THE POWER OF

TENTENNECO AUTOMOTIVE INC. 2003 ANNUAL REPORT

500 North Field DriveLake Forest, Illinois 60045

tenneco-automotive.comNYSE:TEN

Corporate Profile

Tenneco Automotive is one of the world’s largestdesigners, manufacturersand marketers of emissioncontrol and ride controlproducts and systems forthe automotive originalequipment market andaftermarket. The companybecame an independentcorporation in 1999, allowing singular focus on strategies to maximizeglobal results.

Tenneco Automotive markets its products princi-pally under the Monroe®,Walker®, Gillet®, andClevite® Elastomer brandnames. Leading manufac-turers worldwide use our products in their vehicles,attracted principally by ourgroundbreaking advancedtechnologies. We are oneof the top suppliers to theautomotive aftermarket,offering exceptionallystrong brand recognitionamong consumers andtrade personnel.

Tenneco Automotiveemploys approximately19,200 people worldwide.

Mission

Tenneco Automotive’s mission is to delight ourcustomers as the number-one technology-driven,global manufacturer and marketer of value-differentiated ride control,emission control and elastomer products and systems. We will strengthenour leading positionthrough a shared-value culture of employeeinvolvement, where anintense focus on continued improvementdelivers shareholder valuein everything we do.

ContentsGatefold Tenneco at a Glance

1 Financial Highlights

2 Chairman’s Letter

5 Operations Review

6 North America

10 Europe

13 Australia and South America

14 Asia

16 Board of Directors and Officers

17 10K

Back Investor Information

ValuesTeamworkSeamless collaboration

IntegrityBeing honest, fair and never compromising our ethics

TrustRelying on and having faith in one another

Passion and a Sense of UrgencyA consuming desire to win now

BalancePromoting a balanced perspective ineverything we do

AccountabilityAccepting responsibility for our actions

Continuous ImprovementRelentless focus on achieving more with less

EDExecution and Discipline

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Investor InformationCorporate HeadquartersTenneco Automotive Inc.500 North Field DriveLake Forest, Illinois 60045847.482.5000

Web Sitewww.tenneco-automotive.com

Corporate InformationIndividuals interested in receiving thecompany’s latest quarterly earningspress release or other company literature should write the InvestorRelations Department at the corporateheadquarters address or call847.482.5042.

Information about TennecoAutomotive is also available on thecompany’s web site.†

Stock ListingTenneco Automotive’s common stockis listed under the ticker symbol TEN.

TEN is traded primarily on the New York Stock Exchange and also on the following exchanges: Chicago,Pacific and London.

As of February 23, 2004, there wereapproximately 48,841 holders of recordof the company’s common stock, parvalue $0.01 per share.

Investor InquiriesSecurities analysts, portfolio managersand representatives of financial insti-tutions seeking information about thecompany should contact the InvestorRelations department: 847.482.5042.

Stockholder InquiriesFor stockholder services such as ex-change of certificates, issuance of certificates, lost certificates, change ofaddress, change in registered owner-ship or share balance, write, call or e-mail the company’s transfer agent:

Wachovia Bank, N.A.Equity Services Group1525 West W.T. Harris Blvd., 3C3Charlotte, NC 28288-1153866.839.3259 Toll Free704.427.2602

www.wachovia.com/shareholder-servicesClick on “Access Accounts”Click on “FirstLink Equity”

DividendsThe company expects that for theforeseeable future it will follow a policy of retaining earnings in order to finance the continued developmentof its business. Additional informationon the company’s dividend policy andrestrictions on the payment of divi-dends can be found in Management’sDiscussion and Analysis in the AnnualReport on Form 10-K for the yearended December 31, 2003.

Annual MeetingThe Annual Meeting of Stockholders will be held at 10:00 a.m. Central Timeon Tuesday, May 11, 2004, at TennecoAutomotive’s headquarters, 500 NorthField Drive, Lake Forest, Illinois.

Stock Price Data2004 2003 2002

Sales Prices Sales Prices Sales Prices

High Low High Low High Low

First Quarter* $14.88 $6.73 $4.32 $2.01 $4.10 $1.90

Second Quarter $4.65 $2.25 $6.75 $3.82

Third Quarter $7.45 $3.61 $8.32 $3.50

Fourth Quarter $7.32 $4.66 $5.97 $3.28

* 2004 First Quarter through March 4, 2004† The information on our web site is not part of this annual report

2003 Sales 2003 EBIT* 2003 2002

Revenues (millions) $3,766 $3,459

Original Equipment/ Aftermarket Balance† 75/25 74/26

Emission Control/ Ride Control Balance† 63/37 65/35

†percentage of sales

$350 million � Passenger cars� Light trucks� Commercial vehicles� Performance vehicles

� Manifolds� Mufflers� Pipes� Tubing� Mounting components� Catalytic converters� Performance mufflers

Emission Control

$579 million � Passenger cars� Light trucks� Commercial vehicles� Trailers

� Shocks� Struts� Cartridges� Mounting kits� Performance shocks� Torque rods� Suspension bushings� Engine mounts

Ride Control

$2,037 million� Passenger cars� Light trucks� Commercial vehicles� Industrial applications� Motorbikes

� Complete exhaust systems� Fabricated manifolds� Manifold-converter modules� Catalytic converters� Mufflers and resonators� Diesel particulate filter systems� NOx abatement systems� Exhaust heat exchangers� Exhaust isolators & hanging systems

Emission Control

$800 million � Passenger cars� Light trucks� Commercial vehicles� Golf carts� Off-road recreational� Rail cars

� Shocks & struts� Suspension bushings� Coil, air & leaf springs� Torque rods� Engine/body mounts� Suspension modules/systems� Control arms/bars/links

Ride Control

OPERATIONS 2003 SALES MARKETS SERVED PRODUCTS BRANDS

Aftermarket

TENNECO AUTOMOTIVEOPERATIONS 2003 SALES MARKETS SERVED PRODUCTS BRANDS

Original Equipment

North America 74%Europe 8%Rest of World 18%

North America 50%Europe 38%Rest of World 12%

* EBIT is income before interest expense, taxes, and minority interest.

