AKRON (Jan. 26, 2010)—Goodyear said it will take a charge of about $150 million in the first quarter of 2010 because of the Venezuelan government's currency devaluation and establishment of a two-tier exchange structure.
Venezuela on Jan. 8 devalued its official exchange rate from 2.15 bolivar fuerte to each U.S. dollar to 4.30, except in the case of essential goods, for which the rate is 2.60. Goodyear said some of the tires and raw materials it imports into the South American country have been classified as essential, while others have not.
The tire maker said it is evaluating the list of goods classified by the Venezuelan government as essential to determine the exchange rates applicable to its imports. Goodyear said the $150 million charge associated with the devaluation is based on the calculation of a 4.30 exchange rate, and relates to the remeasurement of its balance sheet, net of tax.
To the extent that Goodyear imports are classified as essential, this impact could be reduced, Goodyear said. The firm as of Dec. 31 had about $370 million in cash denominated in bolivar fuerte in Venezuela. The devaluation will not have any impact on Goodyear's 2009 results of operations or financial position.
Also, Goodyear said Venezuela has been designated hyper-inflationary as of Jan. 1, and all future foreign currency fluctuations will be recorded in income.