AKRON — Goodyear's operating income fell 32 and 21.3 percent for the quarter and six months ended June 30 due to the negative effects of higher raw materials costs and lower unit volumes.
Sales were down in both periods as well, with the tire maker's business in Europe suffering the most due to “increased competition and lower summer tire industry demand.”
Richard Kramer
Goodyear Chairman and CEO Richard Kramer said the results “reflect the impact of volatile raw material costs and an increasingly challenging competitive environment, particularly in the U.S. and Europe.”
Mr. Kramer called the first half a “highly unusual” environment, with weakening OE and replacement demand despite strong underlying industry fundamentals, such as favorable trends in miles driven, gasoline prices and unemployment.
In light of the first half results and the “challenging global marketplace,” the company has lowered its segment operating income expectations for the remainder of 2017.
However, Mr. Kramer said that “despite the near-term challenges, I am no less optimistic about our ability to drive our strategic priorities against the favorable industry megatrends.”
Segment operating income fell to $361 million in the quarter and to $746 million in the first half, whiles sales were off 5 percent in the quarter to $3.69 billion and 2.4 percent to $7.39 billion in the half. Unit volume fell 10 percent to 37.4 million units worldwide.
As a result, the firm's operating margin fell nearly four points to 9.8 percent for the quarter and two and a half points to 10 percent for the half year.
For the full year, Goodyear expects sales volumes to be down about 3.5 percent from 2016 and segment operating income to fall between $1.6 billion and $1.65 billion, down from $2 billion last year.
Net income fell 27 percent to $147 million and about 19 percent to $313 million.
In the Americas, Goodyear's operating income fell 26.8 and 22.5 percent in the quarter and half year on 2.9- and 1.3-percent lower sales.
Second quarter sales fell to $2.03 billion on 9-percent lower volume, the Akron-based tire maker said, driven primarily by lower consumer demand, especially in the U.S. for tires in 16-inch rim diameters and below, due to increased competition. OE unit volume was down 12 percent, reflecting lower auto production.
Meanwhile, the United Steelworkers (USW) union recently reached tentative new five-year master labor contracts with Goodyear, as well as with Bridgestone Corp. and Sumitomo Rubber USA L.L.C.
A union spokesman said ratification meetings were being scheduled, then the USW would hold votes on the contracts — which, combined, cover more than 10,000 employees at 12 U.S. facilities. Details of the new agreements were not released.
The previous deals expired at 12:01 a.m. on July 29.
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