Goodyear results point to EMEA ‘profit improvement plan’

Goodyear has reported that its fourth quarter 2012 sales amounted to $5 billion, down 11 per cent from 2011. According to the company, the drop reflects $338 million in lower tyre unit volumes, $221 million in lower sales in other tyre related businesses and $85 million in foreign exchange effects. It is worth pointing out that although tyre unit volumes totalled 40 million, this is generally down 7 per cent compared with 2011. And what’s more Goodyear reported that this primarily reflects lower volumes in Europe.

And it has to be said that Goodyear sales in the Europe, Middle East and Africa (EMEA) region were particularly bad with fourth quarter sales decreasing 16 per cent from last year to US$1.6 billion. According to the company, the sales reflect a 15 per cent decrease in tyre unit volume and unfavourable foreign currency translation of $48 million. Improved price/mix was a partial offset. The replacement market bore the brunt of the decline with tyre shipments here down 17 per cent. However, with original equipment unit volumes down 9 per cent, this route to mark was also hit.

Fourth quarter segment operating income in this division totalled $38 million, down $50 million from a year ago. Segment operating income was negatively impacted by $126 million due to lower unit volume including the impact of unabsorbed overhead from related production cuts. Results were also affected by $6 million due to a strike in South Africa. Lower raw material costs of $64 million and improved price/mix were said to have partially softened the blow

With all this in mind, it is interesting to note that, “due to continued weakness in the European economy and to ensure the long-term competitiveness of the company’s operations in the region”, Goodyear is taking further steps to “return its business to historical margin levels.” We all heard about how the company closed its French agricultural/OTR tyre production facility, but with the relative weakness of the European market in mind, the company reports that over the next three years Goodyear is “focusing on increasing its share in targeted market segments, growth in emerging markets and an additional $75 million to $100 million in productivity improvements across the region.”

Nevertheless, Richard J. Kramer, chairman and chief executive officer, was upbeat: “Our 2012 performance marks the second consecutive year we have exceeded $1.2 billion in segment operating income in a low-volume environment”. 

However: “As a result of our view of continued weakness in the European economy and its effects on the auto and tyre industries, we are reducing our 2013 segment operating income expectation and are taking actions to ensure long-term competitiveness in the region.”