Goodyear Sales Up Despite Lower Volumes

The Goodyear Tire & Rubber Company has reported record third quarter sales of US$5.1 billion, up 3 per cent from last year. The company’s Asia Pacific Tire, Latin American Tire, European Union Tire, and Eastern Europe, Middle East and Africa Tire divisions all achieved record sales during the quarter despite Latin America being the only region to actually sell a greater volume of tyres. Goodyear claims it has successfully offset lower volumes through price increases and a richer product mix. These price and product mix changes in all five business units led to a 7 per cent increase in revenue per tyre over the 2006 quarter, and Goodyear adds that the quarter’s lower sales volume – 51.7 million tyres worldwide as opposed to 55.8 million in third quarter 2006 – reflects the company’s strategic decision to quit “certain segments” of the North American private label tyre market, along with other weak markets.

Total segment operating income from continuing operations was $382 million in the third quarter of 2007, another all-time high and up 35 per cent from the 2006 period. All five business units had higher segment operating income compared to last year, with Asia Pacific Tire and Eastern Europe, Middle East and Africa Tire setting records for any quarter.

“Our outstanding third quarter is evidence of the success we are seeing in marketing our premium product lines while remaining focused on improving our cost structure,” said Robert J. Keegan, Goodyear chairman and chief executive officer. “Despite market challenges, our results are among the best ever achieved by Goodyear.

“Our product, brand, customer and geographic mix drove margin expansion,” he said. The company achieved a gross margin of 20 per cent in the quarter, up from 17.4 per cent a year ago. North American Tire delivered dramatic earnings improvement despite lower volumes. This reflects its new product success, strong marketing initiatives and cost savings efforts.”

Each of the five business units achieved double digit or better percentage growth in segment operating income for the quarter. The company’s three businesses located in emerging markets increased their sales by 15 per cent and segment operating income 24 per cent over last year.

Keegan reported that Goodyear made further progress during the third quarter on its plan to achieve $1.8 billion to $2 billion in gross cost savings by the end of 2009. “We have now achieved nearly $900 million in savings and remain on track to reach our four-year goal.” Third quarter 2007 income from continuing operations was $159 million (67 cents per share). This compares to a third quarter 2006 loss from continuing operations of $76 million (43 cents per share).

In Europe, tyre sales were down by one million units to 15.5 million, a drop of about 6.1 per cent on last year’s result. European sales for quarter three 2007 were $1.38 billion; up on 2006 sales of $1.263 billion. Segment operating income in Q3 2007 was $90 million, with an operating margin of 6.5 per cent – an increase on last year’s $81 million and 6.4 per cent operating margin.