Executive Summary / Key Takeaways

• Goodyear is undergoing a significant transformation under its "Goodyear Forward" plan, successfully divesting non-core assets and aggressively reducing costs to strengthen its balance sheet and improve profitability.
• Despite challenging market conditions marked by global trade volatility, low-cost imports, and raw material inflation, the company is demonstrating sequential earnings and margin expansion, driven by its strategic initiatives.
• Goodyear's competitive advantage is sharpening through its extensive U.S. manufacturing footprint, a focus on premium, large-rim-size tires, and consistent OE share gains in key regions, positioning it favorably against tariff impacts.
• The company faces near-term headwinds from elevated channel inventories and a downturn in the commercial truck market, but management anticipates a recovery as market distortions subside and new product launches gain traction.
• With all planned divestitures complete and substantial cost savings realized, Goodyear is targeting a 10% segment operating income margin and net leverage under 2.5x by Q4 2025, supported by positive free cash flow generation.

A Legacy Reimagined: Goodyear's Strategic Pivot for a New Era

The Goodyear Tire & Rubber Company, established in 1898, has long been a global leader in tire manufacturing, distribution, and services. Operating across the Americas, Europe, Middle East and Africa (EMEA), and Asia Pacific, the company's extensive history has shaped its current strategic direction. In November 2023, Goodyear embarked on a pivotal transformation with the launch of its "Goodyear Forward" plan, a comprehensive initiative designed to optimize its product portfolio, expand segment operating margins, and significantly reduce leverage. This strategic pivot has been instrumental in Goodyear's recent performance, marking the first year of segment operating income and margin growth since 2015, excluding the post-COVID recovery year.

Goodyear's core business revolves around developing, manufacturing, distributing, and selling a wide array of rubber tires for diverse applications, from automobiles and trucks to aircraft and heavy equipment, under a portfolio of recognizable brands including Goodyear, Cooper, and Dunlop. The company also provides retread services, sells chemical products (prior to divestiture), and offers automotive and commercial repair services through its extensive network of approximately 800 retail outlets. This broad market presence and service integration are foundational to its competitive strategy.

Technological Edge and Product Innovation

Goodyear's competitive positioning is significantly bolstered by its continuous investment in technological differentiation and product innovation. The company's focus on advanced materials science and tire engineering aims to deliver superior performance characteristics across its product lines. While specific quantifiable metrics for all core technologies are not publicly detailed, Goodyear consistently emphasizes the tangible benefits of its innovations, such as enhanced handling, grip, comfort, and durability in various driving conditions.

A key strategic thrust is the accelerated introduction of new, high-margin product lines, particularly those for 18-inch and larger rim sizes. These premium tires often incorporate advanced tread compounds and construction techniques designed for modern vehicles, including electric vehicles (EVs) and light trucks. For instance, the Goodyear Eagle F1 Asymmetric 6, an ultra-high-performance summer tire, has seen its lineup extended to nearly 250 SKUs in 2025, setting a benchmark in the industry and earning top ratings in independent tests. The recent launch of the Assurance MaxLife 2 in North America, Goodyear's longest-lasting tire, backed by an 85,000-mile warranty, further underscores this commitment to durability and value. Additionally, the revitalization of the all-terrain portfolio with new Wrangler products, including the Wrangler Electric Drive AT, caters to evolving consumer demands for rugged, versatile, and EV-compatible options.

Goodyear's research and development (R&D) initiatives are strategically aligned with these product goals. The company's modernization project at its Oklahoma facility, for example, is set to add approximately 10 million units of new premium tire capacity in 2025 and 2026. This investment is intended to enhance manufacturing efficiency and support the production of higher-value products. For investors, these technological advancements and product development efforts are critical. They contribute to Goodyear's competitive moat by enabling higher average selling prices (ASPs), improving gross margins, and strengthening market positioning in profitable segments. The ability to innovate and deliver high-performance, specialized tires is crucial for capturing market share, especially as OEM preferences shift towards advanced, USMCA-compliant supply and as consumers demand more sophisticated tire solutions.

