AKRON-Goodyear's bottom line numbers still are awash in red ink, but company officials are pointing toward less-conspicuous numbers in its financial results-plus expectations of better figures coming-as signs of progress in its turnaround efforts.
In 2003, Goodyear cut its net loss to $802.1 million from a $1.2 billion loss in 2002, although the 2002 figure included a $1.08 billion charge the tire maker took in 2002's fourth quarter. In 2003's fourth quarter, the net loss was $434.4 million, compared with a $1.2 billion loss a year earlier.
Goodyear also reported another $164.8 million reduction in net income from restatements of past results. That figure puts the grand total of the company's restatements for the past few years at $280.8 million-well ahead of the $100 million reduction anticipated by Goodyear when it first announced a restatement in October. The Securities and Exchange Commission still is investigating those restatements. Goodyear said it has implemented several of its own accounting changes.
Despite the size of the losses, Goodyear is highlighting some numbers that it says show progress in the firm's goal to stabilize North American Tire (NAT) while expanding other divisions.
The company reported record sales for the year of $15.1 billion, up 9.1 percent from $13.9 billion in 2002. Sales in the fourth quarter were $3.91 billion, up 11.6 percent from $3.51 billion the year before.
NAT trimmed its operating loss in the fourth quarter to $15.6 million from $48.5 million in 2002, although the full-year operating loss of $128.7 million was more than double the $57.1 million in 2002.
NAT sales were up 3.4 percent in the quarter to $1.67 billion and 0.6 percent for the year to $6.75 billion, despite unit shipment drops of 1.2 and 2.6 percent, respectively. Revenue per tire in the fourth quarter was up 4 percent.
The 2004 goal, gaining ``traction,'' aims at driving better results and improving profitability. CEO and Chairman Robert Keegan said he expects segment operating results to increase by more than 25 percent in all businesses except Asia in the first quarter, whose results are delayed until mid-June.
``We entered 2004 with a great deal of momentum and with high expectations,'' Mr. Keegan said. ``We are pleased with the results we are seeing for the first quarter of 2004, which will demonstrate that we are gaining traction in our turnaround initiatives.'' He also promised that the first quarter results will show ``measurable proof'' of this progress.
Goodyear dealer Dale Pinkerton, owner of Dale Pinkerton Inc. in Butler, Pa., said he still has confidence in the company's eventual success. ``I feel pretty confident that they're going to start showing some pretty good results,'' he told Tire Business.
But at least one analyst wasn't sold yet.
``Despite the expected operating improvement (to come in the first quarter), we still believe that Goodyear could remain unprofitable (in the first quarter) and just marginally profitable throughout the year,'' said Rod Lache, an analyst at Deutsche Bank Securities Inc., who has a ``hold'' rating on the stock. He also pointed out that NAT's replacement volume fell 1.7 percent in the fourth quarter despite industry estimates of a 3.7-percent gain.
Rising raw material prices continued to afflict the tire maker, as well as the rest of the industry. Raw material costs impacted the year's net loss by $335 million, although currency translation had a favorable impact of about $51 million.
Margins improved in the fourth quarter by cost reductions and higher selling prices, but raw materials costs offset those figures by $53 million. The company expects raw materials costs to continue to increase by 5-7 percent throughout 2004.
At the same time, though, Goodyear said it is making headway toward its goal of eliminating $1 billion to $1.5 billion in costs by 2005. The company said the benefits from its contract with the United Steelworkers of America should kick in this year, as should other rationalizations and outsourcing.
Goodyear expects to ax $440 million in costs this year, on top of last year's $180 million in savings for a grand total of $620 million by year-end.
Last year higher pension costs ate up $184 million of those savings, and raw materials costs took $335 million. A spokesman said price increases and Six Sigma initiatives helped offset some of those costs.
In addition, Mr. Keegan said the tire maker made strides in improving relations with its independent dealers.
``This was the No. 1 priority for Jon Rich (president of NAT) and his team in 2003,'' he said. ``It simply had to be done, and it was.''
Mr. Keegan added dealers have embraced the two new Assurance tires launched at the firm's February dealer meeting, which he called the ``best in a long time.'' Mr. Keegan said dealer orders of the new tires are three times higher than the company's initial estimates.
So far four plants-Lawton, Okla., Napanee, Ontario, Tyler, Texas, and Gadsden, Ala.-make the tires.
``This is shaping up to be the most successful product launch in our history,'' he said.
One snag so far as been keeping the Assurance supply coming to dealers. ``We're struggling to keep everyone inventoried, and that's a nice problem to have,'' Mr. Keegan told analysts.
Mr. Pinkerton said he's selling both the ComforTred touring tire and the TripleTred all-season tire, though he has some trouble getting enough TripleTred. ``It's pretty easy to convince (customers) that that's the right thing to buy,'' he told Tire Business.
As he has many times since discussing plans for Goodyear's turnaround, Mr. Keegan offered reassurance that the eventual goals will be met.
``While North American Tire is not yet performing at the level we need, we see positive results which are confirming that the right plans are in place, the right actions are being taken and we are starting to return this important business to profitability,'' he said.
Shares of Goodyear stock closed May 19 at $8.56, up 40 cents or 5 percent over the previous day.