Continued weak global industry demand, peak raw material costs impact results
First quarter sales of $3.5 billion on 20% lower tire volumes
Revenue per tire up 3.4% as Goodyear brand continues market share gains
Goodyear net loss is $333 million ($1.38 per share)
First Quarter 2009 Actions
23 new products launched
$145 million in cost savings achieved
Global work force reduced by 3,800
Inventories reduced by more than $300 million from year-end
AKRON, Ohio, April 29, 2009 - The Goodyear Tire & Rubber Company today reported first quarter 2009 financial results and updated its progress on actions taken to address market and economic challenges around the world.
Our markets presented us with the challenges we expected in the first quarter, and in some cases more,” said Robert J. Keegan, chairman and chief executive officer. “While we aren’t satisfied with our results, they generally reflect the difficult market conditions. Our ongoing innovation played a significant role in driving our first quarter top line as we continued to take the right cost and cash actions to weather the economic downturn and position our company to rapidly take advantage of opportunities as the markets recover.”
2009 Actions Update
Top Line: Goodyear’s 23 new product launches in the first quarter, of the more than 50 planned globally during 2009, are finding early success in the marketplace. In North America, Goodyear-brand market share increased during the first quarter in the consumer and commercial replacement markets.
“Based on the consumers’ purchases and the resultant market share gains we have enjoyed with the Goodyear brand, it is evident that the markets are rewarding innovation – and innovation is the key cornerstone of our overall strategy,” Keegan said.
Cost Actions: Goodyear made additional progress during the first quarter on its Four-Point Cost Savings Plan to achieve $2.5 billion in gross cost savings by the end of 2009. The company achieved $145 million in new savings during the quarter.
During the quarter, the company reduced its global work force by 3,800 associates, which will provide further cost savings in subsequent 2009 quarters.
Cash Initiatives: Goodyear made significant progress toward its goal of reducing inventory by more than $500 million during 2009. The company’s total inventory is more than $300 million below the year-end 2008 level.
“Our actions are fully aligned with the strategy that has served us well over the past several years, a strategy guided by our intense focus on the Seven Strategic Drivers of our business,” Keegan said. “Our future direction is not a new one. We firmly believe we are taking a proven strategic path to the next level of business performance.”
First Quarter Results
The company’s first quarter 2009 sales were $3.5 billion, down from record sales of $4.9 billion in the 2008 quarter. Goodyear’s first quarter 2009 net loss was $333 million ($1.38 per share), compared with Goodyear net income of $147 million (60 cents per share) in the 2008 quarter. All per share amounts are diluted.
The quarter’s sales reflect the $766 million impact of a 20 percent decline in tire unit volume due to significantly lower global industry demand. In addition, unfavorable currency translation reduced sales by $484 million. Sales benefited from price/mix improvements that drove revenue per tire, excluding the impact of foreign currency translation, up 3.4 percent over the 2008 quarter despite a significant drop in commercial truck tire unit volume.
Goodyear’s segment operating loss of $176 million in the quarter reflects weak industry demand across all of its businesses resulting in a negative volume impact of $138 million, under-absorbed fixed costs of approximately $200 million and declines in its other tire related businesses. Higher raw material costs, which increased 31 percent, or approximately $332 million, more than offset improved price/mix of $161 million.
Selling, administrative and general expenses improved by $102 million compared to the 2008 quarter benefiting primarily from foreign currency translation and cost efficiencies.
The 2009 quarter was also impacted by after-tax charges of $57 million (23 cents per share) due to rationalizations, asset write-offs and accelerated depreciation, and a gain of $9 million (4 cents per share) after minority interest primarily due to tax law changes.
Business Segment Results
The company had a segment operating loss of $176 million in the first quarter of 2009, compared to segment operating income of $367 million in the year-ago quarter. See the note at the end of this release for further explanation and a segment operating income reconciliation table.
|North American Tire||First Quarter|
|Segment Operating Income (Loss)||$(189)||$32|
|Segment Operating Margin||(12.2)%||1.6%|
North American Tire’s first quarter 2009 sales declined from last year, reflecting significantly reduced industry demand. Original equipment unit volume declined 49 percent, resulting from lower vehicle production. Replacement tire shipments were down 10 percent.
First quarter sales benefited from improved price/mix as well as market share gains for Goodyear-brand tires in the consumer and commercial replacement markets.
