Goodyear to Cut Costs Up to $1B, Close Plants
{{#rendered}} {{/rendered}}Goodyear Tire & Rubber Co. (GT) said on Friday it will cut costs by up to $1 billion by 2008, closing plants and increasing sourcing from Asia to face high raw materials costs, pension obligations and an uncertain global economy.
Goodyear, the largest U.S. tire maker, said it would cut costs by $750 million to $1 billion over the next three years, taking cash charges of $150 million to $350 million for the restructuring, which will include selling more noncore assets.
"Our turnaround is on track and will continue to evolve," Chief Executive Robert Keegan said in a statement.
{{#rendered}} {{/rendered}}Goodyear expects to cut high-cost manufacturing capacity by 8 percent to 12 percent to generate savings of about $100 million to $150 million per year. It did not say how many plants it would close or where they are located.
The Akron, Ohio-based company reported a profit in 2004 after losses totaling more than $2 billion over the previous two years that sparked a previous cost cutting plan of plant closings, job cuts and debt reduction.
Goodyear has sold a resins, business, an Indonesian rubber plantation and the sale of its North American farm tire business is pending. Earlier this week Goodyear said it would consider selling its engineered products business.
{{#rendered}} {{/rendered}}Goodyear said it wants to improve segment operating margin to 8 percent for the total company and 5 percent for its key North American Tire unit. In the second quarter, only two smaller units met that overall standard and the North American Tire unit had an operating margin of 2.4 percent.
Goodyear said it is still assessing the impact of Hurricane Katrina (search) on property, inventory and overall operations. Five retail stores are expected to stay closed indefinitely, but the impact from those closings is not expected to be material.