Goodyear Tire & Rubber Co. reported record earnings for the first quarter ended March 31, 2015, with net income of $224 million, compared to a net loss of $58 million recorded during the same period a year ago. The numbers were driven in large part by record growth in North America.
Tire unit volumes were up 2% compared to 2014, and totaled 40.8 million during the first quarter. Goodyear says both original equipment and replacement tire shipments were up, 3% and 2% respectively.
“Our strong first quarter provides solid momentum as we start 2015,” says Richard Kramer, chairman and CEO. “We overcame significant foreign currency headwinds and delivered record earnings led by North America, which achieved its fourth consecutive quarter of segment operating income margin of more than 10%.
“Our volume growth was driven by market demand for our award-winning high-value-added products and gives us increased confidence in our outlook for the remainder of the year,” Kramer says.
That outlook includes an improvement for the commercial market. Goodyear previously had expected commercial OE numbers to be flat, and commercial replacement numbers to increase by up to 1%. The forecast for North America now calls for an increase of 2-3% in commercial replacement sales.
Goodyear’s first quarter 2015 sales were $4 billion, down from $4.5 billion a year ago. The decrease, Goodyear says, is largely attributable to unfavorable foreign currency translation of $393 million.
The company reported record first quarter segment operating income of $391 million in 2015, up from $373 million a year ago. The increase was driven by higher sales volume, a net benefit from changes in price/mix and raw material costs and improvements in other cost items. These improvements were partially offset by unfavorable foreign currency translation.
In North America, tire volumes were up 1.7%, from 14.6 million to 14.8 million units, while net sales were down 1.1%, from $1.879 billion to $1.858 billion. Goodyear says the uptick in tire volumes were offset by lower sales in other tire-related businesses and unfavorable currency translation. Both replacement and original equipment tire volumes were up 2%, the tire maker says.
First quarter 2015 segment operating income of $198 million was a 27% improvement over the prior year and a first quarter record. The improvement was driven primarily by lower raw material costs and higher tire unit volume.
“By any measure North America achieved one of its best quarters ever,” Kramer told investors. He pointed to January’s introduction of new Kelly Edge tires, a commercial tire lineup that’s “the most fuel-efficient in the industry,” and the creation of an online selling platform which is “another form of both Goodyear’s innovation and Goodyear’s industry leadership.” Kramer says more than 3,000 store locations have signed up for the program.
Another highlight of the quarter was the opening of a research and development center in China, which Goodyear says will allow it to expand its capabilities and “increase the speed and efficiency of high-value-added tire development, especially for China-based automakers.”
And though the announcement came following the close of the first quarter, Goodyear also pointed to its announcement April 24 that its anticipated passenger tire plant will be built in Mexico. That plant, which is expected to be online in 2017, will produce tires for Mexico as well as the Americas.
One of the plant’s targeted markets, Latin America, experienced growth in the first quarter, with units sold increasing 9.6%, from 4 to 4.4 million.
Laura Thompson, executive vice president and chief financial officer at Goodyear, says there was strong growth in the consumer replacement market in Latin America, and incomes were helped by an improvement in business and conditions in Venezuela.