Goodyear Tire & Rubber Q1 2025 Earnings Report

Goodyear Tire & Rubber EPS Results

• Actual EPS: -$0.04
• Consensus EPS: -$0.06
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $0.10

Goodyear Tire & Rubber Revenue Results

• Actual Revenue: $4.25 billion
• Expected Revenue: $4.41 billion
• Beat/Miss: Missed by -$154.25 million
• YoY Revenue Growth: -6.30%

Goodyear Tire & Rubber Announcement Details

• Quarter: Q1 2025
• Date: 5/7/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 8:30AM ET

Goodyear Tire & Rubber (NASDAQ:GT) Co. engages in the development, manufacture, distribution, and sale of tires. It operates through the following geographical segments: Americas, Europe, Middle East, and Africa, and Asia Pacific. The Americas segment is involved in the development, manufacture, distribution, and sale of tires and related products and services in North, Central, and South America. The Europe, Middle East, and Africa segment focuses on the development, manufacture, distribution, and sale of tires for automobiles, trucks, buses, aircraft, motorcycles, earthmoving, mining, and industrial equipment throughout Europe, the Middle East, and Africa. The Asia Pacific segment refers to the development, manufacture, distribution, and sales of tires for automobiles, trucks, buses, aircraft, farm, earthmoving, mining, and industrial equipment throughout the Asia Pacific region. The company was founded by Frank A. Seiberling on August 29, 1898 and is headquartered in Akron, OH.

Goodyear Tire & Rubber Q1 2025 Earnings Call Transcript

Key Takeaways

• Goodyear Forward delivered $200 million of benefit in Q1, the highest quarterly result since the program’s launch, and remains on track to meet full-year targets.
• Goodyear’s US tariff exposure is only ~12% of its supply—versus ~50% industry-wide—leading to an estimated $300 million of annualized tariff costs, significantly lower than peers.
• Management has announced $135 million of price increases effective in Q2 and expects about $150 million of price/mix gains in each of Q3 and Q4 to offset raw‐material and tariff headwinds.
• US factory modernization is underway to add 10 million premium/high-rim tire capacity across 2025–2026, targeting growth in the profitable 18-inch-and-above segment.
• As part of portfolio optimization, Goodyear closed sales of its OTR and Dunlop businesses—aiming for $2 billion in total asset-sale proceeds—and is advancing a strategic review of its Chemicals unit.

Presentation

[Operator]

Please stand by. Your program is about to begin. Good morning. My name is Stephanie, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Goodyear's First Quarter twenty twenty five Earnings Call.

[Operator]

All lines have been placed on mute to prevent any background noise. After some opening remarks, there will be a question and answer session. Please note this call may be recorded. It is now my pleasure to turn the conference over to Greg Shank, Senior Director, Investor Relations.

[Greg Shank, Senior Director of Investor Relations at The Goodyear Tire & Rubber Company]

Thank you, and good morning, everyone. Welcome to our first quarter twenty twenty five earnings call. Today on the call, have Mark Stewart, our CEO and President and Christina Zamaro, our Executive Vice President and CFO. During this call, we will refer to forward looking statements and non GAAP financial measures. Forward looking statements involve risks, assumptions and uncertainties that could cause actual results to differ materially from those forward looking statements.

[Greg Shank, Senior Director of Investor Relations at The Goodyear Tire & Rubber Company]

For more information on the most significant factors that could affect future results, please refer to the disclosure sections of the supporting presentation for today's call and our filings with the SEC. These materials can be found on our website at investor.goodyear.com, where a replay of this call will also be available. A reconciliation of non GAAP financial measures discussed on today's call to the comparable GAAP measures is also included in the appendix of that presentation. With

[Greg Shank, Senior Director of Investor Relations at The Goodyear Tire & Rubber Company]

that,

[Greg Shank, Senior Director of Investor Relations at The Goodyear Tire & Rubber Company]

I will now turn the call over to Mark.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

Thank you, Greg, and good morning, everyone, and welcome to our first quarter earnings call. We're building on our momentum with a strong start to the year, driven by solid operational execution during the first quarter. As we look at our results, Goodyear Forward Workstream delivered US200 million dollars of benefit, the single highest amount we've realized in any quarter as part of the program since we launched. At the same time, we're progressing on our planned asset sales and positioning the company's balance sheet for competitiveness as we move forward. This kind of consistent execution is critical as we work through significant inflation in our raw material costs in the first half of this year.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

