Goodyear Tire & Rubber Co plans to cut 5,000 jobs worldwide in 2009, or 6.7% of its staff, after a prolonged downturn in vehicle demand led to a deeper-than-expected loss in the fourth quarter.
Goodyear, the largest US tire maker, said it would freeze salaries worldwide and cut production capacity as part of efforts to reduce costs by $700 million this year. The target adds to $1.8 billion of cost savings completed over the past three years.
“These are truly extraordinarily times that require extraordinarily actions,” Goodyear Chief Executive Robert Keegan said on Wednesday on a conference call following the company's quarterly results.
“The global economic slowdown has increased both in severity and geographic scope throughout the year. We are aggressively adjusting our plans to the new market realities,” Keegan said.
Goodyear, like other auto parts suppliers, has come under intense pressure from US auto sales at 27-year lows and a steep downturn in consumer demand that has prompted major automakers to slash output.
The Akron, Ohio-based tire maker cut nearly 4,000 jobs in the second half of 2008 and had 75,000 employees worldwide at the end of last year.
Goodyear posted a net loss of $330 million, or $1.37 per share, in the fourth quarter, compared with a profit of $52 million, or a 23 cents per share profit, a year earlier.
Excluding one-time items, Goodyear posted a loss of $1.18 per share, while analysts on average expected a loss of $1.13 per share, according to Reuters Estimates.
Revenue fell to $4.1 billion in the quarter from $5.2 billion a year earlier as tire production fell 19% worldwide.
At the end of 2008, Goodyear had $3.7 billion in total liquidity, including $1.9 billion in cash and cash equivalents.
In its key North American unit, tire volume declined 17% due to weak demand from automobile manufacturers and the replacement tire market.
Goodyear said the planned 5,000 job cuts will come from the salaried and hourly ranks worldwide, but did not specify how the cuts would be divided or what regions they would come from.
The company also plans to cut manufacturing capacity by 15 million to 25 million tires over the next two years. Those capacity cuts come on top of a prior reduction of 25 million tires in recent years that included plant closings.
JPMorgan analyst Himanshu Patel said the target for production cuts would require the closure of two or three plants.
Tire sales to vehicle manufacturers account for about 20% of Goodyear revenue and about 30% of its tire production. The rest goes to the replacement market.
Goodyear also said it would continue to pursue sale of noncore assets. (Reuters)