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Goodyear posts net income of $2 million on record sales

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Goodyear Tire & Rubber Co. reported net income of $2 million on sales of $5.1 billion for the second quarter ended June 30, 2006. That compares to income of $69 million on sales of %5 billion for the same period in 2005.

The quarterly sales were a record for any quarter and an increase of 3% compared to 2Q 2005. Excluding the impact of businesses divested in 2005, sales increased 5% compared to the same period a year ago.

According to Goodyear, the sales growth is a reflection of the following:

* improved pricing and product mix driven by demand for the company's branded tires in the consumer replacement markets;

* the favorable impact of currency translation.

Total segment operating income was $267 million, compared to $316 million in the 2005 period.

Tire unit volume totaled 54 million units, compared to 56.4 million units 12 months ago. Revenue per tire increased 7% compared to the second quarter of 2005.

The 2006 quarter was impacted by raw material costs of $210 million, an increase of 16% compared to last year, and weak tire industry demand, particularly in North America.

"Results remained strong in four of our businesses, and while we are making good progress in reducing our global cost structure against our previously announced plan of $750 million to $1 billion by 2008, we know more needs to be done," says Chairman, CEO and President Robert Keegan. "We have raised the bar to more than $1 billion and will continue to intensify our initiatives to reduce our costs.

"Our strategy to focus on high-value-added products and key market segments resulted in market share gains for our Goodyear and Dunlop brands during the quarter. However, we were not able to offset the impact of weakness in the lower-value segments of the North American consumer replacement tire market."

In the second quarter, Goodyear closed a tire plant in the United Kingdom, announced the proposed closure of a tire plant in New Zealand and took cost reduction actions in Europe and North America. The company says it reduced selling, administrative and general expenses by 7%.

Four of the company's six businesses achieved higher segment operating income compared to the second quarter of 2005, with three (Eastern Europe, Middle East and Africa Tire, Latin American Tire and Asia Pacific Tire) setting records. Sales improved in all five of the company's tire businesses.

North American Tire: operating income, $6 million; sales, $2.3 billion; tire unit sales, 23.3 million.

European Union Tire: operating income, $58 million; sales, $1.2 billion; tire unit sales, 15.7.

Eastern Europe, Middle East and Africa Tire: operating income, $59 million; sales, $384 million; tire unit sales, 5 million.

Latin American Tire: operating income, $83 million; sales, $387 million; tire unit sales, 5 million.

Asia Pacific Tire: operating income, $28 million; sales, $377 million; tire unit sales, 5 million.

In the Engineered Products business unit, sales decreased 5% in the second quarter compared to the 2005 period as a result of "lower volume due to anticipated declines in military sales." This was partially offset by stronger sales in the industrial hose and conveyor belt businesses as well as price and product mix improvements.

For the first six months, Goodyear posted net income of $76 million on record first-half sales of $10 billion. Segment operating income was $578 million, a decrease of 5% compared to the first half of 2005. Tire unit volume was 108 million, a decrease of 4%.

First-half 2006 raw material costs increased approximately $389 million, or 15%, compared to the year-ago period.

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