Cooper Tire & Rubber Co. is ``cautiously optimistic'' about 2002 based on some new long-term tire supply contracts and recent price increases.
But the company's efforts to keep inventories in line with demand may result in short-term erosion of operating margins, according to Thomas A. Dattilo, chairman, president and CEO.
For 2001, Cooper saw its net income slump 81.1 percent to $18.2 million, despite a more than doubling of earnings to $15.7 million in the fourth quarter. Sales fell 9.1 percent to $3.15 billion for the year and slid 5.3 percent to $776.6 million in the fourth quarter.
In its Tire Group, Cooper suffered a 9.4-percent drop in sales in the fourth quarter, to $421.2 million, contributing to a 5.4-percent decline in sales for the year, to $1.7 billion.
Unit sales fell 13 percent in the quarter and 8 percent for the year-but improved pricing partially offset the declines, Cooper said. Cooper attributed the declines in part to extraordinarily high shipments in the second half of 2000 in response to the recall of millions of Firestone Wilderness tires.
The tire maker has announced another price increase of 3 to 5 percent in March.
``I think that we (the industry) are going to get the point across to the world that price increases are not just tied to the price of raw materials,'' Mr. Dattilo said Feb. 7 during a discussion on earnings.
Factors such as engineering expenses and increased regulatory-related costs also play a part, he said.
On a more positive note for domestic tire makers, Mr. Dattilo told analysts he agrees with the belief that the Transportation Recall Efficiency, Accountability and Documentation Act could have a ``chilling effect'' on tire imports.
Tire group operating earnings fell 12.2 percent, to $39.7 million, in the quarter, and 20 percent for the year, to $147 million, before restructuring and class-action settlement charges, Cooper said.
These charges reduced operating earnings further to $73.2 million.
Excluding these items, Cooper's net income for the year was $69 million, the company said.
During the year, Cooper signed new long-term supply agreements with Pep Boys-Manny, Moe and Jack and TBC Corp. and increased its sales to the regional retailer distribution channel by nearly 30 percent, according to the company.
For 2002, Cooper is working to reduce inventory levels-and therefore working capital-while maintaining what it claims are ``industry-leading'' order fill rates and service levels, Mr. Dattilo said.
This effort may require Cooper to continue operating its plants at less than full capacity for up to half a year, an effort that he said could drive operating margins lower in the near term, but which could yield a higher long-term return on assets.