Goodyear Tire's fiscal year off to a good start, company embracing speed, change

By Lisa Kerner

Charlotte, N.C., April 27 - The Goodyear Tire & Rubber Co.'s first quarter demonstrates solid progress and a strong start to the year, according to comments made by chairman and chief executive officer Robert J. Keegan during an earnings call on April 27.

Goodyear is in a transition year, rebounding from the 12-week United Steel Workers strike, a slowdown in certain markets and the sale of some of its non-core businesses.

The Akron, Ohio, tire manufacturing company reported first-quarter sales from continuing operations of $4.5 billion, up 1% from the prior-year period. This increase was offset by a 10% decline in sales for Goodyear's North American Tire business, which were impacted by the strike as well as an exit from some segments the private label tire business, reducing sales by about $200 million.

"Our focus on speed and accelerating the pace of change at Goodyear has just begun to have a major impact on our business model," Keegan said.

The CEO highlighted Goodyear's business platforms, developed in 2006, that have positioned the company for growth:

•Strengthen top-line growth capabilities, including new product development and improved supply chain;

• A step change improvement in cost structure;

• Strengthen balance sheet; and

• Tight focus on core businesses.

Goodyear said it is on track to increase its cost savings more than originally planned, by up to $2 billion by the end of 2009. The company is targeting savings of $1.25 billion to $1.4 billion from continuous improvements alone, with some $200 million to $300 million saved in Asian sourcing. Selling, general and administrative savings are expected to be between $200 million and $250 million.

The company had been targeting more than $1 billion in savings through 2008. Keegan said the new $2 billion target incorporates the original target as well as savings of $300 million from a new United Steel Workers labor contract.

Keegan said improvements in Goodyear's capital structure enable the company to increase investments in growth initiatives.

Over the next five years, the company plans to increase production capacity for high-value-added tires by 40% to support Goodyear's new product pipeline and to take advantage of favorable market trends.

In addition, Goodyear plans investments in existing facilities to increase its production capacity in low-cost countries by one-third to support growth in emerging markets.

"These investments are part of our strategy to have approximately half of our production capacity in low-cost manufacturing within five years," Keegan said.

"Our global manufacturing capacity will be well-aligned with demand, and able to support our outstanding new product engine."

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