##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934
 For the quarterly period ended September 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934
 For the transition period from  to
 COMMISSION FILE NUMBER: 0-452
 TECUMSEH PRODUCTS COMPANY
  Michigan(State or other jurisdiction of
    
    38-1093240incorporation or organization)
    
    (IRS Employer Identification Number)1136 OAK VALLEY DRIVEANN ARBOR, MICHIGAN
    
    48108(Address of Principal Executive Offices)
    
    (Zip Code)
 (734) 585-9500
(Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Class B Common Stock, $1.00 Par Value:
    
    
    5,077,746Class A Common Stock, $1.00 Par Value:
    
    
    13,401,938




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##### 



TABLE OF CONTENTS
 PagePART I FINANCIAL INFORMATION:Item 1. Financial StatementsConsolidated Balance Sheets (unaudited)
    
    
    3Consolidated Statements of Operations (unaudited)
    
    
    4Consolidated Statements of Cash Flows (unaudited)
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    29PART II OTHER INFORMATION:Item 1. Legal Proceedings
    
    
    31Item 6. Exhibits
    
    
    32Signatures
    
    
    33Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   Page 2




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PART I. FINANCIAL INFORMATION
 
 Item 1.
Financial Statements.
 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
 
   September 30,
    
    
    December 31,2010
    
    
    2009ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    70.8
    
    
    $
    90.7Restricted cash and cash equivalents
    
    
    16.1
    
    
    
    10.5Accounts receivable, trade, less allowance for doubtful
accounts of $1.2 in 2010 and
2009
    
    
    136.3
    
    
    
    79.4Inventories
    
    
    149.3
    
    
    
    109.6Deferred and recoverable income taxes
    
    
    6.9
    
    
    
    7.4Recoverable non-income taxes
    
    
    59.6
    
    
    
    38.5Fair value of hedge
    
    
    9.2
    
    
    
    11.2Other current assets
    
    
    17.0
    
    
    
    13.4Total current assets
    
    
    465.2
    
    
    
    360.7Property, Plant, and Equipment, net
    
    
    239.0
    
    
    
    259.7Long-term investments
    
    
    
    
    
    
    4.1Prepaid pension expense
    
    
    8.2
    
    
    
    80.3Recoverable non-income taxes
    
    
    42.1
    
    
    
    38.5Other assets
    
    
    18.7
    
    
    
    23.8Total assets
    
    $
    773.2
    
    
    $
    767.1LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable, trade
    
    $
    142.0
    
    
    $
    117.4Short-term borrowings
    
    
    47.7
    
    
    
    23.0Accrued liabilities:Employee compensation
    
    
    33.0
    
    
    
    29.0Product warranty and self-insured risks
    
    
    12.3
    
    
    
    10.6Payroll taxes
    
    
    10.5
    
    
    
    11.1Fair value of hedge
    
    
    
    
    
    
    0.6Other
    
    
    17.8
    
    
    
    19.2Total current liabilities
    
    
    263.3
    
    
    
    210.9Long-term debt
    
    
    16.2
    
    
    
    8.0Deferred income taxes
    
    
    0.1
    
    
    
    7.2Other postretirement benefit liabilities
    
    
    38.8
    
    
    
    41.1Product warranty and self-insured risks
    
    
    4.4
    
    
    
    4.8Pension liabilities
    
    
    24.8
    
    
    
    25.2Other
    
    
    8.1
    
    
    
    6.5Total liabilities
    
    
    355.7
    
    
    
    303.7Stockholders EquityClass A common stock, $1 par value; authorized
75,000,000 shares; issued and outstanding
13,401,938 shares in 2010 and 2009
    
    
    13.4
    
    
    
    13.4Class B common stock, $1 par value; authorized
25,000,000 shares; issued and outstanding
5,077,746 shares in 2010 and 2009
    
    
    5.1
    
    
    
    5.1Paid in capital
    
    
    11.0
    
    
    
    11.0Retained earnings
    
    
    360.8
    
    
    
    411.0Accumulated other comprehensive income
    
    
    27.2
    
    
    
    22.9Total stockholders equity
    
    
    417.5
    
    
    
    463.4Total liabilities and stockholders equity
    
    $
    773.2
    
    
    $
    767.1
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TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
 
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net sales
    
    $
    221.6
    
    
    $
    211.3
    
    
    $
    709.6
    
    
    $
    526.3Cost of sales and operating expenses
    
    
    196.9
    
    
    
