Analysts Cautious About Goodyear Cost-Cutting

Deutsche Bank analysts have reacted cautiously to the news that Goodyear is closing its Dunlop Tyre factory in the U.K. and ceasing production of bicycle tyres and inner tubes at its Poland plant. The company expects these actions to generate after-tax savings of between $30-$40 million per year. Goodyear has previously announced that it is targeting $250-$350 million in annual cost savings from reducing high cost capacity and shifting production to lower cost markets.

The analysts say that there has been little evidence of these savings so far, but believe that the recently-announced closures will have an effect in the second half of this year. Despite this, they remain cautious on GT shares in the short-term, citing weak 1Q North American replacement volumes, continued rising raw material costs and signs of diminishing pricing power.