Loss-Making Goodyear

Goodyear has released details of its first quarter results. Sales totalled $3.4 billion (2000 Q1: $3.

7 bn) and Goodyear estimates that currency fluctuations reduced sales by $130 million. The company recorded a net loss of $46.7 million and an after tax loss of $3.

5 million. These figures take into account rationalisation charges of $57.1 million and a gain of $13.

9 million from property sales in the UK. Worldwide, 2,800 jobs were lost in Q1 and Goodyear announced that the total number of jobs that would go as part of its rationalisation programme would be 7,800, or 600 more than first anticipated. When completed, the rationalisation programme is expected to save $260 million a year, with savings this year of $155 million.

Samir Gibara said that “The continued decline in orders for tyres and engineered products by auto and truck manufacturers in North America had a substantial impact on our results.” Despite “significantly” reducing production levels, Goodyear could not offset the rapid market decline in February and March. The company also pointed to raw material cost increases, although these were compensated for in part by tyre price increases earlier this year.

Below are brief Q1 performance details of the tyre side of the business, split by business segments. North American Tire:Sales were $1.62 bn (2000 Q1: $1.

73 bn). Unit volume fell 9.6 per cent to 25.

8 million tyres. OE sales were down 22.1 per cent, replacement sales volume fell 2.

7 per cent. The Goodyear brand out-performed the market in many cases, indicative of “a flight to quality by tyre consumers”, according to Gibara. The passenger car tyre replacement market declined by 7 per cent, while Goodyear brand sales rose 4 per cent.

The commercial truck tyre market was down 16 per cent, Goodyear brand sales rose 7.5 per cent. Agricultural tyre sales fell 9 per cent overall; Goodyear sales were only 4 per cent.

European Union Tire:Sales totalled $799.3 million (2000 Q1: $874 m). Volume rose 3.

1 per cent to 15.6 million units. OE sales were up 12 per cent, while the replacement market was flat.

Revenue was adversely affected by currency translation (estimated to have reduced sales by $60 m in Q1), price competition and a change in product mix to lower-priced tyres. Eastern Europe, Africa, Middle East Tire:Sales were $163.4 million (2000 Q1: $191 m).

Volume was down slightly to 3.4 million tyres, due to a combination of a flat replacement market and a decline in OE sales of 3.1 per cent.

Currency devaluations in Turkey, South Africa and Slovenia impacted on earnings. Currency translation reduced sales by $20 million, Goodyear estimates. Latin America Tire:Here there was a slight decrease ($0.

1 m) in value of sales to $257.7, despite a 6.2 per cent increase in volume to 5 million units.

There was a sharp rise in OE sales of 41.6 per cent and a 3% fall in sales to the replacement market. Once again, currency fluctuations (particularly in Brazil) hit revenue, reducing sales by $20 million.

There was also a move towards lower-priced tyres. On the positive side, cost reduction programmes led to lower production costs. Asia Tire:Sales were worth $119 m (2000 Q1: $138 m) and volume fell 4.

1 per cent to 2.9 million units. Gains were made in the OE market, which increased 11.

6 per cent, while the replacement market declined 8.9 per cent. Competition, currency translation and lower unit volume all affected the market.