AKRON (Oct. 30, 2002) — Goodyear's net income tripled in the third quarter, despite a double-digit decline in North American Tire unit volume.
For the quarter, ended Sept. 30, Goodyear earned $33.7 million vs. $9.3 million in the same period a year ago. Worldwide sales fell to $3.5 billion from $3.7 billion as tire unit volume slid 4 percent to 54.4 million units.
Net income in the quarter included an after-tax gain of $8.2 million from the sale of land in Mexico and an $8.9 million after-tax charge related to manufacturing facility consolidation in Europe and the closing of a mold making plant in Stow, Ohio.
In the company's North America Tire segment, operating income slid precipitously to $10.1 million in the quarter from $87 million as sales fell 11.2 percent to $1.74 billion. Tire unit volume in the segment declined 12.1 percent to 26.5 million tires.
The segment's operating income in the quarter was negatively impacted by the decline in replacement market sales, a change in replacement market mix away from premium brands, the change in product mix toward lower-margin original equipment tires and the conclusion of the Ford tire replacement program, Goodyear said. Income benefited from lower raw material costs and cost reduction programs.
For the first nine months of 2002, Goodyear had a near break-even performance, reporting a net loss of $600,000 vs. a loss of $29.6 million a year ago.
Worldwide sales for the quarter fell 3.3 percent to $10.3 billion, with tire unit volume slipping 2.5 percent to 160.5 million units.
The company estimated that the effects of currency movements negatively impacted worldwide sales by about $80 million and earnings by $23 million in the first nine months of the year.
Operating income in the North American Tire unit through September slipped $1.9 million into the red during the period compared with operating earnings of $15.3 million a year ago. Tire unit sales were down 6.9 percent for the first none months.
In addition to third quarter adjustments, the tire maker said its nine-month results included $10 million in pre-tax earnings resulting from the company's participation in Ford Motor Co.'s tire replacement program. However, it saw a pre-tax charge of $10 million principally related to the closure in April of all Penske Automotive Centers in the U.S., of which Goodyear was a principal tire supplier.
Goodyear said unit sales to the North American replacement market decreased 18.8 percent for the quarter and 13 percent for the nine months. Excluding the effects of the 2001 Ford tire replacement program, unit sales to the replacement market were down 6.6 percent for the quarter and 7.2 percent through September.
For the nine months, Goodyear said North American operating income decreased due to lower replacement market volume, lower tire units delivered in connection with the Ford tire replacement program and the change in product mix toward lower-margin original equipment tires.
"Our international business units demonstrate that our initiatives to achieve top line growth and substantial earnings improvement are delivering results," said Sam G. Gibara, chairman and CEO. "Our focus is now to drive this change throughout North America and regain our momentum in the consumer replacement market. We expect our sharpened approach and effective execution will lead to improved financial performance."