Third Quarter Loss For Goodyear

Goodyear Tire & Rubber has reported its results for the third quarter of 2000, and the company’s nine-month performance. Net income in Q3 was $109.1 m and the company recorded a loss of $6.

6 m over the same period. This year’s results include rationalisation charges of $1.2 m, related to the closure of the Italian manufacturing facility at Cisterna di Latina and a $3.

2 m gain from selling property in Mexico. Q3 results suffered from high prices for raw materials and energy, costs associated with manufacturing restructuring in Europe, global competitiveness and the weakness of the Euro against the Dollar. Speaking of the cost of oil-derived raw materials, Samir Gibara, chairman and CEO, said: “Third quarter earnings were approximately 40 cents a share lower than they would have been if these costs had remained at 1999 levels.

Energy costs are about double what they were last year” he added. Looking on the bright side, Gibara said that Goodyear is now experiencing benefits for its Dunlop joint ventures, cost reduction programme, new product introductions and heightened consumer awareness as a result of the Firestone tyre recall. Efforts are being made to streamline global production, including moving some production from the UK, which has been particularly hit by the weak Euro.

Another plus point is the recent agreement with Phoenix, whereby Goodyear has access to increased hose production in Europe, with no investment. Gibara also said that Goodyear was acting all over the world to implement the much-needed price increases to offset energy and raw material costs. The Firestone recall will have positive benefits for Goodyear, he believes, as consumers begin to value quality and brand integrity over mere price.

In the USA, Goodyear has shipped over 2.5 million tyres of the size and type being recalled and the company is producing 28,000 tyres daily to act as replacements. In September, said Gibara, Goodyear brand replacement tyre shipments grew at a rate four times that of the industry average.

The trick is to retain these new Goodyear customers in the future. Some Figures Worldwide in Q3, Goodyear’s sales were $3.5 bn (Q3 1999: $3.

3 bn). The contribution from Dunlop in that period was $540 m. Goodyear estimates that currency movements produced a negative effect on sales of some $135 m in Q3.

Goodyear’s tyre volume during the quarter was 56.9 million units, 4.6 million units higher than last year, which is a reflection of the Dunlop contribution of 9.

4 m tyres. Looking at the nine-month figures, sales reached $10.5 bn, compared to $9.

3 bn for the same period last year. Dunlop contributed $1.7 bn towards this and the negative currency effect was estimated to be $265 m.

Tyre unit volume rose by 22.9 million units (15.8%) to 167.

6 million units. Dunlop accounted for 28.1 million tyres.

Net income for the first nine months was $116.7 m (1999: $200.3 m).

Capital expenditure fell, both in Q3 ($144.4 m, compared to $206.6 m in 1999) and in the nine month period $411.

1 m, compared to $560 m. Said Gibara: “Our businesses are quickly implementing plans to increase margins. Price increases around the globe are a key part of this effort.

Economic and marketplace conditions, however, will make it difficult to realise bottom line improvement in the fourth quarter.” 2001 results, he continued, should reflect the benefits of this year’s price increases..