Goodyear eyes recovery after steep decline in first quarter earnings

Akron, Ohio – Goodyear has posted a 59% decline in segment operating income, to $125 million (€113 million), on first quarter net sales of $4,941 million, 0.7% higher – or 4% excluding foreign currency effects – than in the same period last year.

Sales gains from a stronger price/mix, were largely offset by the effect of lower volume and the impact of foreign exchange, the Akron-based tire maker reported 4 May.

Unit volume, however, fell 7.1% year-on-year to 41.8 million units, reflecting “a weaker replacement industry driven by a strong comparable period and channel destocking.”

Overall replacement demand for consumer tires fell by around 6%, while commercial replacement markets in the Americas and EMEA came in about 7% down on the same period a year ago.

Goodyear was also buffeted by the continued impact of inflation on its markets as well as overall weak European results, continued the US group’s ‘letter to investors’.

The steep fall in operating income was linked to the impact of lower volume, down by $138 million – including $73 million from lower sales volumes and $65 million from a previous reduction in production to align with industry demand.

Price/mix gains of $418 million more than offset raw material cost increases of $304 million and, in turn, offset most of a $185-million impact “related to cost inflation and other cost increases.”

“While our first quarter results were significantly impacted by weak industry volumes and inflation, we are driving toward strong operating results as we move through the year, particularly in Americas and Asia Pacific,” said Goodyear leader Richard Kramer.

Goodyear, he added, anticipates relative stability in industry demand during the third quarter and a resumption of year-over-year growth in the fourth quarter, particularly given significant declines in the prior-year period.

The tire maker should also benefit from decreases in raw material costs and moderation in inflation, according to Goodyear’s chairman, CEO & president.

“As a result, even in this relatively low demand environment, and with the full benefits of the Cooper Tire synergies, we expect to achieve second-half segment operating margin… much closer to our near-term target of 8%,” he stated.

“What’s more, the actions we will take to reduce our costs and further leverage our value proposition will drive margin higher in the years to come,” concluded Kramer.