Goodyear releases fourth quarter 2008 results
The Goodyear Tire & Rubber Co. today reported fourth quarter 2008 sales were $4.1 billion, down from $5.2 billion in the 2007 quarter, despite increases in Goodyear-branded market share.
The company's net loss was $330 million, compared with net income of $52 million in the 2007 quarter.
"Given lower industry demand, we are taking aggressive action, reducing tire production, cutting costs and adjusting investments to better match market conditions," says Robert Keegan, chairman and chief executive officer.
"The many positive actions we took and the results we achieved in 2008 provide a base from which we will address the market challenges we will inevitably face in 2009," he says.
Keegan announced actions to address the economic environment in 2009.
The company plans an unprecedented number of new product launches in 2009, with more than 50 new tires being introduced globally.
Targeted to key segments, these include the new Assurance Fuel Max tire introduced earlier this month in North America and more recently announced as original equipment on the new Chevrolet Volt electric vehicle. Significant launches that showcase Goodyear's innovative new products will be made across all geographic regions.
Goodyear also plans to further reduce costs by approximately $700 million in 2009 and has therefore raised its four-point cost savings plan target to $2.5 billion. Actions include:
* Further reductions in personnel levels by nearly 5,000 in addition to 4,000 reductions in the second half of 2008 and freezing salaries.
* New cost control policies to eliminate non-essential discretionary spending.
* Purchasing actions to lower the cost of both raw materials and indirect materials.
* Cutting capital expenditures to between $700 million and $800 million.
* Reducing inventory levels by more than $500 million.
* Pursuing the sale of non-core assets
"Collectively, these actions address the new economic realities," saiys Keegan. "We will remain flexible and are prepared to take additional actions if market conditions warrant. Our goal is to ensure Goodyear is positioned for success when tire markets recover."
Fourth quarter results:
Goodyear's fourth quarter 2008 sales were $4.1 billion, compared with $5.2 billion in the 2007 quarter. The 2008 sales reflect the $774 million negative impact resulting from a 19% reduction in tire volume due to a rapid deterioration in industry demand around the world during the quarter and the $375 million negative impact of foreign currency translation. Sales benefited from pricing and mix improvements, which drove revenue per tire, excluding the impact of foreign currency translation, up 9% over the 2007 quarter.
Also impacting the change in sales was the 2007 divestiture of the company's T&WA tire mounting business, which contributed sales of $158 million in the fourth quarter of 2007.
The fourth quarter segment operating loss was $159 million in 2008. This compares to segment operating income of $312 million in the 2007 period.
The segment operating loss in the fourth quarter of 2008 reflected lower unit sales, which drove a negative volume impact of $154 million and under- absorbed fixed costs of $213 million.
Higher raw material costs, which increased 28%, or approximately $350 million, more than offset improved pricing and product mix of $263 million.
Sales, administrative and general expenses declined $134 million compared to the 2007 quarter, reflecting foreign currency translation, lower compensation-related expense and cost savings programs.
The fourth quarter 2008 net loss was $330 million. This compares to net income of $52 million in the 2007 fourth quarter. All per share amounts are diluted.
The 2008 fourth quarter included $38 million in after-tax charges for rationalizations, a $16 million after-tax loss due to the liquidation of a Jamaican subsidiary, $11 million in after-tax accelerated depreciation, a $5 million after-tax valuation allowance related to an investment, $2 million in expenses related to hurricanes in North America, an after-tax gain of $13 million related to asset sales, $9 million in various discrete net tax benefits and a $7 million after-tax gain due to settlements with certain suppliers.
The 2007 fourth quarter included $20 million in after- tax rationalization charges, after-tax losses on asset sales of $19 million, after-tax financing fees of $17 million related to debt conversion, $6 million in after-tax accelerated depreciation and reduced tax expense of $11 million due to a tax law change.