    192.3
    
    
    
    625.2
    
    
    
    493.8Gross Profit
    
    
    24.7
    
    
    
    19.0
    
    
    
    84.4
    
    
    
    32.5Selling and administrative expenses
    
    
    27.5
    
    
    
    29.6
    
    
    
    85.6
    
    
    
    95.3Impairments, restructuring charges, and other items
    
    
    0.9
    
    
    
    3.6
    
    
    
    49.4
    
    
    
    10.6Operating loss
    
    
    (3.7
    )
    
    
    (14.2
    )
    
    
    (50.6
    )
    
    
    (73.4
    )Interest expense
    
    
    2.4
    
    
    
    3.0
    
    
    
    8.0
    
    
    
    8.0Interest income and other, net
    
    
    0.3
    
    
    
    0.5
    
    
    
    0.9
    
    
    
    1.9Loss from continuing operations before taxes
    
    
    (5.8
    )
    
    
    (16.7
    )
    
    
    (57.7
    )
    
    
    (79.5
    )Tax benefit
    
    
    2.8
    
    
    
    1.2
    
    
    
    4.7
    
    
    
    14.9Loss from continuing operations
    
    
    (3.0
    )
    
    
    (15.5
    )
    
    
    (53.0
    )
    
    
    (64.6
    )Income (loss) from discontinued operations, net of tax
    
    
    (0.2
    )
    
    
    1.4
    
    
    
    2.8
    
    
    
    1.7Net loss
    
    $
    (3.2
    )
    
    $
    (14.1
    )
    
    $
    (50.2
    )
    
    $
    (62.9
    )Basic and diluted loss per share (a):Loss from continuing operations
    
    $
    (0.16
    )
    
    $
    (0.84
    )
    
    $
    (2.87
    )
    
    $
    (3.50
    )Income (loss) from discontinued operations, net of tax
    
    
    (0.01
    )
    
    
    0.08
    
    
    
    0.15
    
    
    
    0.10Net loss per share
    
    $
    (0.17
    )
    
    $
    (0.76
    )
    
    $
    (2.72
    )
    
    $
    (3.40
    )Weighted average shares, basic and diluted (in thousands)
    
    
    18,480
    
    
    
    18,480
    
    
    
    18,480
    
    
    
    18,480Cash dividends declared per share
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00
 (a)
    
    On April 9, 2007, we issued a warrant to a lender to purchase 1,390,944 shares of our Class A
Common Stock, which is equivalent to 7% of our fully diluted common stock (including both
Class A and Class B shares). This warrant, which expires in 2011, is not included in diluted
per share information, as the effect would be antidilutive.   Page 4




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TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
 
   Nine Months EndedSeptember 30,2010
    
    
    2009Cash Flows from Operating Activities:Net loss
    
    $
    (50.2
    )
    
    $
    (62.9
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    29.8
    
    
    
    30.5Amortization of debt-issuance costs
    
    
    1.1
    
    
    
    0.3Impairment of long-lived assets and goodwill
    
    
    
    
    
    
    2.2Impairment of prepaid asset
    
    
    
    
    
    
    1.5Gain on disposal of property and equipment
    
    
    0.6
    
    
    
    2.4Non-cash settlement of hourly pension plan reversion
    
    
    29.4
    
    
    
    Non-cash curtailment of post-retirement benefits
    
    
    (7.0
    )
    
    
    Deferred income taxes
    
    
    (6.6
    )
    
    
    5.8Share based compensation
    
    
    1.3
    
    
    
    (4.4
    )Investment impairment
    
    
    0.4
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (56.0
    )
    
    
    0.9Inventories
    
    
    (38.5
    )
    
    
    31.0Payables and accrued expenses
    
    
    28.2
    
    
    
    (3.4
    )Employee retirement benefits
    
    
    (5.6
    )
    
    
    (10.0
    )Hourly pension plan reversion
    
    
    54.5
    
    
    
    Recoverable non-income taxes
    
    
    (21.7
    )
    
    
    (17.4
    )Other
    
    
    (1.6
    )
    
    
    12.7Cash used in operating activities
    
    
    (41.9
    )
    
    
    (10.8
    )Cash Flows from Investing Activities:Capital expenditures
    
    
    (5.3
    )
    
