AKRON (Aug. 4) — Weak demand in the North American consumer replacement market kept a lid on Goodyear´s sales in the second quarter as charges relating to cost-cutting moves cut drastically into the tire maker´s profit.
Goodyear´s sales rose 3 percent to $5.14 billion from $4.99 billion the prior year. Net income fell drastically to $2 million from $69 million a year ago. Profits were affected negatively by rationalization and depreciation costs of about $63 million related to plant closings in the United Kingdom and New Zealand.
Tire unit volume in the quarter fell 4.3 percent to 54 million units from 56.4 million units a year ago. Raw material costs also dampened results, with an increase in the quarter of 16 percent.
Total segment operating income fell 15.5 percent to $267 million from $316 million in 2005. North American Tire took a substantial hit as its segment operating income fell almost 90 percent to $6 million from $55 million a year ago. Tire unit volume fell 7.9 percent in the North American business for the quarter to 23.3 million units.
Sales in the unit rose 1.9 percent to $2.34 billion and revenue per tire rose 9 percent in the segment and 7 percent overall.
Goodyear said the unit´s profitability was impacted negatively by lower volume, price mix that was unable to offset raw material costs, the loss of profits from divested businesses and higher costs in general.
"Our strategy to focus on high-value-added products and key market segments resulted in market share gains for our Goodyear and Dunlop brands during the quarter," Chairman and CEO Robert Keegan said in a statement. "However, we were not able to offset the impact of weakness in the lower-value segments of the North American consumer replacement tire market."
For the first half of the year, Goodyear´s sales rose 2.4 percent to $10 billion from $9.76 billion last year. Net income fell 44.5 percent to $76 million from $137 million.
North American Tire´s sales rose 3.3 percent to $4.58 billion as tire unit volume slipped 7.3 percent to 46.9 million units in the half. Segment operating income for the half fell 25.8 percent to $49 million.