The Goodyear Tire & Rubber Company Reports Operating Results (10-K)
Goodyear Tire & Rubber has a market cap of $2.78 billion; its shares were traded at around $12.51 with a P/E ratio of 20.1 and P/S ratio of 0.2. Hedge Fund Gurus that owns GT: David Tepper of APPALOOSA MANAGEMENT LP, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors, George Soros of Soros Fund Management LLC. Mutual Fund and Other Gurus that owns GT: Arnold Schneider of Schneider Capital Management, HOTCHKIS & WILEY of Hotchkis & Wliey Capital Management LLC, John Buckingham of Al Frank Asset Management, Inc., Charles Brandes of Brandes Investment, Jeremy Grantham of GMO LLC, Pioneer Investments.
Highlight of Business Operations: We are one of the worlds leading manufacturers of tires, engaging in operations in most regions of the world. Our 2010 net sales were $18.8 billion, and Goodyears net loss in 2010 was $216 million. Together with our U.S. and international subsidiaries and joint ventures, we develop, manufacture, market and distribute tires for most applications. We also manufacture and market rubber-related chemicals for various applications. We are one of the worlds largest operators of commercial truck service and tire retreading centers. In addition, we operate approximately 1,500 tire and auto service center outlets where we offer our products for retail sale and provide automotive repair and other services. We manufacture our products in 56 manufacturing facilities in 22 countries, including the United States, and we have marketing operations in almost every country around the world. We employ approximately 72,000 full-time and temporary associates worldwide.
Sale of Farm Tire Businesses. On December 13, 2010, we entered into agreements with Titan Tire Corporation, a subsidiary of Titan International Inc., to sell our European and Latin American farm tire businesses, including a licensing agreement that will allow Titan to manufacture and sell Goodyear-brand farm tires in Europe, Latin America and North America, for approximately $130 million, subject to post-closing conditions and adjustments. The Latin American portion of the transaction is expected to close in the first half of 2011. The European portion of the transaction is subject to the exercise of a put option by us following completion of a social plan related to the previously announced discontinuation of consumer tire production at one of our facilities in Amiens, France and required consultation with various works councils. Assuming both the Latin American and European portions of the transaction are consummated, our operating results, excluding the estimated loss on the sale of the European portion of the transaction of approximately $50 million to $75 million, are not expected to be materially affected, although the impact on segment operating income will vary by region. Following the respective sales, EMEAs operating income is expected to be favorably affected by approximately $20 million to $25 million on an annualized basis due to recent operating losses in the European farm tire business, while Latin American Tires operating income is expected to be unfavorably affected by approximately $30 million to $35 million on an annualized basis.
Union City, Tennessee Rationalization Plan. On February 4, 2011, we approved a plan to close our tire manufacturing facility in Union City, Tennessee. The facility, which has about 1,900 associates, produces radial passenger car and light truck tires. We expect the closure of the Union City facility to be substantially completed in the fourth quarter of 2011. The estimated charges associated with the planned closure are expected to be approximately $270 million ($270 million after-tax), of which approximately $140 million are expected to be cash charges, including approximately $65 million related to severance benefits, including continuing medical coverage, and approximately $75 million related to other associate-related and exit costs, and approximately $130 million are expected to be non-cash charges, including approximately $60 million related to accelerated depreciation and asset write-offs and approximately $70 million related to pension and retiree medical costs. Under
the terms of our pre-existing benefit plans, we recorded a charge of $160 million ($160 million after-tax) associated with the plan in the fourth quarter of 2010. The remainder of the charges will be substantially recognized within the next 12 months. The plan will eliminate physical capacity of approximately 12 million tires per year, although we have only manufactured seven million tires per year at this facility since we adopted a five-day schedule in 2009, and is expected to provide annual cost savings of approximately $80 million.
Amiens, France Rationalization Plan. On May 26, 2009, we announced a plan that would discontinue consumer tire production at one of our manufacturing facilities in Amiens, France. In the fourth quarter of 2010, we recorded $43 million of additional charges and now estimate that the total charges associated with this plan will be $107 million (approximately $70 million after taxes and minority interest). These total charges primarily relate to cash severance payments that will be made as actions are taken in the future. This action would eliminate approximately six million units of high-cost capacity and is now expected to be completed by the fourth quarter of 2011.
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