The first quarter 2009 segment operating loss was significantly impacted by lower sales and production levels, which drove a negative volume impact of $37 million, under-absorbed fixed costs of $120 million and declines in its other tire related businesses. Increased raw material costs of $137 million more than offset price/mix improvements of $60 million.
The 2009 quarter benefited from savings resulting from the implementation of the Voluntary Employees’ Beneficiary Association (VEBA) and other actions to reduce costs.
|Europe, Middle East and Africa Tire||First Quarter|
|Segment Operating Income (Loss)||$(50)||$172|
|Segment Operating Margin||(3.9)%||8.8%|
Europe, Middle East and Africa Tire’s first quarter sales declined from last year primarily due to lower tire unit volume, reflecting significantly reduced industry demand and foreign currency translation. Original equipment unit volume declined 47 percent, resulting from lower vehicle production in Europe. Replacement tire shipments were down 9 percent.
The first quarter 2009 segment operating loss was significantly impacted by lower sales and production levels, which drove a negative volume impact of $67 million and under-absorbed fixed costs of $55 million. Increased raw material costs of $111 million more than offset price/mix improvements of $23 million. Price/mix was lower than prior periods due to a significant drop in commercial truck tire volume. Losses were reduced by favorable currency translation and actions to reduce selling, administrative and general expenses.
|Latin American Tire||First Quarter|
|Segment Operating Income||$48||$114|
|Segment Operating Margin||12.5%||21.5%|
Latin American Tire’s first quarter sales declined from last year primarily due to lower tire unit volume, reflecting reduced industry demand and unfavorable foreign currency translation. Original equipment unit volume declined 16 percent, resulting from lower vehicle production. Replacement tire shipments were down 20 percent.
Segment operating income reflected lower sales and production levels, which drove a negative volume impact of $22 million and under-absorbed fixed costs of approximately $15 million. Increased raw material costs of $63 million more than offset price/mix improvements of $57 million.
The 2008 quarter included a $12 million gain from the settlement of an excise tax case.
|Asia Pacific Tire||First Quarter|
|Segment Operating Income||$15||$49|
|Segment Operating Margin||4.4%||10.5%|
Asia Pacific Tire’s first quarter sales declined from last year due to unfavorable foreign currency translation and lower tire unit volume, reflecting reduced industry demand. Original equipment unit volume declined 17 percent, resulting from lower vehicle production. Replacement tire shipments were down 17 percent.
Segment operating income reflected lower sales and production levels, which drove a negative volume impact of $12 million and under-absorbed fixed costs of $10 million. Price/mix improvements of $21 million offset increased raw material costs of $21 million.
Goodyear will hold an investor conference call at 10 a.m. today. Prior to the commencement of the call, the company will post the financial and other related information that will be presented on its investor relations Web site: http://corporate.goodyear.com/en-US/investor.html.
Participating in the conference call will be Robert J. Keegan, chairman and chief executive officer; Darren R. Wells, executive vice president and chief financial officer, and Damon J. Audia, senior vice president, finance and treasurer.
Investors, members of the media and other interested persons may access the conference call on the Web site or via telephone by calling (706) 634-5954 before 9:50 a.m. A taped replay will be available later by calling (706) 645-9291. The replay will also remain available on the Web site.
Goodyear is one of the world’s largest tire companies. It employs approximately 71,000 people and manufactures its products in more than 60 facilities in 25 countries around the world. For more information about Goodyear, go to http://corporate.goodyear.com.
Certain information contained in this press release may constitute forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. There are a variety of factors, many of which are beyond our control, which affect our operations, performance, business strategy and results and could cause our actual results and experience to differ materially from the assumptions, expectations and objectives expressed in any forward-looking statements. These factors include, but are not limited to: deteriorating economic conditions or an inability to access capital markets; our ability to realize anticipated savings and operational benefits from our cost reduction initiatives or to implement successfully other strategic initiatives; actions and initiatives taken by both current and potential competitors; pension plan funding obligations; increases in the prices paid for raw materials and energy; work stoppages, financial difficulties or supply disruptions at our suppliers or customers; a labor strike, work stoppage or other similar event; our failure to comply with a material covenant in our debt obligations; the adequacy of our capital expenditures; potential adverse consequences of litigation involving the company; as well as the effects of more general factors such as changes in general market, economic or political conditions or in legislation, regulation or public policy. Additional factors are discussed in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. In addition, any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.