Previous increases in raw material costs have also been, according to one analyst, absorbed by price rises that appear to have been accepted by consumers.
A major downturn in sales has also been avoided by targeting the more robust segments of the market. In a note to investors, Merrill Lynch’s John Murphy stated that tyre companies around the world have avoided being hurt by North American vehicle production cuts by focusing on the replacement tyre market, which accounts for 70% of the global passenger tyre market and 85% of the entire global tyre market.
Goodyear Tire & Rubber Co. shares have enjoyed some of the largest gains in recent months, despite a three-month United Steelworkers strike that cost the company millions. Goodyear’s stock rose about 39% during the strike, and gained another 24% in the weeks after an agreement was reached in late December. Goodyear shares have more than doubled in value since the end of June.
Meanwhile, Cooper Tire & Rubber Co. shares have risen about 34% since the end of June, although this good fortune has been accompanied by a measure of problems for the company. Thomas Dattilo resigned as company CEO in August after the company reported a second-quarter loss of $21 million. In November, Cooper said it was posting an unadjusted third-quarter loss of $25 million due to charges related to production cuts and to cover a sizable severance payout.
