precious metals such as platinum, palladium and rhodium. These are supplied to us by Tier 2 suppliers and directed by our OE customers. We generally earn a small margin on these components of the system. As the need for more sophisticated emission control solutions increases to meet more stringent environmental regulations, and as we capture more diesel aftertreatment business, these substrate components have been increasing as a percentage of our revenue. While these substrates dilute our gross margin percentage, they are a necessary component of an emission control system. We view the growth of substrates as a key indicator that our value-add content in an emission control system is moving toward the higher technology hot-end gas and diesel business.
Our value-add content in an emission control system includes designing the system to meet environmental regulations through integration of the substrates into the system, maximizing use of thermal energy to heat up the catalyst quickly, efficiently managing airflow to reduce back pressure as the exhaust stream moves past the catalyst, managing the expansion and contraction of the emission control system components due to temperature extremes experienced by an emission control system, using advanced acoustic engineering tools to design the desired exhaust sound, minimizing the opportunity for the fragile components of the substrate to be damaged when we integrate it into the emission control system and reducing unwanted noise, vibration and harshness transmitted through the emission control system.
We present these substrate sales separately in the following table because we believe investors utilize this information to understand the impact of this portion of our revenues on our overall business and because it removes the impact of potentially volatile precious metals pricing from our revenues. While our original equipment customers generally assume the risk of precious metals pricing volatility, it impacts our reported revenues. Excluding "substrate" catalytic converter and diesel particulate filter sales removes this impact.
Revenues from our North American operations increased $945 million in 2007 compared to the same period last year. Higher sales from new North American OE platform launches more than offset lower aftermarket revenues. Total North American OE revenues increased 68 percent to $2,364 million in 2007 from $1,411 million in 2006. North American OE emission control revenues were up 99 percent to $1,850 million, from $928 million in the prior year. Substrate emission control sales excluding currency increased 239 percent to $924 million, from $272 million in 2006. Excluding substrate sales and currency impact, OE emission control sales increased 41 percent from the prior year. This increase was primarily due to significant new OE platform launches which included GM's Lambda crossover, the Ford Super Duty gas and diesel pick-up trucks, GM's light duty pick-up trucks and vans with Duramax diesel engines, Toyota's Tundra gasoline pick-up truck, the International Truck and Engine medium duty diesel platform, GM's three-quarter ton gasoline powered pick-up trucks, and the Dodge Ram three- quarter ton diesel pick-up truck. North American OE ride control revenues for 2007 increased seven percent from the prior year. Expanded ride-control content on the GMT900 platform, the launch of the GMT360 platform, and strong sales of Chrysler's Jeep Wrangler, and Ford Ranger and Superduty, was partially offset by lower ride-control commercial vehicle sales. Total North American light vehicle production fell by two percent with a seven percent production decrease in passenger cars being partially offset by a three percent increase in light truck and SUV production. Aftermarket revenues for North America were $537 million in 2007, representing a decrease of $8 million compared to 2006. Volume decreases on our continuing business were partially offset by new customer wins and price increases to recover steel costs. Aftermarket ride control revenues were $385 million in 2007, an increase of $2 million from the prior year. Aftermarket emission control revenues were $152 million in 2007, down $10 million from the prior year.
Our European, South American and Indian segment's revenues increased $432 million or 19 percent in 2007 compared to last year. Total Europe OE revenues were $1,996 million, up 21 percent from last year. Excluding favorable currency and substrate sales, total European OE revenue was up 18 percent while total light vehicle production for Europe was up six percent. Europe OE emission control revenues increased 24 percent to $1,569 million from $1,264 million in the prior year. Excluding the impact of $120 million of favorable currency and $511 million in substrate sales, OE emission control revenues increased 26 percent from 2006 due to a growing position on the hot-end of exhaust platforms, new launches and higher OE volumes on the BMW 1 and 3-Series, Daimler's Sprinter, C-Class, and Smart, Volvo's V50 and V70, PSA's Picasso and Ford's Mondeo. Europe OE ride control revenues increased by $47 million in 2007, up 12 percent from $380 million a year ago. Excluding currency, revenues increased by three percent in 2007 due to improved volumes on the Ford Focus, Ford Galaxy and Mondeo with electronic shocks, Dacia Logan, VW Transporter, Mazda 2, and Mercedes C-Class with electronic shocks, partially offset with lower volumes on the Audi A4 and a shift in some production for the Audi A6 to our Chinese operations. European aftermarket sales were $408 million in 2007 compared to $389 million last year. Excluding $31 million of favorable currency, European aftermarket revenues declined three percent in 2007 compared to last year. Ride control aftermarket revenues, excluding the impact of currency, were up five percent from the prior year, reflecting strong volumes and improved pricing. Emission control aftermarket revenues were down nine percent, excluding $16 million in currency benefit, due to lower volumes which more than offset improved pricing. South American and Indian revenues were $333 million in 2007, compared to $272 million in the prior year. Stronger OE and aftermarket sales and currency appreciation drove this increase.
