The Goodyear Tire & Rubber Company (GT) is one of the world's leading manufacturers of tires, with a broad global footprint and operations in most regions of the world. The company has 55 manufacturing facilities in 22 countries, including the United States. Goodyear operates its business through three regional tire business segments: Americas, Europe, Middle East and Africa (EMEA), and Asia Pacific.

Financials

In the fiscal year 2023, the company reported annual net income of -$689 million, annual revenue of $20,066 million, annual operating cash flow of $1,032 million, and annual free cash flow of -$18 million. The company's quarterly results for the first quarter of 2024 show a net loss of $57 million, or $0.20 per share, compared to a net loss of $101 million, or $0.35 per share, in the first quarter of 2023.

The company's first quarter 2024 net sales were $4,537 million, decreasing $404 million, or 8.2%, from $4,941 million in the first quarter of 2023. The decrease in net sales was primarily due to lower tire volume of $187 million, global declines in price and product mix of $162 million, unfavorable foreign currency translation of $36 million, and a decrease in sales in other tire-related businesses of $27 million.

Worldwide tire unit sales in the first quarter of 2024 were 40.4 million units, decreasing 1.4 million units, or 3.3%, from 41.8 million units in the first quarter of 2023. Replacement tire volume decreased globally by 2.3 million units, or 7.4%, while OE tire volume increased by 0.9 million units, or 8.9%, driven by Asia Pacific.

Cost of Goods Sold (CGS)

Cost of Goods Sold (CGS) in the first quarter of 2024 was $3,715 million, decreasing $478 million, or 11.4%, from $4,193 million in the first quarter of 2023. The decrease in CGS was primarily due to lower raw material costs of $261 million, lower tire volume of $159 million, lower transportation and imported tire costs of $75 million, savings related to the Goodyear Forward plan of $56 million, and foreign currency translation of $30 million. These decreases were partially offset by higher conversion costs of $102 million driven by inflation, an increase in accelerated depreciation and asset write-offs of $31 million, higher costs related to product mix of $28 million, and $14 million as a result of a fire at the company's Debica, Poland tire manufacturing facility.

Selling, Administrative and General Expense (SAG)

Selling, Administrative and General Expense (SAG) in the first quarter of 2024 was $696 million, increasing $32 million, or 4.8%, from $664 million in the first quarter of 2023. The increase in SAG was primarily due to an increase in costs associated with the Goodyear Forward plan of $28 million, the impact of recoveries in 2023 of accounts receivable and other assets in Russia of $10 million, and accelerated lease costs of $8 million. These increases were partially offset by savings related to the Goodyear Forward plan of $8 million and foreign currency translation of $4 million.

The company recorded net rationalization charges of $22 million ($17 million after-tax and minority) in the first quarter of 2024, primarily related to the plan to close a plant in Malaysia and the closure of Cooper Tire's Melksham, United Kingdom tire manufacturing facility. In the first quarter of 2023, the company recorded net rationalization charges of $32 million ($26 million after-tax and minority) primarily related to plans to streamline its EMEA distribution network, reduce salaried staffing globally, and reduce staffing and capacity in certain of its EMEA manufacturing facilities.

Interest Expense and Other (Income) Expense

Interest expense in the first quarter of 2024 was $126 million, decreasing $1 million, or 0.8%, from $127 million in the first quarter of 2023. The average interest rate was 6.34% in the first quarter of 2024 compared to 6.01% in the first quarter of 2023. The average debt balance was $7,945 million in the first quarter of 2024 compared to $8,451 million in the first quarter of 2023.

Other (Income) Expense in the first quarter of 2024 was $30 million of expense, compared to $25 million of expense in the first quarter of 2023. The increase in Other (Income) Expense was primarily due to a loss on asset and other sales of $10 million, compared to net gains of $2 million in the first quarter of 2023, and a $3 million increase in fees related to accounts receivable factoring programs driven by higher interest rates. These were partially offset by pension settlement income of $5 million and a favorable $2 million tax item in Brazil.

Income Tax

For the first quarter of 2024, the company recorded income tax expense of $6 million on a loss before income taxes of $52 million. Income tax expense for the three months ended March 31, 2024 was favorably impacted by a net discrete tax benefit of $1 million. In the first quarter of 2023, the company recorded an income tax benefit of $1 million on a loss before income taxes of $100 million.

Segment Operating Income

The company's total segment operating income for the first quarter of 2024 was $247 million, compared to $125 million in the first quarter of 2023. The $122 million increase was primarily due to lower raw material costs of $261 million, lower transportation and imported tire costs of $75 million, benefits from the Goodyear Forward plan of $72 million, and a favorable $8 million tax item in Brazil. These increases were partially offset by declines in price and product mix of $134 million, increased conversion costs of $102 million driven by inflation, lower tire volume of $28 million, an $11 million negative impact due to the Debica fire, and a $7 million lower benefit related to a reduction in U.S. duty rates on various commercial tires from China compared to 2023 in the Americas.

The company's Americas segment reported operating income of $179 million in the first quarter of 2024, increasing $100 million from $79 million in the first quarter of 2023. The increase was primarily due to lower raw material costs, lower transportation rates, benefits from the Goodyear Forward plan, and the favorable tax item in Brazil, partially offset by unfavorable price and product mix, higher conversion costs, and lower tire volume.

EMEA's segment operating income was $8 million in the first quarter of 2024, flat compared to the first quarter of 2023. Favorable net price/mix versus raw materials and Goodyear Forward actions were offset by volume declines and inflation, as well as an $11 million negative impact from the Debica fire.

The company's Asia Pacific segment reported operating income of $60 million in the first quarter of 2024, increasing $22 million from $38 million in the first quarter of 2023. The increase was primarily due to favorable net price/mix versus raw materials, higher volume, and Goodyear Forward initiatives, partially offset by higher costs.

Outlook

Looking ahead, the company expects its second quarter 2024 global tire unit volume to be about flat compared to the prior year, excluding the benefit of the recovery from the tornado that affected its Tupelo, Mississippi manufacturing facility in 2023. The company expects its raw material costs to be approximately $160 million lower in the second quarter of 2024 compared to the second quarter of 2023. The company also expects price and product mix, when netted with the raw material reduction, to be a benefit of approximately $90 million in the second quarter of 2024.

For the full year of 2024, the company expects its raw material costs to be $325 million to $350 million lower than in 2023. The company also expects to benefit from its Goodyear Forward plan by at least $375 million and anticipates its capital expenditures to be $1.2 billion to $1.3 billion, excluding repairs related to the Tupelo tornado and the Debica fire, which it expects to be funded by insurance claim recoveries. The company expects its cash flows to include rationalization payments of approximately $300 million as it continues to implement elements of the Goodyear Forward plan to improve its cost structure.

Liquidity

The company's liquidity position remains strong, with $893 million in cash and cash equivalents and $3,313 million of unused availability under its various credit agreements as of March 31, 2024. The company's net debt totaled $7.4 billion at the end of the first quarter of 2024, down just over $550 million from the same time last year.

Conclusion

In summary, the company is executing its Goodyear Forward transformation plan to optimize its portfolio, deliver segment operating margin expansion, and reduce leverage in order to drive sustainable, long-term shareholder value creation. The company's first quarter 2024 results demonstrate the momentum it is building, with significant improvements in segment operating income across its regional tire businesses. The company remains focused on driving cost savings, enhancing its product mix, and capitalizing on growth opportunities, particularly in the premium and electric vehicle tire segments, to position itself for continued success.