    
    (5.7
    )Short and long term investments
    
    
    4.1
    
    
    
    (0.2
    )Change in restricted cash and cash equivalents
    
    
    (5.7
    )
    
    
    1.2Proceeds (payments made) from sale of assets
    
    
    0.2
    
    
    
    (13.3
    )Cash used in investing activities
    
    
    (6.7
    )
    
    
    (18.0
    )Cash Flows from Financing Activities:Other borrowings (repayments), net
    
    
    30.7
    
    
    
    (3.0
    )Cash provided by (used in) financing activities
    
    
    30.7
    
    
    
    (3.0
    )Effect of Exchange Rate Changes on Cash
    
    
    (2.0
    )
    
    
    3.6Decrease in cash and cash equivalents
    
    
    (19.9
    )
    
    
    (28.2
    )Cash and Cash Equivalents:Beginning of Period
    
    
    90.7
    
    
    
    113.1End of Period
    
    $
    70.8
    
    
    $
    84.9Cash paid (refunds received) for taxes
    
    $
    0.1
    
    
    $
    (13.2
    )Cash paid for interest
    
    $
    6.4
    
    
    $
    9.1
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TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES
 
   NOTE 1. Accounting Policies
  Reclassification
  Use of Estimates
   NOTE 2. Discontinued Operations
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(In Millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net sales
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.8Cost of sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6Selling and administrative expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5Impairments, restructuring charges, and other items
    
    
    0.5
    
    
    
    (2.4
    )
    
    
    (4.6
    )
    
    
    (2.8
    )Operating (loss) income from discontinued operations before
income taxes
    
    
    (0.5
    )
    
    
    2.4
    
    
    
    4.6
    
    
    
    2.5Income tax (benefit) provision on discontinued operations
    
    
    (0.3
    )
    
    
    1.0
    
    
    
    1.8
    
    
    
    0.8Operating (loss) income from discontinued operations after
income taxes
    
    $
    (0.2
    )
    
    $
    1.4
    
    
    $
    2.8
    
    
    $
    1.7
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NOTE 3. Inventories
  September 30,
    
    
    December 31,(In Millions)
    
    2010
    
    
    2009Raw materials, net of reserves
    
    $
    75.5
    
    
    $
    54.9Work in progress
    
    
    2.3
    
    
    
    4.3Finished goods, net of reserves
    
    
    71.5
    
    
    
    50.4$
    149.3
    
    
    $
    109.6
  NOTE 4. Property, Plant and Equipment, net
  September 30,
    
    
    December 31,(In Millions)
    
    2010
    
    
    2009Land and land improvements
    
    $
    16.3
    
    
    $
    16.5Buildings
    
    
    97.4
    
    
    
    107.5Machinery and Equipment
    
    
    888.6
    
    
    
    892.11,002.3
    
    
    
    1,016.1Less accumulated depreciation
    
    
    765.9
    
    
    
    759.4236.4
    
    
    
    256.7Construction in process
    
    
    2.6
    
    
    
    3.0Property, plant and equipment, net
    
    $
    239.0
    
    
    $
    259.7
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NOTE 5. Pension and Other Postemployment Benefit (OPEB) Plans
  Pension Benefits
    
    
    Other BenefitsThree Months
    
    
    Three MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,(In Millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    0.5
    
    
    $
    0.6
    
    
    $
    0.1
    
    
    $
    0.1Interest cost
    
    
    2.0
    
    
    
    2.9
    
    
    
    0.5
    
    
    
    0.6Expected return on plan assets
    
    
    (2.1
    )
    
    
    (4.1
    )
    
    
    
    
    
    
    Amortization of net loss (gain)
    
    
    0.4
    
    
    
    
    
    
    
    (1.2
    )
    
    
    (2.4
    )Amortization of actuarial transition obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Additional expense due to curtailments,
settlements and terminations (see below)
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    Net periodic expense (benefit)
    
    $
    1.0
    
    
    $
    (0.6
    )
    
    $
    (0.6
    )
    
    $
    (1.8
    )
 Pension Benefits
    
    
    Other BenefitsNine Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(In Millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    1.5
    
    
    $
    1.8
    
    
    $
    0.3
    
    
    $
    0.4Interest cost
    
    
    6.7
    
    
    
    8.8
    
    
    
    1.6
    
    
    
    1.9Expected return on plan assets
    
    
    (8.2
    )
    
