NEW YORK (Sept. 23, 2005) — Goodyear plans to reduce high-cost manufacturing capacity in North America by 8 to 12 percent over the next three years—saving $100 million to $150 million annually—as part of an effort to save up to $1 billion in three years.
Goodyear executives declined to identify how many plants could be affected or which locations are involved. The tire maker expects to incur cash restructuring charges of $150 million to $250 million over the next three years as a result of this plan.
The company said other cost initiatives include increased Asian sourcing and ongoing productivity improvements. The Akron-based tire maker said it is targeting cost reductions of $750 million to $1 billion through 2008.
Robert Keegan, chairman and CEO, said at an investors meeting Sept. 23 in New York that the company has three new metrics by which to gauge Goodyear's progress. The company plans to improve its total segment operating margin to 8 percent, its North American segment operating income to 5 percent and its debt to EBITA ratio to 2.5 percent.
For the first half of 2005, Goodyear officials said, NAT's margin was 1.5 percent, and total segment margin was 6.2 percent. Debt to EBITA was 3.4 percent. Those figures are improvements from 2002's NAT margin of negative 0.3 percent, total margin of 2.6 percent and debt to EBITA of 5.4 percent.
The company, though, identified continuing challenges, such as increasing raw material costs, uncertain global economic conditions and pension funding obligations that will peak in 2006.
“Our turnaround is on track and will continue to evolve,” Mr. Keegan said in a statement. “We have a business model and a strategy that is working. We believe we have the strongest leadership team in the industry, and we are now a market-driven company. We have a passion for this business and are energized by the opportunities ahead of us.”