Goodyear posts loss, plans 5,000 job cuts

Goodyear Tire & Rubber Co plans to cut 5,000 jobs worldwide in 2009, or 6.7 percent of its staff, after a prolonged downturn in vehicle demand led to a deeper-than-expected loss in the fourth quarter.

• Shares of Goodyear (GT.N) fell more than 11 percent in premarket trading on Wednesday.
• The largest U.S. tire maker said it would freeze salaries worldwide and cut production capacity as part of efforts to reduce costs by $700 million this year. The target adds to $1.8 billion of cost savings completed over the past three years.
• Goodyear, like other auto parts suppliers, has come under intense pressure from U.S. auto sales at 27-year lows and a steep downturn in consumer demand that has prompted major automakers to slash output.
• The Akron, Ohio-based tire maker cut nearly 4,000 jobs in the second half of 2008 and had 75,000 employees worldwide at the end of last year.
• “Collectively, these actions address the new economic realities,” Goodyear Chief Executive Robert Keegan said. “We will remain flexible and are prepared to take additional actions if market conditions warrant.”
• Goodyear posted a net loss of $330 million, or $1.37 per share, in the fourth quarter, compared with a profit of $52 million, or a 23 cents per share profit, a year earlier.
• Excluding one-time items, Goodyear posted a loss of $1.18 per share, while analysts on average expected a loss of $1.13 per share, according to Reuters Estimates.
• Revenue fell to $4.1 billion in the quarter from $5.2 billion a year earlier as tire production fell 19 percent worldwide.
• In its key North American unit, tire volume declined 17 percent due to weak demand from automobile manufacturers and the replacement tire market. Revenue per tire rose 10 percent in the region due to a higher percentage of sales being for more expensive tires and price increases on the tires.
• A jump in raw materials costs also pressured results. Raw materials including natural rubber, synthetic rubbers, fabric and steel cord make up nearly 40 percent of a tire’s cost.
• Goodyear said the planned 5,000 job cuts will come from the salaried and hourly ranks worldwide, but did not specify how the cuts would be divided or what regions they would come from.
• The company plans to cut manufacturing capacity by 15 million to 25 million tires over the next two years. Those capacity cuts come on top of a prior reduction of 25 million tires in recent years that included plant closings.
• Tire sales to vehicle manufacturers account for about 20 percent of Goodyear revenue and about 30 percent of its tire production. The rest goes to the replacement market.
• Goodyear also said it would continue to pursue sale of noncore assets.
• Shares of Goodyear fell to $5.34 in premarket trading, compared to Tuesday’s closing price of $6.02.