Countries Served: 130

People: Approx. 19,200

Engineering Centers: 14

Manufacturing & Just-In-Time Facilities: 72

� ArvinMeritor� OE Service� Bosal� Faurecia� Goerlich’s Exhaust Systems

Emission and Ride Control� Brand dominance� Relationships with all major wholesale distributors/retailers� Global presence� Leading market shares� Product innovation� Product quality� Extensive product and vehicle coverage� Targeted marketing programs� Introduction of service parts

� NAPA� Automotive Distribution International (ADI)� TEMOT Autoteile� Advance Auto Parts� Independent Motor Trade Factors Association (IFA)

� Quiet-Flow3® Mufflers/ Assemblies� Dynomax® Ultra-Flo Stainless/ Welded Mufflers/Systems� DNX™ performance exhaust systems� SoundFX™ mufflers � Clean Air™ catalytic converters

� Growing number of vehicles on the road� OE Service� New technologies� Emission regulations� Performance product demand

� ArvinMeritor� OE Service� ZF Sachs� Kayaba

� NAPA� TEMOT Autoteile� Advance Auto Parts� O’Reilly Auto Parts� ADI

� Reflex® shocks & struts� Sensa-Trac® shocks & struts� Rancho® shocks, struts and suspension lift kits� Gas-Magnum® shocks� DNX™ performance shocks and struts� Monro-Matic Plus® shocks� DuPont™ car care line

� Growing number of vehicles on the road� OE Service� New technologies� Unperformed maintenance � Premium mix expansion� Broader product coverage� Heavy-duty truck penetration� Safety/installer education� Testing/diagnostic equipment

� ArvinMeritor� Faurecia� Visteon� Delphi� Eberspächer

Emission and Ride Control� Leading technologies� Experienced team� Product/process quality� Global program management� Japanese alliances� Joint ventures in China, India, Thailand, and U.K.� Customer relationships� Broad product range� Full service supplier� Just In Time (JIT) assembly

� General Motors� Ford� Volkswagen� DaimlerChrysler� PSA Peugeot/Citroen

� GM Envoy/Bravada/Trailblazer� GM Silverado/Suburban/ Yukon XL/Escalade/Tahoe� VW Bora/Golf/Leon/Jetta� GM Opel Corsa/Chevrolet Corsa� Dodge Ram Pickup

� Additional content due to emission regulations� Diesel aftertreatment� Customized sound attenuation� Demand for diesel/ hybrid/fuel cell� Emerging markets� Commercial vehicle segment

� ArvinMeritor� Delphi� Tokico� ZF Sachs� Kayaba

� Ford� General Motors� Volkswagen� DaimlerChrysler� Nissan

� GM Silverado/Suburban/ Yukon XL/Escalade/Tahoe� DaimlerChrysler Town&Country/ Voyager/Caravan� VW Golf/Toledo� DaimlerChrysler Sebring/Stratus� Ford F-Series Super-Duty

� Vehicle stability/ safety requirements � Modular assembly� New technologies� Adjacent markets� Electronic technologies

COMPETITORS KEY ADVANTAGES TOP FIVE CUSTOMERS LEADING PRODUCTS MARKET OPPORTUNITIES

COMPETITORS KEY ADVANTAGES TOP FIVE CUSTOMERS TOP FIVE PLATFORMS 2003 MARKET OPPORTUNITIES

Other Suspension Components 53%Bushings 47%

Elastomer

Shocks & Springs 61%Struts 32%Modules & Systems 7%

Suspension ManagementRide Control

Cold End 58%Hot End 42%

Exhaust ManagementEmission Control

Broad Product Line Mix

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Financial Highlights (dollars in millions except share and per share data) 2003 2002 2001 2000

Sales $ 3,766 $ 3,459 $ 3,364 $ 3,528

Earnings before interest and taxes $ 176 $ 169 $ 92 $ 120

Depreciation and amortization $ 163 $ 144 $ 153 $ 151

EBITDA* $ 339 $ 313 $ 245 $ 271

Net income (loss) before change in accounting principle $ 27 $ 31 $ (130) $ (42)

Earnings (loss) per share before change in accounting principle $ 0.65 $ 0.74 $ (3.43) $ (1.20)

Capital expenditures $ 130 $ 138 $ 127 $ 146

Average diluted shares outstanding 41,767,959 41,667,815 38,001,248 34,906,825

Total debt $ 1,430 $ 1,445 $ 1,515 $ 1,527

Cash and cash equivalents $ 145 $ 54 $ 53 $ 35

Debt, net of cash balances $ 1,285 $ 1,391 $ 1,462 $ 1,492

*EBITDA represents income from continuing operations before cumulative effect of change in accounting principle, interest expense, income taxes, minority interest and depreciation and amortization. EBITDA is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA should not be considered as an alternative to net income or operating income as an indicatorof our performance, or as an alternative to operating cash flows as a measure of liquidity. We have reportedEBITDA because we believe EBITDA is a measure commonly reported and widely used by investors and otherinterested parties as an indicator of a company’s performance. We believe EBITDA assists investors in compar-ing a company’s performance on a consistent basis without regard to depreciation and amortization, whichcan vary significantly depending upon many factors. However, the EBITDA measure presented in this documentmay not always be comparable to similarly titled measures reported by other companies due to differences inthe components of the calculation.

