AKRON — Goodyear suffered a 49.8% drop in segment operating income and a net loss of $101 million in the quarter ended March 31 as the negative effects of lower sales volume, reduced production and inflation offset benefits such as the price/mix effect.
Segment operating income fell to $215 million on 0.7% higher revenue of $4.94 billion, Goodyear said, dropping the operating ratio four points to 2.5%. The net loss $101 million contrasts with net earnings of $96 million a year ago.
Goodyear set tire unit sales volume was off by over 7%.
Despite the loss in the quarter, Goodyear management — citing the expected synergy benefits of its acquisition of Cooper Tire & Rubber Co. in early 2021 — said the company should achieve second-half segment results that would drive the operating margin closer to the near-term target of 8% that the company disclosed when it announced the Cooper acquisition.
The company said it is "driving toward" strong operating results throughout the rest of the year, particularly in the Americas and Asia/Pacific regions, as the company works through continuing cost inflation and "contractionary demand" in many markets.
Management said it anticipates "relative stability" in industry demand during the third quarter and year-over-year growth in the fourth quarter, while also benefiting from falling raw materials costs and moderating inflation.
As noted already, Goodyear expects to suffer a sales drop of $110 million to $130 million in the second quarter as a result of lost production tied to the tornado that struck the Cooper Tire plant in Tupelo, Miss.
The Americas business unit reported a 63.4% drop in operating income, to $79 million, on 1.6% lower sales of $2.87 billion. Unit sales volume dropped 7.5%, but sales revenue was buoyed by a 6% increase in revenue per tire.
Goodyear said the results were impacted negatively by softer industry volume and the ongoing effects of inflation. Americas consumer replacement volume declined approximately 9%, driven by a strong comparable 2022 period and channel destocking.
Similarly, commercial volumes have normalized in line with 2019 levels, consistent with the industry, Goodyear said. Results included continued benefits from strong price/mix while U.S. consumer replacement market share remained stable year-over-year.
Segment operating income was impacted by lower sales volume ($44 million), unabsorbed overhead from lower production in the fourth quarter ($49 million), higher raw materials costs ($106 million) and inflation ($99). On the positive side, price/mix benefits were booked at $149 million, and the firm benefited from a duty refund of $21 million on imported tires.
Goodyear's replacement market unit sales volume in the Americas fell 9.9% while OE volume increased 4.8%, reflecting the ongoing recovery in auto production.
Goodyear noted in its letter to investors that U.S. industry retail sales to end consumers (i.e., "sell out") were down approximately 2% from the 2022 quarter and that its sales dropped more than the industry wide decline but they were in line with other U.S. Tire Manufacturers Association members.
Elsewhere, net sales in the Europe/Middle East/Africa segment increased 4.6% to $1.49 billion, driven by a 24% increase in revenue per tire (excluding the impact of foreign currency), which offset a 9.1% drop in unit sales volume.
In the Asia/Pacific region, net sales increased 2.6% to $582 million on the positive effects of a 13% increase in revenue per tire. Tire volume fell 2.2%.