It's also what creates the power behind our full year outlook and what gives me confidence in our ability to deliver on our Goodyear Forward target at the end of this year. Turning to the business environment, light vehicle production has become significantly more uncertain in the near term as the industry reacts to friction and global trade. We remain well positioned in our consumer OE business with our mix of luxury, EV and light truck segment wins. As you've seen in our results, we continue to demonstrate significant growth in the OE market share in The U. S.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

As well as EMEA. Importantly, we remain confident in the continued strength of our value proposition with our OEM customers going forward. In consumer replacement, first quarter industry volume followed recent trends with the low end imports outperforming industry members in both The U. S. And in EMEA.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

With that as a backdrop for us in the first quarter, we gained share in the more profitable 18 inches and greater rim size. And that segment, as you know, is very important for us and we outperformed industry members in the quarter. Delivering outsized growth in this profitable segment is key to our strategy and and we're making tremendous progress as we work towards fully unlocking our potential to maximize the larger rim size opportunities. To do that, we're demanding efficiency in our manufacturing operations and achieving that. We're leveraging the strength of our global business and our product offerings and partnering with aligned distributors to ensure our products are available to consumers across all market channels.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

We've also assigned David Ankhart to be our Product Strategy Leader coming from a strong background in engineering as well as consumer sales EMEA. David is leading the charge for that with us together with our engineering leader Chris Helfel. As we shared with you on our last call, one of the ways we're driving growth in the premium segment is through unprecedented number of new product launches. As one example, this quarter we extended the lineup of our industry leading ultra high performance summer tire, the Goodyear Eagle F1 Asymmetric six. We will increase this line's offering to nearly two fifty SKUs this year, making it the largest ultra high performance summer tire offering ever in Goodyear's history.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

And this tire comes with an entitlement to compete. Our products are perfectly positioned and continue to set the benchmark in the industry. The Asymmetric six was recently awarded auto builds top spot in this year's summer tire test. It has also propelled Goodyear to be named the top manufacturer of the year for the twenty five summer season. As you all know, we have planned for multiple product launches in The U.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

S. This year. As we build out our suite of power lines, we're also growing our offering of Cooper products as well. Sellout of Cooper branded products during the first quarter at retail was strong, in fact has been gaining momentum. We have very high expectations for this offering in the coming quarters.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

Turning our views on The U. S. Replacement industry moving forward, we don't yet have a clear read as to whether import flows coming into The U. S. Are slowing based on recently announced tariffs.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

Our base case assumes there's still some lag due to the long supply chains, particularly out of Southeast Asia. In any case, the timing is right. The timing is right to evolve and to build out our product portfolio. Likewise, the timing is right as we discussed with you last quarter for the ramp up of our U. S.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

Factory modernization programs, increasing our capacity by 10,000,000 additional premium tires this year in 2025 and next year in 2026. The timing is also right as we've made major upgrades as to how we're connecting with our consumers. You may have noticed we recently launched an awesome marketing campaign called Still Goodyear, which launched during the NFL draft a few weeks back. It's truly a powerful testament to Goodyear's legacy and our excellence in performance and innovation. In short, we're focused on each of the elements critical to driving success in our U.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

S. Business, and we are ready to capture all opportunities for profitable volume as the year unfolds. Before I move on from replacement, I wanted to briefly comment on our Asia Pacific business, where we saw the majority of our replacement volume decline during the quarter. Asia Pacific's lower volume was largely driven by intentional choices we made as a team to exit less profitable low margin replacement business outside of China. Like our other region, AP is focused on power line introduction in new luxury and EV products, where we saw 25% growth in volume during the quarter.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

With this momentum, we expect to see sequential improvements in Q2 with a gearing again towards growth in the second half of the year. As we look at Asia Pacific's performance for the quarter and after adjusting their results for the sale of the OTR business, the region delivered year over year earnings growth and SOI margin improvements of about 200 basis points. Looking ahead, it's nearly certain that we will continue to see some volatility in our markets related to U. S. Trade policy for Goodyear as the largest U.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

S. Manufacturer already delivering on a turnaround through a major transformation program, it's also clear that we have a lot of opportunity in front of us. Underpinning all of the improvements we are making to the core business is our success of the Goodyear Forward program. We are now six quarters in and we have met or exceeded each of our quarterly targets along the way. It is not only that we're delivering on our planned savings, we're also changing the expectations to a culture of high performance here at Goodyear, to one of no excuses and to one where we are always focused on winning as we've defined winning.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

