Goodyear will reduce its net income from 1997 to 2003 about another $65 million on top of last year's $84.7 million restatement-for a total of nearly $150 million-when it files its 2003 and amended 2002 annual reports by mid-May following the completion of its overseas accounting investigation.
Akron-based Goodyear also said its lenders have approved a 30-day extension until May 19 on the tire maker's deadline for filing its 2003 10-K annual results.
Goodyear said it still is reviewing the results of the four-month overseas investigation, but the company expects it to result in a reduction of net income between 1997 and 2003 of about $10 million, with most of the impact in Goodyear's European Union business.
In addition to the $10 million from the investigation, Goodyear said the rest of the $65 million reduction companywide will include: $20 million related to workers' compensation claims that previously had been estimated at about $16 million, $10 million to fixed assets, $8 million to product liability, $7 million to intercompany profit elimination in inventory and $10 million to other items.
In November, Goodyear said net income would be reduced by about $84.7 million following an earnings restatement. The Securities Exchange Commission in February launched a formal investigation into this restatement. Goodyear began its European investigation in December and in February reported it had been extended to other overseas operations. In March the company said it took disciplinary actions against several unnamed senior managers in the European Union operation.
Goodyear said the filing delay until May 19 will not prevent it from accessing credit facilities or obtaining letters of credit though it said it does not expect to need the facilities before May 19. If it doesn't file its financials by May 19, the Akron-based company could be in default under the loan agreements and thereafter under other debt instruments.
In other news, the company that took over Goodyear's human resources functions and absorbed about 100 Goodyear employees said last month some of those workers eventually will be without jobs as the transition progresses.
Goodyear and Dallas-based ACS Inc. announced in February a 10-year agreement for ACS to provide a wide range of HR business process services for Goodyear's North American operations. About 100 positions were then transferred from the tire maker's Akron headquarters. Goodyear expects a savings of about $45 million over the life of the contract from the move.
At the time of the announcement, Goodyear said the 100 or so employees would be transferred to ACS with the same pay, comparable benefits and vacation time. A spokeswoman with ACS told Tire Business that all transferred employees have been given project-based agreements that indicate how long they will be working on a project as part of the overall transition. She said ACS immediately assumed control of HR functions as part of the agreement, but the larger transition to improve and automate systems will take about a year to year and a half.
``That changes the number of employees and type of employees required to support the work,'' she said, though she did not indicate how many employees will be affected.
A Goodyear spokesman said the contract calls for ACS to provide supplemental benefits to the employees. ``The contract calls for ACS to provide similar benefits and support services if they have to lay anyone off,'' he said.