Not too long ago, Goodyear’s North American Tire business acted much like a cement tire around the neck of the Akron company’s finances.
North American Tire historically accounts for about half of Goodyear’s revenue. But as recently as 2009, it was a money loser as Goodyear Tire & Rubber Co. struggled with debt, high costs and then the impact of the Great Recession.
No more. It took years of work and refocusing, but North American Tire appears to have its swagger back.
“The highlight of our 2012 performance came from our North America business,” Rich Kramer, Goodyear chairman and chief executive officer, said shortly after the company released earnings on Tuesday. “A record fourth quarter pushed our full year earnings to $514 million, beating our 2013 target of $450 million a year early.”
Kramer called North American Tire’s turnaround comparable to any in the auto industry.
“In 2009, this business lost more than $300 million. In 2012, we delivered record earnings but more importantly built the foundation of sustainable economic value creation in line with our strategy,” he said.
North American Tire sold 15.8 million tires in the fourth quarter, down from 16.6 million tires a year ago. Replacement tire sales were down 10 percent from a year ago while original equipment tire sales increased 9 percent. For the full year, North American Tire sold 62.6 million tires, down from 66 million in 2011.
Sales totaled $2.3 billion in the fourth quarter, down from nearly $2.6 billion a year ago. For 2012, North American Tire had sales of nearly $9.7 billion, down from nearly $9.9 billion in 2011.
While 2012 tire sales were down from 2011 levels, Goodyear made more per tire last year.
Goodyear this week lowered its outlook for 2013 while saying it still expects to make record earnings. Goodyear expects to earn between $1.4 billion to $1.5 billion this year instead of a previous forecast of $1.6 billion.
For 2012, Goodyear reported net income of $183 million, or 75 cents per share, on revenue of nearly $21 billion. Net income fell 43 percent from 2011 levels, when Goodyear reported earning $321 million, or $1.32 a share on revenue of $22.77 billion.
The company’s efforts are now focused on turning around weak spots elsewhere in the world, particularly in Europe where a weak economy has hurt Goodyear’s sales and earnings.
Kramer said Goodyear is implementing a plan to bring its Europe, Middle East and Africa business back to its “historic margins.” Part of that plan includes the announcement at the end of January that Goodyear will be closing a tire factory in France and is getting out of the farm tire business in Europe.
“During the fourth quarter, it became increasingly clear that the effects of the European economic crisis will be felt for an extended period of time,” Kramer said. “The resulting slow economic growth will continue to dampen consumer demand.”
In North America, Goodyear said it expects replacement tire sales this year will be flat to up 2 percent, while original equipment tire sales may increase up to 5 percent from 2012 levels.
Shares of Goodyear on Wednesday were up 22 cents to $14.08. Shares are up 1.4 percent from a year ago.
Jim Mackinnon can be reached at 330-996-3544 or email@example.com