We will continue to diligently adapt to the global trade landscape and developments in the macroeconomic environment, ensuring we take action to mitigate headwinds when required, but more importantly ensuring that we are squarely lined up to take advantage of every opportunity the market affords going forward. Now, I'll turn it over to Christina to take you through the financials and we'll move on to the Q and A. Thank you.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Thank you and good morning everyone. As Mark mentioned, we've made significant progress on our deleveraging goals this year with the sale of our OTR business in February and as we announced last night the finalization of the sale of Dunlop to SRI. Thank you to all of our associates who have worked to deliver these tremendous outcomes as part of Goodyear Forward. Under the Dunlop sale agreement, Goodyear will continue to manufacture, sell and distribute Dunlop branded consumer tires in Europe through a transition period that will last through the end of this year. During this time, we'll pay a royalty to SRI on Dunlop sales, but will otherwise retain all profits.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Beginning next year, we'll supply tires to SRI under an offtake agreement for a period of up to five years. Further details about the transaction can be found on our investor website in a separate presentation. I'll note that the Chemicals business remains under strategic review, and we are engaged with multiple interested parties on this potential transaction. We'll share more as we're able to in the future. We continue to expect to generate gross proceeds of at least $2,000,000,000 from asset asset sales as part of Goodyear Forward.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Turning to our first quarter results, I'll begin with the income statement on slide nine. First quarter sales were $4,300,000,000 down 6% from last year, given lower volume and unfavorable foreign currency translation. Unit volume was 5% lower, driven by declines in consumer replacement volume in Asia Pacific and Americas. Gross margin declined 70 basis points. On the other hand, SAG costs were lower $46,000,000 which relates to Goodyear Forward.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Segment operating income for the quarter was $195,000,000 and slightly ahead of our expectations. Goodyear net income increased to $115,000,000 driven by a $260,000,000 gain on the sale of the OTR business. Our results were impacted by other significant items, including rationalization charges of 81,000,000 After adjusting for these items, our loss per share was $04 Turning to the segment operating income walk on Slide 10. The sale of the OTR business reduced earnings $12,000,000 during the first quarter. After this change in scope, our segment operating income declined $40,000,000 versus last year.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Lower tire unit volume and factory utilization were a headwind of $52,000,000 Price mix was $68,000,000 driven by pricing actions across our key markets. This partly offset higher raw material costs of $181,000,000 Goodyear Forward initiatives contributed 200,000,000 Inflation and other costs were $55,000,000 and other SOI was a headwind of $8,000,000 Turning to the cash flow and balance sheet on slide 11. Our free cash flow use was relatively stable versus last year and reflects seasonal increases in working capital. Pro form a for the Dunlop transaction, our first quarter net debt declined almost $1,000,000,000 which reflects the proceeds from asset sales this year, net of cash used for working capital and restructuring as part of Goodyear Forward over the last twelve months. Earlier in the quarter, we used the proceeds from the sale of OTR to repay $500,000,000 outstanding on our 9.5% notes and the remainder was used to reduce balances on our revolving credit lines.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

We'll use the proceeds from the Dunlop sale to address upcoming debt maturities. Moving to the SBU results on Slide 13. Americas unit volume decreased 600,000 units driven by consumer replacement. The U. S.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Consumer replacement industry was relatively flat in the quarter, although low end imports outperformed the industry and grew approximately 10%. In this environment, we continued to focus on the premium segment of the market, driving growth ahead of U. S. TMA members in the larger rim sizes. Commercial OEM replacement volume declined following industry weakness.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Segment operating income was $155,000,000 or 6.2% of sales, a decrease of $24,000,000 compared to last year. On Slide 14, EMEA's first quarter unit volume decreased 2%. Europe's consumer replacement industry grew 5% reflecting high single digit growth of low end imports. ROE volume grew despite significant contraction in the industry as new fitment wins ramped up production during the first quarter. Segment operating income was a loss of $5,000,000 decreasing $13,000,000 versus last year, driven by higher raw material costs.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Turning to Asia Pacific on slide 15. First quarter unit volume decreased 12%, driven by replacement volume, which reflects a strategic decision to exit less profitable business and channel destocking. OE volume was also lower despite overall industry growth given our own customer mix. Segment operating income was $45,000,000 and 9.5% of sales. Excluding the sale of the OTR business, Asia Pacific's segment operating income increased slightly and SOI margin grew nearly 200 basis points.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Before we turn to the outlook, I wanted to provide some context on the impact of Section two thirty two tariffs on the industry and on our own business based on the rates effective today. In total, The U. S. Consumer tire industry includes about 300,000,000 tires in OE and replacement, and we estimate that just over 50% of that supply is sourced from non U. S.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

MCA countries. We sell about 60,000,000 units in The U. S. Annually. As for our own sourcing, about 12% of our supply for The U.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

