Lower volume dampens Goodyear profitability in 2nd quarter

Akron, Ohio -- Weak demand in the North American consumer

replacement market kept a lid on Goodyear´s sales in the second quarter

as charges relating to cost-cutting moves cut drastically into the tyre

maker´s profit.

Goodyear´s sales rose 3 percent to $5.14

billion from $4.99 billion the prior year. Net income fell drastically

to $2 million from $69 million a year ago. Profits were affected

negatively by rationalisation and depreciation costs of about $63

million related to plant closings in the United Kingdom and New

Zealand.

Tyre unit volume in the quarter fell 4.3

percent to 54 million units from 56.4 million units a year ago. Raw

material costs also dampened results, with an increase in the quarter

of 16 percent.

Total segment operating income fell 15.5

percent to $267 million from $316 million in 2005. North American Tire

took a substantial hit as its segment operating income fell almost 90

percent to $6 million from $55 million a year ago. Tyre unit volume

fell 7.9 percent in the North American business for the quarter to 23.3

million units.

Sales in the unit rose 1.9 percent to $2.34 billion and revenue per tyre rose 9 percent in the segment and 7 percent overall.

Goodyear said the unit´s profitability was

impacted negatively by lower volume, price mix that was unable to

offset raw material costs, the loss of profits from divested businesses

and higher costs in general.

"Our strategy to focus on high-value-added

products and key market segments resulted in market share gains for our

Goodyear and Dunlop brands during the quarter," Chairman and CEO Robert

Keegan said in a statement. "However, we were not able to offset the

impact of weakness in the lower-value segments of the North American

consumer replacement tire market."

For the first half of the year, Goodyear´s

sales rose 2.4 percent to $10 billion from $9.76 billion last year. Net

income fell 44.5 percent to $76 million from $137 million.

North American Tire´s sales rose 3.3

percent to $4.58 billion as tyre unit volume slipped 7.3 percent to

46.9 million units in the half. Segment operating income for the half

fell 25.8 percent to $49 million.