Goodyear Tyre & Rubber Co. said on Friday it will cut costs by up to $US1 billion by 2008, closing plants and increasing sourcing from Asia to face high raw materials costs, pension obligations and an uncertain global economy.
Go deeper with GlobalData
Reuters said Goodyear, the largest US tyre maker, would cut costs by $750 million to $1 billion over the next three years, taking cash charges of $150 million to $350 million for the restructuring, which will include selling more noncore assets.
“Our turnaround is on track and will continue to evolve,” chief executive Robert Keegan reportedly said in a statement.
According to the report, Goodyear expects to cut high-cost manufacturing capacity by 8% to 12% to generate savings of about $100 million to $150 million per year. It did not say how many plants it would close or where they are located.
Reuters noted that the Akron, Ohio-based company reported a profit in 2004 after losses of more than $2 billion over the previous two years that sparked a previous cost cutting plan of plant closings, job cuts and debt reduction.
The news agency added that Goodyear has sold a resins, business and an Indonesian rubber plantation while the sale of its North American farm tyre business is pending. Earlier this week Goodyear said it would consider selling its engineered products business.
Goodyear reportedly said it wants to improve segment operating margin to 8% for the total company and 5% for its key North American Tyre unit. In the second quarter, only two smaller units met that overall standard and the North American Tyre unit had an operating margin of 2.4%.
According to Reuters, Goodyear said it is still assessing the impact of Hurricane Katrina on property, inventory and overall operations. Five retail stores are expected to stay closed indefinitely but the impact from those closings is not expected to be material.