†See 2003 Form 10K Item 6 for reconciliation to GAAP reporting measure.††Selling, general and administrative expense plus engineering, research and development expense.

$169

$281

$209

$253

$315

1999 2000 2001 2002 2003 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003

Cash Flow†

$ in millionsSGA&E Expense††

Percentage of salesWorking Capital†Percentage of sales

17.0%

14.0%

12.5% 12.1%11.4%

15.6%

10.1%

6.0%

3.6%2.3%

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For Tenneco Automotive,2003 was the most successful year sincebecoming a stand-alonecompany. Revenue, profitability, new businessand debt reduction were all at record performancelevels. This progress reflectsour continued focus on acore strategy of generatingcash to pay down debt by strengthening businessrelationships, controllingcosts, lowering workingcapital and improving gross margins.

Adhering to this strategic focus, in 2003 we achieved:� A new high in revenues of $3.8

billion, up 9 percent over 2002.� The most new business booked

in a single year.� Our highest revenue per employee

at $196,771.� A new low of 11.4 percent of sales

for overhead expenses.� Our highest operating income

of $176 million, a 4 percent year-over-year increase.

� A two-phased debt refinancing thatimproved flexibility and liquidity.

� Our lowest level of debt net of cashbalances at $1.285 billion.

� More than $154 million in cash flowbefore financing activities due to a 16 percent improvement in cash flowfrom working capital.

� The highest increase in enterprisevalue—the market value of our debtand equity—at 34 percent.

To Our Shareholders

Mark P. FrissoraChairman and Chief Executive Officer

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As we pursue the strategies that generated this success, we are focusingon investments in proprietary technolo-gies for growth markets, increasing the variability of our cost structure and improving our financial flexibility.

Investments in GrowthHigher Global Emission StandardsRequire Advanced TechnologyEnvironmental regulators are tighteningemission standards around the world,increasing the value of emission controlcontent per vehicle. We have invested in technologies that meet more stringent requirements such as our diesel particulate filter, DeNOx converterand lightweight fabricated manifolds.These cutting-edge products, in demandby PSA, Audi, Mercedes Benz and otherautomakers, command higher margins.

Commercial Truck Recovery SuitsEstablished CapabilityThe estimated 25 percent increase incommercial vehicle production projectedfor 2004 would mark a turnaround,driven by improvement in generaleconomic conditions and higher freightvolumes. Progressively tighter emissionregulations affecting heavy-duty trucks will take effect throughout the decade,increasing the size of the globalcommercial truck exhaust market for the products we offer to an estimated$2.3 billion in 2010 from $173 million in 2003. Our technology investments,developed for light trucks, are transfer-able to the medium- and heavy-truckmarket. We have formed a new business

unit to concentrate on heavy duty andother commercial vehicles worldwide,which should allow us to capture anexpanded share of this growingsegment.

Number One in China Our early investments in China and the forging of effective joint ventureshave made us the country’s leading OE emission control supplier. China’seconomy leads the world in growth as passenger car production rose 55 percent in 2003 over the previousyear. Production is expected to increaseabout 10 percent annually through thedecade, which would make China theworld’s second largest vehicle market in2010. Our revenues in China haveincreased at a compounded annualgrowth rate of 60 percent since 1998.

Targeting Japanese OEMs Japanese original equipment manufac-turers (OEMs) have sharply increasedtheir share of the North American auto-motive market. Through alliances withFutaba and Tokico, leading Japaneseemission control and ride controlsuppliers, we have strengthened ourrelationships with these producers. Weare the only North American supplier inour business segments to work with allof the Japanese Big Three—Toyota,Honda and Nissan— and have raised the share of our North America OEMrevenues from Japanese automakers to 18 percent at 2003 year-end from 14 percent at the close of 2002.

New Aftermarket Products We have a new aftermarket strategy to introduce service parts to our core offering of shocks, mufflers and associated “hard parts.” Serviceparts are parts on a vehicle that are serviced regularly— like windshieldwipers, filters and brakes.

In December, we signed an exclusivelicensing agreement with DuPont to market a line of premium car care products in North America. The line,including car washes and waxes, capitalizes on DuPont’s valuable Teflon®

brand name. Our investment in thishigh-margin product line is minimal as we outsource manufacturing, whileleveraging our distribution channels. We expect to introduce additionalservice parts in the next year in bothNorth America and Europe.

Variable Cost StructureWe are implementing a number of measures to increase the variability of our cost structure, includingoutsourcing non-core productionprocesses and select services to manufacturers or regions of the worldthat can render them most efficiently.These actions will give us the flexibilityto respond faster and more effectively to changes in the marketplace.

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We are expanding our use of Six Sigmaand employing Lean manufacturing andother initiatives to improve our produc-tion capability, streamline operations andreduce costs.

� Six Sigma generated $27 million incost savings in 2003 by reducingdefects and waste. An additional $20 million in savings is expected this year.

� Our Lean manufacturing initiatives,modeled on the Toyota ProductionSystem, are reducing costs, inventoriesand lead times, while improving on-time delivery.

