AKRON (Feb. 11, 2000) — Citing product shortages in North America, variances in currency translations and ongoing weak economic conditions, Goodyear reported a 64.7-percent plunge in net income for 1999 to $241.1 million.
The earnings results included third quarter gains of $166.7 million resulting from the formation of Goodyear´s Dunlop joint venture in Europe and the sale of chemical formulations and customer lists. They also included net rationalization charges of $171.6 million.
Worldwide, sales rose 2.4 percent from 1998 to $12.9 billion, with the Dunlop operations contributing $855 million to Goodyear´s overall sales. Dunlop sales were consolidated with Goodyear´s on Sept. 1, 1999.
For the fourth quarter, Goodyear´s net income slid 66.4 percent to $40.8 million, as sales climbed 12.5 percent to $3.6 billion.
In its North American Tire unit, sales rose 1.9 percent in 1999 to $6.36 billion. Operating income, however, fell to $19 million from $378.6 million in 1998.
Fourth quarter sales for the unit grew 5.7 percent to $1.65 billion, while operating income declined to $11.6 million from $84.3 million. This follows an operating loss of $108.6 million for the unit in the third quarter of 1999.
Tire unit sales in North America in 1999´s fourth quarter and 12 months rose 5.6 percent and 3.8 percent, respectively, from 1998 levels due to the addition of Dunlop. Global tire unit sales overall jumped 13.2 percent during the quarter.
During a news conference with security analysts in New York, Goodyear Chairman Samir Gibara acknowledged last year´s results were disappointing but initiatives for 2000 should bring improvements.
"Frankly, 1999 for us, from an operations standpoint, was a very poor year, and that´s an understatement. Frankly, it was a terrible year for us," Mr. Gibara told analysts.
The Goodyear chief reviewed the factors that eroded the tire maker´s financial performance, including integrating Dunlop´s operations, a weak Latin American economy, currency translations, non-recurring Y2K costs, cutting staff and reducing logistics centers.
Other factors—such as $18 million in costs to restructure its Gadsden, Ala., plant, soft business in the agricultural and off-the-road tire markets, and a $6 million charge to exit Indy-car and CART racing—also impacted Goodyear´s results, said Chief Financial Officer Bob Tieken.
However, the tire maker is looking ahead to improving its 2000 financial performance through a number of initiatives, he said. Goodyear is optimistic it can raise its stock price this year to meet analysts´ projections of $3 per share by growing its margins.
Akron-based Goodyear expects its billion-dollar joint venture with Sumitomo Rubber Industries Ltd. to generate an estimated savings of $116 million rather than its initial estimate of $110 million, Mr. Gibara said. The company projects its global market share will increase 3 percent in 2000 to 23 percent, he said.
One of Goodyear´s top priorities is to aim for a better balance between its original equipment and replacement products, Mr. Gibara explained. Twelve million units will be added to the replacement market in 2000—3 million of which will be imported.
Goodyear will keep its capital expenses limited to $650 million this year even though it is now consolidating Dunlop, he said. In 1999, the firm´s capital expenses reached $805 million compared with $838 million in 1998.
Mr. Gibara said Goodyear also will operate all its plants worldwide at or near full capacity, divest any underperforming units within its non-core business, and review its engineered and chemical products divisions.
Meanwhile, Goodyear´s poor fill rates in 1999, which impacted its financial showing, are expected to improve, Mr. Tieken said, because the company has dropped 28 percent of its SKUs.
By the end of March, Goodyear expects its fill rates to be 100 percent for OEMs, 95-100 percent for mass merchandisers and 85-90 percent for dealers, Mr. Gibara said.
Goodyear also will raise prices to offset a projected 3-percent rise in raw material costs during March or April. Already, the firm increased truck tire prices in North America by 2.5 percent Jan. 1 and is raising prices by 3.5 percent across-the-board in Europe, effective March 1.
However, Mr. Gibara declined to disclose if those price hikes mean future price increases for other product lines, particularly in North America.