Goodyear Q4 Loss Soars on Goodwill, Rationalization Charges
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Losses nearly tripled at Goodyear in the fourth quarter of 2023 compared with the year-ago period as the tire manufacturer digested restructuring costs and sales slowed, including in the North American commercial vehicle sector.
Akron, Ohio-based Goodyear’s loss widened in the most recent quarter to $291 million, or $1.02 per diluted share, from $104 million, 37 cents, in the year-ago period, it said.
A substantial percentage of that red ink came in the form of a $230 million goodwill impairment and a $200 million rationalization charge related to the company’s long-awaited Goodyear Forward restructuring plan.
Goodyear — now headed by recently installed CEO Mark Stewart, who previously ran automaker Stellantis’ North America operations — said the goodwill impairment charge was mostly related to its European, Middle East and Africa division.
Unveiled Nov. 15, Goodyear Forward promised savings of $350 million for the first full year, $50 million in the first quarter of 2024 and $750 million in year two.
Stewart via LinkedIn
The company’s sales revenue fell 4.8% or $258 million to $5.116 billion in Q4 from $5.374 billion in the same period a year earlier.
Revenue in the most recent quarter came in below analyst expectations. Deutsche Bank analyst Emmanuel Rosner expected quarterly revenue of $5.35 billion and pegged consensus analyst expectations at $5.39 billion, he said in a Feb. 12 research note.
Goodyear’s tire sales in the quarter totaled 45.4 million units in the most recent three months, down 3.8% or 1.8 million tires compared with 47.2 million units in the same period a year earlier.
Tire sales declined as a result of lower replacement volumes and third-party chemical sales, it said.
Replacement volumes fell 6.7% year-on-year, or 2.3 million units, while original equipment sales rose 6%, or 500,000 units, the company said, without providing specific numbers by press time.
“Fourth-quarter earnings were ahead of the expectations we outlined during our [Goodyear Forward] announcement on Nov. 15, 2023, driven by strong operating results in Americas and Asia Pacific. These results reflected our strongest price/mix ratio versus raw materials since the fourth quarter of 2012. Additionally, we generated the strongest fourth quarter operating cash flow since the pandemic,” Goodyear said in its quarterly investor letter.
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Goodyear said its raw material costs decreased $329 million year-over-year without providing figures for comparison.
In the Americas, Goodyear said its Q4 operating margin was 10.1%, the highest quarterly result since 2021 despite weak commercial truck sales.
Overall, the company’s Americas tires sales volume fell 8.8% or 2.3 million units year-over-year to 23.1 million units after a particularly strong final three months of 2022 in which Goodyear sold 25.4 million units.
Replacement volume fell 8.9%, or 1.9 million units, while original equipment volume declined 8.6%, or 400,000 units, but the company’s commercial truck replacement volume declined 12% on continued industry weakness, it said.
The original equipment decrease primarily reflects United Auto Workers strike-related impacts during Q4 and weaker commercial truck build rates given weak trucking industry conditions, it added.
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Looking forward, Goodyear said its first quarter of 2024 global tire sales are expected to fall about 2% year-over-year, driven by weaker replacement tire appetite.
In the Americas, Goodyear expects consumer replacement sales to fall by a percentage in the “low-single digits” while the commercial tire industry is expected to be “down slightly.”
“The soft Q1 volume outlook ([approximately] 41m units), suggests a meaningful [quarter-over-quarter] decline from 4Q’s 45m units,” Deutsche Bank’s Rosner said in the research note.
