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Goodyear U.S. Tire Units Fell 9% in 3Q

Posted on October 27, 2017

Goodyear Tire & Rubber Co. offered a list of factors that contributed to its "rough" third quarter: replacement and original equipment tire volumes dropped, and raw material costs also hit a peak for the year and increased 32%.

Sales were up 2.6% for the quarter that ended Sept. 30, but net income for the period was $129 million — down 59% — from $317 million in the third quarter in 2016.

Segment operating income for the period was $357 million, down from $556 million for the same quarter in 2016. That's a drop of 35.8%.

“During the third quarter, we saw a continuation of the challenging industry conditions we experienced in the second quarter including lower consumer replacement volumes, production cuts by automakers and an increase of more than 30% in our raw material input costs,” said Rich Kramer, chairman, chief executive officer and president.

“Despite these headwinds, which we expect to moderate over the coming quarters, we continue to execute against our long-term strategy. We remain focused on the opportunities for driving profitable growth including our connected business model, which aligns all of our assets from our manufacturing plants to consumers who choose Goodyear online and at retail.”

Year-to-date

For the first nine months of 2017, sales were $11.3 billion, down 1% from $11.4 billion a year ago. Net income was $442 million, down 37.1% from $703 million. Segment operating income was $1.1 billion, down 26.8% from $1.5 billion.

Tire unit volumes for the first nine months were down 6%, to 117.2 million. Goodyear says replacement tire shipments were down 5% "due to increased competition," and OE unit volume fell 8% and was "driven by reduced auto production."

A quarterly look at the regions

The Americas

20172016Percent Change
Units17.1 million18.6 million-7.7%
Net sales$2.04 billion$2.07 billion-1.4%
Operating income$189 million$305 million-38%
Margin9.3%14.7%

Goodyear no longer reports results for just the U.S., but when pressed by an analyst during a conference call to provide some details about the U.S. market, Laura Thompson, executive vice president and chief financial officer, said tire units were down 9% in the U.S.

She and Kramer said that 9% drop is fully attributable to the wholesale channel.

"You have a channel that has a capability to store inventory, take advantage of pre-buy," Kramer said. "We had a value proposition that wasn't as attractive to them."

He declined to talk about competing tire makers when asked if it was his understanding that Goodyear prices were a lot higher than others, but separately Kramer did acknowledge it was "a rough quarter."

Europe, Middle East and Africa

20172016Percent Change
Units14.9 million15.4 million-4%
Net sales$1.3 billion$1.2 billion6.1%
Operating income$87 million$152 million-42.8%
Margin6.6%12.3%

Asia Pacific

20172016Percent Change
Units7.8 million8 million-1.5%
Net sales$569 million$541 million5.2%
Operating income$81 million$99 million-18.2%
Margin14.2%18.3%

Related Topics: Goodyear, Goodyear financials, Laura Thompson, Rich Kramer

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