S&P nicks Goodyear Tire

S&P said it lowered its ratings on Goodyear Tire & Rubber Co. and its debt to B+ from BB-.

Recently, the company announced several strategic initiatives, including asset sales, greater restructuring and mix optimization over the next two years to improve profitability, and planned debt paydown.

“While we view the strategic initiatives as a positive step forward for Goodyear as it tries to increase margins closer to peers and reduce leverage, the cost of the restructuring is significant and will take an extended period of time, during which we expect Goodyear's margins will be lower and free operating cash flow (FOCF) will remain negative, leading to overall weaker credit metrics than previously expected,” S&P said in a press release.

“We expect Goodyear's margins, cash flows, and credit metrics will be materially weaker over the next two years. While third-quarter performance showed improvement over a very weak first half, European margins remain weak and restructuring costs continue to reduce overall margins. The company has lost share in consumer replacement markets globally, with the share loss for Europe being the most severe (down 16.6% for Goodyear while the market is down only 5.6% in Europe,” the agency said.

The outlook is stable.

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