Revenues from our Asia Pacific segment, which includes Asia and Australia, increased $125 million to $546 million in 2007, as compared to $421 million in the prior year. Excluding the impact of substrate sales and currency, Asian revenues increased $53 million in 2007 compared to last year driven by higher OE sales in China due to new launches and higher emission control volumes on existing platforms. In Australia, industry OE production declines negatively impacted revenues. Excluding substrate sales and favorable currency of $23 million, Australian revenue was down $10 million due to lower volumes.
MANAGEMENT DISCUSSION FOR LATEST QUARTER
Results from Operations
Net Sales and Operating Revenues for the Three Months Ended June 30, 2008 and 2007
The following tables reflect our revenues for the second quarter of 2008 and 2007. We present these reconciliations of revenues in order to reflect the trend in our sales in various product lines and geographic regions separately from the effects of doing business in currencies other than the U.S. dollar. We have not reflected any currency impact in the 2007 table since this is the base period for measuring the effects of currency during 2008 on our operations. We believe investors find this information useful in understanding period-to-period comparisons in our revenues.
Additionally, we show the component of our revenue represented by substrate sales in the following table. While we generally have primary design, engineering and manufacturing responsibility for OE emission control systems, we do not manufacture substrates. Substrates are porous ceramic filters coated with a catalyst â€” precious metals such as platinum, palladium and rhodium. These are supplied to us by Tier 2 suppliers and directed by our OE customers. We generally earn a small margin on these components of the system. As the need for more sophisticated emission control solutions increases to meet more stringent environmental regulations, and as we capture more diesel aftertreatment business, these substrate components have been increasing as a percentage of our revenue. While these substrates dilute our gross margin percentage they are a necessary component of an emission control system.
Our value-add content in an emission control system includes designing the system to meet environmental regulations through integration of the substrates into the system, maximizing use of thermal energy to heat up the catalyst quickly, efficiently managing airflow to reduce back pressure as the exhaust stream moves past the catalyst, managing the expansion and contraction of the emission control system components due to temperature extremes experienced by an emission control system, using advanced acoustic engineering tools to design the desired exhaust sound, minimizing the opportunity for the fragile components of the substrate to be damaged when we integrate it into the emission control system and reducing unwanted noise, vibration and harshness transmitted through the emission control system.
We present these substrate sales separately in the following table because we believe investors utilize this information to understand the impact of this portion of our revenues on our overall business and because it removes the impact of potentially volatile precious metals pricing from our revenues. While, generally, our original equipment customers assume the risk of precious metals pricing volatility, it impacts our reported revenues. Excluding â€śsubstrateâ€ť catalytic converter and diesel particulate filters sales removes this impact.
Revenues from our North American operations decreased $136 million in the second quarter of 2008 compared to the same period last year. Higher aftermarket sales were more than offset by lower North American OE revenues. North American OE emission control revenues were down $134 million in the second quarter of 2008. Excluding substrate sales, revenues were down $60 million compared to last year. This decrease was primarily due to significant reduction in customer light truck production which included the Ford Super Duty gas and diesel pick up trucks, GMâ€™s three-quarter ton gasoline powered pick-up trucks, GMâ€™s light duty pick-up trucks and vans with the Duramax diesel engines and the Dodge Ram. North American OE ride control revenues for the second quarter of 2008 were down $11 million from the prior year. Revenues from our recently acquired Kettering, Ohio ride-control operations helped partially offset the significantly lower light truck and SUV production. Our total North American OE revenues, excluding substrate sales and currency, decreased 18 percent in the second quarter of 2008 compared to second quarter of 2007. The second quarter North American light truck production rate decreased 23 percent while production rates for passenger cars fell four percent. Aftermarket revenues for North America were $158 million in the second quarter of 2008, an increase of $9 million compared to the prior year, driven by higher volumes in both product lines due to sales to new customers. Aftermarket ride control revenues excluding currency increased four percent in the second quarter of 2008 while aftermarket emission control revenues excluding currency increased 10 percent in the second quarter of 2008.
