Goodyear expects up to $800m additional raw materials costs in first half

Akron, Ohio – The Goodyear Tire & Rubber Co. expects an increase of $700-800 million (€615-703 million) in raw materials costs in the first half of 2022, as commodity prices continue to increase.

The figure incorporates 2/3 raw material costs which come from feedstock and about 1/3 which come from non-feedstock, including transportation and other supplier costs, explained Darren Wells, EVP & CFO in an 11 Feb conference call.

“So that $700 million to $800 million, to be clear, includes the increases in feedstock, which would probably be somewhere around $500 million,” Wells added.

In addition, the estimated cost includes “some significant non-feedstock costs”, including about $70 million impact of foreign exchange and “significant step-up” in transportation costs. 

The Goodyear official explained that the figure only offers an outlook for the first half, as the tire maker sees "a lot of uncertainty about how commodity prices are going to evolve over the next few months.”

If commodity prices stay where they are, Wells went on to say, Goodyear would still face “several hundred million dollars” of raw material cost increases in the second half year-over-year. 

“But we think it is really difficult to make that call right now and raw materials have dipped down,” he added. 

Goodyear’s raw materials’ cost stood at $5 billion in 2021, nearly half of which was spent on natural and synthetic rubbers.

The US tire maker said its fourth quarter costs of raw materials increase by 31% – or $300 million – reflecting a significant acceleration from earlier in the year.

The group also saw a step-up in other inflation as well, with over $80 million in calculated general inflation compared with its recent historical average of closer to $35 million per quarter.

The tire maker said it offset both raw materials and other cost inflation with price/mix during the quarter.