AKRON-An economic recession and the immediate aftermath of the Sept. 11 terrorist attacks on the U.S. impacted most tire companies during 2001's third quarter.
Many tire companies struggled as raw material costs rose and volumes declined. Some, like Bandag Inc. and Cooper Tire & Rubber Co., took charges against earnings for legal expenses. Some announced production cutbacks and layoffs to counter decreases in sales and earnings.
Bandag Inc.'s third quarter net earnings fell 18.4 percent from 2000 to $14.6 million. Net sales slipped 3 percent from last year's quarter to $261.7 million.
Net earnings for the nine-month period plunged 41.8 percent to $26.5 million, while net sales slipped 3 percent to $715.7 million. Tire Distribution Systems Inc., the firm's subsidiary, posted an operating profit of $785,000 in the third quarter and a loss of $5.4 million for the nine-month period.
The Muscatine, Iowa-based firm said corporate expenses increased significantly due to higher legal expenses related to the ongoing lawsuit against Michelin North America Inc. Expenses for that litigation in the third quarter amounted to approximately $4.5 million compared with $1.6 million for the same period in 2000.
Chairman Martin Carver said the company saw a slight reduction in gross margins to 36.9 percent from 37.5 percent during 2000's third quarter, ``a reflection of both the economic slowdown in Bandag's major markets and higher raw material costs.''
Mr. Carver said Bandag doesn't anticipate any significant recovery in the commercial truck tire business before the second half of 2002, given the slow economy and the Sept. 11 terrorist attacks. He acknowledged that though TDS' sales increased from last year, ``competitive conditions continued to adversely affect margins, which limited profitability.''
Cooper Tire & Rubber
Findlay, Ohio-based Cooper Tire & Rubber Co. saw its earnings fall 38.7 percent in the third quarter to $14.4 million, as sales fell 6.2 percent to $791.5 million on weaker demand by original equipment customers for the company's automotive components.
Two-thirds of the earnings decline is attributed to expenses for product liability and litigation.
Tire division sales and operating earnings fell 4.2 percent to $482 million and 11.9 percent, respectively.
For the nine-month period ended Sept. 30, Cooper's sales fell 10.3 percent to $2.7 billion, while net earnings slid 59.8 percent to $36.3 million.
While tire sales overall were down, Cooper reported unit sales of its light truck tires in North America increased by more than 4 percent, aided in part by the demand to fill Ford Motor Co.'s recall and replacement of 13 million Firestone P-metric light truck tires.
Despite its lower earnings, Cooper reduced its debt by $43 million in the three-month period. Cooper, with tire segment sales for the quarter of $461.8 million vs. $482 million last year, outperformed the market in light and radial medium truck tires but underperformed the industry in passenger tires, said Chairman Thomas Dattilo.
Passenger tire shipments declined 11 percent for the quarter. Overall, Cooper's unit volumes fell slightly more than 8 percent, he said, largely because of Goodyear and Group Michelin's designation as replacement suppliers for recalled Firestone tires.
But this might be the first time in years, he said, that other tire makers aren't reverting to discounting. Instead of cutting prices, Cooper, like its competitors, is focusing on keeping tire production in line with demand.
Instead of laying off employees during the quarter, Cooper eliminated 150 positions through attrition and took 14 days off the tire production schedule, cutting 1.2 million tires from inventory.
The firm probably will cut at least that many days from production in the fourth quarter, Mr. Dattilo said.
Sales of radial medium truck tire units were up by nearly 13 percent, Cooper said, significantly outpacing the industry.
In general, falling sales, lower production volumes related to inventory reductions and continuing product liability and litigation costs more than offset price increases, improved product mix and savings on raw material costs, Cooper said.
Goodyear reported net income of $9.3 million on net sales of $3.7 billion in the third quarter ended Sept. 30, despite an economic slowdown that affected most global markets and reduced volumes, the company said.
Goodyear's income was down from $17 million in 2000's third quarter, while sales were up slightly.
In North America, Goodyear posted sales of $1.96 billion for the quarter, up 2.4 percent from $1.83 billion in the year-ago quarter. Nine-months' sales of $5.41 billion were up 1.7 percent from $5.32 billion in the previous year.