Competitive Landscape and Strategic Positioning

Goodyear operates in a highly competitive global market, contending with major players such as Bridgestone Corporation , Michelin Group , Continental AG , and Hankook Tire. Each competitor brings distinct strengths, shaping Goodyear's strategic responses.

Bridgestone (BRDCY), for instance, is recognized for its diversified product portfolio and strong R&D in sustainable and high-performance tires. While Bridgestone often holds an edge in technological innovation, Goodyear counters with its extensive retail network and a strong, recognizable brand that fosters customer loyalty. Michelin (MGDDY), a leader in premium, performance-oriented products, emphasizes R&D in sustainable materials and digital solutions. Goodyear competes by offering a broad range of tire brands and services, including retreading and maintenance, and by strategically expanding its premium offerings, such as the relaunch of the Cooper brand in EMEA following the Dunlop sale. Continental (CTTAY), known for its technology integration in tires for connected vehicles, presents a challenge in smart tire innovation. Goodyear's focus on its U.S. manufacturing footprint and USMCA-compliant supply, however, provides a significant advantage, particularly in the North American OEM market. Hankook Tire, with its emphasis on cost-effective production and market agility, drives competition in value segments. Goodyear's strategy of optimizing its manufacturing footprint and streamlining operations aims to enhance its own cost efficiency.

A critical competitive dynamic is the surge of low-cost imports, particularly from Southeast Asia, which has impacted consumer replacement markets in the U.S. and EMEA. This influx has led to elevated channel inventories and increased competitive pressure. However, Goodyear's U.S. tariff exposure is estimated to be about one-quarter of the industry average, providing a significant competitive advantage. The company is actively engaging with government officials to address these trade imbalances, while also adjusting its supply chain to mitigate tariff impacts. The potential for new tariffs in Europe, with proposed rates of 41% to 104%, could further reshape the competitive landscape in Goodyear's favor by increasing the cost of low-end imports.

Goodyear's strategic positioning leverages its global brand, extensive distribution network, and diversified product portfolio. Its focus on OE share gains, with seven consecutive quarters of growth in both the Americas and EMEA consumer OE business, is crucial for long-term pull-through in replacement cycles. The company's retail strategy, including upgrading company-owned stores and expanding its physical footprint, aims to enhance customer experience and service revenues, further differentiating it in the aftermarket.

Financial Performance and Operational Details

Goodyear's financial performance in 2025 reflects both the impact of its "Goodyear Forward" transformation and a challenging macroeconomic environment. For the third quarter of 2025, the company reported revenues of $4.6 billion and segment operating income (SOI) of $287 million, slightly exceeding revised expectations. This performance demonstrated meaningful sequential earnings and margin expansion, largely driven by the Goodyear Forward initiatives. However, the company recorded a net loss of $2.2 billion in Q3 2025, primarily due to non-cash, non-recurring items: a $674 million goodwill impairment charge for its North America reporting unit and the establishment of a $1.40 billion full valuation allowance on its U.S. net deferred tax assets. These charges were a direct consequence of industry disruption and a reduced outlook.

For the first nine months of 2025, net sales were $13.36 billion, down from $13.93 billion in the same period of 2024. Total SOI for this period was $641 million, a decrease from $920 million in the prior year. This decline was primarily attributed to higher raw material costs ($433 million), increased conversion costs ($215 million), elevated Selling, Administrative and General (SAG) expenses ($147 million excluding Goodyear Forward savings), and lower tire volume ($120 million). These headwinds were partially offset by substantial benefits from the Goodyear Forward plan, which contributed $580 million to SOI during the nine-month period, and global improvements in price and product mix of $259 million.

Goodyear's liquidity position remains a key focus. At September 30, 2025, cash and cash equivalents stood at $810 million, with $2.55 billion of unused credit facility availability.

