Goodyear Posts Loss, Plans to Slash 7,200 Jobs

Wednesday, February 14, 2001 11:42AM EST

AKRON, Ohio -- Goodyear Tire & Rubber Co. posted a fourth-quarter net loss, citing a long list of 'external factors,' and said it will slash 7,200 jobs, or nearly 7% of its world-wide work force, as part of an effort to lower expenses.

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Goodyear (GT) blamed 'unrelenting high costs' for raw materials; the deterioration of the euro against the strong dollar; a 'severe decline' in original-equipment demand for tires and engineered products in North America, and a soft winter tire market in Europe.

The company reported a net loss of $102 million, or 65 cents a share, compared with net income of $37 million, or 23 cents a share, a year earlier.

The most-recent quarter included items, without which the loss from operations came to $16.5 million, or 11 cents a share, not as bad as Wall Street expected. Analysts anticipated a loss of 16 cents a share, according to First Call/Thomson Financial.

Sales fell 4.1% to $3.53 billion from $3.68 billion. Goodyear attributed the decline to lower unit volume, the decrease of the euro's value against the dollar and the British pound, competitive pricing in Germany, and an 'adverse change' in product mix.

Earlier this month, Samir G. Gibara, chairman and chief executive officer, said he was comfortable with estimates for a loss of 14 cents a share, noting that the period wasn't going to be a good quarter 'and Wall Street knows that.' He said then that the company was working on a series of growth and cost-cutting initiatives, but didn't provide details.

Special items in the latest quarter included charges of $93.7 million, or 59 cents a share, related to work-force reductions and facility consolidations around the world; a charge of $10.5 million, or seven cents a share, for its Australian tire joint venture; and a gain of $18.7 million, or 12 cents a share, related to a change in the company's inventory-costing method.

Goodyear said it will incur additional charges of $64 million in the first quarter of this year.

Excluding items in the fourth quarter of 1999, the company earned $47.6 million, or 29 cents a share, from operations.

'Our fourth-quarter and full year results were disappointing, especially as much of our difficulty was caused by external factors,' Mr. Gibara said in a prepared statement. 'We have solid improvement plans in place for 2001,' he said.

Specifically, Goodyear said it is reducing its world-wide work force of more than 105,000 by more than 7,200 people. In addition, Goodyear has increased prices, reduced production to align inventory levels with demand and curtailed discretionary spending. These steps should reduce costs by about $150 million in 2001 and about $250 million annually after that.

To increase sales, Goodyear plans to expand distribution channels and beef up advertising efforts.

In December, Goodyear said it was offering an early-retirement package to about 8.5% of its U.S. white-collar work force as part of a global effort to bolster profit. The program, offered to about 700 employees, was in addition to layoffs and cutbacks in other countries, the company said at the time.

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-- Martin Thompson (mthom1927@aol.com), February 14, 2001