AKRON—Tire makers the world around blamed high raw material costs for their lower earnings last year.
For the year ended Dec. 31, Goodyear, Cooper Tire & Rubber Co., Nokian Tyres P.L.C. and Vredestein N.V. all cited raw material costs as contributing to their reduced profits.
Meanwhile, wholesale distributor Myers Industries Inc., parent of Myers Tire Supply, blamed the soft automotive aftermarket in the fourth quarter for its earnings decline.
Goodyear suffered a net loss of $102 million in the fourth quarter—due largely to rationalization charges taken to cover workforce reductions and plant closings—pulling the company's net for the year down 83.4 percent to $40.3 million.
Net sales in the quarter declined as well, falling 4.1 percent to $3.53 billion from $3.68 billion in 1999. The Akron tire maker's poor fourth-quarter operating performance was caused mainly by increasing raw material costs, the further decline of the euro's value vs. the U.S. dollar and reduced North American original equipment sales, the company said.
For the year ended Dec. 31, sales increased 7.9 percent to a record $14.4 billion.
The Dunlop businesses in Europe and North America, acquired through the 1999 alliance with Japan's Sumitomo Rubber Industries Ltd., contributed about $2.3 billion in sales for 2000.
North American tire operations, aided by the full-year addition of the Dunlop Tire activities, reported a near ten-fold increase in operating income for the year to $260.7 million, while sales rose 7 percent to $7.11 billion.
In the fourth quarter, sales overall were up 4.1 percent to $1.79 billion as shipments were up but prices did not keep pace. Replacement market consumer tire shipments jumped 14.6 percent over the 1999 period and OE shipments fell 16.4 percent.
As a result of the replacement market increase—in part due to added sales from the Bridgestone/Firestone Inc. tire recall and the inclusion of units from Dunlop operations—Goodyear gained three percentage points of market share during the quarter, according to Chairman Sam Gibara.
Volume for 2000 increased 6.3 percent to 115.9 million units, according to Mr. Gibara, who said gains were achieved by expanding the distribution channels—in some cases by signing on Firestone dealers—stronger advertising and taking advantage of a consumer "flight to quality."
Replacement shipments of medium truck tires slipped 13.2 percent, while OE truck tire shipments plummeted 39.9 percent.
Cooper Tire & Rubber Co.
Cooper posted record sales for 2000, but a host of factors—predominantly related to its automotive operations—pulled net income down.
The tire maker said increasing raw material costs, restructuring costs, automotive production cutbacks and continued inefficiencies at its Mexican and European sealing operations all impacted its bottom line.
For the fourth quarter ended Dec. 31, Cooper reported net income of $6.3 million on sales of $819.8 million compared with earnings of $31.5 million on sales of $701.2 million in 1999's quarter.
For the year, Cooper posted net income of $96.7 million on sales of $3.5 billion, vs. earnings of $135.5 million on sales of $2.2 billion in 1999.
Cooper increased its tire unit sales by 9 percent for the quarter and 4 percent for the year, "...and...once again increased market share significantly in the light truck market," said Thomas A. Dattilo, chairman, CEO and president. Although some of the increase was attributable to the Firestone recall, it is not possible to say exactly how much, he said.
"We're satisfied we've made the most of the opportunities we had in this difficult fourth quarter," Mr. Dattilo said. "When taken in the context of our industries, our fourth quarter results are outstanding."
The company took restructuring and non-recurring charges of $37 million associated with the restructuring plan it disclosed last October. Since then, Cooper has closed three non-tire facilities and cut 200 jobs.
By the end of 2001, Cooper plans to have closed 11 plants total and downsized 12 operations, eliminating 1,100 positions globally for savings of about $30 million annually.
Cooper expects to feel continued slowdowns for heavy-duty truck tires and the loss of Treadco Inc. business in its Oliver Rubber segment, Mr. Dattilo said.
Treadco, formerly Oliver's largest customer, teamed up with Goodyear last fall to form the world's largest truck tire service network, a deal that will result in the conversion of Treadco's 21 retread plants to Goodyear systems from Oliver.
However, Cooper is "very optimistic" about the price hikes it announced last fall, Mr. Dattilo said. "The price increases we announced|are sticking. In fact, we've heard our competitors are planning additional increases in the first half of 2001," and Cooper may follow suit, he said.
Vredestein blamed higher raw materials prices and disappointing winter tire sales for a 98-percent drop in fiscal 2000 earnings. Sales, driven by acquisitions, rose 15 percent to $273 million, the company said.
For 2001, Vredestein predicted a return to previous levels of profitability, assuming an average winter season, further integration of recent acquisitions and tight control of the cost structure.
Selling prices have been adjusted to the higher raw material prices in a large number of markets, it added. Fiscal 2000 net profit fell to nearly breakeven—$190,000, the company's preliminary results show.
Nokian Tyres P.L.C.
Nokian, suffering the effects of rising raw materials prices and acquisition-related integration costs, reported a 23-percent drop in net earnings last year, while sales rose 23.5 percent.
For 2001, the company expects sales to grow 10 percent—vs. 1 to 2 percent market growth—while also improving earnings an undisclosed amount.
Net sales for 2000 rose to $369 million, with revenues from tire chain acquisitions contributing more than half the increase, the company said. Net earnings fell to $18.2 million, reducing the profitability ratio to 4.9 percent.
Nokian's sales of passenger tires grew 13.5 percent, to $172 million, although production of the same was up only 4.9 percent, to 4.3 million units, the company said. Sales in North America "increased clearly," Nokian said, without citing numbers.
Nokian anticipates tough market conditions in 2001—particularly in the first quarter—including additional raw material price increases of 10 percent or more. On the other hand, Nokian now has secure off-take agreements with Group Michelin for large agricultural and medium truck tires, and it will benefit from expanded mixing operations as the year progresses.
Myers Industries Inc.
The soft automotive aftermarket contributed to a 23-percent drop in fiscal 2000 net earnings for Myers and left sales by the distribution segment behind their 1999 level.
Overall, Myers' sales for the year grew 12 percent to a record $652.7 million, but sales in the distribution segment—which includes Myers Tire Supply—fell 3 percent for the quarter and 2 percent for the year, compared with 1999. Sales of capital equipment, the more cyclical part of the distribution business, continued to be weak, the company said.
Net earnings, including provisions for a fourth-quarter restructuring, dropped to $24 million, the company said.
"The continued decline in heavy-duty truck production, the slowing of automotive production, and the slowing of the U.S. economy all combined to restrict our performance," Stephen E. Myers, president and CEO, said in a prepared statement.
Myers claims to be the largest wholesale distributor of tools, equipment and supplies for the tire service and automotive underbody repair industry in the U.S. The distribution business traditionally accounts for about 27 percent of sales.
Brad Dawson and Sherri Begin, Crain News Service, contributed to this report.