Goodyear said it will evaluate the impact of Venezuela’s changes to its exchange structure, but expects to book a charge in the first quarter of this year due to currency devaluation.
On Jan. 8, the Venezuelan government announced the devaluation of its currency and the establishment of a two-tier exchange structure for “essential” and “non-essential” goods.
Goodyear said its imports into Venezuela have been classified as essential (2.60 bolivar fuerte to $1), while others have not (4.30 bolivar fuerte to $1).
Therefore, in order to properly sort out its accounting reports, Goodyear is “evaluating the list of goods classified by the Venezuelan government as essential to determine the exchange rates applicable to its imports.”
In addition, Goodyear said, “Venezuela has been designated hyper-inflationary effective Jan. 1, and as such, all future foreign currency fluctuations will be recorded in income.”
According to Goodyear, prior to the devaluation, the tiremaker had approximately $370 million in bolivar fuerte in Venezuela.
The company said the devaluation will not have any impact on its 2009 results of operations or financial position, but future results of its Venezuelan operations “will be affected by many factors, including the company’s ability to take actions to mitigate the effect of the devaluation, further actions of the Venezuelan government, economic conditions in Venezuela such as inflation and consumer spending, and the availability of raw materials, utilities and energy.”