Standard & Poor's has dropped Goodyear Tire & Rubber Co.'s credit rating from "B+" to "BB-" but says the tiremaker's outlook is "stable."
"The downgrade reflects our view that the weak, albeit improving, operating performance of the company's North American Tire operations -- along with Goodyear's heavy schedule of debt maturities, pension funding, and other cash obligations during the next few years -- will support a financial profile consistent with the now-lower rating," says Standard & Poor's Credit Analyst Martin King.
"Although credit protection measures are currently stretched for the rating, they are expected to gradually improve and liquidity remains adequate."
Standard & Poor's officials say that Goodyear "faces numerous challenges in continuing to improve the performance of its domestic tire operations, after several years of poor results.
"The company is expected to realize meaningful savings during 2004 from a plant closure, headcount reductions and other benefits stemming from a new union contract signed in 2003."
However, Standard & Poor's believes that "incremental benefits beyond 2004 will be more modest and that Goodyear's operations in North America will continue to report subpar operating performance for the next few years."
Goodyear finally posted its fourth quarter 2003 financial results last week, which included a net loss of $434.4 million on sales of $3.91 billion.
That compares to a net loss of $1.2 billion on sales of $3.51 billion during the fourth quarter of 2002.
For the fiscal year of 2003, ended Dec. 31, Goodyear recorded a net loss of $802.1 million on record net sales of $15.1 billion, a 9.1% increase from the previous year.
Goodyear expects a strong first quarter performance this year, driven by price and product mix improvements, plus cost reductions.
"We look for both market and financial gains in 2004," says Goodyear Chairman, CEO and President Bob Keegan.