� Our Project Genesis restructuringprogram has improved capacity utilization by closing underutilizedmanufacturing facilities and improvingworkflow at remaining plants. Genesisyielded $17 million in incrementalsavings in 2003 in addition to the $12 million saved in 2002. Now thatthe program is complete, we willbenefit from the full $30 million of cost reductions that have beenachieved over the past two years.

� Additionally, we are among ourindustry’s best-in-class in plant safetyperformance, which further enhancesour global manufacturing position.Safety performance is based on a totalcase rate measure, which is calculated by the number of injuries per 100employees. Our total case rate was3.5 last year, which is 65 percentlower than the industry average.

Go East In Europe, we are more closely aligningwith our customers and lowering costs

by expanding more of our operations to Eastern Europe. We now operate six facilities in Poland, Russia and theCzech Republic and these plants were responsible for most of the 2003launches in Europe.

Improved FinancialFlexibilityLast year, we executed a very successfultwo-phased debt refinancing transactionthat improved our flexibility in the appli-cation of our cash flow and createdgreater liquidity. The new agreementsextended nearly all debt maturities outto 2009 and beyond.

When Tenneco Automotive became a stand-alone company in 1999, ourdebt totaled approximately $1.7 billion.We reduced this by nearly $300 millionand are further improving our capitalstructure by debt reduction throughhigher earnings and cash flow, as well as opportunistic debt management in an environment of low interest ratesand strong capital markets.

Looking AheadWe will continue to strive towardimproved performance, focusing on additional cost and capacity reductions,greater flexibility and investments in tech-nology that fuel new business growth.

Our book of new business is at a peakwith revenues from OEMs in 2004 estimated to climb 3 percent over 2003. In 2005, we expect our OEMbook of business to increase 11 percentover 2003, with strong potential foradditional growth.

The continued success of TennecoAutomotive ultimately will be driven by uncompromising integrity— in theway we deal with our customers,manage our employees and report to our stakeholders—and a corporateculture committed to world-classperformance through execution and discipline.

At Tenneco Automotive, we believe our people are our most valuable asset.They design our products, manufactureour products and sell our products.Recognizing this, we invest in a culturethat provides opportunities for employeedevelopment, which results in greaterjob satisfaction as exemplified by oursalaried-employee turnover rate, whichwe believe is well below the industryaverage. This distinguishes TennecoAutomotive and reflects a unique advan-tage, both in serving our customers andin allowing us to retain and recruit thebest and brightest employees.

In the end, our overall objective is clear and unchanging. We are deter-mined to build on the fundamentals that enable our business to succeed and will continue to invest in opportuni-ties that strengthen our position in key growth areas.

Mark P. FrissoraChairman and Chief Executive OfficerApril 2004

We are a global company,operating from establishedmarkets in North America to areas of explosive growthsuch as China.

These distinct markets provide strength, as doesthe balance between ouroriginal equipment andaftermarket businesses,

market-leading ride controland emission control products, and our variedcustomer base.

From this foundation, wegrow revenues by investingin technologies for expand-ing markets, and reducedebt by increasing the variable structure of our

costs and maximizing financial flexibility. However,the diversity of our geo-graphic coverage, products,markets, businesses andcustomers requires strategiestailored to specific needs.

Diversity combined with unity of purpose: the Power of TEN.

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THE POWER OF TEN

Semi-Active Muffler

LiteningRod Computerized Electronic Shock

N O R T HA M E R I C A

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Our ResultsNorth American consumers maintained a preference for SUVs, minivans andlight trucks over passenger cars in 2003.Our significant presence on these top-selling vehicle platforms was benefi-cial as we generated revenues thatoutpaced overall production rates. Ouroriginal equipment (OE) revenues inNorth America increased 1 percent lastyear compared with a 3 percent declinein industry production. Sales of newautos and light trucks, while about 1percent lower than 2002 levels at 16.8million units, marked the fifth best yearin the history of the industry.

Competition intensified for domesticvehicle manufacturers as Japan-basedautomakers increased their market sharein North America. Our global allianceswith Tokico and Futaba, leading Japaneseride control and emission controlsuppliers, provided us with a competitiveadvantage and helped to further expandour business with Japanese originalequipment manufacturers. Revenuegenerated from these manufacturersincreased to about 18 percent of our

total North American OE revenue atyear-end 2003 from just 14 percentone year earlier. Our products are onstrong-selling platforms and newlaunches including Honda’s Accord, Pilot,Odyssey and Acura MDX; Nissan’s Titan,Frontier, Pathfinder, Armada, Xterra,Infiniti, and Altima; and Toyota’s Sienna,Sequoia and Lexus RX 330.

The North American launch of the LexusRX 330 was especially noteworthy in2003. This was the first launch of a Lexusvehicle outside of Japan. Tenneco issupplying the exhaust system on this

vehicle. Our team executed a virtuallyflawless launch—a performance thatToyota referred to as a benchmark in delivering Lexus quality. Our high marksfor production processes and efficiencywere underscored when we receivedToyota’s Excellence Award for LexusLaunch as well as an Excellence Awardfor Value Improvement, reflecting ouroverall support to Toyota in 2003. We will continue to build our relationshipswith the Japanese OEMs, pursuing moreof their business in North America,which represents a strong growthopportunity for us.

We successfullylaunched theexhaust system on Toyota’s LexusRX 330, the firstLexus vehicle to be sourced inNorth America.