    
    (12.2
    )
    
    
    
    
    
    
    Amortization of net loss (gain)
    
    
    1.1
    
    
    
    (0.1
    )
    
    
    (3.7
    )
    
    
    (7.4
    )Amortization of actuarial transition obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Additional expense (income) due to
curtailments, settlements and terminations
(see below)
    
    
    29.6
    
    
    
    0.5
    
    
    
    (6.8
    )
    
    
    Net periodic expense (benefit)
    
    $
    30.7
    
    
    $
    (1.2
    )
    
    $
    (8.6
    )
    
    $
    (5.4
    )
       Page 8




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NOTE 6. Recoverable Non-income Taxes
    September 30,
    
    
    December 31,(In Millions)
    
    2010
    
    
    2009Brazil
    
    $
    81.6
    
    
    $
    67.7India
    
    
    12.8
    
    
    
    7.1Europe
    
    
    7.3
    
    
    
    2.2Total recoverable non-income taxes
    
    $
    101.7
    
    
    $
    77.0
  NOTE 7. Warranties
   Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended(In Millions)
    

September
30, 2010
    
    

September
30, 2009Balance at January 1,
    
    $
    5.1
    
    
    $
    6.6Settlements made (in cash or in kind)
    
    
    (3.6
    )
    
    
    (4.1
    )Current year accrual
    
    
    4.2
    
    
    
    3.6Adjustments to preexisting warranties
    
    
    
    
    
    
    (1.1
    )Effect of foreign currency translation
    
    
    
    
    
    
    0.3Balance at September 30,
    
    $
    5.7
    
    
    $
    5.3
  NOTE 8. Debt
    Page 9




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NOTE 9. Comprehensive Income (Loss)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(In Millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net loss
    
    $
    (3.2
    )
    
    $
    (14.1
    )
    
    $
    (50.2
    )
    
    $
    (62.9
    )Other comprehensive income (loss), net of taxForeign currency translation adjustments
    
    
    19.6
    
    
    
    18.0
    
    
    
    5.6
    
    
    
    53.3Gain(Loss) on derivatives, net of tax
    
    
    6.0
    
    
    
    3.9
    
    
    
    (3.1
    )
    
    
    31.1Total comprehensive income (loss)
    
    $
    22.4
    
    
    $
    7.8
    
    
    $
    (47.7
    )
    
    $
    21.5
  Page 10




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NOTE 10. Share-Based Compensation Arrangements
      September 30, 2010
    
    September 30, 2009Risk-free interest rate
    
    1.07-1.70%
    
    2.93%Dividend yield
    
    0.0%
    
    0.0%Expected life (years)
    
    4.4-6.3 years
    
    5.4-6.8 yearsVolatility
    
    88.33%
    
    91.65%
  NOTE 11. Impairments, Restructuring Charges, and Other Items
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,(In Millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Legal Settlement
    
    $
    
    
    
    $
    
    
    
    $
    7.3
    
    
    $
    Environmental reserve on held-for-sale building
    
    
    
    
    
    
    
    
    
    
    1.2
    
    
    
    2.3Severance, restructuring costs, and special termination benefits
    
    
    0.7
    
    
    
    1.1
    
    
    
    1.7
    
    
    
    5.5Curtailment Gain
    
    
    
    
    
    
    
    
    
    
    (0.4
    )
    
    
    Settlement loss on the hourly pension plan reversion
    
    
    0.2
    
    
    
    
    
    
    
    29.4
    
    
    
    Excise tax expense on proceeds from hourly retirement plan reversion
    
    
    
    
    
    
    
    
    
    
    10.9
    
    
    
    Impairment of Investment
    
    
    
    
    
    
    1.0
    
    
    
    0.3
    
    
    
    1.0Final settlement of previously terminated salary retirement plan,
net of excise tax
    
    
    
    
    
    
    
    
    
    
    (1.0
    )
    
    
    Loss on transfer of surplus land
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3Impairment of prepaid outside sales expense
    
    
    
    
    
    
    1.5
    
    
    
    
    
    
    
    1.5Total impairments, restructuring charges, and other items
    
    $
    0.9
    
    
    $
    3.6
    
    
    $
    49.4
    
    
    $
    10.6
  Page 11




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(In Millions)
    