Our geographic diversification benefitted us in the quarter as our European, South American and Indian segmentâ€™s revenues increased $97 million, or 14 percent, in the second quarter of 2008 compared to last year. The second quarter total European light vehicle industry production increased six percent from the second quarter of 2007. Europe OE emission control revenues of $447 million in the second quarter of 2008 were up 10 percent as compared to the second quarter of last year. Excluding substrate sales and a favorable impact of $54 million due to currency, Europe OE emission control revenues decreased two percent over 2007, primarily due to less than prior year alloy surcharge recovery as nickel alloy costs were lower in the current year. Improved volumes on the BMW 1 and 3 series, Mini and VW Golf helped partially offset the emission control decrease. Europe OE ride control revenues of $131 million in the second quarter of 2008 were up 23 percent year-over-year. Excluding currency, revenues increased by nine percent in the 2008 second quarter due to favorable volumes on the Suzuki Splash, VW Passat and Mercedes C-class. Lower volumes on the Audi A4 and A6 and the Renault Scenic partially offset the ride control increase. European aftermarket revenues increased $5 million in the second quarter of 2008 compared to last year. When adjusted for currency, aftermarket revenues were down seven percent year over year. Excluding the $8 million impact of currency, ride control aftermarket revenues were flat compared to prior year. Emission control aftermarket revenues were down $10 million, excluding $7 million in currency benefit, due to overall market declines. South American and Indian revenues were $108 million during the second quarter of 2008, compared to $81 million in the prior year. Stronger OE and aftermarket sales and currency appreciation drove this increase.
Our geographic diversification further benefitted us as revenues from our Asia Pacific segment increased $27 million to $162 million in the second quarter of 2008 compared to the same period last year. Excluding the impact of substrate sales and currency, revenues increased to $115 million from $98 million in the prior year. Asian revenues for the second quarter of 2008 were $105 million, up 23 percent from last year. This increase was primarily due to higher OE sales in China. Second quarter revenues for Australia increased 13 percent to $57 million. Excluding substrate sales and favorable currency of $7 million, Australian revenue was up $4 million.
Net Sales and Operating Revenues for the Six Months Ended June 30, 2008 and 2007
Revenues from our North American operations decreased $96 million in the first six months of 2008 compared to the same period last year. Higher aftermarket revenues were more than offset by lower OE revenues. North American OE emission control revenues were down $72 million in the first six months of 2008. Excluding substrate sales and currency impact, revenues were down $51 million compared to last year. This decrease was primarily due to significantly lower light vehicle OE production, as discussed in the three month discussion above. North American OE ride control revenues for the first six months of 2008 were down $32 million from the prior year. The increase to ride control revenues from our recently acquired Kettering, Ohio ride-control operations was more than offset by the significantly lower customer production schedules. Our total North American OE revenues, excluding substrate sales and currency, decreased 11 percent in the first six months of 2008 compared to the first six months of 2007, consistent with the North American light vehicle production rate decrease of 12 percent. Aftermarket revenues for North America were $291 million in the first six months of 2008, an increase of $8 million compared to the prior year, driven by higher sales in both product lines. Sales to new customers drove the increase. Excluding currency, aftermarket ride control revenues increased one percent in the first six months of 2008 while aftermarket emission control revenues increased three percent in the first six months of 2008.
Our geographic diversification benefitted us as our European, South American and Indian segmentâ€™s revenues increased $189 million, or 14 percent, in the first six months of 2008 compared to last year. The first six months total European light vehicle industry production increased five percent from the first six months of 2007. Europe OE emission control revenues of $873 million in the first six months of 2008 were up 10 percent as compared to the first six months of last year. Excluding substrate sales and a favorable impact of $109 million due to currency, Europe OE emission control revenues decreased four percent over 2007, primarily due to less than prior year alloy surcharge recovery as nickel alloy costs are lower in the current year. Europe OE ride control revenues of $260 million in the first six months of 2008 were up 22 percent year-over-year. Excluding currency, revenues increased by six percent in the first six months of 2008 due to improved volumes on the VW Passat and Mercedes C-class both equipped with our electronic shocks. European aftermarket revenues increased $12 million in the first six months of 2008 compared to last year. When adjusted for currency, aftermarket revenues were down six percent. Excluding the $14 million impact of currency, ride control aftermarket revenues were up four percent due to strong volumes and improved pricing. Emission control aftermarket revenues were down 16 percent, excluding $12 million in currency benefit, due to lower volumes which more than offset improved pricing. South American and Indian revenues were $202 million during the first six months of 2008, compared to $151 million in the prior year. Stronger OE and aftermarket sales and currency appreciation drove this increase.
Our geographic diversification further benefitted us as revenues from our Asia Pacific segment, increased $55 million to $303 million in the first six months of 2008 compared to the same period last year. Excluding the impact of substrate sales and currency, revenues increased to $207 million from $180 million in the prior year. Asian revenues for the first six months of 2008 were $195 million, up 25 percent from last year. This increase was primarily due to higher OE sales in China driven by new launches and higher emission control volumes on existing platforms. Revenues for the first six months of 2008 for Australia increased 17 percent to $108 million. Excluding substrate sales and favorable currency of $14 million, Australian revenue was up $4 million.
Good morning and welcome to Tenneco's second quarter 2008 financial results conference call. Earlier this morning, we issued our press release and associated financial information. In a minute, I'll be turning the call over to Gregg Sherrill, Tenneco's Chairman and CEO, and Ken Trammell, our Chief Financial Officer. Gregg and Ken will spend about 30 minutes, taking you through a detailed explanation of our second quarter performance.
