Goodyear: Materials prices to peak in first quarter

ERJ staff report (TB)

Miami Beach, Miami - Goodyear expects raw materials prices to peak in the first quarter, but it will be three to six months before that easing will be reflected in pricing because of the lag time between purchasing and consuming materials, the firm's chief financial officer told analysts recently.

Raw material costs shot up about 25 percent in the fourth quarter, Darren Wells said at the JP Morgan Chase & Co. High Yield Conference in Miami Beach. The increase largely offset price/mix gains the company had made during the first nine months of the year.

Goodyear expects prices to begin to moderate in the second quarter. Wells cautioned, though, that the economic slowdown and Goodyear's resultant production scale backs mean longer inventory times for raw materials bought at the current and recent higher price levels.

For fiscal 2008, the impact of raw materials costs was roughly 13 percent higher than in 2007, Mr. Wells said. Through the third quarter, Goodyear calculates its spent $361 million more on raw materials than in 2007, but this was offset by more than $680 million in added revenue from improved pricing and product mix.

Globally, Mr. Wells said, Goodyear's revenue per tire was up 8 percent last year through September, including an 11-percent gain in North America.

From Tire Business (A Crain publication)