    Severance
    
    
    Excise Tax
    
    
    Legal
    
    
    Other
    
    
    TotalBalance at January 1, 2010
    
    $
    9.7
    
    
    $
    
    
    
    $
    
    
    
    $
    1.8
    
    
    $
    11.5Accruals
    
    
    1.3
    
    
    
    10.9
    
    
    
    7.3
    
    
    
    1.2
    
    
    
    20.7Payments
    
    
    (10.4
    )
    
    
    (10.9
    )
    
    
    (7.3
    )
    
    
    (0.5
    )
    
    
    (29.1
    )Balance at September 30, 2010
    
    $
    0.6
    
    
    $
    
    
    
    $
    
    
    
    $
    2.5
    
    
    $
    3.1
  NOTE 12. Income Taxes
      Page 12




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NOTE 13. Fair Value
  Level 1
    
    Valuation is based upon quoted prices for identical instruments traded in active markets.Level 2
    
    Valuation is based upon quoted prices for similar instruments in active markets, quoted
prices for identical or similar instruments in markets that are not active, and model-based
valuation techniques for which all significant assumptions are observable in the market.Level 3
    
    Valuation is generated from model-based techniques that use at least one significant
assumption not observable in the market. These unobservable assumptions reflect estimates of
assumptions that market participants would use in pricing the asset or liability.
  Total Fair(In Millions)
    
    Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Assets:Commodity futures contracts
    
    $
    4.7
    
    
    $
    
    
    
    $
    4.7
    
    
    $
    Foreign currency derivatives
    
    
    4.5
    
    
    
    
    
    
    
    4.5
    
    
    
    Balance as of September 30, 2010
    
    $
    9.2
    
    
    $
    
    
    
    $
    9.2
    
    
    $
    
  Auction Rate
    
    
    Auction Rate(In Millions)
    
    Certificates
    
    
    Securities RightsBalance at January 1, 2010
    
    $
    3.9
    
    
    $
    0.2Payments on principal
    
    
    (4.2
    )
    
    
    Gains (losses) included in investment income
    
    
    0.3
    
    
    
    (0.2
    )Balance at September 30, 2010
    
    $
    
    
    
    $
    
   Page 13




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NOTE 14. Derivative Instruments and Hedging Activities
      Asset (Liability) DerivativesSeptember 30, 2010
    
    
    December 31, 2009Financial
    
    
    
    
    
    Financial(In Millions)
    
    Position Location
    
    Fair Value
    
    
    Position Location
    
    Fair ValueDerivatives designated as hedging instrumentsCommodity futures contracts
    
    Fair value of hedge (asset)
    
    $
    4.7
    
    
    Fair value of hedge (asset)
    
    $
    5.4Commodity futures contracts
    
    Fair value of hedge (liability)
    
    
    
    
    
    Fair value of hedge (liability)
    
    
    (0.4
    )Foreign currency derivatives
    
    Fair value of hedge  (asset)
    
    
    4.5
    
    
    Fair value of hedge (asset)
    
    
    5.8Foreign currency derivatives
    
    Fair value of hedge  (liability)
    
    
    
    
    
    Fair value of hedge (liability)
    
    
    (0.2
    )Total derivatives designated as hedging
instruments
    
    
    
    $
    9.2
    
    
    
    
    $
    10.6
  Page 14




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Location ofGain (Loss)Amount of Gain (Loss)
    
    
    Reclassified
    
    Amount of Gain (Loss)recognized in OCI (effective
    
    
    from AOCI
    
    Reclassified from AOCI intoPortion)
    
    
    into Income
    
    Income (Effective Portion)(In Millions)
    
    September 30,
    
    
    September 30,
    
    
    (Effective
    
    September 30,
    
    
    September 30,Three Months Ended
    
    2010
    
    
    2009
    
    
    Portion)
    
    2010
    
    
    2009Commodity futures
contracts
    
    $
    4.1
    
    
    $
    (5.5
    )
    
    Cost of sales
    
    $
    2.0
    
    
    $
    1.4Foreign currency
derivatives
    
    
    5.9
    
    
    
    11.6
    
    
    Net sales
    
    
    0.9
    
    
    
    0.2Total
    
    $
    10.0
    
    
    $
    6.1
    
    
    
    
    $
    2.9
    
    
    $
    1.6September 30,
    
    
    September 30,
    
    
    
