Goodyear raises savings target to $1.5bn as earnings grow

Akron, Ohio – Goodyear has raised its savings target from an ongoing transformation plan to $1.5 billion (€1.37 billion), up 50% compared to the original $1 billion announced late last year. 

Over the last four quarters, the Akron-based tire maker has expanded its operating margin consecutively and achieved ‘tangible and solid results’, explained president and CEO Mark Stewart 4 Oct.

Due to the progress, Stewart said Goodyear was increasing its target for gross run-rate gains from the Goodyear Forward plan (ERJ report) to $1.5 billion by the end of 2025.

"This increase will enable us to realise significant year-over-year earnings benefits in both 2024 and 2025 from the programme," he added while delivering third quarter results.

The group, Stewart explained, has now raised its guidance for 2024 Goodyear Forward gross benefits to $450 million and expects an additional $750 million of year-over-year gross benefits in 2025.

Goodyear also expects to achieve a 10% segment operating income (SOI) margin and 2.0x – 2.5x leverage targets by the fourth quarter of next year.

Financial results

For the three months to end of September, Goodyear sales were down 6.1% year-on-year at $4.8 billion, as tire volumes fell 6.2% to a total of 42.5 million units.

Group SOI for the three months, however, rose 3.3% year-on-year to $347 million, with SOI margin up 0.7 percentage points at 7.2%.

Over the first nine months of the year, group SOI increased 60% year-over-year to $933 million, reflecting $285 million gains from Goodyear Forward and $235 million positive price/mix effect.

Further gains were made through insurance proceeds of $69 million and a $55 million non-recurrence of Tupelo storm (ERJ report) from last year.

These were partially offset by the $143 million impact of lower tire volumes and inflationary costs of $116 million.

Nine-month sales declined 6.8% to $14 billion, as volumes decreased 3.8% to 123 million units.

SOI margin for the first three quarters of the year grew 2.8% percentage points to 6.7%.

Regions

Breaking down the third quarter performance of each region, Goodyear reported a $24 million SOI in the EMEA region, up 9.1% compared to the year before.

The earnings growth in the region was achieved despite a 2% decline in sales to $1.3 billion and 2.9% lower volumes of 12.2 million units.

Lower sales were driven by tire volume declines and the negative impact of changes in foreign currency exchange rates, partially offset by favourable price/mix.

Third quarter OE unit volumes decreased 5.6% year-on-year, reflecting lower OEM production, while replacement tire unit volume decreased 2.1%, driven by decreased volume in smaller rim sizes.

EMEA SOI benefitted from the Goodyear Forward plan and favourable net price/mix versus raw material costs. These benefits were partly offset by inflation, other costs, and unfavourable fixed overhead absorption.

In Americas, both sales and earnings were down during the third quarter due to an 8.3% decline in volumes to 21 million units.

The region’s SOI for the period fell 2.7% year-on-year to $251 million while revenue dropped 8.4% to $2.8 billion.

The earnings decrease was driven by lower volume, inflation, and unfavourable price/mix and raw material costs. 

Replacement tire unit volume decreased 11.3% in Americas, reflecting industry member declines in the US.

Industry non-members, generally representing low-cost imported product, grew significantly in the quarter.

OE unit volumes in Americas were up 7.9%, helped by new fitment wins.

Asia-Pacific performed strongly during the third quarter, posting a 29% year-over-year growth in SOI to $72 million, on 4.8% lower sales of $618. Total units declined 5.4% to 9.3 million in the region.

For the fourth quarter, Goodyear expects global volumes to be down 4% year-on-year reflecting “weaker sell-out trends and high levels of distributor inventories of low-end imports.”