Source: Automotive News

Light Truck 53%Passenger Car 47%

Light Truck 78%Passenger Car 22%

North American Vehicle Production 2003

Tenneco North American OE Light Vehicle Sales

2003’s hottest-selling vehicles incorporate our products, boosting our originalequipment revenues and offsetting declines in overall automotive production. Weare countering adversity in the aftermarket business by broadening our customerbase, extending our product lines and entering new product categories.

World HeadquartersEmission Control ManufacturingRide Control ManufacturingEmission Control Engineering CenterRide Control Engineering Center

6 GM Chevy Trailblazer

7 DaimlerChrysler Dodge Caravan

8 GM GMC Sierra

9 DaimlerChrysler Jeep Liberty

10 GM Chevy Tahoe

Top Ten 2003 North American Light Trucks

1 GM Chevy Silverado

2 Ford F-Series Truck

3 DaimlerChrysler Dodge Ram Pickup

4 Ford Explorer

5 Ford F-Series Super-Duty

THE POWER OF TEN

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TennecoAutomotive hasone or more prod-ucts on each of the top 10 lightvehicles produced in North America in 2003.

We supply emis-sion control andelastomer productsfor the Ford F150pickup, one of the best-sellinglight trucks inNorth America.

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We are also targeting the commercialand specialty vehicle markets by intro-ducing innovative products such as ourLiteningRod torque rod, Magnum FSshock line, integrated muffler/convertertechnology and diesel particulate filtersfor heavy-duty trucks. These marketsrepresent additional growth opportuni-ties as new emission standards takeeffect and demand increases forimproved vehicle handling and ridecomfort. We formed a new business unit in 2004 to capture these opportuni-ties, leveraging our diesel emissioncontrol technologies and value-addedride control product offerings.

Our ability to transfer technology across our global organization is a

powerful tool to leverage our advancedengineering capabilities. For example, our Semi-Active Muffler, which usesunique valve technology, was developedin Europe but is finding potential applications for more fuel-efficientengines in North America. We are alsoapplying our technology to help ourcustomers differentiate their vehicleswith consumers. Our acoustics expertisehelped General Motors engineers duplicate the sound quality of the 1960-era Pontiac GTO muscle car in a 2004version, while incorporating a moresophisticated emission control system to meet today’s stiffer environmentalrequirements. Similarly, our exhaust and elastomer engineering teams collab-orated to develop an award-winning

exhaust isolator, which is a product usingour elastomeric rubber compounds thatprovides more design flexibility andbetter performance in reducing noise,vibration and harshness in the exhaustsystem assembly.

Overall, our superior technology, business relationships and high-qualitymanufacturing combined in 2003 toattract more than $575 million in totalNorth American new business, expectedto launch between 2004 and 2008.

In the aftermarket, we maintained our leading market share positions in emission and ride control products.This was despite a prolonged decline inthe traditional “hard-parts” sectors, driven by a longer product replacementcycle, especially for stainless steelexhaust systems. We added new cus-tomers in both product segments to offset persistent weakness in the overallmarket. We also continued our efforts to

We are targetinggrowth opportuni-ties in the heavy-duty truck andspecialty vehiclemarkets by invest-ing in technologiesthat provide moreeffective emission

control andenhanced safety.These opportuni-ties will expand as the scheduledtightening of environmental requirements take effect.

Ten Key Improvements in Lean—Smithville, TN Plant

1 Revenue $82mm $99mm 21% 2 Process capability 50% 95% 90% 3 Inventory $13mm $8mm 37% 4 Productivity 37% 58% 58% 5 Headcount 511 304 41% 6 Scrap percent 2.5% 1.2% 52% 7 Revenue/floor space $390,000 $695,700 78% 8 Travel distance (ft.) 2,100 675 67% 9 Revenue/employee $161,000 $325,000 101% 10 Open floor space (sq. ft.) 0 70,000 30%

Measurement 1999 Pre-Lean 2003 Post-Lean % Improvement

THE POWER OF TEN

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generate increased replacement sales byeducating consumers through our SafetyTriangle campaign about the importanceof inspecting shock absorbers as regularlyas brakes and other equipment. In addi-tion, we added new products by launch-ing DNX, a new brand of niche exhaustand ride control products for the tunermarket—where car owners modify theirvehicles, typically small, imported pas-senger cars, for sound and appearance.

We are extending beyond our tradi-tional “hard-parts” product lines withthe introduction of a DuPont-brandedline of car care products. Recently wesigned an exclusive licensing agreementwith DuPont to develop, manufacture and market appearance, performance,maintenance and accessory products.The initial customer response has beenoverwhelmingly positive. We are shipping these products to more than 10,000 retail outlets throughoutthe U.S. and Canada for customersincluding Advance Auto Parts, NAPA and O’Reilly Auto Parts.

OutlookThe economic recovery appears to begaining strength in North America,which would help improve new vehiclesales. Besides targeting passenger carsand light trucks—our traditional areas of strength—we are stepping up effortsto increase our share of the heavy-dutytruck and specialty vehicle markets.

There are also signs that the exhaustaftermarket’s deterioration may beending. And the average number ofvehicles on the road is increasing.

Regardless of market conditions, we willcontinue to create our own opportuni-ties in the aftermarket by expanding ourcustomer base, introducing new prod-ucts and extending our product linesinto new service parts areas.

In addition to increasing sales, we willcontinue to emphasize stringent costmanagement and quality improvementin all our operations through our Leanmanufacturing and Six Sigma initiatives.

With the early-2004 addition of Pep Boys, which becomes our fifth largestaftermarket customer in NorthAmerica, we nowdo business with four of the topfive automotiveaftermarket retailchains, as well asall of the nation’sleading wholesaledistributors.