S. Is sourced from non USMCA countries. Our factories in Canada and Mexico are fully compliant with USMCA. In effect, this means that Goodyear's U. S.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Tariff exposure equates to about one quarter of the average for the industry. This is no doubt a significant advantage for our U. S. Business going forward. In addition to tariffs on consumer tires, we will also incur tariffs on imported raw materials and to a lesser extent commercial tires.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

In aggregate, we expect annualized costs of approximately $300,000,000 based on our planned sourcing and tariff rates applicable today. As we look at our outlook for 2025, we continue to expect to deliver our good year forward targets of 10% SOI margin and net leverage of under 2.5 times in the fourth quarter of this year and earnings in line with the $1,300,000,000 referenced during our fourth quarter call. With our favorable relative positioning, we could upside to our plan from price mix opportunities or from higher volume. We've assumed price mix of about $150,000,000 in the third and fourth quarters, which reflects the realization of our announced pricing to date. We've also assumed our second half volume will be about flat as we prioritize our revenue per tire to offset higher costs.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

We are presenting a more balanced view for the near term given an expectation for sell through of pre buy in the second and third quarters and the potential for increased competitive pressure in our international businesses, particularly as tires originally destined for The U. S. May be redirected to other locations. I'll note that we continue to anticipate that the European Commission may make a consumer tire tariff determination as to unfair competition in the coming months. Turning to the second quarter outlook, we expect global unit volumes to decline approximately 2% given elevated wholesale channel inventories in The U.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

S. And lower volume in Asia Pacific. In addition, we expect higher unabsorbed fixed costs of $20,000,000 driven by lower production during the first quarter. Price mix is expected to be a benefit of about $135,000,000 driven by the benefit of recent pricing actions and raw material index contracts with OE and fleet customers. Raw material costs will increase approximately $180,000,000 driven by natural rubber price increases and currency transaction costs.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

At current spot and currency rates, Q3 raw materials will be a headwind of $50,000,000 and Q4 raw materials will flip to a benefit of about $25,000,000 Goodyear Forward will drive benefits of approximately 190,000,000 reflecting continued progress across all of our work streams. Inflation, tariff and other costs are expected to be a headwind of approximately $120,000,000 reflecting higher costs given U. S. Tariff impacts on finished goods and raw materials and a global inflation rate of about 3%. In addition, this amount captures increases in transportation costs and transitory manufacturing costs associated with announced facility closures.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

If current tariff rates hold, these costs will be approximately $175,000,000 in Q3 and about the same level in the fourth quarter. Foreign exchange will be a headwind of approximately 10,000,000 headwind of $15,000,000 driven by increases in marketing and other miscellaneous costs. Finally, the non recurrence of insurance proceeds received last year, it will be $63,000,000 and the sale of OTR is 23,000,000 Looking beyond Q2, we expect significant benefits in price mix and from Goodyear Forward, which will support solid earnings growth, positive free cash flow generation for the year and significant margin expansion. Other financial assumptions on Slide 18 have been updated to reflect our latest estimate for working capital, which has been adjusted for the impact of tariffs on our working capital. With that, we'll open the line for your questions.

[Operator]

Thank you. At this time, we will open the floor for questions. We'll go first to James Picariello with BNP Paribas.

[James Picariello, Director & Sr. Automotive Analyst at BNP Paribas]

Hey. Good morning, everybody, and appreciate, all the great color on the call this morning. So I just want to clarify, I thought it was pretty crystal clear, for price mix in the third quarter and fourth quarter, it's $150,000,000 year over year in the bridge for each quarter in the

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

back That's right. That's right, James.

[James Picariello, Director & Sr. Automotive Analyst at BNP Paribas]

Okay.

[James Picariello, Director & Sr. Automotive Analyst at BNP Paribas]

And that's are you seeing other your competition also follow through on price? I imagine everybody is pricing to an extent, right, with tariffs right in front of it. But yes, can you just maybe provide some competitive color on the pricing? Because raw materials are now guided about $100,000,000 lower for the full year. Right, for yourself.

[James Picariello, Director & Sr. Automotive Analyst at BNP Paribas]

So yeah, if you could speak to that. Thanks.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Yes, sure, James. I mean, won't comment on any individual competitors. I'd say across the board, we've seen very significant price increases among the competitive set. I mean, think that's all just in relation to the tariff exposure that we described in our prepared remarks. I mean our own exposure is probably about a quarter of what others will see.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

When you look at the $300,000,000 that we laid out, I'd say you could think about 80% of that flowing through into our consumer business that equates to about $4 per tire. And I think that based on our analysis of the competitive set, our competitors will be anywhere in the area of three to four times that level of exposure. And so there's a big need to go out there and offset some of this cost. It's, there's just so much many imports coming into The U. S.

