AKRON — Goodyear said higher raw material costs were among the factors that contributed to a 32.4%-drop in operating income for both the quarter that ended June 30 and for the first six months of 2019.
The Akron-based tire maker said lower volume, weaker results from other tire-related businesses and adverse currency, partially offset by favorable price/mix, also contributed to the drop in operating income in the quarter, from $324 million a year ago to $219 million in 2018.
Operating income in the first half decreased from $605 million in 2018 to $409 million in 2019.
Goodyear also reported a net loss of $7 million for the first six months of 2019, compared to net income of $232 million in the same period of 2018. That was due, Goodyear said, to several significant items, including $107 million in rationalization charges, related to the previously announced plan to modernize two of tire manufacturing facilities in Germany.
First half 2019 adjusted net income was $103 million, compared to $272 million in 2018.
Net income for the quarter was $54 million, compared to $157 million in the corresponding quarter of 2018.
According to Goodyear, unfavorable currency translation, lower volume and reduced sales from other tire-related businesses were factors in a 5% drop in net sales during the quarter, from $3.8 billion in 2018 to $3.6 billion during the most recent quarter.
Tire unit volumes were 37.4 million, a decrease of 4% from 2018. Replacement tire shipments were flat, while OE unit volume dropped 11%, reflecting lower global vehicle production and strategic fitment choices.
In the half, sales fell to $7.2 billion, a 6% decline from the 2018 period due to unfavorable foreign currency translation, lower volume and reduced sales from other tire-related businesses. These factors were partially offset by improvements in price/mix, Goodyear reported.
Replacement tire shipments increased 1% in the Americas segment. U.S. consumer replacement volume increased 4% over the prior year, Goodyear said, buoyed by growth in the 17-inch-and-greater wheel rim category. OE unit volume dropped 9%, as a direct result, Goodyear said, of a 12% decrease in consumer OE due to lower vehicle production and strategic fitment choices.
"Our U.S. consumer replacement and commercial businesses continued to perform well in a challenging environment, aided by recent product launches," Goodyear Chairman, CEO and President Richard J. Kramer said in a statement. "We have continued our focus on strengthening our business by investing in premium supply and enhancing our OE pipeline and cost competitiveness.
Sales in the Americas segment dropped slightly in both the quarter ($1.97 billion from $2.02 billion in 2018) and the half ($3.85 billion from $ 3.95 billion in 2018). Operating income dropped from $154 million in 2018 to $134 million this quarter, and from $281 million in 2018 to $223 million this half.
"I am encouraged that several of the external factors that have impacted our business in recent quarters are beginning to moderate, positioning us to deliver stronger results going forward," Mr. Kramer said.
In its financial report, Goodyear said its OE win rates over the last 18 months have increased significantly, "reflecting industry trends toward vehicles with more complex tire constructions, as well as Goodyear's success in bringing advanced new technology to OE platforms."
Based on that, Goodyear said it expects OE volume to increase approximately 20% between 2019 and 2022 based on industry projections for auto production. These new fitments, expected to include a significant percentage of high-value electric vehicle fitments, will provide a higher average revenue per tire than existing volume, Goodyear said.
Sales in both the European, Middle East and Africa segment and the Asia Pacific segment dropped 9% and 8% in the quarter