Goodyear Tire & Rubber Co. took a net loss of $89 million during the third quarter of 2023 versus net income of $44 million during the same period last year.
The Akron, Ohio-based tiremaker's third quarter sales dropped 3.2% year-over-year, "driven by the impact of commercial truck industry weakness and lower, other-tire related sales," according to Goodyear officials, who attribute the $89 million net loss to "higher rationalization costs," which were driven by workforce reduction in Europe and changes in the company's "operating model" in New Zealand and Australia.
Goodyear's segment operating income during the third quarter of 2023 was $336 million, down $37 million versus the same period last year.
That number includes the impact of lower sales volume and reduced production during 2Q 2023, "with industry demand down 3.9 million units compared to the second quarter of the prior year," say Goodyear officials.
Overall, Goodyear's tire volume during the third quarter of 2023 totaled 45.3 million units, down nearly 3% from 3Q 2022.
"Global replacement volume was lower by 5.3%," driven by Goodyear's Americas and Europe, Middle East and Africa (EMEA) regions.
"The Americas decline reflects the impact of increased low-cost imports in Latin America;" residual impact of the tornado that struck Goodyear's Tupelo, Miss., plant in April 2023; and "continued weakness in the commercial truck industry. These headwinds were partially off-set by strong growth in premium segments of the U.S. market."
Goodyear's global original equipment volume increased by 5.7%, driven by gains in its Asia-Pacific region.
In its Americas region, Goodyear posted net sales of $3.1 billion, a 5.6% drop from sales generated in that region during the third quarter of 2022.
Segment operating income in Goodyear's Americas region totaled $258 million versus $306 million during 3Q 2022, due to "the impact of lower volume" and "unabsorbed overhead from lower production in the second quarter."
Americas volume dropped 4.9%, or 1.2 million units year-over-year, also "driven by the impact of increased low-cost imports in Latin America," the shutdown of the company's Tupelo factory and commercial trucking industry conditions.
Goodyear's commercial truck tire volume in the replacement channel fell by 10% "on continued destocking," which company officials claim was "better than the industry."
The company's overall U.S. replacement consumer tire inventory dropped to around 10% below 2022 year-end levels.
Net/price mix versus raw materials in the Americas region was $51 million. "Lower price/mix reflects weaker commercial business results, driven by the mix effect of lower volume in a continued weak industry environment. Consumer replacement pricing remained stable in the quarter."
In the Americas, Goodyear posted net cost savings of $19 million, "driven by the continuing effects of inflation on our business."
The rest of the world
Goodyear's net sales in EMEA increased $16 million year-over-year during 3Q 2023. This gain was driven by a 10% per-tire revenue increase, according to Goodyear officials, who note that the tiremaker's volume in EMEA fell.
Segment operating income in EMEA was $22 million versus $30 million one year ago.
"EMEA's earnings remained below historic levels due to continued industry volume weakness and elevated inflation," say Goodyear officials, who add the replacement consumer tire volume "remained soft" and commercial truck tire volume fell by 11%, "reflecting weak industry conditions and increased competition from low-cost imports."
Goodyear's overall tire volume declined by nearly 5% during the third quarter of 2023 versus prior-year levels.
Net sales in the company's Asia-Pacific region were flat year-over-year and Goodyear's volume grew by 5.4% in the region. Segment operating income in Asia-Pacific totaled $56 million, an increase of $19 million from 3Q 2022.
"Asia-Pacific results reflect continued growth in volume and segment operating income, driven by China. Strong volume and continued benefits from price/mix versus raw material and other cost increases drove operating margin to 8.6% in the quarter - the highest level since before the pandemic."
Comments from the CEO
"Strong execution amid improving industry conditions enabled us to deliver solid operating results during the third quarter," says Goodyear Chairman, CEO and President Rich Kramer. "At the same time, we continue to lay the foundation for long-term value creation, led by the work of our board's Strategic and Operational Review Committee.
"This was the first quarter in two year where the benefits of price/mix versus raw materials exceeded inflation, including price remaining a benefit in the quarter," he continues. "And more importantly, we were able to expand margins in the context of a global industry that remains below 2019 levels. Consumer replacement industry volumes remained 5% below 2019 on a year-to-date basis, while OE remained about 2% lower.
"That said, there were signs of improving volume conditions in several of our markets, including the U.S., where industry volume grew 10% over last year, indicating an end to channel destocking that began in late-2022. Demand for travel in the U.S., meanwhile, remained strong, with vehicle miles traveled more than 2% above last year's levels. During the quarter, we continued our strategy to focus on the most profitable segments where we can capture the value of our products, brands and technology in the market.
"Our products have never been stronger and our positioning in the marketplace has never been better. While we expect margin growth again in the fourth quarter, we see significant improvement in ... margin as we move ahead."