    
    September 30,
    
    
    September 30,Nine Months Ended
    
    2010
    
    
    2009
    
    
    
    
    2010
    
    
    2009Commodity futures
contracts
    
    $
    4.2
    
    
    $
    10.5
    
    
    Cost of sales
    
    $
    5.4
    
    
    $
    (2.5
    )Foreign currency
derivatives
    
    
    4.5
    
    
    
    26.4
    
    
    Net sales
    
    
    5.6
    
    
    
    (6.1
    )Total
    
    $
    8.7
    
    
    $
    36.9
    
    
    
    
    $
    11.0
    
    
    $
    (8.6
    )
 Location ofGain (Loss)Amount of Gain (Loss)
    
    
    Reclassified
    
    Amount of Gain (Loss)recognized in OCI (Ineffective
    
    
    from AOCI
    
    Reclassified from AOCI intoPortion)
    
    
    into Income
    
    Income (Ineffective Portion)(In Millions)
    
    September 30,
    
    
    September 30,
    
    
    (Ineffective
    
    September 30,
    
    
    September 30,Three Months Ended
    
    2010
    
    
    2009
    
    
    Portion)
    
    2010
    
    
    2009Commodity futures
contracts
    
    $
    
    
    
    $
    (0.4
    )
    
    Cost of sales
    
    $
    
    
    
    $
    0.3Foreign currency
derivatives
    
    
    
    
    
    
    
    
    
    Net sales
    
    
    
    
    
    
    Total
    
    $
    
    
    
    $
    (0.4
    )
    
    
    
    $
    
    
    
    $
    0.3
 September 30,
    
    
    September 30,
    
    
    
    
    September 30,
    
    
    September 30,Nine Months Ended
    
    2010
    
    
    2009
    
    
    
    
    2010
    
    
    2009Commodity futures
contracts
    
    $
    
    
    
    $
    0.6
    
    
    Cost of sales
    
    $
    
    
    
    $
    0.6Foreign currency
derivatives
    
    
    
    
    
    
    
    
    
    Net sales
    
    
    
    
    
    
    Total
    
    $
    
    
    
    $
    0.6
    
    
    
    
    $
    
    
    
    $
    0.6
  NOTE 15. Commitments and Contingencies
 Accounts Receivables
  Purchase Commitments
  Letters of Credit
   Page 15




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Litigation
 General
  U.S. Horsepower label litigation
 th
 Canadian Horsepower label litigation
   Page 16




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Compressor industry antitrust investigation
        Page 17




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##### Table of Contents



Platinum
  Environmental Matters
    Page 18




---



##### Table of Contents



NOTE 16. Recently Issued Accounting Pronouncements
  NOTE 17. Subsequent Events
   Page 19




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 CAUTIONARY STATEMENTS RELATING TO FORWARD LOOKING STATEMENTS
     EXECUTIVE SUMMARY
  Economy
   Page 20




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Commodities
       Currency Exchange
  Liquidity
   Page 21




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RESULTS OF OPERATIONS
 Three Months Ended September 30, 2010 vs. Three Months Ended September 30, 2009
  Three Months Ended September 30,(Dollars In Millions)
    
    2010
    
    
    %
    
    
    2009*
    
    
    %Net sales
    
    $
    221.6
    
    
    
    100.0
    %
    
    $
    211.3
    
    
    
    100.0
    %Cost of sales and operating expenses
    
    
    196.9
    
    
    
    88.9
    %
    
    
    192.3
    
    
    
    91.0
    %Gross Profit
    
    
    24.7
    
    
    
    11.1
    %
    
    
    19.0
    
    
    
    9.0
    %Selling and administrative expenses
    
    
    27.5
    
    
    
    12.4
    %
    
    
    29.6
    
    
    
    14.0
    %Impairments, restructuring charges, and other items
    
    
    0.9
    
    
    
    0.4
    %
    
    
    3.6
    
    
    
    1.7
    %Operating loss
    
    
    (3.7
    )
    
    
    (1.7
    )%
    
    
    (14.2
    )
    
    
    (6.7
    )%Interest expense
    
    
    2.4
    
    
    
    1.0
    %
    
    
    3.0
    
    
    
    1.4
    %Interest income and other, net
    
    
    0.3
    
    
    
    0.1
    %
    
    
    0.5
    
    
    
    0.2
    %Loss from continuing operations before taxes
    
    
    (5.8
    )
    
