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April 26, 1999 02:00 AM

GOODYEAR 1ST QTR. PROFITS FALL

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    AKRON—Goodyear's efforts at reducing costs and boosting productivity dragged down profits for the Akron-based tire maker in 1999's first quarter. Net earnings fell 85.6 percent to $25.5 million, for the period ended March 31, as the company took a $167.4 million rationalization charge as part of a plan to become the low-cost producer among the world's three largest tire makers.

    That plan includes the layoff of an additional 1,500 workers worldwide, bringing to 4,200 the number of jobs that will be eliminated, a Goodyear spokesman said.

    In 1998's first quarter, Goodyear had net income of $173.6 million.

    1999's quarterly earnings before the charge would have been $141.5 million, the company said.

    Sales fell 3.3 percent to $2.99 billion.

    Goodyear's rationalization charges included $95.5 million to reduce employment by 1,600 and annual capacity by nearly 9 million units at its Gadsden, Ala., and Freeport, Ill., tire plants.

    The company also took a charge of $42.5 million for productivity improvements in Latin America that will cut employment by 1,500 workers. Another $20.6 million charge was taken for programs under way in the company's engineered products, chemical and Asia tire segments and in corporate operations.

    These programs will reduce employment by 800.

    When fully implemented, the rationalization efforts should save $150 million annually, Goodyear said.

    ``Our cost leadership strategy is not only focused on better utilizing our low-cost manufacturing operations around the world, but also making our global production capability more cost competitive,'' said Chairman and CEO Samir Gibara.

    Worldwide, Goodyear's tire unit sales grew 1 percent during the quarter, despite a 2.3 percent decrease in North America.

    Goodyear attributed the downturn in North America to its strategy of emphasizing a more-profitable product mix.

    Sales for the North American business unit slipped 1.1 percent to $1.51 billion in the quarter. Operating income declined 16.8 percent to $91.7 million.

    ``Our second quarter results will continue to be impacted by the completion of our inventory realignment program and the lingering weakness in emerging market economies,'' Mr. Gibara said.

    ``However, the benefits of our growth and rationalization initiatives, and the progressive economic recovery in emerging markets, should be reflected in the company's second-half results.''

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