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Goodyear Still Expects 50% Volume Drop During Second Quarter

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Goodyear Still Expects 50% Volume Drop During Second Quarter

Goodyear Tire & Rubber Co. thought its volume would be down “around 50%” during the second quarter of 2020, Darren Wells, the company’s executive vice president and chief financial officer, said June 10 during the Deutsche Bank Global Auto Industry Conference. “I think that estimate still holds."

“The downside for us has been a slower-than-originally-expected OE start-up,” he said. "Hopefully, June and July see OE volume getting back to more normalized levels.”

The Akron, Ohio-based tiremaker’s replacement volume was down 33% in May “from a year ago,” said Wells. “The other element in our U.S. replacement tire business is that Wal-Mart has not opened their auto service centers as quickly as we had hoped for.”

Wal -Mart “remains our single largest channel," he noted, and represents "a significant part" of Goodyear's replacement tire business in the United States. "We feel as they get those (auto service) centers reopened, that volume will come back.”

Moving forward, “we’re expecting a little bit better replacement volume and a little worse OE volume.”

During the presentation, Wells also addressed Goodyear’s manufacturing plans. He stated that the company’s production will be down by more than 26 million units during the second quarter versus one year ago. (On April 30, it was announced that Goodyear would reopen its North American manufacturing plants by the end of May.)

He added that the tiremaker is taking the current situation as “an opportunity to change the way we run our manufacturing ticket so we are able to improve customer service levels at lower levels of inventory. That’s one of the benefits of having some extra manufacturing capacity.”

Wells also mentioned cost-saving measures that Goodyear has implemented, including a $65 million reduction related to salaries and personnel, plus an additional $75 million reduction in selling, general and administrative expenses. “Cost actions we have taken for the quarter still remain directionally correct.”

Wells addressed Goodyear’s retail store network. “We continue to feel like there is a lot of benefit to us – maybe an increasing benefit – in having support from our retail footprint.” He mentioned that “we’ve seen good traffic coming back to our stores.”

In May, the company’s online sales increased 50% year-over-year, which Wells called “a reflection of changing consumer preferences. In this environment, shopping online is making more sense to people. It’s supported by the mobile fitment option we offer in some markets.”

The number of mobile tire installations performed by Goodyear “has risen dramatically,” he noted.

Moving forward, Wells said that “I think really when we’re looking at what we need to do to repair the balance sheet, we are certainly focused on what it takes to get back to positive cash flow. I think some of the actions we’ve taken – including suspending our dividend and cutting back on (capital expenditures) – are in the direction of setting us up” to generate cash.

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