We are uncover-ing growth opportunities inthe aftermarket by extending traditional productlines with newofferings, such asthe DuPont line ofcar care products.

Under an exclusivelicensing agree-ment, we are marketing waxes,car washes andother productsunder the DuPontlabel through morethan 10,000 retailoutlets in the U.S.and Canada.

E U R O P E

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Our ResultsA record number of launches in our original equipment ride control businesscontributed to increased OE revenues in2003, despite a weak year for WesternEurope light vehicle production. Theconcentration of OE launches in EasternEurope demonstrated the success of our “Go East” manufacturing strategy, withOEMs such as Ford, General Motors,Volkswagen, Fiat and Renault awardingmajor new platforms to our plants inPoland and the Czech Republic.Measures taken over the last two yearsto improve our OE emission control business showed results with year-over-year improvement in profitability, despitelower volumes. Moreover, our presenceon popular PSA, BMW, DaimlerChrysler,Audi and Ford platforms boosted ourperformance over the industry trends.

Tenneco’s growing reputation foradvanced design, superior technology,quality and flexible delivery helpedattract more than $167 million in totalnew business contracts in 2003 that areexpected to launch between 2004 and2008. This new business included orders

for our advanced ComputerizedElectronic Suspension technology, whichsells at a significant premium to a standard set of shocks. And our positionas a leading supplier of diesel particulatefilters was reinforced by an agreementwith Audi to supply filters for its four-cylinder A4 and A6 passenger cars.Besides Audi, we also won contracts tosupply filters for Mercedes Benz six-cylinder C-Class and E-Class vehicles aswell as the new-generation Citroen C5and Peugeot 407 passenger cars. Basedon booked business, we anticipate that

our annual production of diesel particu-late filters will double to 600,000 unitsby 2006. In 2003, we also startedproduction of our Semi-Active Mufflertechnology, and sound-engineered theexhaust for one of Europe’s mostexciting new launches in 2004.

Original equipment manufacturerscontinue to demand that suppliersdeliver high-quality products on time,while holding the line on costs. Wemade significant operational improve-ments, including implementing Leanmanufacturing techniques andexpanding the Six Sigma program. Ourgreater efficiency facilitated our recordnumber of successful new productlaunches, 13 in emission control and 17 in ride control, during 2003.

Our strategy of shifting more manufac-turing to low-cost countries—to locatenear our customers and to take advan-tage of lower labor costs— is alsoimproving our efficiency. We increasedproduction by 230 percent at our

Our reach in Europeextends to Russia,and in 2003 weopened an exhaust manufacturingplant in Togliatti,located in the country’s automo-tive heartland.

Emission Control ManufacturingRide Control ManufacturingEmission Control Engineering CenterRide Control Engineering Center

Our state-of-the-art technology is attracting techno-savvy consumers, while our shift of production to low-cost countries is increasing efficiency and lowering costs. On the horizon: higher vehicle content due to stricter vehicle emission standards, the continuing success of diesel powertrains in Europe and rising consumer demands for advanced suspension systems.

1 VW Altea

2 Mercedes Benz E-Class

3 Ford Focus

4 Audi A6

5 Porsche 911

6 Porsche Boxster

7 Opel Astra

8 VW Golf

9 VW Octavia

10 Paccar Heavy-duty truck

Tenneco Automotive’s Top Ten 2004 European Launches

THE POWER OF TEN

TennecoAutomotive’s use of ComputerAided Design(CAD) technologycuts time andcosts from designto finished product. CADtechnologyincreases thespeed, accuracyand repeatabilityof production.

This CAD model of a diesel particulate filterfor Audi passengercars is done at our worldwideemission controlengineering centerin Edenkoben,Germany.

Our Gliwice,Poland ride controlplant is an exam-ple of our growingpresence inEastern Europe.We now operatesix plants in theregion to costeffectively servegrowing markets.Gliwice reachedrecord productionin 2003 for suchcustomers as Ford,Fiat and Renault.

Gliwice, Poland and Hodkovice, CzechRepublic, ride control plants during theyear as a result of new launches. Wegained first entrant advantage in Russiaas the first global supplier to open anexhaust facility, which will supply theChevrolet Niva, manufactured by aGeneral Motors/AvtoVAZ joint venture.This operation will grow as more OEMsmove to the region, and as we leverageour presence in Russia to expand ourride control business further east. A newInline Sequence (ILS) plant was openedin Poznan, Poland, to supplyVolkswagen’s new Golf. A second ILSplant was commissioned in Ingolstadt,Germany, to supply the new Audi A3.

European aftermarket sales for exhaustproducts declined during the year due to reduced demand industry-wide. We partially countered this market softness by increasing sales of catalyticconverters by 47 percent over 2002, as increased emission regulationsimproved the replacement cycle. Thisgrowth included about $4 million ofsales to a leading OEM for its originalequipment service business. We werealso able to grow our share of the ridecontrol market with new customersincluding Kwik-Fit in the United Kingdom.

Besides signing new aftermarketcustomers, we entered an importantadjacent market by winning Wabco’sheavy-duty shock business that enabledus to add new heavy-duty distributors in the United Kingdom. Brand awarenessfor Monroe ride control products wasfurther increased through our SafetyTriangle campaign.

12

Our investments in high-technologygrowth products areattracting customerssuch as PSA, whichselected our newest-generation additivediesel particulatefilter and exclusiveSemi-Active Muffler(SAM) for thisPeugeot 407.

