Goodyear Tire & Rubber Co. and Cooper Tire & Rubber Co. were both bleeding red ink in the third quarter, even as they saw revenues soar. Both companies faced high raw material prices while Goodyear’s operations were also hamstrung by an ongoing strike initiated by the United Steelworkers (USW).
Cooper widened its losses nearly 30-fold to $25 million compared to $840,000 in 3Q 2005 even as net sales grew 28% to $716 million. Cooper said its sales growth was driven by booming business in China and better pricing in North America and Europe.
Goodyear swung a loss of $48 million compared to a profit of $142 in 3Q 2005 despite net sales expanding 5% all the way to a record $5.3 billion.
For Cooper, many factors contributed to its losses—$7 million due to higher raw material costs, $10 million in unabsorbed overhead due to reduced production levels, $2 million to close its Athens, GA plant, $5 million in severance costs to cover the departure of its former CEO; and the management reorganization of Cooper Tire Europe.
“This was a tough quarter with some of the operating challenges and continued dramatic raw material cost increases we faced,” said Byron Pond, Cooper’s interim CEO. “It was made even tougher with some of the unusual expenses we incurred.”
Goodyear lost $48 million after taking $126 million worth of charges, $107 million alone to close down its Tyler, TX plant.
Ongoing market weakness in North America and record high raw material costs made matters worse, according to Robert Keegan, Goodyear’s chairman & CEO. Raw material costs jumped although they were offset partially by an improved price/mix and lower tire volume.
An ongoing strike isn’t helping matters either. “Although we are in the midst of a strike by the United Steelworkers in North America, we continue to work hard for a contract that is fair to all stakeholders and puts Goodyear on a level playing field with our competitors,” Keegan said. “In the meantime, we are executing on our contingency plans so we can continue providing our customers with … products and services.”
He added that Goodyear’s negotiating team has returned to Cincinnati, OH, in the hopes USW representatives will return to the bargaining table.
To comment on this article, write to [email protected]
