AKRON (Sept. 21, 2000)—Goodyear has lowered its second-half earnings outlook in light of what the company called "continued deterioration of global and industry-wide conditions."
The Akron-based tire maker, in a Sept. 21 announcement, said its best estimate is that it will break even in the third quarter or sustain a "small loss." Assuming economic and market conditions remain unchanged, the company said it anticipates similar results in the fourth quarter.
Goodyear, which earlier had anticipated limited improvement over its first-half financial results, blamed its more pessimistic outlook on escalating raw material and energy costs, continued deterioration of the Euro´s value vs. the U.S. dollar, weak tire pricing worldwide and lower-than-expected industry volumes in North America and Europe.
Chairman, CEO and president Samir G. Gibara called the economic outlook for the tire industry at large "difficult at best" and said the company has undertaken several initiatives to realize improved revenue, margin and working capital performance. The company also is continuing its efforts to redeploy selected assets, he said.
Net income in the third quarter of 1999 was $109.1 million (69 cents per share), including various adjustments, most notably an after-tax gain of $143.7 million (90 cents per share) resulting from the completion of the company´s Sumitomo joint ventures.
Goodyear said its North American sales are benefiting from Bridgestone/Firestone Inc.´s Sept. 9 recall of 6.5 million ATX, ATX II and Wilderness AT light truck tires. But the company said global economic and industry conditions have deteriorated even beyond its "most-pessimistic" previous assumptions, preventing such benefits from flowing to the bottom line.
The company said its raw material costs have increased more than 3 percent since June and approximately 10 percent for the year. Oil-derived products, which can make up 25 percent of the cost of a tire, are at a 10-year high.
Furthermore, Goodyear said, it had planned for sales volumes to out pace an expected industry growth rate of between 2 and 3 percent in the second half. The tire industry, however, has slowed since June. Production cutbacks by original equipment customers in the auto and commercial truck industries are negatively impacting shipments.
In response, Goodyear said it has reduced third-quarter tire production beyond original expectations to maintain proper inventory levels, resulting in manufacturing inefficiencies and higher costs. The current phase out of its Birmingham, England, tire plant has further increased European costs during the third quarter, the company said
Goodyear´s actual third-quarter results are scheduled to be released Oct. 24.