Ludwig: 'Times remain challenging'

Jan. 15, 2009

In his latest earnings preview, tire industry analyst Saul Ludwig shares some thoughts on what to expect in 2009. He also puts the upcoming fourth-quarter results from Cooper Tire & Rubber Co. and Goodyear Tire & Rubber Co. in perspective.

"Times remain challenging for the tire industry. Tire shipments continue to fall and dealers continue to reduce inventory in anticipation of falling prices as raw materials ease and excess capacity remains high," he says.

"On the positive, miles driven should begin to trend higher as gasoline prices have fallen."

His ratings remain on 'Hold" for both companies.

"Although management is taking the necessary steps -- taking out capacity, protecting cash -- the headwinds continue to far outweigh the tailwinds," he writes about Cooper. "Chinese and Indonesian imports continue to pressure Cooper's products."

What about Goodyear? Its volume in North America declined more than 20% in the fourth quarter, according to Ludwig.

"In addition to North America, volume in Europe and Latin America remains extremely weak. Volume in Europe could decline by as much as 10% in the quarter, while Latin America volume will likely decline more than our 6% estimate, as OE auto production has slumped dramatically in November and December.

"On the positive, declining raw materials and cost savings initiatives will likely benefit the company by 2Q09."

Ludwig adds that Goodyear will introduce a lineup of new products on Feb. 1, 2009.

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