Goodyear sales increasing, according to company's second quarter results

The Goodyear Tire & Rubber Company has reported record second quarter sales driven by the performance of its international businesses.

Goodyear's second quarter sales were a record $5.2 billion, up 6.5 percent from last year due to improved pricing, a richer product mix and the impact of favorable foreign currency translation, which offset lower volume in North America and Europe. Also impacting results was the 2007 divestiture of the company's T&WA tire mounting business, which had sales of $186 million in last year's second quarter.

Revenue per tire, excluding the impact of foreign currency translation, increased 9 percent over the 2007 quarter, reflecting worldwide gains in pricing and product mix generated by the company's successful strategy to focus on high-value-added tires, Goodyear reports. Year-over-year revenue per tire has increased for 15 consecutive quarters.

The higher level of sales in 2008 reflects strong growth in Goodyear's international businesses, which collectively increased sales 18 percent over 2007's second quarter and represented approximately 60 percent of total sales in the quarter. The company reports that this growth helped to offset lower sales in North American Tire, which declined 6 percent. Compared to 2007, North American Tire's second quarter unit volume was down 12 percent, reflecting the weak demand environment. The decline was most notable in the consumer original equipment market and in low-value-added segments of the consumer replacement market.

"Our strong second quarter and first half performance demonstrates the successful execution of our strategies despite the significant economic challenges we are facing, particularly in North America," says Robert J. Keegan, chairman and chief executive officer. "Robust growth in our international operations, especially in emerging markets, more than offset the continuing weakness in the North American market. Our strategy to invest in emerging markets has resulted in a profitable and growing set of businesses.

"We remain confident in our ability to manage through the challenging near-term business conditions and are focused on maximizing business performance given the environment," Keegan adds. "At the same time, our long-term investment strategy positions us to capitalize on available, attractive market opportunities."

Total segment operating income from continuing operations was $330 million, up 6.5 percent from the year-ago period, driven by significant improvement in the company's international business units, each of which achieved record second quarter results.

Improved pricing and product mix of approximately $249 million in the second quarter more than offset increased raw material costs of approximately $124 million, according to the company.

Second quarter 2008 net income from continuing operations was $75 million (31 cents per share). This compares to $29 million (14 cents per share) in the year-ago quarter. Including discontinued operations, Goodyear had net income of $56 million (26 cents per share) in the 2007 second quarter. All per share amounts are diluted.

The 2008 quarter was impacted by after-tax rationalization and accelerated depreciation costs of $87 million (36 cents per share) primarily related to the planned closure of a tire plant in Australia. The second quarter of 2007 included after-tax debt retirement expenses of $45 million (20 cents per share), rationalization and accelerated depreciation costs of $15 million (6 cents per share) and an out-of-period tax benefit to correct deferred taxes in Colombia of $11 million (5 cents per share).

Goodyear reports that it made additional progress during the second quarter on its four-point cost savings plan and increased its target to more than $2 billion in gross cost savings from 2006 through 2009. "We have achieved more than $1.4 billion in savings since beginning this plan and remain on target to reach this higher level of savings," Keegan saidsays

The company's strategy to drive profitable growth includes significant plans to capitalize on worldwide increases in demand for its innovative, high- value-added tires. The company also plans to build on its strength in emerging markets in Latin America, Eastern Europe and Asia.

Business Segments
Segment operating income from continuing operations increased to $330 million representing the highest level ever achieved in a second quarter. All three of the international businesses reported record second quarter segment operating income, with Asia Pacific Tire setting a record for any quarter.

North American Tire's second quarter sales were down 6 percent compared to the 2007 period. Impacting results was the 2007 divestiture of the company's T&WA tire mounting business, which had sales of $186 million in the second quarter of 2007. Also, tire volume declined by 2.5 million units reflecting significantly weaker demand compared to last year, particularly in the consumer original equipment market and in low-value-added segments of the consumer replacement market. Sales in the 2008 quarter were positively impacted by improved pricing and product mix, market share gains in Goodyear- branded consumer replacement tires, and the success of the company's other high-value-added tire lines.

Second quarter segment operating income was $24 million, down from the 2007 quarter as continued improvements in pricing, product mix and structural costs were more than offset by the effects of market weakness, higher inflation and costs related to modernizing factories and training new manufacturing associates. Improved pricing and product mix of $107 million more than offset increased raw material costs of $59 million.

Europe, Middle East and Africa Tire's quarterly sales exceeded $2 billion for the first time, increasing 15 percent compared to the second quarter of 2007. The increase resulted primarily from the favorable impact of foreign currency translation and improved pricing and product mix that more than offset lower volume resulting from softer market conditions. Sales in the 2008 quarter were positively impacted by market share gains in Goodyear- and Dunlop-branded consumer replacement tires.

Segment operating income increased 20 percent due in part to improved pricing and product mix of $78 million that more than offset $37 million in higher raw material costs. Favorable foreign currency translation also benefited the 2008 period, according to Goodyear. These positive factors were partially offset by lower volume and higher manufacturing costs partly related to a strike in Turkey, ongoing labor issues in France and the impact of inflation.

Latin American Tire's second quarter sales increased 25 percent compared to the 2007 quarter primarily due to improved pricing and product mix and the favorable impact of foreign currency translation. Sales in the 2008 quarter were positively impacted by market share gains for Goodyear-branded tires in premium market segments.

Segment operating income increased 14 percent from 2007 due to improved
pricing and product mix of $43 million that more than offset $17 million in
higher raw material costs, according to the company. Higher inflation impacting manufacturing and transportation costs as well as favorable foreign currency translation also affected the quarter.

Asia Pacific Tire's quarterly sales exceeded $500 million for the first time, increasing 20 percent compared to the 2007 second quarter primarily due to improved pricing and product mix, higher volume and the favorable impact of foreign currency translation.

Segment operating income increased 27 percent in the 2008 quarter, primarily due to improved pricing and product mix of $21 million, which more than offset raw material cost increases of $11 million. Higher unit volume also positively impacted the quarter.