Slides related to their prepared comments are available on the financial section of Tenneco's website at www.tenneco.com. The two of them will then take your questions during the second half of our call. The conference call operator will explain the process for asking a question at that time. We will do everything possible to address all of your questions on our call today.
Now, please note that our discussion today will include information on non-GAAP financial measures, all of which are reconciled with GAAP numbers, as shown in our press release attachment. The press release and the attachment are also posted on our website. Also, in addition to reviewing our second quarter financial results, some of our comments today will include forward-looking statements. Please keep in mind that our actual results could differ materially from those projected in any of our forward-looking statements.
With that, let me turn the call over to, Gregg Sherrill. Gregg?
Thank you. Good morning, everyone and thanks for joining us. As everyone is well aware, the North American automotive environment is facing trying and tumultuous time. While the North America automotive industry experienced a difficult first quarter with dramatically lower production volumes, the second quarter was even more challenging with an unprecedented mix shift away from the highly profitable light truck segment.
For Tenneco, our total revenue was essentially flat as strong sales in our Europe and Asia Pacific segment offset a 17% decline in North America. Furthermore on slide 4, our Europe and Asia Pacific segment showed strong earnings improvement in the quarter, and even in North America our operating performance partially offset the volume and mix issue. All the things are in their control, our team did an outstanding job.
I really want to thank the employees at Tenneco from around the world for their perseverance and tremendous effort this year. It's easy to get distracted by all of the noise in the marketplace, but our team stayed focused and stood together to accomplish a lot and very quickly. They are an impressive group of people.
Turning back to North America, the combination of historically low levels of housing activity and consumer confidence, coupled with rising fuel prices is resulting in one of the most difficult automotive environments ever for OEMs, suppliers, and consumers alike and we don't see much evidence that would suggest a reversal in business trends any time soon. According to the latest industry information, retail demand in North America for light vehicles fell 12% in the second quarter compared to 2007 and production declined by 15%.
Moreover, the extraordinary vehicle mix shift away from pickup trucks and full frame SUVs has added to the volatility in the auto industry, because of the magnitude and the speed of the shift. As we've seen, the industry volume decline is more pronounced in the light truck segment at 23%, compared with passenger cars, which were down 4% in the second quarter.
Tenneco is the leading supplier of emission control and ride control systems for light trucks, the dominant segment of vehicle demand over the last 10 years. In the 2008 second quarter, full frame SUVs, pickup trucks, and mini vans, made up 58% of our total North American OE revenue, compared with 72% in all of 2007.
We've included our top 15 platforms, as a percent of total 2007 sales on slide 5. In North America, our earnings also were impacted as the American Axle labor strike shutdown production of two of our largest platforms, during the first two months of the quarter. And local labor strikes at GM halted assembly of their popular Malibu passenger cars for about two weeks and their strong selling crossover vehicles for more than four weeks. These are also key platforms for Tenneco.
Overall, we are looking at our business from top to bottom, flexing operations with announced production cuts and OEM plant consolidations, this is on slide 6. We've had as many as 15% of our North American hourly workforce on temporary or permanent furlough. We are focused on redeploying equipment to pay down capital expenditure needs for upcoming programs, and to more productively utilize capacity. And we're continuing to look at ways throughout the business to enhance our profitability and competitiveness.
For example, we've reduced our aftermarket sales and support staff to shore up the efficiency of our distribution channel. We are also examining our manufacturing footprint in North America, in order to better match today's lower production levels, while also planning for capacity requirements for future business. It's difficult that these actions are now, it's imperative that we position the operations for long-term success.
On slide 7, you will see that there were several factors in our favor last quarter. In an agreement with Delphi and General Motors, we acquired the ride control assets at Delphi's Kettering Ohio facility and picked up GM passenger car ride control business, which came on June 1st at full run rate contributing 12 million to our top line in the second quarter.
Additionally, new customers in the North American aftermarket provided margin upside, and our North American commercial and specialty vehicle business for ride control, showed a year-over-year revenue increase for the first time in six quarters.
Finally, our geographic balance continues to deliver support and as reflected by our leading market shares in Eastern and Western Europe, South America, China, and Australia. During the quarter, our European segment generated 12% adjusted earnings growth year-over-year. Our Asia Pacific group drove adjusted earnings 40% higher than the previous year, leveraging a 19% top line expansion and improved manufacturing efficiencies. Additionally, we have a solid liquidity position.
Ken will take you through the details. But in general, on slide 8, at the end of the quarter, we had $164 million in cash, $351 million available on our revolving credit facility, and cushions against our tightest covenant of $125 million for EBITDA and $500 million for debt, and importantly we have no near-term maturities due on our outstanding debt.
With that, let's get into some of the financial details of the quarter. On slide 9, you'll see that for the quarter, North America represented 41% of total revenue and 23% of EBIT. The European segment accounted for 49% of revenue and 65% of EBIT, and the Asia Pacific region reflected 10% of revenue and 12% of total EBIT.