The filter helpsmeet more stringentenvironmentalrequirements andthe SAM uses inno-vative valve designsto economicallyprovide soundsilencing at lowengine speeds,while minimizingbackpressure athigher engine RPMs.

On the cost side, we are streamliningour aftermarket emission control manufacturing capacity to bring it in line with market demand. During 2003, we announced that we will close our Birmingham, Englandexhaust plant, which, by shifting production to remaining plants, will help increase efficiency.

OutlookForecasts call for no more than a modestincrease in European automotive produc-tion in 2004 with some strengthening in the second half of the year. We willcontinue to streamline our operationsand improve efficiency in preparation for the significant platform launches wehave slated for 2005.

At the same time, we will be aggres-sively seeking new business, based on our technological leadership, particularly through our diesel emissioncontrol products and electronic suspen-sion systems.

We will also apply our strong brands,superior service and innovativemarketing and distribution strategies to continue to attract additional after-market business. We will overcome some of the aftermarket weakness bylaunching product extensions includingMonroe cabin shocks and steering parts,and entering new categories. The DNXrange of branded performance exhaust,brake, suspension, ignition and filterproducts that target the European youthmarket will be contract manufactured to maximize the profitability of thisexciting new line.

Our emphasis on further improving operating efficiency will increase as we elevate our efforts to enhance ourEuropean performance and reputation,and position ourselves to take greateradvantage of the opportunities offeredby manufacturing in low-cost areas ofthe region.

3.23.5

3.74.0

4.3

2003 2004 2005 2006 2007 2008

4.5

Source: Global Insight Dec. 2003

Well Positioned for Vehicle ProductionGrowth in Eastern EuropeUnits in millions

A U S T R A L I A andSOUTH AMERICA

13

Our Results Australia

We have achieved the leading marketshare for both OEM sales of emissioncontrol and ride control products,serving all four of the Australian manu-facturers: Ford, Toyota, General Motorsand Mitsubishi. Our expanding presenceon export platforms allows us togenerate revenue growth. And, weexpect the introduction of vehicles withhigher value content, such as the V-8Pontiac coupe, requiring a split exhaustsystem with two catalytic converters and more rigorous noise control, tocontribute as well to higher revenues. In the aftermarket, the strength of ourMonroe brand name, along with the2003 introduction of our premium Reflex shock absorber helped maintainour market share in replacement parts.

We’ve overcome competitive pressures inAustralia with our strong customer baseand product offerings, and by applying SixSigma and Lean manufacturing processesto control costs and boost efficiency.

Outlook Australia

Australia’s economy remains strong,which helped boost the nation’s currencyby more than 34 percent in 2003 versusthe U.S. Its automotive production isexpected to grow 13 percent by 2006.Increasing export sales, particularly tothe Middle East, U.S. and Asia, a strongmarket position and efficient operationswill help us capture a significant portionof this growth.

Our Results South America

In South America, we operate some ofthe most efficient manufacturing facilitiesin the Tenneco Automotive organization.

As a result, we have maintained prof-itability despite challenging economicconditions in recent years. During 2003,economies in the region generallyshowed improvement, and we were able to increase OEM sales year-over-yeardue to new incremental business.

We are benefiting from a strong aftermarket, resulting from longer vehicle ownership with a greater needfor replacement parts. High brand recognition for Monroe and our elastomer brand, Axios, coupled withour status as a low-cost producer, havemade this aftermarket operation a steady source of increasing revenueand growing profitability.

Outlook South America

The improving economic conditions in South America aided by incrementalOEM business awarded in 2003 provide a basis for revenue growth. Combined with our low-cost manufacturing facilities and leadingbrands, this will help us achieve greater profitability, while serving as a spring-board for higher export sales.

We are Australia’s leading original equipment emission control and ride control supplier and Monroe is the country’s leading aftermarket brand. In South America, manufacturing operations are among the most efficient in our global organization, opening opportunities for increased inter-company and export sales.

Emission Control ManufacturingRide Control ManufacturingEmission Control Engineering CenterRide Control Engineering Center

Emission Control ManufacturingRide Control ManufacturingRide/Emission Control Engineering Center

Top Ten 2003 Achievements

1 Increased revenues 34 percent in 2003 2 Improved operating income 33 percent 3 Awarded major contract for 2006 General Motors Holden VE Commodore 4 Introduced new premium Reflex shock absorber to aftermarket 5 Won Automotive Aftermarket Association’s Excellence in Marketing Award

1 Generated $20 million of new incremental OEM business during 2003 2 Named first domestic ride control supplier to Toyota in Argentina 3 Reduced salaried headcount by 15 percent 4 Reduced inventory Days on Hand by 25 percent 5 Achieved all-time record for cash flow generated

Australia

South America

THE POWER OF TEN

ASIAOur ResultsChina’s economy is maintaining itsrobust growth, with increases in auto-motive production that place it oncourse to become the world’s secondlargest producer within a decade. Thegovernment is encouraging consolida-tion among the roughly 100 OEMs andseveral thousand automotive suppliers,with the survivors being those with the strongest customer relationships,manufacturing capabilities, technologiesand product quality. In addition toconsolidation, the Chinese governmentcontinues to put regulations in place to grow the domestic auto marketincluding encouraging technology transfers, increasing the availability ofcredit to consumers and reducing thereliance on imported components.

