Strong dollar, weak winter are bad for Goodyear

Jan. 16, 2015

A strong U.S. dollar and mild winter in Europe do have something in common – both have negative effects on business at Goodyear Tire & Rubber Co.

This week Laura Thompson, executive vice president and chief financial officer at Goodyear, presented the company’s latest financial forecast at the 2015 Deutsche Bank Global Auto Industry Conference in Detroit. The company will present its 2014 year-end earnings in February.

Thompson said Goodyear is expecting record total company and North America segment operating income (SOI) for 2014, though the end-of-third-quarter projection of SOI growth between 10 and 15% now is expected to be slightly lower.

At the end of the third quarter on Sept. 30, 2014, Goodyear posted net income of $161 million on net sales of $4.6 billion. Almost $2.1 billion of that total came from sales in North America.

“Our strategy is not about selling more tires for the sake of selling more tires,” Thompson said. “Our strategy is about pursuing a very profitable volume growth.”

As part of that, Thompson said Goodyear’s top focus in North America isn’t to grab the largest piece of the market share pie. “Our goal is to grow profitably,” she said. The company’s market share may fluctuate along the way.

“A lot of good things are going on in our North America market. (I’m) not going to say our goal in 2015 in North America is to gain market share,” Thompson said.

Among the “good things” she pointed to was an inventory of premium tires plus a gradual increase in the number of miles traveled in recent months, driven by lower fuel prices.

Those lower fuel prices also are helping the company on the production side, as about two-thirds of raw materials are influenced by oil prices. The benefit of lower oil prices should continue to affect the balance sheets through the first half of 2015, since Thompson said there’s typically a three- to six-month lag.

The mild winter in Europe caused a drop in orders in the fourth quarter of 2014, Thompson said. The company had expected dealers to replenish their stock during the final months of the year, but relatively mild temperatures and snowfall derailed that expectation. In some regions it led to double digit declines in sell-out volumes.

Global volume is expected to be flat, Thompson said, whereas at the end of the third quarter Goodyear was expecting a slight increase between 1 and 2%.