Turning to gross margin on slide 11, our consolidated margin in the second quarter was 16.2% compared with 17.2% one year-ago. There were $3 million of restructuring charges included in the 2008 margin and $2 million in the prior year quarter. The gross margin decline was more than accounted for by manufacturing absorption in North America resulting from the lower industry production levels, and the mix shift away from the light-trucks.
We also incurred higher raw material costs in the quarter. Steel cost increases presented a headwind of $17 million globally, but we're addressing these rising prices through concentrated efforts on cost reductions and customer recovery.
Moving on to slide 12, we reported SGA&E at 8.2% of revenue, compared with 8% of revenue for the same period last year. The increase in the SGA&E percent resulted from lower than planned revenue, $3 million of restructuring charges from a 7% staff reduction in our North American aftermarket group, as well as headcount reductions in Europe and Australia, $7 million of aftermarket changeover costs for new customers secured during the quarter and was partially offset by SG&A cost controls and reduced incentive compensation cost.
At the same time, that we are employing strict cost disciplines. We are continuing our planned investments in engineering for future programs and technologies. Now, I want to take a couple of minutes to discuss some commercial highlights on slide 13.
We launched 57 light vehicle models in the second quarter that we either, renew, refreshed, or had expanded content. We're also very pleased with our success in expanding in commercial vehicle markets for emission control after-treatment. As I've talked about before, we've won several platforms for the 2010 regulation change for on road vehicles in North America and China, and we secured after treatment business for off road applications in construction, agriculture, mining, and forestry, beginning in 2011, which reflects our ability to transfer our hot end emission control capabilities into new market segments.
As you saw yesterday, we announced that we've been awarded Caterpillar's global business for diesel engine after treatment systems. These systems will be used to meet stricter diesel emission regulations taking effect in 2011. Obviously, we are very pleased to work with Caterpillar, the world's leading manufacturer of construction and mining equipment Today the company has been awarded 37 development or production contracts globally to supply diesel after treatment technologies to meet the stricter emission regulations that take effect in various regions of the world starting in 2010.
These include 21 commercial vehicle contracts for on-road and off-road applications, 15 light vehicle contracts and one contract to meet locomotive regulations. In addition to the awarded OE business, we announced last week that we had one contracts for new or expanded after market business in North America. All of these awards are indicative of the significant amount of organic growth we're planning for over the next five years.
And with that, I'll turn the call over to Ken.
Thanks Gregg. Before I go into the business segment analysis, I'll review some of the items that affect comparability between the second quarters of 2007 and 2008 on slide 14.
Second quarter 2007 adjustments included one item, restructuring and related expenses of $2 million pre-tax or $0.03 per diluted share. Second quarter 2008 adjustments included three items. Restructuring and related expenses of $6 million pre-tax or $0.08 per diluted share, after market customer changeover cost of $7 million pre-tax or $0.09 per diluted share related to new after market business, and finally, a non cash tax expense of $13 million or $0.28 per diluted share for tax liabilities mostly related to changes in inter-company billing arrangements.
Now, turning to the North American OE results on slide 15, our revenue for the second quarter of 2008 was $516 million, down 22% compared with $661 million in the second quarter last year. Excluding substrate sales in currency, revenue was down 18%. Comparatively, North American light vehicle market production was down 15%.
Our North American OE revenue was impacted by the overall volume weakness, and more specifically by mix issues for industry production for the higher content light truck platforms fell by 23% compared with only a 4% passenger car decline as Gregg mentioned.
Our ride control revenue was down 8% compared with the prior year, much of it due to lower production including the American Axle strike, which shutdown nearly all production of the GMT, 900 where we have content on the SUVs, as well as the half ton and three quarter ton pick ups.
This was partially offset by $12 million of incremental revenue in June from the passenger car platforms we took over from Delphi as a result of the asset acquisition, we finalized at the end of May. Additionally, content on higher margin commercial vehicle platforms benefited our ride control performance in the second quarter.
According to Power Systems Research, the market class V through VIII, commercial vehicle production was down 3%. However, our ride control sales into that segment increased due to a favorable customer mix.
North American OE emission control revenue fell by 25%. Substrate sales, net of currency were 28% lower than the prior year as a result of production declines. When you exclude substrate cells and currency, North American OE emission control revenue fell 23% in the 2008 second quarter.
Our emission control sales suffered as a result of a lower year-over-year volumes on the light truck platforms. The biggest impact came from the Ford Super Duty, the GMT 900 and Dodge Ram. Only partially able to offset the decline is GM's Epsilon passenger car platform, Toyota compact wagon called Matrix, Volkswagen compact Jetta passenger car and the new Dodge Journey crossover.
