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June 04, 2020 05:12 PM

Goodyear sees tire volumes dropping 50% in Q2

Tire Business Staff
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    AKRON — Goodyear is forecasting tire volumes will plunge roughly 50% in the second quarter versus the same period in 2019, or roughly 25 million units, according to information the company published in a recent 424B filing with Securities and Exchange Commission.

    Goodyear cited the negative economic effects of the global COVID-19 pandemic for its forecast, saying it's been forced to close many operations temporarily throughout the world during the first quarter, including most of its manufacturing facilities. This has limited global business activity.

    In the filing — which is related to Goodyear's $800 million senior notes offering — the company said the reduced production volume will reflect "expected demand" and will allow it to reduce inventory.

    In the first quarter, ended March 31, Goodyear reported a segment operating loss of $47 million, down from an operating profit of $190 million in 2019, and showed a net loss of $619 million, versus a net loss of $61 million from a year earlier.

    Sales fell 15.1% to $3.06 billion "driven by lower industry volume and unfavorable foreign currency translation." Tire volume was down 18% to 31.3 million units.

    In the filing, Goodyear said it believes the largest volume discount throughout 2020 will be in the second quarter.

    Goodyear's forecast is in line with expectations issued earlier by Continental A.G. and Pirelli & Co. S.p.A., which said consumer tire shipments could drop by 30% to 40% in Europe and the Americas, with commensurate negative effect on the companies' earnings potential.

    In the commercial sector, Conti is projecting a drop in demand of over 20% in the second quarter, with the decline even steeper in Europe at over 30% after shipments.

    In the SEC filing, Goodyear also stated:

    "Given the limited visibility we have into vehicle production and replacement tire demand, we have difficulty projecting industry volumes for the year."

    In addition, Goodyear added, "our other tire-related businesses are also being significantly affected by the weakening economic environment. Traffic and volume at our retail locations is low and the sharp drop in business and leisure travel is adversely impacting our aviation business. Our chemicals business is also feeling the effects of the decline in tire production."

    Goodyear said it's expecting a decline in earnings in the second quarter of about $150 million. In the second quarter of 2019, the company reported segment operating income of $219 million and net earnings of $54 million.

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