Goodyear Releases Monthly Investor Update
AKRON, Ohio, Aug. 21 Goodyear's Investor Relations
department today published its monthly update for individuals interested in
tracking Goodyear's progress on a more frequent basis.
Operating Highlights
North American Tire
* In July, industry shipments to the replacement market were 13 percent
above last year's levels for consumer tires. Goodyear shipments in
total to the consumer replacement market were well above industry
levels. Shipments of the Goodyear brand gained more than 6 points of
market share. In July, Goodyear shipped about one million tires as part
of the Ford replacement program.
* Industry shipments in July to the commercial replacement market were
14 percent above last year's levels. Goodyear shipments in total were
also above last year's levels allowing Goodyear to gain more than 2
points of market share.
* In July, industry shipments to Original Equipment dropped 5 percent from
a year ago for consumer tires and 32 percent for commercial tires.
Goodyear's unit shipments generally reflected the industry shipments.
* Production levels for the Ford-approved replacement tire lines are
running at full capacity. However, in light of the weak OE consumer and
commercial markets, significant production cutbacks were made in July.
Additional production cutbacks are expected in August and September as
the company continues to focus on aligning inventories with market
conditions.
* Petrochemical raw material prices have improved slightly in July
compared with the first half of 2001, which was up approximately
3 percent year-over-year. Energy costs are still higher than prior year
levels.
* The second price increase this year for the consumer replacement market
was implemented on June 15, 2001.
European Union
* In July, industry replacement market sales were about flat with last
year's levels for consumer and commercial tires. Goodyear shipments
were below industry levels due to slow winter tire shipments as dealers
in Germany continue to carry high inventories.
* Industry OE consumer shipments in July were down slightly from last
year. Goodyear shipments were up from last year. Both industry and
Goodyear shipments of OE commercial tires were down compared to July of
last year.
* Lower production volumes due to soft markets and inventory adjustments,
especially in the commercial business, had a negative impact on margins
in July.
* High raw material costs, driven by a strong dollar, contributed to
further margin erosion.
* The euro at 0.87 to the dollar at the end of July has weakened
significantly versus fourth quarter levels but has improved slightly
from the first half of 2001. On a year-to-date basis, the euro is down
6 percent.
Eastern Europe
* Replacement tire unit sales for Goodyear were down from July of last
year primarily due to the economic crisis in Turkey.
* OE tire unit sales for Goodyear were down approximately 7 percent from
July of last year due primarily to the substantial decline in the Polish
automotive industry.
* The Turkish lira has devalued approximately 97 percent this year.
* Due to lower volumes, higher raw material costs and currency
devaluations, margins have been negatively impacted in Turkey, Poland
and South Africa.
Latin America
* July replacement market volumes were down from last year due to softness
in the economies. OE volumes in July were up from last year due to a
more robust OE industry in 2001.
* Operating results continue to be negatively impacted by the economic
situation in Argentina and a weaker real in Brazil.
Asia
* Replacement and OE shipments for July were up over last year primarily
due to strong shipments and share gains in China, Malaysia and Thailand.
* Low-cost bias imports, intense market competition and weak exchange
rates have negatively affected margins.
Engineered Products
* Weak OE demand for automotive hoses and power transmission products
negatively impacted sales volumes in July.
* Production cutbacks were necessary to balance inventories.
Chemicals
* Volumes have been reduced significantly due to production cutbacks in
the tire industry. The volume reduction has negatively impacted
margins. Cost reduction efforts and slightly better raw material prices
have offset some of the impact.
* Raw material and energy costs, while slightly better than the first half
of 2001 are still significantly above 2000 levels.
Corporate News
* As part of Goodyear's previously announced financing strategy, the
company successfully placed $650 million of 10-year bonds in the U.S.
marketplace and has renewed and upsized its 364-day revolver.
* Philip A. Laskawy, who retired as chairman and chief executive officer
of Ernst & Young LLP on June 30, was elected to Goodyear's board of
directors on Aug. 7, 2001. His experience and focus on change
management will be a valuable addition as the company seeks to get even
closer to its customers. The board now has 12 members.
* Timothy R. Toppen, former president of Goodyear Chemical, was named
president of Goodyear Engineered Products, following the sudden death of
Tave Mallamaci in July. Replacing Toppen as president of Goodyear
Chemical is Jonathon D. Rich, former director, chemical research and
development. Rich joined Goodyear in September 2000, having previously
been technical director at GE Bayer Silicones in Germany.
* The new North American advertising campaign for our Goodyear-brand tires
will kick off on television and in print in early September. The ad
campaign is expected to solidify the momentum of Goodyear's market share
gains the past year and intensify the consumer's flight to quality.
* Goodyear's three North American airships are visiting more than 25 major
cities this summer on a Safety Tour promoting tire care and educating
consumers about the safe operation of their tires. The blimps are using
their aerial sign technology, called EagleVision, to remind the public
to check their tire inflation, tread depth and, when in doubt, visit
their local Goodyear stores for a free safety inspection. The eye-
catching sign is visible day or night, can be programmed in 256 colors
with logos and graphics, and can be seen up to a mile away.
* Goodyear signed an exclusive supply agreement with the U.S. Postal
Service. Goodyear will provide all of the replacement tires used by the
Postal Service's 200,000 transport and delivery vehicles for the next
10 years.
* To better serve customers and be more competitive, Goodyear will
outsource portions of its automotive coolant hose final assembly
operation located in Lincoln, Neb. The action is expected to begin in
September and be completed in 2002.