Now North American after market revenue for the second quarter 2008 was $158 million, up 6% from the year earlier period. Excluding currency, revenues were up 5%. This increase was driven by $6 million of new customer orders in the quarter. As we've been able to do several times in recent years, we took advantage of some opportunities to add new customers to our business.
We added more than 10 new customers including retail and wholesale distributors for our ride control and mission control and break products. We expect all the new accounts in total add incremental revenue of about $12 million annually. When we acquire new customers, we incur a cost to remove competitive products from the shelves that was the reason for the $7 million charge we took in the quarter.
Excluding currency, ride control after market revenue was up 4% in the second quarter, and emission control after-market revenue rose 10%. Now on slide 16, second quarter EBIT for our total North American operations was $17 million, including a $1 million of unfavorable currency versus $50 million in last years second quarter.
Second quarter 2008, also included a $1 million of restructuring cost or headcount reduction in the after market and $7 million of after market changeover cost. The prior year had no adjustments. In total, adjusted EBIT for North America was $25 million, compared with $50 million last year.
In the press release, we bridged the $25 million adjusted EBIT decline for you. Let me quickly run through it again. The biggest impact was our lower OE sales and an unfavorable mix, which resulted in $27 million decrease in EBIT.
Manufacturing cost absorption due to substantial decline and overall production volumes, including the industry's union labor strikes accounted for another $12 million of the decrease. And we had a $2 million increase in depreciation expense related to capital expenditures to support the sizeable 2007 emission control platform launches.
The good news is that the higher after market volumes and the new OE platform launches added $9 million to EBIT in the quarter. Our focus on spending controls and reducing SG&A accounted for most of the remaining $7 million of EBIT contribution.
Moving onto Europe, on slide 17, we reported second quarter 2008 OE revenue of $578 million, now that's up 13% compared with $513 million we reported a year ago. Currency exchange rates favorably impacted our total European OE revenue by $70 million in the latest three months. Substrate sales, net of currency effects were down 6% over the last year. Excluding substrate sales and currency, our total European OE revenue was up 1%.
Last year, our top line benefited from alloy surcharge recovery. Since then, the price of nickel has come down considerably, as such we require less recovery from our European customers. To illustrate the impact of this, after the impact of the alloy surcharge recovery in each year, we would have reported an increase of 3% in European OE revenue, excluding currency and substrate sales in the 2008 second quarter.
European OE ride controlled revenue excluding currency increased by 9% from the 2008 second quarter, but favorable volumes on a the new Suzuki splash, Volkswagen Passat and Mercedes C-Class, both of them are electronic shock technology and the VW Golf offsetting lower volumes on the Audi A4, the Audi A6, and Renault Scenic.
Revenue from our European OE emission control unit increased 10%. Excluding currency and substrates, revenue declined 2%. Now the Nickel surcharge declined that I just mentioned affects our emission control business. If we exclude the impact of the alloy surcharge in each year, we would have reported an increase of 1% in European OE emission control revenues excluding currency, and substrate sales in the 2008 second quarter.
Volume increases in this operation, primarily came from new launches in 2007 that continued to ramp up including BMW's new one and three series and many. The new Daimler, Sprinter, and Smart models, the Ford Mondeo, the Jaguar XF, and the Volvo V70, to name just a few.
Now second quarter European after market revenue was $129 million, that's up 5% from the $124 million we recorded a year ago. This is on slide 18. When adjusted for currency, after market revenue was down 10%. The shrinking European market for exhaust replacement parts drove the decrease.
Excluding currency, ride control after market revenue was flat compared with the second quarter of 2007, while emission control after market sales excluding currency were down 10%.
Revenue from our South America and India operations on slide 19 was $108 million compared with $81 million reported in the year earlier quarter due to higher OE revenue, and an increase in South American after market revenue. Currency had an $11 million favorable impact on revenue. So excluding currency and substrate sales, revenue in South America and India combined rose 15%.
For the 2008 second quarter, total EBIT for our Europe, South America and India segment was $48 million, compared with $45 million in the second quarter of 2007. This is on slide 20. Adjusted for restructuring in each quarter, EBIT was $51 million in the latest quarter compared with $47 million in the second quarter 2007, 12% higher.
The EBIT increase was driven by OE volume increases and manufacturing efficiency improvements, as well as the lower alloy surcharges. EBIT included a $2 million currency benefit. Restructuring charges were for salaried and hourly headcount reductions in both our OE and our after market operations.
On the next slide, second quarter revenue for our Australian operations was $57 million compared with $50 million in the 2007 quarter, excluding currency and lower substrate sales, revenue rose 8%. Finally, our Asian operations reported revenue of $105 million during the second quarter of 2008, up 23% from the year earlier period.
This was driven by 23% higher sales in China, primarily related to higher volumes on existing platforms, and also to new platform launches. EBIT was $10 million versus $8 million last year in our Asia Pacific region. There were $2 million of restructuring charges taken in the late of second quarter for a 28% headcount reductions in Australia, compared with no charges last year.
