Goodyear Highlights Industry Challenges, Resulting Production Cuts at JP Morgan Investor Conference
MIAMI BEACH, Fla. – The Goodyear Tire & Rubber Company at the JP Morgan High Yield Conference today will discuss fourth quarter 2008 industry conditions as well as corresponding production cuts taken during the period.
“It is widely known that the economic slowdown is having a considerable impact on consumer demand and industry volume,” said Darren R. Wells, executive vice president and chief financial officer. “Fourth quarter industry volumes were well below expected levels, prompting a significant increase to our production cuts that now extend across all business units.”
Wells said Goodyear continues to respond aggressively to the environment in 2009 with additional cost savings and inventory reductions. “We continue to adjust production to reduce inventory levels and to keep pace with the lower demand environment.” The company plans to announce a series of new actions on its full-year conference call scheduled for February 18.
Goodyear estimates industry volumes in North America for consumer replacement shipments were down approximately 3.5 percent for the 2008 full year compared to 2007. The consumer original equipment market was down 22 percent. In the commercial tire market, replacement shipments were down 11 percent and original equipment shipments were down approximately 18.5 percent.
For industry volumes in Europe, the company estimates the consumer replacement market was down 6 percent in 2008 compared to 2007. Consumer original equipment shipments were down approximately 4.5 percent. In the commercial tire market, replacement shipments were down 13 percent and original equipment shipments were down 2 percent.
“In response to the sharp decline in fourth quarter industry volumes, we raised our production cuts in the quarter to approximately 17 million units compared to our previous expectation of 11 million units,” Wells said. “Most of the 6 million unit increase can be attributed to the company’s international businesses, including Asia-Pacific and Latin America, and resulted in higher unabsorbed fixed cost across all regions.”
Wells also said high raw material costs remain a challenge. “Goodyear’s raw material costs were approximately 13 percent higher in 2008 than in 2007, with much of this increase coming in the fourth quarter, which was up more than 25 percent. We anticipate raw material cost increases to peak in the first quarter before beginning to moderate in the second quarter.”
Investors, media and other interested persons can access a live webcast of the presentation at 11:15 a.m. on the company’s investor relations Web site: www.goodyear.com/investor. Presentation materials also will be posted to the web site.
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