Goodyear Tire and Rubber Co. today reported record-breaking earnings in the Americas and strong earnings globally, despite a year-over-year decrease in consumer and commercial tire sales numbers globally. Goodyear earnings include a net income of $1.3 billion globally for 2016 and record high Q4 income of $295 million for the Americas. Growth, despite a 4.6% decline in units sold and a 10.9% decrease in net sales within the Americas (in part due to the deconsolidation of Venezuela), the tiremaker reported a 1.1% YoY increase in consumer tire units sold and a 4.2% YoY decrease in commercial units sold worldwide.
The company’s strategy to focus on the more profitable large-rim-diameter tire sizes (17-inch and larger) and increasing the value of the Goodyear brand seems to be paying off. According to Richard Kramer, chairman and chief executive officer, the income increase was driven by strong performance is the company’s Asia Pacific and Americas consumer tire businesses. Kramer said robust growth in the large-rim-diameter tire sizes (17-inch and larger) in 2016 was 9% in the US and 10% in EMEA.
“With the increasing demand for these premium tires, we expect supply to remain tight,” Kramer said. “The segment is growing in multiples [as compared to] the total industry.”
He added that the trend is driven by the auto manufacturers so the company will continue to target OE fitment opportunities that have high consumer loyalty, resulting in eventual pull-through to the replacement market.
On the topic of price increases that took effect February 1 for passenger and commercial tires in North America, Kramer said that inflation and market volatility in raw material prices – materials including natural rubber, butadiene, oil and carbon black – made the increase necessary. “We expect raw material costs to remain at heightened levels through 2016,” he said. Laura K. Thompson, executive vice president and chief financial officer, reported that 2017 SOI is anticipated to remain somewhat flat, in part due to the instability of raw material prices. “We expect raw material costs to be up 27% based on current prices, and that equates to a $1.1 billion increase versus last year.”
When asked about OTR and tires 16-inch and smaller, Kramer sees those as an important part of the mix, but not necessarily an area of sustained growth. While declines in the mining industry have had a negative impact on OTR tire sales, Thompson sees a potential for rebound by 2020. Kramer also shared that the 16-inch and smaller tire market is “fantastic” in India and parts of Latin America so they will continue to manage that part of the brand portfolio.
Kramer also shared a positive outlook for the upcoming release of the Assurance WeatherReady consumer tire, the new Endurance trailer tire as well as new commercial products from both the Goodyear and Kelly brands, describing the new releases as “well received” by tire dealers at the company’s customer conference in January.