The company has actively managed its debt, redeeming $500 million of 9.50% senior notes in February 2025 and $900 million of 5% senior notes in June/July 2025, utilizing proceeds from new 6.62% senior notes and cash. The U.S. first lien revolving credit facility was extended to May 2030, enhancing financial flexibility.

Net cash used for operating activities in the first nine months of 2025 was $716 million, largely due to working capital utilization and the net loss, while investing activities provided $663 million, primarily from asset sales.

Strategic Initiatives and Outlook

The Goodyear Forward plan is central to the company's future. All planned divestitures have been completed, including the sale of the Off-the-Road (OTR) tire business ($905 million), the Dunlop brand rights ($526 million), and the polymer chemicals business ($650 million). These divestitures are expected to significantly deleverage the balance sheet, with an estimated $70 million in annual interest expense savings from the OTR sale alone. The company anticipates recording a pre-tax gain of approximately $135 million from the chemical business sale in Q4 2025.

Looking ahead to the fourth quarter of 2025, Goodyear expects a meaningful sequential increase in SOI, with all regions contributing to earnings growth in the mid-single-digit range year-over-year (excluding divestiture impacts). Global tire unit volume is projected to decline by approximately 4%, driven by lower consumer replacement volume due to high channel inventories. Price and product mix are expected to be a benefit of approximately $135 million, while raw material costs are anticipated to be a slight benefit. Goodyear Forward is projected to deliver an additional $180 million in benefits during Q4 2025, contributing to a full-year benefit of approximately $750 million. However, inflation, tariffs, and other costs are expected to be a $190 million headwind in Q4 2025, with annualized tariff costs estimated at $300 million.

For the full year 2025, Goodyear expects capital expenditures of approximately $875 million and rationalization payments of $450 million. Working capital is projected to be a use of cash of approximately $150 million, reflecting tariff impacts. Despite these uses, the company aims for positive free cash flow in 2025, including $400 million of restructuring, with an estimated EBITDA of about $2.1 billion. Management is targeting a 10% SOI margin and net leverage under 2.5x by the fourth quarter of 2025. For 2026, Goodyear Forward carryover benefits are expected to be at least $250 million, with raw materials providing a $200 million benefit at current spot rates, and net interest expense projected to fall to $425 million.

Risks and Challenges

Goodyear faces several pertinent risks. The ongoing volatility in global trade flows and the impact of tariffs, particularly in the U.S. and potentially in Europe, pose significant challenges. The surge of low-cost imports has created elevated channel inventories, extending the consumer replacement cycle and pressuring volumes. The commercial truck market remains weak due to economic uncertainty and regulatory changes. Furthermore, the company's non-cash goodwill impairment and the establishment of a full valuation allowance on U.S. deferred tax assets highlight the sensitivity of its financial outlook to industry disruption and macroeconomic factors. Contingent liabilities, including asbestos and environmental claims, also present potential financial exposures, though management believes current reserves are adequate. The company's ability to access cash and credit, especially from foreign subsidiaries subject to transfer restrictions, is another ongoing consideration.

Conclusion

Goodyear is in the midst of a profound transformation, strategically shedding non-core assets and rigorously optimizing its operations through the Goodyear Forward plan. This concerted effort is yielding tangible benefits, driving sequential earnings growth and strengthening the company's financial foundation amidst a turbulent global market. While headwinds from trade volatility, raw material costs, and industry-wide inventory imbalances persist, Goodyear's focused approach on premium product innovation, leveraging its robust U.S. manufacturing footprint, and consistent OE market share gains positions it to capitalize on a normalizing market. The successful completion of divestitures and a clear roadmap for cost reduction and deleveraging underscore a compelling investment thesis centered on a more agile, profitable, and financially resilient Goodyear. As the company progresses towards its 2025 targets and beyond, its ability to execute on its technological roadmap and maintain competitive differentiation will be paramount to unlocking sustainable long-term shareholder value.