[James Picariello, Director & Sr. Automotive Analyst at BNP Paribas]

Yeah. And given your predominant US footprint, yeah, I imagine market share opportunities will present

[James Picariello, Director & Sr. Automotive Analyst at BNP Paribas]

themselves.

[James Picariello, Director & Sr. Automotive Analyst at BNP Paribas]

One clarifying question as well on tariffs within the $120,000,000 inflation and other bucket for the second quarter, what constitutes tariffs specifically there? And then for the full year, the same question. Thanks.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Sure. So I'll take you through all of the basket of inflation tariffs and other costs. And I'll start with the annual James. Our annual inflation runs about $225,000,000 that's 3% on our cost base. And then the tariff we've already said $300,000,000 in annualized cost.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

We also then and if you do the math on Q2 for modeling, you should get to a number of close to $50,000,000 in Q2. And then that will take a step up in Q3 and Q4. Other cost inflation though also includes any excess costs over and above inflation. You'll see that that increases a bit in the second half of the year particularly as we have three restructurings occurring at the same time in the second half. And that's the ramp down of two factories in Germany, One in The U.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

S. And that temporarily creates inefficiencies in our factories increases our costs. But that's all included in that guidance for 175 in the third quarter and then in the fourth quarter as well.

[James Picariello, Director & Sr. Automotive Analyst at BNP Paribas]

Much appreciated. Thanks.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Sure.

[Operator]

Thank you. We'll move next to Itay Michele with TD Cowen.

[Itay Michaeli, Equity Analyst at TD Cowen]

Great. Thanks. Good morning, everybody. And appreciate all the details as well. Just two questions for me.

[Itay Michaeli, Equity Analyst at TD Cowen]

First, on the tariff impact, the $300,000,000 Just curious whether there's some potential for mitigation for that over time, just given your strong U. S. Capacity opportunity and maybe other offsets that you might explore for that.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

Yeah, so maybe I can start and then Christine, I can kind of reiterate a few of the things that say, and good morning to you. We've got, as you mentioned, feel we're in a really favorable strong position, right? Having the largest US footprint from that side. As well, I think as we've shared with you guys on earlier quarterly calls, we've already been embarking on this journey really over the last couple of years. But in '25 and '26, we're going to be continuing to upgrade our UMS facilities with about 10,000,000 of high value, high rim size and the bigger profit pool size tires more competitively compete and win in that marketplace.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

As we shared as well, with a tremendous amount of new high rim sizes being launched in The US coupled with the fact that we do have that large US footprint, we're looking for those opportunities. But we also want to be really mitigate that factor, if you will, by just by watching this on a month by month basis, working with our customers and working with distributors and retailers on it.

[Itay Michaeli, Equity Analyst at TD Cowen]

Terrific. Thanks for that detail. And then just second question, hoping you could just expand a bit more on some of the assumptions in your second half volume assumption. Think you mentioned kind of flat volume year over year. Maybe just talk about assumptions on share macro, maybe a little bit if you could share kind of the regional view within that outlook as well.

[Itay Michaeli, Equity Analyst at TD Cowen]

Thank you.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

So I'll go ahead and get started Itay. I think what we've described in our prepared remarks is recovery in Asia Pacific turning to growth in the second half. We had a really negative first quarter driven by choices we made to exit some of the lower end of the market in Asia Pac that helped boost margins. We'll still see a drag in Asia Pacific in the second quarter, but then I think we'll begin to get some growth. In EMEA, I think that our first quarter volume was just slightly negative.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Our expectation is strengthening volume over the course of the rest of the year. Of course, in The U. S, I think we still have a really rough sell through dynamic in Q2 and Q3 in particular all around this sell out of low end pre buy that has just filled the channels. And so I think The U. S.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Will still be pretty tough. I also think Latin America volume will be tough as well. That I think a lot of volatility is still around OE. And I think we all appreciate that. But the expectation is that we will continue to grow a lot of market share, just like you've seen from us here over the last couple of quarters, just given our fitment wins on the SUVs, light trucks and EVs over the last couple of few years.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

That should flow through as well, I'd say, from the just to call a few of those out, right? We have been winning with the winners in the marketplace with like Chevy Silverado, Dodge Ram, Ford F-one hundred fifty's. And you mentioned in the first quarter, we had about a half a point of share growth in that OE segment. That should flow on through in the replacement cycles as well.

[Itay Michaeli, Equity Analyst at TD Cowen]

Yep, absolutely. That's all great to hear. Thanks for the detail. Thank you.

[Operator]

Thank you. We'll move next to Ryan Brinkman with JPMorgan.

