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October 08, 2001 02:00 AM

Terrorist attacks cloud tire makers' forecasts Tire Business staff report

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    AKRON-Buildings crumbled to the ground nearly a month ago; now tire manufacturers are in a wait-and-see mode as to whether the economy will do the same.

    At least two tire makers-Goodyear and Cooper Tire and Rubber Co.-have lowered earnings expectations for the third quarter following the Sept. 11 terrorist attacks.

    Others remain cautious, pondering whether a fall-off in air travel and a downturn in new-car sales might benefit replacement tire and auto service sales.

    The following are reactions from various tire makers regarding the current economic climate and state of mind.

    Goodyear

    Goodyear, in the wake of the Sept. 11 terrorist attacks, has scaled back its earnings expectations for the third quarter (see story on page 3) and, since August, also has made what it termed ``significant'' cutbacks in production to bring tire inventories into line with reduced customer demand. It also has asked employees to restrict their travel to essential trips during the current period of uncertainty.

    In a Sept. 26 advisory to shareholders and others, the Akron-based tire maker said it was reducing its earnings expectations for the third quarter, citing what it called already weakened markets that were further disrupted by September's catastrophe.

    Goodyear Chairman and CEO Sam G. Gibara said the company, like many, experienced ``an abrupt decline'' in customer demand after the attacks.

    A company spokesman said Goodyear's forecasters believe it could be well into next year before the nation's economy recovers sufficiently to return tire shipments to normalcy. Dealers' sales fell off immediately after the terrorist attacks, he said, just like those of other sectors of the economy.

    The spokesman said Goodyear's cutbacks in tire production largely have been achieved without widespread layoffs, accomplishing the same ends by such means as extending holidays and reducing overtime requirements.

    Asked whether the reduced demand on the part of auto makers will result in a flood of ``downstreamed'' OE units to undercut replacement tire pricing, Goodyear's spokesman replied: ``That's why we're paying close attention to production-so we don't build tires that aren't needed.''

    Goodyear is encouraging employees to limit air travel to critical flights and urging particular caution for those working in sensitive offshore areas such as the Middle East.

    Meanwhile, the company is still planning to hold a meeting of about 1,500 Goodyear dealers in Las Vegas, Oct. 29-one day before the opening of the giant Specialty Equipment Market Association/International Tire Expo there.

    Cooper

    Cooper Tire & Rubber Co. has reduced its earnings expectations for the third quarter after a hoped-for improvement in sales failed to materialize during summer months. The Findlay, Ohio-based company said it now anticipates earnings per share in the range of 17 to 21 cents for the third quarter. Analysts on average had estimated Cooper would earn 26 cents per share, according to research firm Thomson Financial/First Call.

    Cooper ChairmanThomas A. Dattilo said the firm, at the end of the second quarter, had anticipated consumer demand and the economy would pick up significantly during the summer months.

    ``Both sides of our business have been impacted by the slow economy,'' he said. ``Sales of automotive components have declined due to reduced original equipment production. Tire sales have remained well below the normal `peak-season' levels all summer and September, which is normally one of the strongest months of the year, was particularly weak following the events of Sept. 11.''

    Meanwhile, the tire maker has banned international travel for employees worldwide. ``We believe this is a prudent decision and want to take every measure possible to assure the safety of our people,'' a spokeswoman said.

    Cooper said it is still too early to tell whether decreased air travel might mean increased business for tire makers. The spokeswoman said that, ``when that time comes, tire sales may pick up accordingly as people drive to more destinations.''

    She also said Cooper does not anticipate making production adjustments due to the Sept. 11 attacks, but will follow it's pre-inscribed plans for the year. She added the firm has seen increased business from the government for inner tubes for use in military vehicles.

    Bridgestone/Firestone

    Nashville, Tenn.-based Bridgestone/Firestone Inc. said it would continue current production at the same levels it had prior to the events of Sept. 11. Travel for employees was reinstated Oct. 1 after a suspension to an as-needed basis following the terrorist attacks.

    BFS declined to comment on any economic forecasts or earnings outlooks, but said it will wait and see on what the future holds.

    ``We remain cautiously optimistic that tire sales will continue to increase with many Americans choosing to drive to their destinations instead of opting to fly,'' a spokeswoman said.

    Yokohama

    Yokohama Tire Corp. said it recognizes a ``potential for a spike in tire sales due to the large numbers of individuals who now prefer driving as their primary mode of transportation.''

    The company said though the softening economy coupled with the attacks will affect tire sales in conflicting ways, the company's strategy will not change. A spokeswoman said it's too early to tell how the attacks will impact the tire industry and Yokohama.

    ``We will continue to monitor our overall business activity and adjust production accordingly,'' she said. ``We have no current plan to take unscheduled production curtailments.''

    Continental Tire

    A spokeswoman for Continental Tire North America Inc. said the Charlotte, N.C.-based tire maker anticipates ``business back to normal'' sometime next year and is not increasing production in anticipation of greater demand.

    ``We clearly see a softening of the OE market,'' she said, but Conti expects its fourth-quarter earnings will be ``negatively effected'' by the temporary OE downturn.

    Worldwide, employees have been communicating via phone or video conferencing.

    Michelin

    Michelin Tire North America Inc. said all meetings are going on as scheduled and that there is no direct policy on travel, but reductions on employee business travel are expected.

    A spokeswoman said the firm doesn't see any reduction in air travel as ``a factor at this time'' in terms of increased tire sales, or the need for commercial hauling.

    Michelin has made workforce reductions in an effort to reduce operating costs, but the spokeswoman made it clear that those cuts were announced a day before the terrorist attacks and were in no way a reaction to them.

    Letter
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    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

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