In terms of units, Goodyear said its tire shipments were up 2.4 percent overall for the quarter, but down 5.8 percent for the nine months. Replacement market volumes increased by 5.8 percent for the quarter and 3.7 percent for the nine months. However, shipments to OE customers were down 6.7 percent for the quarter and 14.3 percent for the nine months.
Goodyear said increased sales in both periods reflected a change in product mix to higher-priced tires and price increases in the replacement market. The company also noted that comparative sales during the previous year were depressed by production cutbacks on the part of auto and commercial truck makers.
During the past nine months, Goodyear said it increased its share of the car tire replacement market by 3 percent and its OE share by 4 percent. The firm said it also increased its market share in truck tires, but did not elaborate in terms of percentages. The Akron-based tire maker said it supplied about 4 million units for Ford Motor Co.'s Firestone tire replacement program during the past nine months.
To combat the negative conditions, Goodyear cut back production; reduced inventory; ``aggressively'' reduced costs; curtailed discretionary expenditures; and pushed for increased sales revenue and margins, the Akron tire maker said.
Earlier this month, the firm announced it was laying off 1,400 workers at five U.S. tire plants.
For the nine-month period, the company posted worldwide sales of $10.7 billion, down about 2 percent from 2000, and a net loss of $29.6 million.
The loss figure is based primarily on the first quarter, when Goodyear posted a net loss of $46.7 million.
For the third quarter, Group Michelin saw sales edge up 1.9 percent to $3.6 billion, while nine-month sales rose 3.6 percent to $10.5 billion, despite a 2.4-percent drop in unit volume.
Earnings weren't released, but Michelin did say it would take $180 million in charges against 2001 earnings to cover costs associated with the closings of three plants in Europe next year and enacting an early retirement program in France that will result in nearly 3,850 job cuts.
The company also is putting employees and investors on notice that it does not rule out ``additional steps to adjust production capacities.''
In North America, the company claimed it gained market share in both the original equipment and replacement passenger tire markets, and recouped nearly all of its lost market share in the truck tire aftermarket.
Michelin said it expects to cut annual global operating costs by nearly $135 million over the next three years.
Myers Industries Inc., parent of Myers Tire Supply and Patch Rubber Co., suffered a recession-induced 46.3-percent drop in third quarter earnings to $1.7 million, as sales fell 7.9 percent to $141.5 million.
Polymer manufacturing segment sales suffered more than the distribution segment, falling 9 percent in the quarter vs. 4 percent for distribution.
For the nine-month period, net earnings dropped 34.2 percent, to $12.9 million, while sales slipped 4.6 percent, to $459.4 million.
TBC Corp.'s net earnings for the quarter jumped 13.2 percent to $6 million. Sales for the Memphis, Tenn.-based firm rose 4.1 percent to a record $278.9 million.
For the nine-month period, TBC posted a 7.7-percent jump in net income to $15.4 million. Sales surged 16.9 percent to $761.6 million.
President and CEO Larry Day said the positive results are due to TBC's multi-channel marketing approach, which has helped it to outpace the replacement tire industry as a whole. He said the company's retail units-Big O Tires Inc. and Tire Kingdom Inc.-are providing TBC an increasing proportion of sales and income.
Mr. Day also noted that sales are continuing to recover from the aftermath of Sept. 11 events. He said pricing remained firm and is helping the TBC improve its margins. He also said TBC's EBITDA for the full year 2001 should total more than $60 million.
Titan International Inc. posted a net loss of $9.5 million in the third quarter ended Sept. 30, but forecasts recovery in its core markets by the first quarter of 2002 with the return of the union workforce at its Des Moines, Iowa, farm tire plant. Quincy-based Titan posted sales of $100.5 million in the quarter, down 16 percent from last year.
Maurice Taylor Jr., Titan president and CEO, said the company reached milestones during the quarter: the resolution of the 40-month strike by the United Steelworkers local in Des Moines and the securing of two military deals, including a $45 million wheel pact with the U.S. Army-its largest military contract ever.
For the nine-month period, Titan has lost a net $13.3 million on sales $356.9 million.