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Fitch Lowers Goodyear's Long-Term Debt Rating

4 December 2000

Fitch Lowers Goodyear's Long-Term Debt Rating

    CHICAGO--Dec. 4, 2000--Fitch has lowered the senior unsecured debt rating of The Goodyear Tire & Rubber Company from 'A-' to 'BBB+', and has removed the rating from Rating Watch Negative.
    The company's commercial paper rating is affirmed at 'F2'. Goodyear had approximately $4 billion of total debt outstanding at Sept. 30, 2000. The Rating Outlook is Stable.
    The rating downgrade is due mainly to a significant reduction in expected free cash flow leading to higher expected debt levels, a result of lower than expected earnings in the second half of 2000 and into 2001. Fitch continues to expect the divestiture of some non-core operations -- with proceeds utilized to pay down debt, but at proceed levels below previous expectations - as a result of the industry-wide deterioration in earning levels. With less reduction of debt, Fitch now believes Goodyear's total outstanding debt likely will be $3.1-3.3 billion at 2001 year-end, versus the $2.7-2.9 billion previously expected.
    Operating results are expected to improve near-term as the recent steep rise in oil and energy costs is partially recovered via price increases in replacement markets. Fitch also believes Goodyear will benefit in both replacement and original equipmemt (OE) markets from the recent major tire recall by competitor Bridgestone/Firestone Inc., with higher OE market share potentially providing a key volume offset to a moderate decline expected in overall OE demand.
    Goodyear has a large net exposure in Western Europe, and the weak euro continues to be a concern. Also, while the ratings do not incorporate any significant impact from increased regulation or litigation, Fitch acknowledges that the Bridgestone/Firestone recall has heightened the scrutiny of regulators and lawmakers and the litigation zeal of consumers and their attorneys.