    
    (2.6
    )%
    
    
    (16.7
    )
    
    
    (7.9
    )%Tax benefit
    
    
    2.8
    
    
    
    1.3
    %
    
    
    1.2
    
    
    
    0.6
    %Net loss from continuing operations
    
    $
    (3.0
    )
    
    
    (1.3
    )%
    
    $
    (15.5
    )
    
    
    (7.3
    )%
 *
    
    The Paris Tennessee operation reclassification decreases net loss from continuing
operations, net of tax, by $0.7 million for the quarter ended September 30, 2009.    Page 22




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Nine Months Ended September 30, 2010 vs. Nine Months Ended September 30, 2009
  Nine Months Ended September 30,(Dollars In Millions)
    
    2010
    
    
    %
    
    
    2009*
    
    
    %Net sales
    
    $
    709.6
    
    
    
    100.0
    %
    
    $
    526.3
    
    
    
    100.0
    %Cost of sales and operating expenses
    
    
    625.2
    
    
    
    88.1
    %
    
    
    493.8
    
    
    
    93.8
    %Gross Profit
    
    
    84.4
    
    
    
    11.9
    %
    
    
    32.5
    
    
    
    6.2
    %Selling and administrative expenses
    
    
    85.6
    
    
    
    12.1
    %
    
    
    95.3
    
    
    
    18.1
    %Impairments, restructuring charges, and other items
    
    
    49.4
    
    
    
    6.9
    %
    
    
    10.6
    
    
    
    2.0
    %Operating loss
    
    
    (50.6
    )
    
    
    (7.1
    )%
    
    
    (73.4
    )
    
    
    (13.9
    )%Interest expense
    
    
    8.0
    
    
    
    1.1
    %
    
    
    8.0
    
    
    
    1.5
    %Interest income and other, net
    
    
    0.9
    
    
    
    0.1
    %
    
    
    1.9
    
    
    
    0.3
    %Loss from continuing operations before taxes
    
    
    (57.7
    )
    
    
    (8.1
    )%
    
    
    (79.5
    )
    
    
    (15.1
    )%Tax benefit
    
    
    4.7
    
    
    
    0.7
    %
    
    
    14.9
    
    
    
    2.8
    %Net loss from continuing operations
    
    $
    (53.0
    )
    
    
    (7.4
    )%
    
    $
    (64.6
    )
    
    
    (12.3
    )%
 *
    
    The Paris Tennessee operation reclassification increases net loss from continuing
operations, net of tax, by $0.6 million for the nine months ended September 30, 2009.   Page 23




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Page 24




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LIQUIDITY AND CAPITAL RESOURCES
   Cash Flow
         Page 25




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##### Table of Contents



Liquidity Sources
 Credit Facilities and Cash on Hand
   Cash inflows related to taxes
   Accounts Receivable Sales
  Adequacy of Liquidity Sources
   Page 26




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OFF-BALANCE SHEET ARRANGEMENTS
  CONTRACTUAL OBLIGATIONS
  SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES
   OUTLOOK
         Page 27




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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  Credit Risk 
  Interest Rate Risk 
 Commodity Price Risk 
    Page 28




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Foreign Currency Exchange Risk 
     
 Item 4. Controls and Procedures.
     Page 29




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##### Table of Contents



Changes In Internal Control Over Financial Reporting
  Limitations On The Effectiveness Of Controls And Procedures
    Page 30




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
 Kahn shareholder lawsuit
  Canadian Horsepower label litigation
 Canadian
Horsepower label litigation
 U.S. Horsepower label litigation
 U.S. Horsepower label
litigation
 Compressor industry antitrust investigation
 Compressor
industry antitrust investigation
 Platinum
 Platinum
 Other litigation
  Form
10-Q
  Page 31




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Item 6. Exhibits
 ExhibitNumber
    
    Description31.1
    
    
    Certifications of the Principal Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certifications of the Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of the Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of the Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
  Page 32




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TECUMSEH PRODUCTS COMPANY(Registrant)Date: November 4, 2010
    
    By:
    
    /s/ James J. ConnorJames J. ConnorVice President, Treasurer and Chief Financial Officer(Duly Authorized and Principal Financial Officer)
  Page 33




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EXHIBIT INDEX
 ExhibitNumber
    
    Description31.1
    
    
    Certifications of the Principal Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certifications of the Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of the Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of the Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.