[Ryan Brinkman, Equity Research Analyst at JP Morgan]

Hi, great. Thanks for taking my questions. Just relative to the $300,000,000 of annualized tariff costs on finished goods COGS and raw math on Slide 17, which you referenced in your prepared remarks, I realize those costs start now, right, versus the associated pricing gains might take more time, just given all of the inventory that's been built up in the channel during the pre buy before and after the election. So some questions around how you see that situation evolving from here, including like, what is your sense for how much inventory of low cost tires might be built up in the system relative to normal? How long do you think it will take the industry to work through those elevated inventory levels?

[Ryan Brinkman, Equity Research Analyst at JP Morgan]

And then whenever we do work through the oversupply, what kind of pricing gains do you expect to net against those $300,000,000 of higher annualized costs? Just given your costs will increase less than the overall industries, are you expecting and I think it would be very reasonable expectation, are you expecting the pricing gains to be well in excess of $300,000,000 or maybe you'll exploit share gain? Is there a reason to reassess the 10% SOI margin target longer term? What do you think?

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

So I'll I'll I'll

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

it a go.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

But but yeah, as Christina shared, know, we we already have pricing in the market, Ryan, for $135,000,000 of announced price increases that we've already have out there that have been digested or are being digested into the marketplace. And I'll let Christina pick up from some of the other details to the going forward for it. Christina, if you want to cover the rest of that section, I'll chime in some more here.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Sure, so Brian we talked about the $300,000,000,000 and $240,000,000 of that will flow through to replacement. So we've announced price increases as Mark just mentioned already in The U. S. Effective May 1 and that's 4% which and using our modeling assumptions that would be worth $220,000,000 Similarly, we've announced price increases in commercial. We also have opportunities to increase our price mix with our OE customers as well.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

We're very confident about commercial talked about that as well. We've increased pricing there. Of course, we'll look at every opportunity to grow our business and increase our price mix. As you look at the guidance, we've thought about the flow through of pre buy carrying through until the third quarter. We have not yet seen a decrease in imports.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

I think that the tariffs are effective May 3. And so we may begin to see that after May 3, but have not yet seen for example, ocean freight rates out of Southeast Asia coming down, which would be an indicator to us that some of those tires have stopped flowing into The U. S. And so it's going to take at least through the third quarter to see that play off. Think you asked about the balance between whether or not tariffs are price or volume opportunity.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

I'd say the Goodyear branded products have done really well. Mark referenced that the growth in the capacity that we're looking to achieve in The U. S. Over the next year or two. And so our plan already includes a lot of good growth in Goodyear branded products.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Supply demand dynamics there have been strong. And so that's an area where we're going to focus on driving higher revenue per tire through price and mix. In the mid tier and to the extent distributors do increase the pricing of low end products certainly makes our Cooper offering a lot more attractive. In those instances, we do have some extra capacity. We're going to work through the economics of price mix and volume just to maximize our earnings.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

And Cooper doesn't directly compete with Tier three and Tier four tires, but because it has such an attractive value proposition certainly some opportunities for us there.

[Ryan Brinkman, Equity Research Analyst at JP Morgan]

Okay, thanks. And maybe just an update on the disposition process now that you've got two of three finished. Sure, you're limited what you can say with regard to chemicals, including about overall proceeds because we can do a process of elimination math. But previously, I think investors have regarded chemicals to be maybe the easiest to get done over the shortest time frame just because there seem to be so many more potential interested buyers and they tend to be deep pocketed and just up and down the petrochemical space, And yet it's the one that remains. Historically, I think one thing you liked about it was that it would do better when oil prices were high and not as well when it was lower oil, so kind of hedge you.

[Ryan Brinkman, Equity Research Analyst at JP Morgan]

Now we see oil coming down. Overall, that's good for you. But does that impact timing or proceeds at all? Having overachieved so far on the two that you have completed in terms of the proceeds? Does that make you less sensitive to timing and more sensitive to proceeds?

[Ryan Brinkman, Equity Research Analyst at JP Morgan]

Or just what can you say about what remains here on the disposition side?

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Thanks, Ryan. I mentioned in the prepared remarks that our chemical process is ongoing and of course we're continuing to evaluate how best to maximize the value of that business. I'd say it was three major programs that we've been working on over the last eighteen months or so. This one was the last one in the market. I think you're right.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

I think the current environment, whether you're looking at chem prices, whether you're thinking about tariffs, this business for us is more valuable today than say it was six months ago. It's the only major synthetic rubber manufacturing site supplying tire manufacturers in The U. S. And so that makes it inherently more valuable. But as part of that strategic and operating review committee that we held back in 2023, we did conclude that the chem business was non core.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

And so the work in front of us is ensuring that we deliver the right strategic value for Goodyear and for our shareholders. And we'll continue to do that and update you more when we can.

