Goodyear Reports 2008 Third Quarter Results


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Third Quarter highlights include:

Sales increased 2% to third quarter record $5.2 billion
Revenue per tire excluding translation increased 8%
Continued strength in international markets
Price/mix improvement offsets raw material cost increases
Segment operating income $266 million
Income from continuing operations $31 million
4-point cost savings plan to significantly surpass target, $1.6 billion achieved to date
VEBA trust approved by federal court, $1.1 billion in OPEB liabilities eliminated

AKRON, Ohio, Nov. 3, 2008: The Goodyear Tire & Rubber Company today reported record third quarter sales driven by growth in international markets.

The company's third quarter sales of $5.2 billion increased 2 percent from last year as improved pricing, a richer product mix and strength in international markets more than offset lower volume, most notably in North America and Europe. Also impacting sales was the 2007 divestiture of the company's T&WA tire mounting business, which contributed sales of $145 million in last year's third quarter.

Revenue per tire, excluding the impact of foreign currency translation, increased 8 percent over the 2007 quarter, reflecting worldwide gains in pricing and product mix generated by the company's strategy to focus on high- value-added tires.

"Goodyear's solid third quarter concludes a strong nine months of performance, reflecting the successful execution of our business strategies and continued strength in our international businesses," said Robert J. Keegan, chairman and chief executive officer.

"The tire industry is facing challenging business conditions as the global financial crisis and slowing economic conditions are impacting consumer demand in all regions. Our results reflect the economic reality of weakened industry demand and the associated cost impact of production cuts we initiated during the quarter," he added.

"Our leadership team has the experience to operate effectively under these conditions and is taking decisive actions necessary to lessen the impact of falling industry demand. In this environment, you can expect Goodyear associates to drive business innovation, aggressively target costs and advance our business strategies," Keegan said.

"The strength of our strategies and the proactive measures we are taking to address economic challenges position Goodyear well to maximize performance now and when industry demand recovers."

Third quarter 2008 income from continuing operations was $31 million (13 cents per share). This compares to $159 million (67 cents per share) last year. Goodyear had net income of $668 million ($2.75 per share) in the 2007 third quarter, including a gain of $517 million ($2.12 per share) on the sale of its former Engineered Products business. All per share amounts are diluted.

The 2008 quarter was impacted by net rationalization charges and accelerated depreciation of $46 million (19 cents per share), a loss on settlement of postretirement healthcare obligations in connection with the establishment of a Voluntary Employees' Beneficiary Association (VEBA) of $13 million (5 cents per share), expenses related to Hurricanes Gustav and Ike of $7 million (3 cents per share), discrete net tax charges related primarily to German operations of $6 million (2 cents per share), charges related to the exit of its Moroccan business of $5 million (2 cents per share) and a gain on asset sales of $2 million (1 cent per share). All amounts are after taxes and minority interest.

The 2007 quarter was impacted by net rationalization charges and accelerated depreciation of $6 million (2 cents per share), tax expense related primarily to a German tax law change of $12 million (5 cents per share) and a gain on asset sales of $10 million (4 cents per share). All amounts are after taxes and minority interest.

See the table at the end of this release for a list of significant items impacting continuing operations from the 2008 and 2007 third quarters.

Goodyear made significant progress during the third quarter on its four- point plan to achieve more than $2 billion in cost savings from 2006 through 2009. "We have now achieved $1.6 billion in savings and are clearly on a path to significantly surpass $2 billion," Keegan said.

During the quarter, Goodyear sought redemption of $360 million invested in The Reserve Primary Fund. This fund has temporarily frozen withdrawals. As a result, Goodyear has reclassified this $360 million in cash to other current assets. On October 31, the company received $183 million from the fund.

Business Segments

Total segment operating income was $266 million in the third quarter of 2008, down $116 million from the 2007 period. Reductions in tire production due to weak industry demand and the resulting impact on overhead absorption, along with inflationary cost increases, were the primary drivers of higher conversion costs of $150 million during the third quarter of 2008.

Improved pricing and product mix of $280 million in the third quarter of 2008 more than offset increased raw material costs of $238 million.

Foreign currency translation positively impacted sales by $113 million and segment operating income by $8 million in the quarter.

Asia Pacific Tire and Europe, Middle East and Africa Tire achieved record third quarter sales. Latin American Tire's sales were a record for any quarter.

