The Goodyear Tire & Rubber Company announced today that it expects second quarter earnings per share before rationalization charges to be about level with last year. The company reported earnings per share before rationalization charges of 37 cents in 1999’s second quarter.
Second quarter 2000 net income will include after-tax rationalization charges of approximately $6.5 million (4 cents per share) related to closing a tire plant in Italy and sales office consolidation in Europe. Both are part of the company’s European rationalization program.
The second quarter 1999 net income included an after-tax gain of $6 million (4 cents per share) for rationalization charge reversals.
Goodyear said its second quarter 2000 estimate reflects an increasingly competitive environment in many markets around the world. Reduced volumes resulting from price increases implemented in North America and Europe, a weak Euro versus the U.S. Dollar and British Pound Sterling and further increases in raw material and energy costs also negatively impacted second quarter results.
“While the books have not yet closed on June, it has become clear that we will not be able to overcome the volume shortfall from April,” said Samir G. Gibara, chairman, chief executive officer and president. “We had anticipated that volume would fall as a result of our price increases in March and April, but expected to regain the business as competitors took their own pricing actions.
“But, despite rising costs, the marketplace has actually seen price reductions. In this environment, our price increases impacted our volumes and made it more difficult to recover cost increases,” he said.
“While our results are disappointing, we are taking aggressive action to respond to the current market conditions,” Gibara said.
A summary of issues impacting results of the company’s business units follows:
* North American Tire — Escalating raw material costs have negatively
impacted the business in several areas. Initiatives to increase prices
to offset these escalating raw material costs have met substantial
resistance in the marketplace. This has resulted in volume shortfalls
in some market segments. Manufacturing efficiency continues to improve
and customer fill-rates are at acceptable levels.
* European Union Tire — Pricing has become extremely competitive
throughout the region, especially in the United Kingdom, and — more
recently — in Germany. The Goodyear-Dunlop joint venture implemented
price increases in April, some of which have met resistance, resulting
in lower volume. The weak Euro versus the Dollar and Pound is expected
to significantly reduce operating earnings. Synergies resulting from
the joint venture are being realized ahead of schedule.
* Eastern Europe, Africa & Middle East Tire — The impact of an industry-
wide strike in Turkey offset improving results in other countries in the
region.
* Latin America Tire — Volume and revenue continued to improve in the
second quarter, but higher raw material costs and resistance to price
increases prevented earnings growth. Much of the volume growth is
concentrated in lower-margin product lines, including sales to original
equipment customers.
* Asia Tire — An increasingly competitive marketplace intensified in the
second quarter. Pricing has weakened in certain markets as many
competitors have reduced prices, despite higher raw material costs.
Drought conditions and rising fuel prices have reduced demand for farm
and commercial tires in India. Low-cost truck tire imports have
depressed margins in the Philippines and Indonesia.
* Engineered Products — Revenue decreased primarily as a result of lower
conveyor belt sales to the depressed mining industry and reduced hose
and power transmission product sales due to lower-than-expected demand
for replacement products in North America as well as competitive pricing
in Europe and Latin America. Higher costs due to reduced capacity
utilization and raw material costs negatively impacted margins.
* Chemical Products — Raw material and energy costs continue to escalate
and price increases have not been sufficient to recover the additional
cost.
Goodyear’s actual second quarter results are scheduled to be released July 24.
Goodyear is the world’s largest tire company. Headquartered in Akron, Ohio, the company manufactures tires, engineered rubber products and chemicals in more than 90 facilities in 27 countries. It has marketing operations in almost every country around the world. Goodyear, with the addition of its Dunlop tire joint ventures, employs more than 105,000 people worldwide. For more information about the company, visit www.GoodyearNewsRoom.com on the Internet.