During 2003, we expanded operationsto keep pace with the booming automotive market by entering intoagreements for two new joint venturesin China, one with Chengdu LingchuanMechanical Plant to provide emissioncontrol products and systems to

Changan Ford Ltd, and another withGerman-based Eberspächer InternationalGmbH to provide similar products toBMW and Audi in China. We also haveexhaust joint ventures in Shanghai andDalian, and a ride control joint venture inBeijing, which brings the total to fivesince beginning operations in China in1995. Our joint venture strategy allowsus to minimize our capital investment,while still keeping pace with the tremen-dous growth. Today, we are the largestOE exhaust supplier in China.

We continue to expand our customerbase and win significant new businessfrom existing customers like Nissan,Volkswagen, Ford, BMW and GeneralMotors. Our product launches in 2004include exhaust systems for theVolkswagen Santana, China’s best-sellingvehicle with annual production ofbetween 80,000 and 100,000 units.

In Thailand, our joint venture issupplying emission control products forthe Isuzu I-190 global platform. This JV represents a potential entry into the

developing markets of Malaysia andIndonesia, among others. During 2003,we took sole ownership of our exhaustproduction facility in India. Additionally,our ride control business in Indiaexpanded during the year to export shock absorbers for specialty markets in North America.

OutlookWe will continue to grow in China,possibly adding new joint ventures to expand geographically, add newcustomers and increase our ride controlcapacity. We also plan to establish anengineering center in China within twoyears. In addition, we are evaluating the start-up of an elastomer operation to serve that country’s light truck andpassenger car market, and potentially its large heavy-duty market. Anotherlonger-term opportunity may beexporting from our operations inThailand, as well as expanding ourexisting exports from India andextending our programs to increaseoperational efficiency in the region.

6 GM J200

7 VW Touran

8 Audi A4

9 Toyota Hiace

10 Nissan Blue Bird

Tenneco Automotive’s Top Ten Vehicle Platforms in China

1 VW Bora and Golf

2 VW Passat

3 VW Santana

4 PSA Citroen ZX

5 Isuzu D-Max

THE POWER OF TEN

Emission Control ManufacturingRide Control ManufacturingRide/Emission Control Engineering Center

As an early entrant, our five majority-owned joint ventures give us a solidfoothold in China, whose economic growth continues to lead the world. We are also well positioned to serve other Asian markets through our established production in Thailand and operations in India.

1998 2000 2002 2003

$11

$30

$80

$120

.8

1.2

2.12.3 2.2

2001 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 2010

2.4

2.7

3.03.3

3.6

Source: Global Insight & Analysis & News

Leveraging JVs to capitalize on growth in China—60% Annual GrowthRevenue in millions

Expected Light Vehicle Production in ChinaUnits in millions

15

We now have fivejoint ventures inChina. The latest,with partnerEberspächerInternationalGmbH, will provideemission controlsystems for the

Audi A4. This addsto our rapidlyexpanding busi-ness in China thatalso includesVolkswagen, Ford,General Motorsand Nissan.

Board of DirectorsSeated, left to right:

David B. Price, Jr.2,3

Consultant, Former President BF Goodrich Performance Materials

Charles W. Cramb1

Senior Vice President and Chief Financial OfficerThe Gillette Company

Standing, left to right:

Frank E. Macher1

Retired Chairman and Chief Executive OfficerFederal-Mogul Corporation

Roger B. Porter2,3

IBM Professor of Business and GovernmentHarvard University

Mark P. FrissoraChairman and Chief Executive OfficerTenneco Automotive Inc.

Dennis G. Severance1

Accenture Professor of Computer and Information Systems University of Michigan Business School

M. Kathryn Eickhoff1,3

President and Chief Executive OfficerEickhoff Economics, Inc.

Paul T. Stecko2,3

Chairman and Chief Executive OfficerPackaging Corporation of America

Sir David Plastow2

Retired Chairman and Chief Executive OfficerVickers plc

Not pictured:

Timothy R. DonovanExecutive Vice President and General CounselManaging Director, International GroupTenneco Automotive Inc.

1 Audit Committee2 Compensation/Nominating/Governance Committee3 Three-Year Independent Director Evaluation Committee

Red numbers indicate the committee chair

16

Officers

Mark P. FrissoraChairman and Chief Executive Officer

Timothy R. DonovanExecutive Vice President and General CounselManaging Director, International Group

Hari N. NairExecutive Vice President and ManagingDirector, Europe

Kenneth R. TrammellSenior Vice President and Chief FinancialOfficer

Richard P. SchneiderSenior Vice President, Global Administration

Timothy E. JacksonSenior Vice President, Global Manufacturingand Engineering

Paul SchultzSenior Vice PresidentGlobal Supply Chain Management

Brent J. BauerSenior Vice President and General ManagerNorth America Original Equipment Emission Control

Neal A. YanosSenior Vice President and General ManagerNorth America Ride Control andAftermarket

Lois BoydVice President and General ManagerCommercial Vehicle Segment and GlobalProgram Management

Alex DrysdaleVice President and Managing DirectorAustralia and New Zealand

Josep FornosVice President and General ManagerEurope Original Equipment Ride Control

Ulrich MehlmannVice President and General ManagerEurope Original Equipment Emission Control

Don MillerVice President and General ManagerEurope Aftermarket

William M. ChurchillVice President, Global EngineeringRide Control

Herman WeltensVice President, Global EngineeringEmission Control

Theo BonneuVice President and Controller, Europe

H. William HaserVice President and Chief Information Officer

John E. KunzVice President and Treasurer

Paul D. NovasVice President, Finance and Administration,Europe

James PerkinsVice President and Controller

James K. SpanglerVice President, Global Communications