AKRON (Sept. 26, 2001) — Goodyear has reduced its third-quarter earnings forecast based on on what it described as weak markets that were further disrupted by the Sept. 11 terrorist attacks on the U.S.
Goodyear said previously slowing world demand for both replacement and original equipment tires has weakened significantly. As a result, the Akron-based tire maker said it expects net income to resemble that of the second quarter, which amounted to 5 cents per diluted share. The company earned 11 cents per share in the third quarter of 2000.
Chairman and CEO Sam G. Gibara said Goodyear's business, like many, experienced “an abrupt decline” in demand after the attack. “As a substantial portion of our third-quarter volume is shipped in September, our volumes will not be as strong as originally planned," he said.
"Because of these unprecedented conditions and continued market
deterioration in our major markets, we continue to assess the weakened outlook for the fourth quarter," Mr. Gibara said.
Goodyear reaffirmed its commitment to generate $350 million in cash flow
this year to reduce debt and increase its financial flexibility. The company said this will be achieved primarily through working capital and capital expenditure reduction initiatives as well as asset sales.
"It is difficult to foresee the future, but market share gains realized
through August have positioned us to rebound once demand and market conditions improve," Mr. Gibara said. "Additionally, moderating oil prices and a projected increase in car and truck traffic could benefit our results," he said.
Meanwhile, industrywide shipments of replacement tires in North America were 3 percent below last year´s levels, the company said. Goodyear said its own shipments of replacement passenger and light truck tires were up overall, while those of the Goodyear brand increased more than 17 percent. The company said it has shipped about 1 million units as part of Ford Motor Co.'s Firestone tire replacement program.
Goodyear said industrywide shipments of replacement truck tires in August were up slightly from last year´s levels, and that its own shipments of such generally reflected that trend.
Industry shipments to the OE market dropped 6 percent from year-ago levels in the case of passenger and light truck tires and approximately 30 percent for commercial tires.
Goodyear said its shipments of passenger and light truck as well as commercial truck tires outpaced those of the industry at large.
While production of the Ford-approved replacement tires is running at full capacity, Goodyear said it made “significant production cutbacks” during August in response to weakness in the OE consumer and commercial truck tire markets. The company said it expects to make additional cutbacks in September to align its inventories with changing market conditions.
Petrochemical-based raw-material costs, meanwhile, declined slightly in the third quarter from those of the first half of 2001, which were up approximately 3 percent on a year-to-year basis. Energy costs— especially those of natural gas—likewise are improving vs. prior-year levels, the company said.
Goodyear said its replacement-tire pricing during August reflected the full impact of the company's second price increase this year, implemented on June 15, 2001.