Goodyear Price Hike Will “More Than Offset Costs”

Following Goodyear’s announcement that it will increase prices on by 4-5 per cent on 1 April, some analysts have suggested that the rise will more than offset raw material costs. The announcement follows similar moves by other premium manufacturers (namely Michelin and Bridgestone).

“While higher raw material costs were a significant headwind for all tyre manufacturers in 2006, we believe they are starting to ease, as evidenced by expected sequential declines in commodity costs in the first half of 2007, and expected flat year-on-year costs for full-year 2007. Given this, we believe price increases will more than offset year-on-year headwinds from raw material cost inflation,” Deutsche Bank reported in its analysis.

Illustrating this, the analysts noted that Cooper Tire experienced a $29 million year-on-year earnings hit from raw materials in the fourth quarter of 2006, but this was more than offset by the $49 million generated by better pricing and product mix.