The Goodyear Tire & Rubber Company Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Overall Results: Delivered revenue of $4.6 billion and segment operating income of $287 million in the quarter, slightly ahead of revised expectations. Completed planned divestitures and strengthened the balance sheet.
• Americas Focus: Introduced high-margin product lines, revitalized all-terrain portfolio, upgraded retail stores, and plans to open new brick-and-mortar stores.
• EMEA Progress: Returned to profitability, with 20% growth in consumer OE volume and completed factory restructuring.
• Asia Pacific: Strong execution, exited low-margin SKUs, and expects Q4 volume growth from new fitments.
• Goodyear Forward: Focus on controlling controllables, margin improvement, and portfolio optimization to position the business for future growth.

Segment Performance

• Americas: Unit volume decreased 6.5% driven by consumer replacement. U.S. consumer replacement industry sell-in down 4% with low-end imports up 2%. Americas consumer OE volume grew 4%, commercial OE volume declined 33%. Segment operating income was $206 million, a decrease of $45 million compared to last year.
• EMEA: Unit volume decreased 2% due to replacement volume prebuy. Consumer OE volume grew 20%, marking the seventh consecutive quarter of OE share gains in EMEA. Segment operating income was $30 million, up $7 million.
• Asia Pacific: Unit volume decreased 9% due to consumer OE and replacement. Segment operating income was $51 million, over 10% of sales.

Guidance

• Fourth Quarter: Expect sequential SOI increase, mid-single-digit Y/Y growth excluding divestitures. Global volume down ~4%, higher unabsorbed fixed costs, price/mix benefit ~$135M, raw materials slight benefit, inflation/tariffs headwind ~$190M, insurance collection offsetting prior nonrecurrence, sales of OTR and chemical a headwind ~$30M.
• 2026 Outlook: Goodyear Forward carryover benefits at least $250M, flow-through pricing ~$100M, raw materials benefit $200M, inflation headwind $200-225M, tariff carryover $150-160M, and impacts from divestitures, with details to be shared in Feb.

Risks

• Industry Challenges: Continued volatility in global trade flows, elevated channel inventories, impact of tariffs on imports, and uncertainties around EPA emissions mandates affecting commercial truck builds.
• Market Dynamics: Slow digestion of low-cost imports and potential long-term impact on commercial vehicle margins due to import competition.

Question and Answer

• Q: Consumer OE market share gains? A: Driven by premium partnerships, USMCA compliance, and new SKUs, with 7 consecutive quarters of growth in Americas and EMEA.
• Q: Q4 SOI drivers? A: Price/mix benefit, Goodyear Forward benefits, offset by inflation, tariffs, and divestiture headwinds.
• Q: Commercial vehicle environment? A: Challenging with low prebuy, trade down, but strong fleet subscriptions and TaaS initiatives.
• Q: EMEA OE performance? A: Broad-based gains, winter tire strength, and 7 consecutive quarters of OE share growth.
• Q: Insurance collection and chemicals divestiture? A: Insurance collection in Q4, chemicals divestiture impacts earnings and raw materials, annualized impact ~$120M.
• Q: Low-cost imports in Europe? A: Similar to US, prebuy of low-end imports, with tariffs potentially retroactive, impacting channel dynamics.
• Q: 2026 puts and takes? A: Goodyear Forward benefits, pricing, raw materials, inflation, tariffs, and divestiture impacts, with details to be shared in Feb.
• Q: Cash flow in Q4? A: Expected strong cash flow, EBITDA ~$1.8B, free cash flow breakeven with asset sale fees flowing through.