Due to the unexpectedly weak sales in the first two months, Goodyear’s share price yesterday fell by more than 9 per cent in a few hours. Analysts regard some of the problems as self-inflicted and reduced the share from “Buy” to “Market Perform”.
In conversation with analysts, Goodyear disclosed that it holds 35 million Goodyear shares in its 401 K Savings Plan, 20 million from salaried employees and 15 million from blue collar workers. This means that Goodyear employees hold 22 per cent of outstanding Goodyear stock. Some analysts, including those from Deutsche Bank, are sticking to their “buy” recommendation.
Some weeks ago, Akron Beacon Journal business columnist Diane Evans stressed the point that Goodyear bonds have become “junk bonds”. Who could ever have imagined that, she asked? In a letter to the editor, Gibara said that Evans seemed to criticise him constantly and, more importantly, not give the readers the full facts, which forced him to answer back in the name of all the good Goodyear associates. The issue rumbles on – the supervisory board has given Gibara a bonus of US$ 1.25 million, which Evans believes is not a good decision. Furthermore, it has become obvious that a power struggle is going on within the group, between the two highest-ranking managers.
Following a conference given by Goodyear boss Sam Gibara in New York, there was a difference of opinion among analysts. While Deutsche Bank recommended Goodyear shares now as a buy – the bank also recommends Michelin, Continental and Cooper as buys because it foresees improvements for the whole industry. On the one hand there have been price increases to the dealers while, on the other hand oil prices were 15% cheaper than last year. Analysts from UBS Warburg however see Goodyear shares as a “hold”. The turnaround plans presented by Goodyear are clear and the analysts believe that these can be achieved. On the other hand they refer to the fact that the Goodyear management has made many promises in the past that they could not fulfil. Therefore from their point of view the message is ‘wait and see’. They say that the fair price for Goodyear shares at the moment is 25 US-$; at the stock exchange the shares are worth 24.50 US-$.
Pirelli has announced a 32 per cent fall in operating profits for 2001 to 295 million Euro (2000: 437 m). Revenue was broadly similar at 7.5 billion Euro (7.48 bn). The company blamed a slump in the telecoms cable sector. Pirelli’s shares have been up and down, falling 18 per cent in the past month. Rumours of bad results led to a 4 per cent fall last week, but when the results were published, there was a partial recovery of 1.6 per cent.
The bids for 80 per cent of Kumho’s tyre operations are due in by tomorrow and the company expects to name a final candidate by the end of the month. Press reports say that at least two bids have been submitted so far by US-based consortia. If the deal goes ahead, it will be among the largest-ever asset sales by a South Korean company to foreign investors. Earlier today, Kumho’s shares rose 8.4 per cent while the overall stock market was down 0.41 per cent.
Shortly before Christmas, it was announced that the two Dutch wholesalers, Intersprint and Van den Ban, were to co-operate in areas such as logistics, warehousing and transport. Under the agreement, Intersprint will purchase a number of shares from Van den Ban and it is possible that Van den Ban will buy a small amount of Intersprint’s shares. The founder of Van den Ban, Mr. Arie van den Ban, stressed that the amount of shares to be purchased by Intersprint has not yet been determined, but it will be less than fifty per cent. The two companies share up to 70 per cent of customers but want to continue to act independently in the market. Van den Ban’s managing director Simon Klapwijk and commercial director Henk van Dijk will leave the company this week; a parting which was described as “amicable” by both sides.
Jarro Kaplan, Goodyear’s President for Middle and Eastern Europe, Africa and the Near East, recently officially opened the new Debica logistic centre in Tarnow, Poland. The storage area is 30,000 square metres and the warehouse has 30 loading docks for trucks. 200 new jobs have been created and the investment is estimated at $12 million.
ContiTechFluid, the business unit of tyre producer’s subsidiary ContiTech, has recently purchased 51 percent of shares of Chinese hose producer Grand Ocean (Chang Chun). From January 2002 the 100 employees will produce parts for VW models Jetta and Bora and the Audi A6. The project in the north of China requires an investment by ContiTech of up to five million euro.
Ford has warned that it expects to lose $900 million in the fourth quarter; which will be the company’s third consecutive quarterly loss. This figure is in addition to the estimated $700 million one-off charge that the company will make to facilitate restructuring. Ford’s shares fell by 3.8 per cent at the news, despite a general rise in the stock market.
Hayes Lemmerz, the wheel manufacturer that has been undergoing difficult times recently, has filed for restructuring under Chapter 11 of the US Bankruptcy Code. The company is at pains to point out that it has not “gone bankrupt”, neither is it going out of business and that Chapter 11 is a court-supervised restructuring proceeding, not a liquidation proceeding. It also applies only to Hayes Lemmerz’s own operations in the USA and that operations outside the country (except for one plant in Mexico) and joint ventures are not included. Declining market conditions and excessive debt were blamed for the action. Hayes Lemmerz shares fell to 52 cents at the news.
After last year’s disaster, Firestone is now making a voluntary recall of 98,000 Firehawk GTA-02 tyres. The size is P205/55 R16 and the tyres were mostly fitted as OE on Nissan Altima sedans in the USA. The problem is an over-wide steel belt which could lead to cracking at the shoulder – the design has since been modified. Both Bridgestone/Firestone and Nissan stress that the move is purely precautionary and that there have been no tread separations, accidents or claims associated with the tyre.
At a press conference, Bridgestone President Shigeo Watanabe revealed that the company was to close its plant at Decatur, Illinois, where 1,500 people are employed. The plant closure will lead to a loss of $210 million, offset to some extent by cost savings of $100 million. Bridgestone will also incur an additional special loss this year, amounting to $549.6 million and the group has revised its worldwide consolidated net profit forecast from 48 billion Yen to 10 billion. For Bridgestone Japan, the company is predicting a net loss of 130 billion Yen for the calendar year 2001, the first loss for the group since it was first listed on the Tokyo Stock Exchange in 1961. Bridgestone’s shares fell nearly 2 per cent on the news, to stand at 1,273 Yen.
Deutsche Bank analysts have upgraded Goodyear shares from “Market Perform” to “Buy”. They are of the opinion that Goodyear has made significant progress in reforming its cost structure and this, coupled with lower raw material prices, will mean much better-than-expected profits. The analysts also believe that Goodyear can capture many Firestone dealers in February next year, when their contracts with Firestone expire.
Despite the admission of chairman and CEO Samir G. Gibara that Goodyear’s 4Q results were “disappointing”, some financial analysts have recommended the company’s shares as a “buy”. The results were better than forecast, plus the analysts are confident that Goodyear will start to turn things around before long.
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