Fitch Upgrades Goodyear IDR to 'B+'; Outlook Positive

NEW YORK--Fitch Ratings has upgraded the Issuer Default Rating (IDR) for The Goodyear Tire & Rubber Company (GT) to 'B+' from 'B'. In addition, the following debt ratings have been upgraded:

The Goodyear Tire & Rubber Company

--Issuer Default Rating (IDR) to 'B+' from 'B';

--$1.5 billion first lien credit facility to 'BB+/RR1' from 'BB/RR1';

--$1.2 billion second lien term loan to 'BB+/RR1' from 'BB/RR1';

--$300 million third lien term loan to 'BB-/RR3' from 'B/RR4';

--$650 million third lien senior secured notes to 'BB-/RR3' from 'B/RR4';

--Senior unsecured debt to 'B-/RR6' from 'CCC+/RR6'.

Goodyear Dunlop Tires Europe B.V. (GDTE)

--EUR505 million European secured credit facilities to 'BB+/RR1' from 'BB/RR1'.

The Rating Outlook is Positive. GT had approximately $5.8 billion of debt outstanding at March 31, 2007.

The rating upgrades reflect the positive impact on GT's balance sheet of the recent sale of common stock for approximately $834 million in net proceeds. GT used proceeds from the sale to redeem $175 million of outstanding 8.625% notes due in 2011 and $140 million of 9% notes due in 2015. The ratings and Outlook also incorporate GT's pending sale of its Engineered Products business for nearly $1.5 billion, which was announced in March 2007. The proceeds from both transactions strengthen GT's liquidity as it recovers from the labor strike in 2006, continues with its multi-year program to reduce its cost structure, and further implements its strategy to exit certain segments of the private label tire business and expand its higher-margin premium tire business.

GT has made meaningful progress toward its goals but significant challenges remain with respect to high material costs, achieving capacity reductions including the closing of the Tyler Texas plant in 2008, and a highly competitive global tire market. In addition, GT faces substantial cash requirements including its agreement to fund a VEBA trust for $1 billion, rebuild inventory, and fund capital expenditures and pension contributions. The company expects pension contributions to decline after 2007, and GT would realize annual cash savings from the transfer of OPEB liabilities to the VEBA trust assuming it is approved.

As a result of ongoing restructuring and other special items such as the VEBA trust, GT's free cash flow in 2007 is likely to remain weak. However, the Positive Outlook incorporates Fitch's view that GT will attain its targeted cost savings that would support stronger cash flow in 2008 and additional debt reduction consistent with the company's goals. The settlement of the labor strike at the end of 2006 reinforced GT's ability to address its high-cost structure in North America. Partly as a result of its new labor agreement, GT expanded its cost reduction program to at least $1.8 billion over a four year period through 2009. The company's ratings and/or Outlook will be contingent on realizing stronger margins in North America, generating higher levels of free cash flow, and maintaining a competitive position in the global tire market.

In April 2007, GT restated and extended its bank facilities that provide more flexible terms, although the facilities remain secured. The amounts of the facilities were generally unchanged; however, GT's third-lien bank term loan was not amended and the term loan portion of GDTE's EUR505 million first-lien credit facilities was converted into a revolver. Fitch's recovery ratings for GT's debt remain unchanged with the exception of the third lien debt. The improvement in the recovery rating to 'RR3' reflects expectations for stronger operating results as GT makes further progress in reducing costs and paying down debt.

Fitch's Recovery Ratings (RR) are a relative indicator of creditor recovery prospects on a given obligation within an issuers' capital structure in the event of a default. A broad overview of Fitch's RR methodology as it relates to specific sectors can be found at www.fitchratings.com/recovery.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. The issuer did not participate in the rating process other than through the medium of its public disclosure.