Once very stable by industry standards, Goodyear's stock price plummeted below the $10 per-share mark the week of Sept. 23-the first time it has been that low in more than a decade.
The Akron tire maker's shares on the New York Stock Exchange closed at $9.07 Sept. 23, their lowest closing price since May 20, 1991, when it fell to $9.06, marking the first time the stock was in single digits since May 30 of the same year. Prices are adjusted for dividends and splits.
Goodyear's stock has been an issue with analysts and shareholders over the past few years, as the price's decline has coincided with the company's financial struggles. The stock closed at $75.75 at the end of March 1998. A year later it was down to $49.81, and 12 months later it had sunk to $23.31.
In March this year the daily price peaked at $28.84 and has fallen fairly steadily since.
In fiscal 1998, Goodyear posted net earnings of $637.5 million on sales of $13.1 billion. In 1999, sales rose slightly but income dropped by more than half to $243.2 million.
Buoyed by its alliance with Sumitomo Rubber Industries Ltd. and its takeover of Dunlop operations in North America and Europe, sales increased nearly 8 percent in 2000, but profits again took a tumble to $40.3 million. Last year, Goodyear lost $203.6 million.
The company would not address the stock price issue directly. A spokesman did say Goodyear would keep an eye on the price but would continue to focus and act on improving its earnings and balance sheet for the long run.
Goodyear's monthly investor update, released earlier this month, indicated the firm's North America shipments for August were below industry levels and raw material costs have been high, the spokesman said.
Saul Ludwig, analyst with McDonald Investments in Cleveland, said generally when there is a given expectation of corporate profit, and then a change in expectation one way or the other, there often is a commensurate movement in stock price.
Goodyear had a positive second quarter, marked by a tripling of net profits from the year before, showing evidence of progress, Mr. Ludwig said. But as the third quarter progressed and reduced demand negatively affected shipments, expectations in profits came down and the stock price has fallen as well.
On Sept. 23, as Goodyear stock dropped below $10, he downgraded his recommendation on company shares to ``hold'' from ``buy'' and said he was lowering his outlook regarding the firm for the rest of 2002 and 2003.
Three days earlier, Saul Rubin of UBS Warburg-whose recommendation has stayed at ``hold'' throughout this year-cut his earnings per share estimate for the third quarter to 10 cents from 25 cents and year-end estimate to break-even from 25 cents. Goodyear's shipments lagging behind the industry's ``invokes deep concern,'' he noted, and having to fight to keep market share is not well-timed for the company.
``Goodyear is fighting an uphill battle,'' Mr. Rubin said. ``Retail demand is getting weaker, raw material prices are moving higher and the competition is becoming more aggressive.''
Deutsche Securities also downgraded Goodyear on Sept. 17 to ``hold'' from ``buy.'' As of Sept. 24, six of nine brokers covering Goodyear recommended ``hold'' for the firm's stock and three recommended ``sell,'' according to a Yahoo online finance report.
Credit agency Fitch Ratings also downgraded Goodyear, changing its debt rating for the company to negative from stable. It based the move on recent industry developments which will ``significantly challenge'' the company's road to profitability.
Goodyear's pricing flexibility-one of its main goals in looking to improve results in 2002-may be hindered by reduced volume, Fitch said.
Shareholders in most companies these days are unhappy, Mr. Ludwig noted. In Goodyear's case, it's facing a downward market position in an apprehensive environment. But if the mood around the equity market changes, Goodyear's fortunes could be altered as well, he said.
The stock price could be aided if raw material cost pressures were alleviated, he said. Oil prices have risen from $20 per barrel earlier this year to about $30 now, and even with tire price increases, it's difficult to offset rising costs like that in the long-term.
As for management changes-specifically in the case of Samir G. Gibara, Goodyear CEO and chairman-times like these are when companies usually make them, analysts say. Anytime people are disappointed in how a company is doing it's a natural question, Mr. Ludwig said, but in the case of Goodyear and Mr. Gibara, ``I don't have the answer.''
A 35-year company veteran, Mr. Gibara was named president in 1995, took over as CEO on Jan. 1, 1996, and became chairman on July 1 of that year. When he became CEO, the firm's stock price remained steady in the mid-$40 to low-$50 range until moving into the $60 range by mid-1997.
The price hit a peak in the $70-75 range in the first half of 1998, stabilized into the high-$40 to low-$60 range through the first half of 1999, then began to slip into the mid-$20 range and below by the start of 2000. It hasn't been at $30 or above since then.