Adjusted EBIT for Asia Pacific was $12 million versus $8 million a year-ago, a 40% increase. The EBIT benefited from volume increases in China, operational improvements and a $1 million of favorable currency. On slide 22, for the company in total. Currency favorably impacted year-over-year second quarter revenue comparisons by $115 million which translated into a $2 million benefit to total company EBIT.
Depreciation and amortization was $57 million for the quarter, compared with $50 million in the prior year. The change was primarily related to the investments we made in equipment and machinery for 2007 launches, as well as the stronger euro. For 2008, we still expect depreciation and amortization will likely be in a range of $220 to $225 million.
Moving on to slide 23, interest expense in the 2008 second quarter was $33 million including a $4 million expense related to marking the interest rate swaps to market. Last years interest expense of 40 million included a $3 million mark-to-market expense from the swaps.
The net decrease in interest expense came from lower rates on both our variable portion, our variable debt and a portion of our fixed rate debt. For 2008, our projected interest expense is expected to be roughly $120 million, excluding any mark-to-market in that.
On slide 24, we recorded $27 million tax expense in the latest three months, which includes the $13 million non-cash charge that I referred to early. In 2007 comparable quarter, we recorded a $20 million cash expense. We still expect our overall operational effective tax rate to be about 33% for 2008, this excludes the $14 million of liability adjustments that we've recorded year-to-date.
Cash taxes for the latest quarter were $12 million compared with $20 million in the prior year. We still expect our cash taxes to be in the range of $45 to $50 million for 2008.
Now let's talk about cash and debt on slide 25. On an overall basis, we completed the quarter with $287 million in borrowings and $42 million in letters of credit outstanding against our $680 million in revolving credit facilities. Accordingly, we had $351 million of unused committed borrowing capacity available at June 30th.
Our consolidated debt level was $1.492 billion at quarter end and our cash balance was at $164 million, bringing debt net of cash balances to $1.328 billion. Net debt to adjusted last 12 months EBITDA at June 30 was 2.8 times improved from 2.9 times last year.
While we remain intently focused on reducing our leverage, the [Volvo] production schedules and vehicles mix in North America in the second half of the year will make it difficult to achieve our goal of improving our net debt to adjusted EBITDA ratio to 2.2 times this year.
Now if you will turn to the next slide, we'll review our cash flow performance. Cash provided by operations in the quarter was $61 million versus $67 million a year ago.
Our working capital cash flow was about the same year-over-year. Our cash flow benefited from $45 million improvement in our securitized accounts receivable. The cash flow changes for accounts receivable and accounts payable year-over-year relate mostly to the different levels of production activity and somewhat lower days payable outstanding. We also managed the downtime that resulted from the second quarter strikes, without a significant impact on our inventories.
And finally, the change in other operating activities on the second quarter cash flow statement is mostly related to the non-cash tax charge that I explained earlier. Now day sales outstanding, excluding factoring, improved to 65 days, versus 71 days a year ago. Inventory days on hand were 42 days that's in line with last year's level.
Day's payable outstanding at 72 days in the 2008 second quarter, was consistent with our historical average, but down from 84 days a year ago, when we were ramping up a significant number of new platforms. On slide 27 at June 30th, our debt compliance leverage ratio was 2.92 it can be no more than 4.0.
The interest coverage ratio was 4.22, and we needed to maintain this ratio above 2.1 times. The cushion we've built against our tightest covenant for EBITDA is a $125 million and for debt, it's $500 million. This level of covenant performance meets our tightest covenant ratio through the maturity of our senior debt facility in 2012, and we have no ratings figures in our covenants.
On slide 28, you will see that our worldwide factored receivables were higher at $216 million as of June 30, 2008, compared with $148 million one year ago, of the amount outstanding in the latest quarter $120 million was from the US accounts receivable securitization program with the balance of the factored receivables coming from programs with regional institutions in Europe.
In November of 2007, we expanded our securitization limit by more than 60% to $250 million of receivables. The second quarter's higher limit of factored receivables is a reflection of our taking advantage of that now larger limit. So let me sum up where we stand on liquidity on slide 29.
We worked to finance Tenneco with a conservative debt profile, so we can be prepared to deal with and weather auto industry volatility. We currently have substantial room on our debt covenant ratios, and so we have available to us all of the borrowing capacity on our committed revolving credit agreements.
Last November, we were able to expand our cap on factoring receivables, and we expect to reach a level near our $250 million limit by taking advantage of additional factoring opportunities in Europe. Our first significant debt maturities are in 2010 and they total $54 million.
And at the end of June, we had $177 million of receivables from GM, Ford, and Chrysler in the United States. Of this amount $45 million was sold into the North American securitization program. While there can never be any guarantees, based on what's happening today, our liquidity is adequate to see us through these difficult times in North America.
