Goodyear Seeing the Benefit’s of Last Year’s Actions – Kramer

“We are very pleased with our strong first quarter performance,” stated Goodyear’s recently appointed president and chief executive officer, Richard J. Kramer, upon the release of the company’s January 1 to March 31 results. The US tyre maker reports an improvement in tyre unit volumes, sales and segment operating income during the quarter, as well as a “significantly” smaller net loss despite a one-time charge related to the currency devaluation in Venezuela.

“As markets around the world continue to improve, we are starting to see the benefits of the strategic actions we took last year, including our commitment to launch innovative new products during an economic downturn,” Kramer continued. “The strategic actions contributed to strong growth in both sales and earnings, positioning us well as the global economy continues its recovery.

“As I take over the role as the company’s CEO, I am optimistic about the tire industry and confident that Goodyear’s brands, focus on innovation, leading distribution and excellent leadership team position us strongly for the future,” added Kramer, who succeeded Robert Keegan on April 13.

Sales in the first quarter of 2010 amounted to US$4.3 billion, up 21 per cent from the corresponding 2009 quarter. This increase reflects the $399 million impact of a 14 per cent increase in tyre unit volume, brought about through improved global demand and growth in emerging markets. Sales were also positively impacted by $224 million in favourable foreign currency translation and by $125 million from higher sales in other tyre-related businesses, primarily third-party chemical sales in North America. The company’s segment operating income was $240 million in the quarter compared to a segment operating loss of $176 million in the year-ago quarter. This latest result reflects improved year-on-year global demand. Goodyear’s first quarter 2010 net loss was $47 million (19 cents per share), compared with a loss of $333 million ($1.38 cents per share) in the first quarter of 2009.

Sales generated by Goodyear’s North American Tire business unit increased 15 per cent year-on-year in the first quarter of 2010 to $1.8 billion, reflecting a nine per cent increase in tyre unit volume and strong price/mix performance. Original equipment unit volume increased 45 per cent, primarily in the consumer business due to higher vehicle production. Replacement tyre shipments were up slightly from last year. The first quarter 2010 segment operating loss of $14 million was a $175 million improvement over the prior year.

First quarter 2010 sales for the company’s Europe, Middle East and Africa Tire business unit increased 21 per cent from last year to $1.5 billion, primarily due to a 14 per cent increase in tyre unit volume and favourable foreign currency translation. Original equipment unit volume increased 53 per cent, resulting from higher vehicle production in Europe. Replacement tyre shipments were up five per cent. First quarter 2010 segment operating income of $109 million was a $159 million improvement over the prior year.

The Latin American Tire business unit’s first quarter 2010 sales increased 25 per cent year-on-year to $478 million, mainly thanks to a 21 per cent increase in tyre unit volume. Original equipment unit volume increased 21 per cent, resulting from higher vehicle production. Replacement tyre shipments were up 20 per cent. Segment operating income of $76 million was a 58 per cent improvement over 2009, despite a $28 million decline related to events in Venezuela, including the currency devaluation. Goodyear expects the events in Venezuela, including the devaluation, to negatively impact Latin American Tire’s full-year 2010 segment operating income by between $50 million and $75 million as compared to 2009.

In the first quarter of 2010 Asia Pacific Tire sales increased 42 per cent year-on-year to $484 million, primarily due to a 27 per cent increase in tyre unit volume and favourable foreign currency translation. Original equipment unit volume increased 48 per cent, resulting from higher vehicle production. Replacement tyre shipments were up 16 per cent. Segment operating income of $69 million represents a $54 million increase over last year and was a first quarter record.

Kramer said his strategic priorities as CEO include the continued introduction of new products; increasing operating efficiencies throughout the supply chain; improving earnings, especially in North American Tire; expanding growth in emerging markets; enhancing Goodyear’s capital structure; and continuing to build the company’s leadership team. “I am confident that our focus on these priorities will enable Goodyear to gain from the recovery in industry volumes and help us overcome the challenges before us, specifically higher raw material costs,” he stated.