The Goodyear Tire & Rubber Company today reported a net loss of $174.0 million U.S. or $1.07 U.S. per share for the fourth quarter of 2001, but rationalization moves and growing tire market share show promise for 2002.. This compares with a net loss of $102.0 million (65 cents per share) in the fourth quarter of 2000. All figures in U.S. dollars. The fourth quarter 2001 results include after-tax rationalization charges and other adjustments totaling $126.9 million (78 cents per share). Excluding these adjustments, Goodyear posted a loss of $47.1 million (29 cents per share) for the period. The after-tax adjustments recorded in the fourth quarter of 2001 include a gain of $16.9 million (10 cents per share) on the sale of its specialty chemicals business, rationalization charges of $101.2 million (62 cents per share) and a charge of $18.6 million (11 cents per share) against Cost of Goods Sold for a tire replacement program. Equity in Earnings of Affiliates includes a charge of $24.0 million (15 cents per share) for a rationalization program at the company’s South Pacific Tyres joint venture in Australia. Results for the 2000 fourth quarter included after-tax rationalization charges of $93.7 million (59 cents per share), a charge of $10.5 million (7 cents per share) for a rationalization at South Pacific Tyres and an after- tax benefit of $18.7 million (12 cents per share) due to the change in the company’s inventory costing method. Excluding these adjustments, Goodyear posted a loss of $16.5 million (11 cents per share) in the 2000 quarter. “Depressed economic conditions, continued weak demand around the world and the cost of reducing production to align inventory levels accordingly had a significant impact on our results,” said Sam G. Gibara, chairman and chief executive officer. “Reducing our inventory levels through production cutbacks relative to 2000 levels resulted in approximately $320 million of unabsorbed costs during the year, $150 million of this impacted us in the fourth quarter.” During the fourth quarter of 2001, Goodyear generated $806 million of positive cash flow, which included $78.2 million from asset sales and the impact of reducing amounts outstanding under the company’s accounts receivable sales program by $165.5 million. The fourth quarter rationalization programs focus on eliminating high-cost tire manufacturing capacity, principally in Europe, Asia and Australia, and other staffing reductions. Employment reductions are expected to total more than 3,500, while annualized savings are expected to exceed $102 million. Goodyear’s tire replacement program relates to the company proactively changing certain tires on 15-passenger vans to those of the company’s latest design. It is estimated that approximately 200,000 tires could be replaced. Worldwide, Goodyear’s fourth quarter sales were $3.47 billion in 2001, down 1.5 percent from $3.53 billion in 2000. Tire unit volume in 2001’s fourth quarter was 54.5 million units, down 1.2 million units or 2.2 percent from 2000. Capital expenditures in 2001’s fourth quarter were $119.5 million compared with $203.4 million in the 2000 period. Depreciation and amortization expense in 2001’s fourth quarter was $159.6 million compared with $154.6 million in the 2000 period.
Year-end results The company’s net loss for 2001 was $203.6 million ($1.27 per share). For 2000, the company had net income of $40.3 million (25 cents per share). The 2001 results include net after-tax charges of $170.1 million ($1.06 per share). The 2000 results include net after-tax charges of $63.0 million (40 cents per share). The company estimates that the effects of currency movements reduced operating income by approximately $85.0 million in 2001. Net sales for 2001 were $14.1 billion, down 1.9 percent from $14.4 billion in 2000. Tire volume was 219.3 million units, down 4.0 million units or 1.8 percent for the year. The company estimates that the effects of currency movements reduced net sales by approximately $395.0 million in 2001. “Our sales performance, while below 2000’s, outperformed the industry,” Gibara said. “Industry shipments in North America were down 6 percent for the year and the U.S. consumer replacement market was down 8.5 percent in the fourth quarter, the biggest decline since 1980. “Led by our Goodyear brand, we gained market share around the world. In North America, we added two points of market share,” he added. During 2001, the company generated $724 million of positive cash flow, which included $249.1 million from the sale of receivables and $118.2 from the sale of other assets. Cash flow benefited from a reduction in inventories of almost $500 million. Capital expenditures for 2001 were $435.4 million compared with $614.5 million in 2000. For the year, depreciation and amortization expense was $636.7 million in 2001 and $630.3 million in 2000. The rationalization programs recorded in the fourth quarter of 2000 and the first quarter of 2001 have been substantially completed. Employment reductions during 2001 totaled about 10,000.
North American Tire Business North American Tire’s unit volume in 2001’s fourth quarter was down 6.8 percent from 2000. Replacement volume decreased 9.2 percent. Shipments to original equipment customers were down 0.3 percent. For the year, volume was down 3.4 percent. Replacement volume was up 0.2 percent for the year. Shipments to original equipment customers were down 11.3 percent compared with 2000. Sales decreased in the quarter due to the reduced volume and weak replacement tire demand. Despite the lower volume, sales increased for the year due to a change in product mix to higher-priced tires and price increases in the replacement market. Sales were adversely affected by poor economic conditions in the second half of the year. The replacement market for consumer tires was favorably impacted in 2001 and 2000 by replacement programs involving Firestone tires on Ford Motor Co. vehicles. In May 2001, a program involving an estimated 13 million tires began. In August 2000, a replacement program involving an estimated 6.5 million tires was initiated. During the fourth quarter of 2001, North American Tire supplied about 1.0 million tires for the replacement program. During the fourth quarter of 2000, it supplied about 1.5 million tires. For the full year, North American Tire supplied about 5.0 million tires for the replacement program in 2001. During 2000, it supplied about 3.0 million tires. Operating income decreased in both 2001 periods as a result of increased manufacturing costs due to production cutbacks to better align inventory levels with demand and the costs of the company’s tire replacement program. Income was favorably impacted by a shift in mix to higher-margin tires and lower research and development costs.