Goodyear gained plenty of traction in 2009

Published on March 16th, 2010

Remember there was an old joke that goes something along the lines of, “What do you call a tyre made of condoms; A good year,” or something like that. Well crass jokes aside, last year was a really good year for Goodyear.

According to the fourth quarter sales report, their sales shot up by seven per cent on higher tyre unit volume while the segment operating income for the Asia Pacific region was a record high.

Overall, the company made a nett income of $107 million that probably had much to do with the 62 new products it launched in 2009 that surpassed the targeted 50 new products it had set.

The focus of the financial plan though was on cost-saving. A four-year goal of saving $2.5 billion was met and followed by the introduction of a new $1 billion plan.

Finally, Goodyear managed to reduce its inventories by more than $1.1 billion from the end of 2008. The strong cash flow drastically propelled debt reduction.

Honestly though, none of us here at Traffic majored in business so this is the best we got. The whole press release is below for your perusal if you’re the Wall Street type.

Press Release

The Goodyear Tire & Rubber Company today reported improved fourth quarter tire unit volumes, sales and earnings in 2009.

“Our fourth quarter results were solid, with improved gross margins, segment operating income and net income reflecting lower raw material costs, improved volumes and actions to reduce costs. These gains are a reflection of the success we had in strengthening our business despite a challenging economy and operating environment,” said Robert J. Keegan, chairman and chief executive officer.

“Tire demand around the world has begun to recover and we look forward to year-over-year global growth in 2010. The degree of recovery, however, varies considerably by geography and product segment. We remain confident, but many challenges, including high raw material costs and weak commercial truck tire demand, will persist in 2010,” he said. “Goodyear’s strong market position and growing capabilities will, however, enable us to fully capitalize on the attractive market opportunities available to us.”

Fourth Quarter Results

The company’s fourth quarter 2009 sales were $4.4 billion, up 7 percent from 2008’s fourth quarter. Fourth quarter sales reflect the $276 million impact of an 8 percent increase in tire unit volume due to improved global consumer tire demand and growth in emerging markets. Weakness continued in commercial tire demand in Europe and North America. Favorable foreign currency translation positively impacted sales by $310 million.

The company had segment operating income of $249 million in the fourth quarter of 2009 compared to a segment operating loss of $159 million in the year-ago quarter. Compared to the prior year, fourth quarter 2009 segment operating income reflects actions to reduce costs along with improved industry demand, which resulted in higher sales and increased production levels. The 2009 quarter benefited from $358 million in lower raw material costs.

Fourth quarter 2009 Goodyear net income was $107 million (44 cents per share), compared to a loss of $330 million ($1.37 per share) in 2008’s fourth quarter. All per share amounts are diluted.

The 2009 fourth quarter was impacted by charges of $20 million (8 cents per share) due to rationalizations, asset write-offs and accelerated depreciation; expenses related to a legal reserve for a closed facility, $4 million (2 cents per share); net tax benefits of $64 million (26 cents per share) primarily related to employee benefit plans and $21 million (8 cents per share) primarily related to the release of a valuation allowance in Australia; and gains of $13 million (5 cents per share) on insurance proceeds from the settlement of a claim related to a 2007 fire in Thailand and
$2 million (1 cent per share) on asset sales. All amounts are after taxes and minority interest.

Full Year Results

Goodyear’s annual sales for 2009 were $16.3 billion, down from $19.5 billion in the 2008 period. Sales reflect the $1.4 billion impact of a 9.5 percent decline in tire unit volume primarily due to lower industry demand in North America and Europe, as well as a $924 million reduction in sales in other tire-related businesses, primarily third-party chemical sales by North American Tire. Sales were negatively impacted by a lower mix of high-value commercial truck and OTR tires due to ongoing weakness in those product segments. Unfavorable foreign currency translation further reduced sales by $699 million.

Segment operating income was $372 million compared to $804 million in 2008. This reflects weak industry demand that resulted in a negative volume impact of $266 million, increased under-absorbed fixed costs of approximately $490 million and reduced operating income from other tire-related businesses.

Improved price/mix of $207 million and lower raw material costs of $115 million positively impacted segment operating income in 2009.

The Goodyear net loss of $375 million ($1.55 per share) compares to a net loss of
$77 million (32 cents per share) in 2008. All per share amounts are diluted.

Goodyear successfully launched 62 new products during the year, exceeding its goal of more than 50 new product launches during 2009.

During 2009, the company reduced its global work force by approximately 5,700 positions, exceeding its full-year target of 5,000.

Goodyear made further progress during 2009 on its four-point cost savings plan with
$730 million in new savings, including $190 million during the fourth quarter. Savings achieved from 2006 through 2009 under the plan total $2.5 billion.

“Although we reached our four-point cost savings goal in 2009, we will continue to attack cost in 2010,” Keegan said. “Over the next three years, we expect to achieve gross savings of an additional $1 billion.”

goodyear-logo

Positive cash flow and reduced working capital requirements combined to improve Goodyear’s cash and liquidity position. As a result of its supply chain initiative, inventory levels are more than $1.1 billion below the year-end 2008 level, significantly exceeding the goal of a more than
$500 million reduction.

“Putting aside economic factors that were outside of our control, we had an impressive performance in 2009,” Keegan said. “Whether measured by market share, price/mix net of raw material costs, cost reductions, lower inventory or our excellent cash flow performance, our success in 2009 establishes a solid foundation for the future.”

Asia Pacific Tire

Fourth Quarter

Twelve Months

(in millions)

2009

2008

2009

2008

Tire Units

5.2

4.4

19.2

19.8

Sales

$ 486

$ 381

$ 1,709

$ 1,829

Segment Operating Income

70

17

210

168

Segment Operating Margin

14.4%

4.5%

12.3%

9.2%

Asia Pacific Tire’s fourth quarter sales increased 28 percent from last year to $486 million due to favorable foreign currency translation of $71 million and higher tire unit volume, reflecting improved demand. Original equipment unit volume increased 36 percent. Replacement tire shipments were up 11 percent.

Fourth quarter segment operating income of $70 million increased $53 million over last year and was a record for any quarter. This was due to $37 million in lower raw material costs, higher sales, productivity improvements, actions to reduce costs and foreign currency translation.

“We are very pleased that Goodyear in Asia achieved its highest ever earnings performance in the fourth quarter and the full year of 2009,” said Pierre E. Cohade, president of Asia Pacific. “Despite the uncertainties and challenges of 2009, Goodyear continues to build a strong momentum in Asia as we mobilize to fuel more growth across the region, beginning with China, which has now become the largest passenger vehicle market in the world,” he added.

“Last quarter’s performance was also underscored with more awards and recognitions from our OE partners and for our new products such as Eagle F1 Asymmetric, Assurance and DuraPlus tires in highly competitive markets like Australia and China,” said Cohade. “By constantly innovating in our product portfolio and across other areas of the business, we not only make Goodyear a highly competitive brand but a very relevant one as well for our consumers and customers. I wish to thank all our hardworking associates and valued customers for these achievements.”

Goodyear is one of the world’s largest tire companies. It employs approximately 69,000 people and manufactures its products in 57 facilities in 23 countries around the world. Its two Innovation Centers in Akron, Ohio and Colmar-Berg, Luxembourg strive to develop state-of-the-art products and services that set the technology and performance standard for the industry.

text: Dinesh Appavu & Goodyear

Comments

  1. Posted by MarkSpizer on May 3rd, 2010, 21:27

    great post as usual!

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