Goodyear posts income drops, cites sales volumes, higher raw materials costs as reasons

AKRON—Goodyear reported double digit declines in operating income for the three- and nine-month periods ended Sept. 30 on the negative effects of lower sales volumes, higher raw materials costs and other factors.

Segment operating income fell 18.8 percent in the quarter to $294 million and 27.3 percent in the nine months to $703 million, cutting the earnings/sales ratio to 7.7 percent in the quarter and 6.4 percent for the nine months.

Revenue fell 3.2 percent in the quarter to $3.8 billion, driven by unfavorable foreign currency translation and lower third-party chemical sales, and 4.9 percent for the nine months to $11.6 billion.

Net income plunged 75 percent in the quarter to $88 million and 86.1 percent in the nine months to $81 million.

The firm's tire unit volumes totaled 40.3 million in the quarter, down 1 percent from 2018, as original equipment unit volume fell 5 percent, driven by lower global vehicle production, Goodyear said. Replacement tire shipments increased 1 percent.

The company did not issue an overall outlook for the remainder of fiscal 2019, but Richard Kramer, Goodyear chairman, president and CEO, said the company experienced "continued strength" in its U.S. consumer replacement business and "solid growth" in Brazil, yielding "positive momentum in these important markets as we head into the final months of the year."

The Americas business unit posted a 9.8 percent drop in operating income for the quarter on 2.8 percent lower revenue, Goodyear said. Overall tire unit volume rose 0.6 percent to 40.3 million units, buoyed by 3 percent higher replacement tire shipments. OE unit volume, on the other hand, fell 7 percent, reflecting lower North American vehicle production, including the impact of a strike at General Motors and "strategic fitment choices," Goodyear said.

Revenue in Europe/Middle East/Africa fell 6.6 percent to $1.21 billion, attributable primarily to lower volume and unfavorable foreign currency translation and partially offset by improved price/mix.

Kramer also noted that industry conditions in Europe were "softer than expected," and Goodyear continued to see negative impacts from "lack of alignment" throughout its distribution channels.

"In response, we expect to accelerate our plans to rationalize distribution in the region," Kramer said. "These actions, which will begin early next year, should improve the focus on our brands and ensure that we capture the full benefits of the investments we are making to increase the supply of premium, high margin tires over the next few years."

Asia Pacific recorded a 3.2 percent rise in revenue to $548 million, reflecting higher volume and improved price/mix, Goodyear said. Tire unit volume increased 5 percent, driven by growth in China, which Kramer attributed, in part, to the launch of several new OE fitments there that helped mitigate the impact of lower auto production.