TOKYO (Dec. 17, 2001)—Bridgestone/Firestone Americas Holding Inc. will suffer a $1.61 billion special loss in 2001 and require an extra $1.3 billion in funding from Bridgestone Corp. next year, the Japanese parent company said.
Even so, Bridgestone President Shigeo Watanabe predicted Bridgestone/Firestone would be profitable in 2002.
In remarks reported Dec. 4 by Reuters and the Associated Press, Mr. Watanabe said the $1.3 billion infusion of capital to Bridge-stone/Firestone would cut the U.S. subsidiary's interest-bearing debt load nearly in half from the current figure of $2.7 billion.
Between this and the reorganization, Bridgestone/Firestone should be in position to get back in the black in 2002 after two years of losses, Mr. Watanabe said.
Firestone took an extraordinary charge of $573 million in the first half of 2001 for recall-related charges, and will write off $285 million more in the second half because of lawsuits brought by owners of allegedly defective Firestone tires, Bridgestone said.
Other charges to be taken include $675 million to cover a write-down of assets, $50 million related to the closing of the Decatur, Ill., plant, and $25 million related to the Firestone Wilderness AT replacement program announced in October.
The U.S. company still faces a class-action lawsuit certified last month in Indianapolis federal district court—which it plans to appeal—and also possible payments to Ford Motor Co. to defray the costs of Ford's unilateral recall last May of 13 million Firestone Wilderness AT tires.
“While we are extremely disappointed that our company has incurred these losses, we know that taking these one-time charges this year puts us squarely on the road to recovery for 2002,” said Michael Gorey, vice president and controller of Bridgestone/Firestone Americas.
In addition, John Lampe, chairman, CEO and president of the new Americas holding company, said, “We must put our company in the best position to obtain cost-effective financing for the long-term and to permit management at the operating level to focus on their respective core businesses. This reorganization will go a long way toward accomplishing these two essential goals and marks a fresh beginning for our operations in the Americas.”
Meanwhile, Bridgestone has lowered its corporate sales and earnings projections for 2001 to reflect a decline in unit sales at Bridgestone/Firestone.
The tire maker is now projecting a 27.6-percent decline in ordinary (before tax) income to $628 million, and a slight dip, less than 1 percent, in revenue for its fiscal year ending Dec. 31, 2001, to $17.5 billion. Bridgestone/Firestone Americas' sales are expected to slip about 1.3 percent to $7.4 billion, the company said.
Bridgestone/Firestone's decline in unit sales has more than offset the positive effect of the depreciation of the yen, the company said.
Still, thanks to tax benefits related to the transfer of the shares of Bridgestone/Firestone into a wholly owned U.S. holding company, the Japanese tire maker has revised upward its projection for net earnings for the year, by 80 percent to $150 million.
The tax benefits, the company said, have arisen through the transfer of shares, which have deteriorated in value because of the accumulated losses incurred at Bridgestone/Firestone.
The new Americas holding company incorporates four separate operating companies in North America and several subsidiary companies in Latin America.
The reorganization reflects the collective work of teams of Bridgestone/Firestone employees, tax and accounting professionals and financial institutions to develop and implement a plan to secure more cost-effective long-term financing and design a corporate structure that facilitates management focus on core business operations, the company said.