AKRON — Goodyear's segment operating income fell 44.5% in the quarter ended Sept. 30 on 8.9% lower sales, but the company stresses in its quarterly results presentation that the pace of decline has slowed considerably.
"Our results reflect increasing momentum as the global tire industry recovered more quickly than we expected during the quarter, led by the Americas," Goodyear Chairman, CEO and President Richard Kramer said.
"We are taking every opportunity to continue building our business for the long term, while generating significant cost savings and free cash flow."
Goodyear cited the negative effects of lower volume, reduced factory utilization and lower earnings from other tire-related businesses for the earnings decline, to $162 million.
The company's net result fell $2 million into the red, versus earnings of $88 million a year ago.
Sales fell to $3.47 billion, driven by 9% lower unit sales volume, unfavorable foreign currency translation and reduced sales from other tire-related businesses, Goodyear said. These factors were partially offset by improvements in price/mix.
Goodyear noted that both replacement and OE shipments were off by 9%, reflecting the impact of lower consumer demand, temporary third-party retail store closings in the U.S., and actions taken to align European distribution.
The operating ratio fell three points to 4.7%.
In the Americas business unit, operating income fell 39.4% to $106 million, while sales revenue dropped 11% to $1.82 billion. Tire unit volume declined 10% overall, Goodyear said, with replacement market shipments dropping 12%, reflecting weak retail demand and temporary third-party retail store closings (Walmart Corp.) in the U.S. OE unit volume was essentially flat.
Goodyear said the situation with consumer tire shipments was improving as Walmart, one of its largest single customers, has been bringing its auto service centers back on stream. Goodyear said at the start of the fourth quarter about 15% of Walmart's auto service centers remained closed, versus roughly two-thirds at the start of the third quarter.
Goodyear cited reduced factory utilization and lower volume for the reduced earnings. These factors were partially offset by the benefits of cost saving actions, lower SAG and improved price/mix.
For the January-September period, Goodyear reported a segment operating loss of $316 million on 21.5% lower sales of $8.67 billion. The net loss stands at $1.32 billion, versus earnings of $81 million a year ago.
Goodyear attributed the sales decline to 24% lower unit sales volume, reduced sales from other tire-related businesses and unfavorable foreign currency translation. The unit volume drop was more severe at the OE level (down 31%) than in the replacement markets (down 21%).
Sales in the Americas region were down 21.4% for the nine-month period, to $4.63 billion, while the operating result was a loss of $181 million.
The company did not comment on its prospects for the remainder of fiscal 2020.