HOUSTON (AP) _ Tenneco Inc. president Michael H. Walsh will assume duties as chief executive officer effective Jan. 1, the company said Monday.

Walsh, 49, was elected chief executive at the company's regular board meeting Dec. 9. He will succeed James L. Ketelsen, who remains board chairman. The board also said it intended to name Walsh chairman of the board at the company's May 12, 1992 annual meeting, when Ketelsen retires.

Walsh came to Tenneco in August after serving as chairman and chief executive officer of the union Pacific Railroad Co. since 1986. Tenneco said then that Walsh would be in line to take over the top duties.

Since joining Tenneco, the company has begun a $2 billion restructuring, which has included sales of $686 million in assets and layoffs of 4,000 employees by the end of 1992 from its JI Case farm and equipment unit.

In October, Tenneco blamed Case for most of a $693 million loss posted for the 1991 third quarter. The company announced Dec. 6 that Edward J. Campbell had been named president of the Racine, Wis.-based unit. Robert J. Carlson kept the posts of Case president and CEO, which he assumed last summer.

Tenneco also has reduced capital spending, cut the company's regular quarterly dividend in half and filed a registration statement with the Securities and Exchange Commission to issue a $500 million stock offering.

''We are on track with our action plan,'' Walsh said. ''We intend to keep our commitment to this program and to make this company financially strong, consistently profitable and growth-oriented.''

Besides its farm and construction equipment operations, the company has interests in the manufacturing of automotive parts, shipbuilding and packaging.