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Goodyear posts loss, but tops expectations

Goodyear posts loss, but tops expectations
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First Published: Thu, Jul 30 2009. 07 38 PM IST
Updated: Thu, Jul 30 2009. 07 38 PM IST
Detroit: Goodyear Tire & Rubber Co posted a loss on Thursday that was smaller than analysts had expected as the downturn in the North American and European economies pressured results.
Goodyear, the largest US tire maker, said there were indications that the severe economic downturn that has pressured the company over the past three fiscal quarters was easing.
“We are beginning to see some signs of economic stabilization and recovery, although still fragile at this stage and varied around the globe,” chief executive Bob Keegan said in a statement.
The net loss amounted to $221 million, or 92 cents per share, for the second quarter, compared with a profit of $75 million, or a 31 cents per share, a year earlier.
Excluding one-time items, Goodyear posted a 35 cent-per- share loss while analysts on average had expected it to report a loss of 70 cents per share on that basis, according to Reuters Estimates.
Revenue fell 25% to $3.94 billion. Analysts had expected $3.8 billion.
Goodyear reported operating losses in its largest unit, North American Tire, and in its Europe, Middle East and Africa unit. It posted an operating earnings decline in the Latin America unit and operating income growth in its Asia Pacific unit.
Tire unit volume fell 17% in the second quarter from a year earlier, with sales to vehicle builders in North America and Europe plunging 55% and 33% respectively.
As with Ford Motor Co and many auto parts suppliers and car dealership groups, Goodyear results improved sequentially from the first quarter when US auto sales, for example, were falling to the lowest levels in three decades.
Goodyear has come under pressure from US auto production declines since late last year, though direct sales of tires to vehicle manufacturers account for about 30% of unit volume and 20% of revenue overall.
Demand from the replacement market, which accounts for 70% of unit volume and 80% of revenue because of higher margins, also has dropped during the economic downturn.
Replacement tire shipments fell 4% in North America in the second quarter and 10% in its European unit, Goodyear said.
Goodyear is in a long-term restructuring that is taking out excess production capacity across the globe to focus on more expensive tires that command higher profit margins.
The tire maker said it was focusing on the middle of the market. Sales of the most expensive and least expensive tires have been pressured during the downturn as customers who can afford to buy tires look for cheaper alternatives and cash-strapped drivers put off replacing tires altogether.
Goodyear reported progress in planned inventory reductions and capacity cuts and said it had already surpassed its goal for job cuts in 2009.
Goodyear cut 5,500 jobs in the first half of the year, ahead of its plan to cut 5,000 for the year. The Akron, Ohio-based automaker had 75,000 employees worldwide at the end of 2008.
In June, Goodyear said it would cut excess capacity in Tennessee, and in July, it said it would close a tire plant in the Philippines by the end of the third quarter, eliminating 500 of the 600 jobs it has in the country.
Goodyear shares closed at $13.89 Wednesday on the New York Stock Exchange. The stock has more than doubled since the start of the year.
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First Published: Thu, Jul 30 2009. 07 38 PM IST