The Goodyear Tire & Rubber Company today announced preliminary results for the first quarter of 2020 and provided an update on several operational and financial actions that the company has taken in response to the COVID-19 pandemic.
“During this challenging time, our top priority continues to be the health and wellbeing of our associates. We are working diligently to ensure we will be prepared to resume our manufacturing operations safely and efficiently when automotive production and replacement tire demand recovers. At the same time, we are proactively taking actions to mitigate the impact of the sharp decline in industry demand on our profitability and financial position,” said Richard J. Kramer, chairman, chief executive officer and president. “I am proud of the courage and resilience of our associates around the world as they continue to service our customers and consumers during this unprecedented time. I am confident we will weather this crisis and that, as we continue to focus on our strategic priorities, we are positioning the company to win in our markets when the auto industry and broader economy recovers.”
In addition to the update on its operations, the company also announced the successful refinancing of its primary revolving credit facility in the U.S. “We are pleased to complete this action, particularly given the current economic climate,” said Darren R. Wells, executive vice president and chief financial officer. “The extension of our debt maturities enhances our financial flexibility and further strengthens our liquidity position, allowing us to better manage the challenges we face. This renewal reflects the financial community’s confidence in our business and the quality of our assets.”
Business Update and Preliminary First Quarter Results
The company’s first quarter results were greatly affected by the economic disruption associated with the COVID-19 pandemic.
Goodyear’s first quarter 2020 sales were approximately $3.0 billion, down from $3.6 billion a year ago. Tire unit volume totaled approximately 31 million for the first quarter of 2020, down 18% from the prior year. These results reflect significant declines in global OE shipments after auto manufacturers halted production and weak replacement demand following sweeping shelter-in-place mandates.
The company expects to report a loss before income taxes of $185 million to $195 million for the first quarter of 2020 and an adjusted loss before income taxes of $175 million to $185 million, which excludes approximately $10 million of rationalization and accelerated depreciation charges incurred during the quarter. The company’s results include an approximately $65 million unfavorable impact driven by lower factory utilization and other period costs, both directly related to shutting down its manufacturing facilities. The company has not yet calculated its tax rate for the first quarter and, accordingly, is not able to provide its preliminary net loss or loss per share.
Given evolving macroeconomic conditions during the first quarter, the company continues to conduct impairment testing related to the carrying values of certain assets, including goodwill of its Europe, Middle East and Africa business. As a result, the company could record a non-cash impairment charge during the quarter and its reported loss before income taxes could be higher by up to $185 million.
Goodyear continues to evaluate its production plans around the world in light of the fluid situation. Most of the company’s manufacturing facilities in the Americas and Europe, as well as several of its tire plants in Asia Pacific, remain closed.
The company plans a phased restart of production during the second quarter, beginning in April with some of its commercial truck tire facilities in the U.S. and Europe. Decisions to resume production will be based on an evaluation of market demand signals, inventory and supply levels, as well as the company’s ability to safeguard the health of its associates.
The company’s plant in Pulandian, China is operating with 100% of its workforce and is able to meet customer demand. The facility is expected to continue ramping up production throughout the second quarter.
The company will provide more details related to the quarter and its production plans when it reports its first quarter results.
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SOURCE: Goodyear
