The Goodyear Tire & Rubber Co. reported strong price/mix and tire unit volumes in the Americas despite industry and economic challenges in its Q4 2022 earnings released this week. According to Goodyear, the company is continuing to see the benefits of synergies with Cooper Tire, yet overall, its European business has been a weak spot due to global inflation and the geopolitical situation.
“Our business made significant progress in a very challenging operating environment during 2022,” said Richard Kramer, chairman, president and CEO of Goodyear Tire & Rubber Co. “Backed by a slate of innovative new products, our advantaged supply chain and our combination with Cooper Tire, we grew share and strengthened our brand position globally. At the same time, we captured the value of our brand in the face of inflationary conditions not seen in more than four decades, achieving a record level of price/mix.”
Kramer said Goodyear’s tire volumes also outperformed the industry in both replacement and OE, with replacement volumes driven by share gains in its Americas consumer business. According to Goodyear’s investor report, global OE industry volume grew 4.4%, while Goodyear OE volume increased 10.7%. He said global OE volumes grew above industry levels, thanks to the ramp-up of new fitments. Global replacement industry volume was down 10.6% in the quarter. Goodyear replacement volume, by comparison, declined 6.2%, according to the report.
“Our replacement volume was helped by a U.S. consumer who remained resilient through the fourth quarter,” Kramer noted.
Goodyear reported its net sales in Q3 grew 6% compared with last year (13% excluding foreign currency), primarily due to pricing actions that drove revenue per tire 17% higher (excluding foreign currency) compared to fourth quarter 2021 levels.
“While the strong revenue per tire and market share gains that carried us through most of 2022 continued during the fourth quarter, they were not enough to offset weaker industry conditions and a quarterly high point of inflationary cost increases,” Kramer added in his investor letter.
The company reported a net loss of $104 million (compared to $553 million of income in the prior year) and an adjusted net income of $20 million (compared to $162 million in the prior year). Goodyear said the decrease in net income was primarily due to higher U.S. and foreign tax expenses, as well as the cost of goods sold increases driven by inflation in excess of increases in net sales. The company also reported a segment operating income of $236 million compared to $391 million in the prior year.
Kramer said difficult operating conditions were felt most in the company’s EMEA (Europe, Middle East and Africa) region.
“While we anticipated weaker industry conditions in Europe, the magnitude of the volume softness was greater than expected,” he continued. “Weaker industry volume in the quarter magnified already challenging conditions given the Ukraine conflict and elevated inflation. We are taking action throughout our global operations to match the realities of the business environment while also preparing for the future. These ongoing actions in Europe include manufacturing plant optimization efforts and identifying opportunities to reduce structural cost.”
According to Goodyear’s investor report, cost increases in the quarter included transportation headwinds of $70 million, higher energy costs of $68 million and increased manufacturing wages of $64 million, with most of the increase in energy costs in the EMEA region.
Kramer said while industry volume and the height of inflationary cost conditions combined to create a very challenging setup in the fourth quarter, “I am encouraged by recent developments as we look ahead.” He noted raw material and other input costs have moderated, which should provide some relief as the year progresses. In addition, the synergies from the Cooper Tire integration during Q3 totaled approximately $40 million, compared with third-quarter benefits of approximately $25 million, according to Goodyear’s Q3 results. “We continue to expect synergies to reach an annual run rate of $250 million by mid-2023,” Kramer said.
Lastly, he highlighted how Goodyear is laying the groundwork for future earnings growth with its innovations in future mobility, mentioning its demonstration tire comprised of 90% sustainable materials that debuted at this year’s Consumer Electronics Show. Goodyear also said its partnership with B2B trucking provider Gatik has shown how intelligent tires powered by Goodyear SightLine technology can estimate tire-road friction potential and provide real-time information to Gatik’s automated driving system.