Asia Pacific Tire and Latin American Tire had third quarter record segment operating income.

See the disclosure at the end of this release for further explanation and a segment operating income reconciliation table.

North American Tire's third quarter sales were down $100 million compared to the 2007 period. Impacting sales was the 2007 divestiture of the company's T&WA tire mounting business, which contributed sales of $145 million in the third quarter of 2007. Also, tire volume declined 12.4 percent reflecting significantly weaker market demand in both the original equipment and consumer replacement markets. Sales in the 2008 quarter were positively impacted by improved pricing and product mix and market share gains for Goodyear-branded consumer replacement tires.

Third quarter segment operating income decreased $85 million compared to the 2007 quarter due to lower sales and production levels, which resulted in unabsorbed overhead. Lower SAG costs were a partial offset. Pricing and product mix improvements of $109 million offset increased raw material costs of $109 million.

Europe, Middle East and Africa Tire third quarter sales increased 4 percent over last year as a result of improved pricing and product mix and the favorable impact of currency translation, which more than offset lower volume, particularly in the consumer replacement market. Sales in the 2008 third quarter were positively impacted by market share gains for Goodyear- and Dunlop-branded consumer replacement tires.

Third quarter segment operating income decreased $42 million from 2007 due to lower production levels, which resulted in unabsorbed overhead. Pricing and product mix improvements of $71 million more than offset $59 million in higher raw material costs.

Latin American Tire sales increased 18 percent from the third quarter of 2007 due to improved pricing and product mix and the favorable impact of currency translation. Lower volume was a partial offset.

Third quarter 2008 segment operating income increased 2 percent from last year due to improved pricing and product mix of $61 million, which more than offset higher raw material costs of $40 million. Results were also favorably impacted by currency translation.

Asia Pacific Tire third quarter sales were 11 percent higher than the 2007 period primarily due to improved pricing and product mix. Sales in the 2008 quarter were positively impacted by strong volume growth for Goodyear-branded high-value-added tires in the consumer replacement market, most notably in Australia and China.

Segment operating income increased 22 percent in the 2008 third quarter, primarily due to improved pricing and product mix of $39 million, which more than offset higher raw material costs of $30 million.

Year-to-Date Results

Goodyear's sales for the first nine months of 2008 were a record $15.4 billion, a 6 percent increase over 2007 despite a 5 percent decline in tire unit volume. Impacting sales was the 2007 divestiture of the company's T&WA tire mounting business, which contributed sales of $481 million in the first nine months of 2007.

Segment operating income was $963 million in the first nine months of 2008, up $45 million from the 2007 period.

Income from continuing operations for the first nine months of 2008 was $253 million ($1.04 per share). This compares to $78 million (39 cents per share) last year. Goodyear had net income of $550 million ($2.44 per share) in the first nine months of 2007, including the gain on the sale of the Engineered Products business. All per share amounts are diluted.

Improved pricing and product mix of $682 million in the first nine months of 2008 more than offset increased raw material costs of $361 million.

Revenue per tire, excluding the impact of foreign currency translation, was up 8 percent over 2007's first nine months.

"Our performance under challenging conditions this year demonstrates the capabilities of the business model we have put in place and the operating leverage we expect to harness once industry conditions improve," said Keegan.

Conference Call

Goodyear will hold an investor conference call at 10 a.m. today. Prior to the commencement of the call, the company will post the financial and other related information that will be presented on its investor relations Web site: GOODYEAR.

Participating in the conference call with Keegan will be Darren R. Wells, executive vice president and chief financial officer.

Investors, members of the media and other interested persons may access the conference call on the Web site or via telephone by calling (706) 634-5954 before 9:45 a.m. A taped replay will be available later today by calling (706) 645-9291. The replay will remain available on the Web site.

Goodyear is one of the world's largest tire companies. Fortune magazine named Goodyear the World's Most Admired Motor Vehicle Parts Company in its 2008 list of the World's Most Admired Companies. The publication ranked Goodyear No. 1 in innovation, people management, use of assets and global orientation. The company is also listed on Forbes magazine's list of the Most Respected Companies in America and its list of the Most Trustworthy Companies in America and CRO magazine's ranking of the 100 Best Corporate Citizens. Goodyear employs about 70,000 people and manufactures its products in more than 60 facilities in 25 countries around the world. For more information about Goodyear, go to GOODYEAR.

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