Goodyear cutting nearly 5,000 jobs after 4Q loss

AP, February 18

 

Goodyear Tire & Rubber Co., the biggest U.S. tire maker, said Wednesday it plans to cut nearly 5,000 jobs this year after a sharp drop in sales led to a loss of $330 million in the fourth quarter.

The Akron-based company said demand for new tires is weak as auto sales slump and the market for replacement tires is also down because people are driving less.

The job cuts equal almost 7 percent of the company's work force and follow the elimination of about 4,000 jobs in the second half of last year.

Goodyear's loss in the three months ended Dec. 31 amount to $1.37 per share, compared with a profit of $52 million, or 23 cents per share, a year earlier.

The company lost $1.18 per share, excluding one-time charges or gains, in the most recent quarter. Analysts surveyed by Thomson Reuters expected a loss of $1.03 cents per share on that basis.

Revenue dipped 21 to $4.1 billion from $5.2 billion a year earlier.

The company said the global economy depressed the number of tires sold in the recent quarter by 19 percent.

As a strategy to boost sales, Goodyear said it will step up new product offerings. These include its Assurance Fuel Max tire, which was introduced earlier this month and will go on General Motors' new Chevrolet Volt electric vehicle.

Besides the job cuts, Goodyear is freezing salaries, putting restrictions on some spending and putting in place purchasing strategies aimed at lowering raw materials costs.

Goodyear also plans to reduce its global tire capacity by 15 million and 25 million tires over two years while seeking ways to improve cash flow this year. It is reducing capital expenditures, inventory levels and is looking to sell noncore assets.

Robert J. Keegan, Goodyear chairman and chief executive officer, said the actions reflect new economic realities.

In a conference call Wednesday morning with analysts, Keegan said Goodyear is feeling the impact of a down market for new cars and people driving fewer miles.

"Today's economic uncertainty, the new economic realities of the world and the implications for our industry and for Goodyear are extremely challenging," Keegan told analysts. "The global economic slowdown has increased both in severity and geographic scope throughout the year. By year end, it had a significant impact in volume in each of our major business units."

Goodyear sales in North America were helped by higher tire prices and market-share gains for Goodyear-branded consumer replacement tires.

But fourth-quarter sales at its North American Tire Segment fell to $1.94 billion, from $2.28 billion a year ago, reflecting lower demand and the sale of its T&WA tire mounting business. The segment had a $193 million loss, versus a profit of $40 million the prior year's fourth quarter.

For all of 2008, Goodyear had a loss of $77 million, or 32 cents per share, versus a profit in 2007 of $602 million, or $2.65 per share. The 2007 result included an after-tax gain of $508 million, or $2.19 per share, on the sale of the company's former engineered products business.

Sales last year were $19.5 billion, slightly less than 2007's company record of $19.6 billion.

Keegan wasn't specific about the timing of the job cuts or where they may be made. But he did say adjustments in staffing and hours at some plants could lead to fewer workers, and he praised the United Steelworkers union for its cooperation.

He said the company reached a tentative deal with local Steelworker leadership at Goodyear's Danville, Va. plant to cut capacity and reduce the work force by about 400 people. The agreement will be voted on by the membership Thursday.

Kevin Johnsen, Goodyear contract coordinator and a staff representative with the Steelworkers in Gadsden, Ala., said the Danville plant will vote on schedule changes in the part of the plant where truck tires are made. He wouldn't be more specific until after union members vote.

"We always have concerns about companies laying off members and we'll do everything that we can to protect our members," Johnsen said. "Other than Danville, Goodyear has not come to us and said they are looking at this plant or that plant."

In Goodyear's home city, Akron Mayor Don Plusquellic said he appreciates Goodyear's efforts to remain a financially healthy company.

"My thoughts today are first and foremost with employees who face the loss of their jobs." Plusquellic said. "That's why mayors sought to shore-up the safety net for families as part of the Recovery Act signed by the president."

Goodyear shares rose 36 cents, or 6 percent, to close Wednesday at $6.38. Goodyear shares have traded in a one-year range of $3.93 to $30.10.