Weaker Truck Sector Tire Demand Induces Q2 Loss at Goodyear
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Weaker demand from the U.S. and European commercial truck sectors resulted in a second-quarter 2023 loss at Goodyear Tire & Rubber Co., it said, while also citing a tornado shuttering production at a Mississippi plant as a factor.
Akron, Ohio-based Goodyear reported a loss of $208 million, or 73 cents per diluted share, in the three months that ended June 30, compared with a profit of $166 million, 58 cents, in the same period a year earlier, it said in an Aug. 2 letter to investors.
The company’s revenue totaled $4.867 billion in the second quarter, compared with $5.212 billion in the year-ago period.
Goodyear sold 4.8 million or 10.7% fewer tires globally in the most recent quarter at 40.8 million tires, compared with 45.6 million in the year-ago period. The company saw a 10.9% or 2.5 million-tire decrease in its second-quarter sales in the Americas to 20.8 million tires from 23.3 million units a year earlier.
A Goodyear service center in Akron, Ohio. (Goodyear Tire & Rubber Co.)
Heading into the most recent quarter, Goodyear expected an improvement in earnings; however, softer consumer and commercial truck markets, particularly in the Western world, sank those prognostications, it said.
Goodyear Chairman and CEO Richard Kramer said in the letter that a decrease in freight ton miles and utilization drove commercial tire replacement destocking.
The weakness in demand from the commercial truck industry hurt Goodyear earnings to the tune of $60 million, it said.
For context, the impact of the storm-damaged Tupelo, Miss., plant shutting for part of April, all of May and part of June on operating income was estimated at $50 million. The facility’s absence cut Goodyear tire production by about 1 million units, it said.
Sales to the commercial vehicle replacement sector in the Americas fell 21% year-over-year in the most recent quarter, with Goodyear noting it was a significant worsening of a trend seen in the first quarter of 2023.
Goodyear Chief Financial Officer Christina Zamarro said during the company’s analyst earnings call Aug. 3 that the commercial sector was typically more volatile than other areas, but a slump in freight rates led to major headwinds for the company. Zamarro said spot freight rates fell 25% year-over-year in June, without providing more specifics on the geography she was referring to.
Zamarro said the freight rate level led to immediate destocking, and Goodyear’s commercial truck tire sales volumes fell by 600,000 as a result, adding that the trend will continue into the third quarter, but the impact will not be as severe. The impact is likely to be 200,000-300,000 tire sales in the third quarter, she said.
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Goodyear is more optimistic about the outlook for the third quarter.
The third quarter is expected to be the first of 2023 where the net effect of price/mix, raw material costs and inflation will be positive, it said. Commercial tire replacement will continue to be affected by continued destocking in the third quarter, but the impact will be less severe than in the second quarter, it added.
