The Goodyear Tire & Rubber Company Q2 FY2025 earnings call

• Second quarter results were below expectations due to unprecedented industry disruption from global trade changes impacting consumer and commercial businesses globally.
• Executed on Goodyear Forward with P&L benefits ahead of schedule, including pricing increases in U.S. and Canada, refreshed product portfolio with growth in >18-inch market, expanded margins in Asia Pacific, and SG&A costs down.
• Introduced new products like Eagle F1 Asymmetric 6, Assurance MaxLife 2 in North America, and extended premium winter tire lineup in Europe, with the Vector 4Seasons Gen-3 tire awarded top rating by ADAC.

Americas: Unit volume decreased 2.6% driven by consumer OE and replacement headwinds. Americas segment operating income (SOI) was $141 million, 5.3% of sales, down $100 million from the prior year. EMEA: Unit volume decreased 2%, segment operating income was a loss of $25 million, consistent with Q1. Consumer OE volume grew 11% but Commercial business was weak with truck registrations down 15% across EU. Asia Pacific: Unit volume decreased 16% due to replacement and OE volume issues. Segment operating income was $43 million, 9.4% of sales, flat excluding the sale of the Off-the-Road (OTR) business, with SOI margin growing 150 basis points.

• Market headwinds expected to persist in the near term. Commercial truck recovery not expected until 2026, full year commercial earnings ~$135 million lower than prior forecast.
• Consumer business outlook weakened with global OE volume reductions and challenging replacement volume in U.S. EMEA at risk due to EU tire import investigation.
• Third quarter volume expected down ~5%, higher unabsorbed fixed costs of $50 million, price/mix benefit ~$100 million, raw material costs increase ~$50 million, Goodyear Forward benefits ~$180 million, inflation/tariff costs headwind ~$180 million.

• Industry disruption and global trade changes negatively impacting consumer and commercial businesses.
• Tariff impacts on U.S. supply chain from truck tire joint venture in Vietnam and U.S. retread products from Brazil.
• Weak demand in global commercial truck market, leading to lower volume and mix.
• Consumer replacement market competition and distribution challenges in U.S.
• EU investigation on imported tires from China, causing distributor prioritization of imports.

Q: About the surge in low-cost imports across key markets and tariffs, especially in the U.S. and Europe.

A: Christina Zamarro states imports surged in key markets like U.S. and Europe due to tariff speculation. Tariffs on tires in U.S. effective early May, with expectation of import declines in U.S. in third quarter, but EU investigation on Chinese tires may lead to continued import prioritization in Europe.

Q: Regarding the 'other costs' bucket in the segment operating income walk.

A: Christina Zamarro explains it includes annualized 3% inflation ($225 million), annualized tariff costs ($350 million), and incremental manufacturing inefficiencies from factory ramping down, expected to be ~$60 million in Q3 and ~$70-80 million in Q4.

Q: About full year metrics and potential additional cost cutting actions.

A: Christina Zamarro discusses fourth quarter SOI drivers, with raw materials favorable, Goodyear Forward benefit ~$175 million, but unabsorbed overhead and other costs higher. Mark Stewart mentions ongoing cost control through Goodyear Forward and plant rightsizing, with no immediate additional restructuring planned beyond current actions.