Goodyear lost $291 million in Q4 2023, but EMEA improvements

Goodyear’s fourth-quarter 2023 sales decreased 4.8 per cent compared to the previous year driven by “the impact of lower replacement volume and lower third-party chemical sales”. That and other factors resulted in a fourth-quarter 2023 net loss of $291 million compared to a net loss of $104 million – 180 per cent worse than the figure a year ago.

According to executives, the change in net loss was primarily due to “a goodwill impairment charge related to our EMEA segment and higher rationalization charges, partly offset by higher segment operating income”. Most of that relates to the execution of Goodyear Forward, which in the Europe Middle East and Africa (EMEA) region centres on the rationalisation of manufacturing and jobs:

“After adjusting for significant items, our fourth quarter net income was $135 million, compared to $20 million in the prior year’s quarter. Significant items included $35 million in Corporate Other expenses related to Goodyear Forward, which includes advisory, legal and consulting fees and costs associated with planned asset sales.”

Tyre volumes still down

Goodyear’s global tyre unit volume in the quarter totalled 45.4 million units, down 3.8 per cent compared with the prior year period. Global replacement volume was lower by 6.7 per cent. Goodyear executives suggest that the declines reflects “a strong fourth quarter 2022 comparable for Americas and continued weak trends in EMEA”. Meanwhile, global OE volume increased 6.0 per cent, driven by share gains in Asia Pacific.

Overall executives characterise the figures as better-than-expected: “Fourth quarter earnings were ahead of the expectations we outlined during our announcement on November 15, 2023, driven by

strong operating results in Americas and Asia Pacific. These results reflected our strongest price/mix versus raw materials since the fourth quarter of 2012. Additionally, we generated the strongest fourth quarter operating cash flow since the pandemic. Our quarter results position us well as we execute on the Goodyear Forward plan.”

Improvements in EMEA: Operating income up $86 million

However, while Goodyear’s global executives noted “weak trends in EMEA”, there were signs of improvement in the European region. Segment operating income in EMEA was $6 million compared with a loss of ($80) million a year ago. In other words, an increase of $86 million.

According to the company, the result was driven by positive net price/mix versus raw materials of $170 million, including raw material cost decreases of $108 million and price/mix benefit of $62 million.

However, these positives were partly offset by the impact of lower tyre volume, including ($6) million of lower sales and ($27) million of unabsorbed overhead from lower production in the third quarter.

The combined impact of inflation ($27) million as well as the Debica factory fire ($12) million were even more significant. But since the factory fire is, by its nature, a unusual one-off and all competitors have to face the same inflationary environment, even small improvements must be welcome news.

EMEA tyre volumes down 3.7%

One the subject of tyre unit volumes, overall volume in EMEA was down 0.4 million units, or 3.7 per cent below fourth quarter 2022 levels. At the same time, replacement volume was 5.8 per cent lower (0.5 million units). However, OE volume rose 2.3 per cent (0.1 million units).

Goodyear’s suggestion that wider industry growth was in some way “driven by low-end imports” requires further ongoing observation.  But it is also worth noting that EMEA’s volume declined at a more modest rate than in the Americas where volumes were down 2.3 million units, or 8.8 per cent below fourth quarter 2022 levels off the back of declines in both the replacement and OE markets.

Goodyear’s EMEA operating result represented a not-insignificant improvement (Source: Goodyear)