"Given the 38% drop in the S&P 500 index in 2008, the pension assets of all U.S. tire manufacturers plunged," said Saul Ludwig in the latest installment of the "Ludwig Report" in Modern Tire Dealer magazine.
"In the case of Goodyear Tire & Rubber Co., it probably means that their pension expense in 2009 could be as much as $175 million higher than in 2008, and in the case of Cooper Tire, maybe $40 million more.
"While raw material prices are falling, the pension expense is significant and cannot be ignored," Ludwig said. "I expect 2009 to be challenging so the manufacturers will try to hold the line on pricing as long as possible."
Ludwig is a managing director with KeyBanc Capital Markets Inc., based in Cleveland, Ohio. Look for the full "Ludwig Report" in the February issue of Modern Tire Dealer magazine.
