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Struggling Goodyear cutting up to 5,000 jobs

Goodyear, the biggest U.S. tire maker, said the global economic slowdown will force it to cut nearly 5,000 jobs this year after it posted a fourth-quarter loss and revenue sank 21 percent.
/ Source: The Associated Press

Goodyear Tire & Rubber Co., the biggest U.S. tire maker, said Wednesday the global economic slowdown will force it to cut nearly 5,000 jobs this year after it posted a fourth-quarter loss and revenue sank 21 percent.

The cuts equal almost 7 percent of the Akron, Ohio-based company’s work force and follow the elimination of about 4,000 jobs in the second half of last year.

Goodyear lost $330 million, $1.37 per share, in the fourth quarter, after a profit of $52 million, or 23 cents per share, a year earlier.

The company lost $1.18 per share, excluding one-time charges or gains, in the most recent quarter. Analysts surveyed by Thomson Reuters expected a loss of $1.03 cents per share on that basis.

Sales dipped to $4.1 billion from $5.2 billion a year earlier.

The company said the global economy depressed the number of tires sold in the recent quarter by 19 percent. Revenue per tire actually increased.

As a strategy to boost sales, Goodyear said it will step up new product offerings. These include its Assurance Fuel Max tire, which was introduced earlier this month and will go on General Motors’ new Chevrolet Volt electric vehicle.

Besides the job cuts, Goodyear is freezing salaries, putting restrictions on some spending and putting in place purchasing strategies aimed at lowering raw materials costs.

Goodyear also plans to reduce its global tire capacity by 15 million and 25 million tires over two years while seeking ways to improve cash flow this year. It is reducing capital expenditures, inventory levels and is looking to sell noncore assets.

Robert J. Keegan, Goodyear chairman and chief executive officer, said in a prepared statement the actions reflect new economic realities.

“We will remain flexible and are prepared to take additional actions if market conditions warrant. Our goal is to ensure Goodyear is positioned for success when tire markets recover,” he said.

In a conference call Wednesday morning with analysts, Keegan said Goodyear is feeling the impact of a down market for new cars and people driving fewer miles.

“Today’s economic uncertainty, the new economic realities of the world and the implications for our industry and for Goodyear are extremely challenging,” Keegan told analysts. “The global economic slowdown has increased both in severity and geographic scope throughout the year. By year end, it had a significant impact in volume in each of our major business units.”

Goodyear sales in North America were helped by higher tire prices and market-share gains for Goodyear-branded consumer replacement tires.

But its North American Tire Segment fourth-quarter sales decreased to $1.94 billion, from $2.28 billion a year ago, reflecting lower demand and the sale of its T&WA tire mounting business. The segment had a $193 million loss, versus a profit of $40 million the prior year’s fourth quarter.

For all of 2008, Goodyear had a loss of $77 million, or 32 cents per share, versus a profit in 2007 of $602 million, or $2.65 per share. The 2007 result included an after-tax gain of $508 million, or $2.19 per share, on the sale of the company’s former engineered products business.

Sales last year were $19.5 billion, slightly less than 2007’s company record of $19.6 billion.