Goodyear Tire & Rubber Co. has outlined "operational response" and "financial response" actions it is taking in response to first quarter declines, including a $700 million ceiling on capital expenditures this year.
Operational Response Actions
Earlier today, Goodyear announced that it is taking "swift action to aggressively reduce operating costs and capital expenditures in response to rapid declines in industry volumes. These initiatives follow the company’s previously announced decision to temporarily close its manufacturing facilities in the Americas and Europe, which will reduce conversion costs, improve inventory levels and preserve cash.
"As a result of current conditions, the company expects 2020 capital expenditures to be no more than $700 million."
The Akron, Ohio-based tiremaker also is "implementing actions to reduce its payroll costs through a combination of furloughs, temporary salary reductions and salary deferrals covering over 9,000 of its corporate and business unit associates, including substantial salary reductions and deferrals for the company’s CEO, officers and directors.
"In addition, the company is reducing discretionary spending, including marketing and advertising expenditures. Together, these actions will help to mitigate the financial impact of lower industry demand as a result of COVID-19."
The company says it alsois evaluating opportunities "to accelerate restructuring actions to further improve its cost structure and position the company for recovery."
Financial Response Actions
Goodyear says it has "a strong liquidity position. However, in light of the uncertain environment, the company is taking prudent actions to further strengthen its balance sheet and enhance its financial flexibility."
These include suspending its quarterly dividend to shareholders, which is expected to "preserve" $37 million in cash on a quarterly basis.
In addition, the company refinanced its $2 billion asset-based revolving credit facility, extending the maturity to 2025.
"The refinancing included favorable adjustments to the calculation of the facility’s borrowing base, further strengthening the company’s liquidity position. The covenants in the amended facility are substantially similar to those in the prior facility, and do not include any financial covenants unless the aggregate amount of cash and cash equivalents of Goodyear and its guarantor subsidiaries and the availability under the facility is less than $200 million."