Goodyear suffered a ``disappointing'' $73.6 million net loss in the second quarter, but management is ``encouraged by numerous positive trends'' and is optimistic about a turnaround in light of positive results at six of the firm's seven business units.
The Akron-based tire maker's North American Tire unit, however, was still in the red on an operating basis, as higher raw material, manufacturing and benefits costs and an unfavorable product mix offset cost savings. While the unit was in the red for the quarter, it operated in the black in May and June, according to Robert J. Keegan, chairman and CEO.
Unit sales in North America slipped 4.2 percent, but sales revenue held steady at $1.69 billion, driving up the revenue per tire by 4 percent.
Overall, Goodyear lost market share in the North American replacement market but the Goodyear-brand share edged up slightly in both the consumer and commercial replacement tire markets, Mr. Keegan said, including double-digit growth in the independent dealer channel. Shipments of lower-end private brand tires declined.
``We have numerous obstacles to overcome, including continued weakness in the U.S. economy,'' Mr. Keegan said, ``but we remain confident that our strategies are solid.''
Goodyear said the improved sales in the dealer channel reflected progress in mending fences with some of its larger wholesalers, who had been at odds throughout 2002 with the tire maker over pricing policies instituted at year-end 2001. In addition, the company is holding the line on its ``right pricing'' efforts, resulting in less ``yo-yo'' buying at quarter's end. This effort is starting to show results in the bottom line, a spokesman said.
Global sales revenue rose 8 percent to $3.76 billion despite slightly lower unit sales. Overall second quarter segment operating income of $161 million was only 4.2 percent below 2002, but higher financing, interest, foreign currency exchange and rationalization costs left Goodyear with a pre-tax loss of $52 million vs. a pre-tax profit of $49 million in 2002. The company posted net income of $28.9 million in the second quarter a year ago.
The net loss for the first six months of 2003 was $236.9 million, a seven-fold increase from the $34.3 million loss recorded a year ago. The loss includes an after-tax rationalization charge of $78.6 million to cover salaried staff reductions and manufacturing consolidations in North America, Europe, Latin America and Asia, Goodyear said, along with $186 million in higher raw materials costs.
Sales for the six months were up 7.6 percent to $7.3 billion, while tire unit volume was down 0.8 percent to 105.4 million units. Tire price improvements and the effects of currency movements had a favorable impact on sales for the first six months.
Operating income was up for the quarter and six months at the firm's six other business units: European Union Tire, Eastern Europe/Africa/Middle East Tire, Latin American Tire, Asia Tire, Engineered Products and Chemicals. Of these, only Latin American Tire struggled, with tire unit sales down.
Mr. Keegan told analysts in a conference call the firm expects to start seeing cost reductions in the second half from its Six Sigma operational efficiency programs implemented in the second quarter.