Goodyear Dębica plant at 70% capacity following fire – sales up to $40 million lower

The Goodyear Tire & Rubber Company estimates that fire damage to its manufacturing facility in Dębica, Poland will reduce sales by up to US$40 million and lower operating income by as much as $30 million. After resuming production two days after the blaze of 20 August 2023, production has slowly risen from around 55 per cent of capacity to approximately 70 per cent by the end of September. Goodyear does not expect a full ramp-up of production until the fourth quarter of 2024 due to the lead time to replace damaged equipment.

Until full production resumes, Goodyear is “mitigating the impact” on its customers by leveraging existing inventory and through increasing production at other facilities.

As a result of all these factors, Goodyear anticipates that Europe, Middle East and Africa (EMEA) consumer sales will be negatively impacted by $20 million to $25 million in the third quarter of 2023 and $10 million to $15 million in the fourth quarter of 2023. The tyre maker expects that lost sales margin, as well as unabsorbed fixed costs and other period expenses, will negatively impact EMEA’s operating income by $10 million to $15 million in both the third and fourth quarters of 2023. Goodyear intends to provide its estimate of impact upon the 2024 financial year after confirming its schedule for resuming production and undertaking repairs.

Insurance to the rescue

Goodyear maintains third-party insurance with a $15 million per occurrence deductible that covers property damage, cleanup expenses, and also reimburses the impact upon certain interruptions to business. This deductible limit was reached in the third quarter of 2023. “We expect that a significant portion of the business interruption impacts will be reimbursed by our insurance,” writes Goodyear in a filing to the United States Securities & Exchange Commission. “However, due to uncertainty in determining the ultimate amount and timing of business interruption coverage that could be available to us, we did not reflect potential insurance reimbursement for business interruption in the above sales and operating income estimates for EMEA nor have we recognised a business interruption insurance receivable at this time. Consistent with past practice, we will record a receivable related to business interruption insurance once the claim is substantially complete.”