Capital spending on slide 30, was $57 million for the second quarter compared with $33 million a year ago, as we prepare for new business including commercial vehicle on highway and off road programs, that have been awarded to us for 2010 and 2011 and to support our growth in the BRIC economies.
For 2008, we still expect capital spending will be between $200 million and $220 million. On slide 31, in terms of restructuring, we recorded $6 million of expense in the second quarter for the actions that Gregg and I have outlined.
For 2008, we now expect restructuring costs may run higher than our earlier estimate of $25 million, reflecting necessary actions to adjust operations to the declining North American production environment, as well as our normal restructuring initiatives that come about as a result of successful Lean and Six Sigma programs.
We'll give you more details about those as actions occur. Now, I will turn the call back to, Gregg.
Okay. Thank you, Ken. Our expectation is for the North American economic environment to continue to be weak and for the automotive market in this region to remain under stress through the second half of 2008. In Europe, although economic indicators are weakening, light vehicle production so far continues at a steady pace.
Global Insight's recent forecast on slide 32 projects second half 2008 production to be up 2% year-over-year, with Western Europe's estimated 1% decline being fully offset by Eastern Europe's 9% expansion. Production in South America and India is expected to grow 9% and 19% respectively in the second half.
Our European segment continues to drive operating efficiencies to expand margins. This strength overseas helps to counter some of the North American obstacles we're facing. Global Insight's second half estimate for China calls for 16% increase in production.
However, as consumers deal with rising inflation including increasing fuel costs and the recent earthquake, we expect to see some moderation in China's growth rate. Evidence of this is already occurring, as two of our major OEMs there have reduced their production schedules in July.
Moving onto slide 33, we've looked over our global OE revenue guidance for 2008 and 2009, and of course our assumptions at the beginning of the year are drastically different from where they are today. And the North American production environment is still extremely volatile.
With an ongoing stream of customer shift changes, plant down time, and restructuring announcements, it's still difficult to predict, what might occur over the next 5 months and in the next year. Because things are quickly and dramatically changing in North America, our January OE revenue guidance is no longer applicable.
While our year-to-date OE revenue is up approximately $100 million year-over-year, with all of the volatility in the market, we won't attempt to update the revenue guidance at this point, as the data would probably prove unreliable. Our expectations are also tampered by record breaking commodity inflation, this is on slide 34.
Rising alloy surcharges for chrome in North America and soaring carbon steel prices worldwide are having a greater impact on cost and those foreseen at the beginning of 2008. While we have substantial protection for much of the current steel inflation due to our annual contracts, we do have some shorter term contracts and renewals that occurred during the course of the year.
As such, we are now forecasting 2008 steel cost increases of approximately $50 million to $60 million, versus our earlier estimate of $40 million. As in previous years, we will offset these cost increases through our cost reduction efforts, after market pricing, and OE customer price recoveries.
As current contract expire, and we move into 2009, we're expecting an even more significant acceleration of these costs. As I'm sure everyone in the industry agrees, it is imperative that these costs must be passed on to the market and discussions on this topic are already underway with our customers.
In the second half of 2008 and into 2009, you will also see us take further restructuring actions. In fact, earlier this week, we reduced North American salaried headcount by roughly 75 people across different business units and different apartments. And as Kim mentioned, we are taking a hard look at our North American manufacturing footprint to not only ensure we have the appropriate capacity for the forecasted lower light truck production mix, but also to support the significant growth opportunities coming on in the next few years.
Cost reductions and productivity improvements are important focuses for us. As such, we have aggressive internal savings targets that will service well in the current environment and should position us to fully realize our higher margin incremental new business as the economy recovers. As we manage for the short-term challenges, we're not in anyway losing focus of our long-term prospects.
We continue to execute on our growth strategy, and to invest in new technologies and new markets that will play an important role in our future. Our future that is as promising as ever. Regulation driven opportunities to gain share in adjacent markets like commercial vehicle will be a significant driver of our growth over the next 5 years. The new off road business award from Caterpillar is indicative of this trend. We're still confident in our projection of 11% to 13% compounded annual revenue growth through 2012, even after adjusting for the change in production volumes in light vehicle mix in North America.
If you look at the components of the growth on slide 35, the majority comes from our emission control business, where environmental regulations are mandating additional after treatment content to reduce pollution from nearly ever type of vehicle with an internal combustion engine. These regulations are being instituted around the world.
If you further feel back the layers of our growth goal, you'll see that more than half will come from the commercial vehicle segment, both on highway and off road. The environmental regulations over the next five years are concentrated in the diesel agreement and therefore, will impact commercial vehicles much more than light vehicles.
The second biggest contributor to our expansion will come from the rapidly growing BRIC economies. We have multiple facilities in Brazil, Russia, India, and China, and are investing in additional capacity to meet the growing demands of our expanding customer base there. It's evident that the near-term is going to be challenging, where we have new market opportunities launching, as soon as the later part of 2009 that will help offset the effects of the current North American mixture.