[Ryan Brinkman, Equity Research Analyst at JP Morgan]

Okay, very helpful. Thank you.

[Operator]

Thank you. Our next question will come from Edison Yu with Deutsche Bank.

[James Mulholland, VP - Equity Research at Deutsche Bank]

Good morning. This is James Lohan on for Edison. Two quick questions for me. On the SKU rationalization that impacted the Asia segment volumes in the quarter, should we expect something similar to that to happen in the other geographies throughout the year? Or is that going to be predominantly an Asia story and it's going be relatively complete after the second quarter?

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

Yeah. Thanks James. As we mentioned on the AP side that was predominantly outside of China on that SKU rationalization. We are actually we have been going through the same activity both on the Americas side as well as in EMEA. As we've shared with you guys in the past, we've been really marching forward with our common platforming, if you will, of certain SKUs.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

Looking as well at the retiring of some of the older SKUs as we bring the newer SKUs into the marketplace. Really pleased with the results of that with the wins we're getting in terms of performance, in terms of consumer take rates and so forth. So yeah, we absolutely are continuing to do that as part of that. And as announced with David Enkhart being the head of our product technology roadmap, it really is one of our key areas there is looking at the right number of SKUs and complexity within our manufacturing footprint to optimize efficiency. But also the right messaging that we take with our marketing teams out into the marketplace so that we've got the right product for the right folks across the market and not crowding up, but in fact cleaning things up.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

So you'll see more of that.

[James Mulholland, VP - Equity Research at Deutsche Bank]

Great. Got it. That's very helpful. And then my second question. So based on your math, let's just say in The US, about 6,000,000 tires, give or take, are non USMCA.

[James Mulholland, VP - Equity Research at Deutsche Bank]

Would you look to fully offset those with the 10,000,000 units coming online from the plant optimization? Or should we view that as a source of exports or maybe market share gains? Just how should we think about that extra 10,000,000 units?

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

Yes. That 10,000,000 units is actually going more to your first question, right? It really is about us moving into the higher rim sizes and the higher value added proposition piece to And then we'll utilize that as well as opportunities would come up in the marketplace of other tires coming in. But we would part of that $10,000,000 is really centered primarily around our Lawton facility where we've been doing that massive modernization activity.

[James Mulholland, VP - Equity Research at Deutsche Bank]

Got it. All right. Thanks, guys.

[Operator]

Thank you. Our next question will come from Emmanuel Rosner with Wolfe Research.

[Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC]

Thanks so much. Good morning. Thanks a lot for the detail around the outlook. Cristina, I was hoping you can maybe just help us put a final point on a couple of bridges, in particular, maybe sequentially. Q2 SOI doesn't look all that different from Q1, but in many ways, a little bit backward looking.

[Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC]

So what would the sequential bridge look like towards your double digit SOI margin by the fourth quarter? And then also curious about sort of like an updated free cash flow bridge to the extent that there are a few there were just mainly changes in terms of working capital.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Sure, Emmanuel. Thanks. Good morning. So when you look at the sequential earnings from the second quarter, either in the third or the fourth, I'd say two main drivers. And the growth in earnings is all going to come from higher volume and significantly better price mix relative to raw materials.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

I think as you look at the third and fourth quarters even in a flat volume environment which we've laid out the additional growth just coming from volume would be $200 to $300,000,000 And then the growth that we would see from price mix and raw materials will be a benefit of $100,000,000 in Q3, dollars '1 hundred and '70 '5 million in Q4 and that's all relative to a headwind in the second quarter of $45,000,000 So big step up in volume even in a flat environment and significant price mix versus raws relative to the first half. And we're just second quarter taking on a whole lot of cost in raw materials also now with tariffs, but we'll begin to get the full realization of pricing in the third quarter, which helps us to fully offset that.

[Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC]

Thank you. On the free cash flow side?

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Free cash flow, what we've done is decrease the source of free cash from working capital. Our guidance at the fourth quarter call was 100,000,000 to $150,000,000 inflow. We reduced that to an inflow of $50,000,000 just given the impact of tariffs on our working capital. So as you look at our free cash flow walk, we said that SOI should be around the same level as last year. If you back out our corporate other costs and add back D and A, you should get to an EBITDA level of about 2,100,000,000.0 And then we talked about the working capital inflow restructurings about $400,000,000 taxes $200,000,000 interest expense.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

I have a range still for maybe it's $460,000,000 interest income $40,000,000 positive there CapEx of $950,000,000 and then a little bit of financing fees should still give you a positive free cash flow for 2025.

[Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC]

Got

[Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC]

it. Thank you. And then just a little bit more comments around conceptually and strategically how do you plan on taking advantage of this tariff competitive advantage? Looks like within the full year guidance, you're essentially offsetting increased costs direct costs to you with pricing, but it's sort of like a one for one offset. Yet you do have a competitive advantage where your costs are going up less than most of the competition.

[Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC]

And so directionally, you also mentioned potential for upside risk from there. So how would you go about once you cover your costs deciding basically where to allocate the additional opportunity?

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

Yeah. We're taking a look at it really from multiple angles on it, Emmanuel. We're looking at pricing in terms of where the products are positioned in the marketplace. We're also looking at from our engineering side as we continue to bring these new SKUs into the marketplace as well, make sure we've got the right pricing position and the value for the customer. So we obviously will take a look and make sure that we're optimizing that pricing and that profitability in the marketplace.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

At the same time, sure that we're being very cognizant of the consumer, end consumer in the marketplace as well. Right? So all that is coming together for the value proposition for them. We'll we'll take a look at it on the OEM side of the house. We'll take a look at it on the replacement side as well.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

So we we're really making sure that we we we've got quite a few war rooms as you could imagine that we've got things mapped out in that, but we're we're also watching very carefully around the inventory in that marketplace. Because as Christina mentioned, there is, feels to be large amount of the pre buy towards that low end side of the stuff that needs to work through the system at the same time. So that's why we're presenting as we are.

[Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC]

Got it. Thank you.

[Operator]

Thank you. Our next question will come from Wesley Brooks with HSBC.

[Wesley Brooks, Analyst at HSBC]

Hi, guys. Thanks for the color around the tariffs and your guidance. I guess a couple of questions from me. One, you talked about the risk obviously of those Asian tires being redirected to your other markets. Could you just remind us your exposure in EMEA and Asia to sort of Tier one versus the mid tier where you'd be more exposed to that in those markets, and if you have any thoughts on the size of the impact that you could have there?

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

So, good morning, this is Christina. I'll just jump in to say in Europe, we have some lower tier brands, mostly our Dambica and our Salva brands that are focused more in the Eastern European countries. Those would be the ones that would be most likely to compete with some of the Tier three and Tier four products going into Europe. What I'd say on the whole, if you look at our volume and I'm talking specifically about twenty twenty four volumes in consumer for Europe, I'd say about 35% or 40% of it is Goodyear and Cooper branded. The remainder or 20% let me see, 12% would be these brands that I think are more exposed to those Tier three and Tier four imports.

[Wesley Brooks, Analyst at HSBC]

Okay. Thank you. I mean, yeah, it doesn't feel like the impact in these markets will be anywhere near offsetting the positives in The US obviously. Then my other question was more a clarification on the guidance, I think you have a guide for corporate and others being $165,000,000 in the full year. And I just wanted to understand, so you had 57,000,000 in Q1, you've got $50,000,000 in Q2, so that means only 30,000,000 run rate in Q3 and Q4.

[Wesley Brooks, Analyst at HSBC]

And if we look at the year over year, that's a long way down. I just wanted to understand what's going on there and what drives the quarterly variance in that.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

So I would say, it's a great question. I would say that that variability in corporate other tends to be very typical and it has to do with a lot of the incentive compensation accruals that based on our performance in any given year will be higher at the beginning of the year or at the end of the year. And this year our corporate other is more first half weighted.

[Wesley Brooks, Analyst at HSBC]

Okay, thanks. And I mean, I had one last quick one, just the chemical business sale, I mean, changing environment around tariffs and market, does that change your strategy there? Is that still does that still make sense? And do you have any updated visibility on the timing of this?

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

Sure. So we chatted about this a little bit earlier. I think, yes, certainly a bit more valuable because it is the only major synthetic rubber supplier for tire manufacturing in The U. S. And just given the tariff environment that adds some as we think about the overall enterprise value of that business.

[Christina Zamarro, Executive VP & CFO at The Goodyear Tire & Rubber Company]

But I don't think it changes necessarily the conclusion at all that we arrived at back in 2023 that this business is non core. And so we're continuing. I mentioned earlier that this was the last process that we put into the market. We're talking with multiple interested parties and no other updates. We'll share more when we're able.

[Wesley Brooks, Analyst at HSBC]

All right. Thank you very much.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

Thank

[Operator]

you. There are no additional questioners at this time. I'd like to now turn the conference back to Mark Stewart for any closing remarks.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

Okay. Thank you. And thank you all for taking the time to join us today for our first quarter earnings call. We continue to build on the momentum that we have from last year and definitely continue to deliver on the Goodyear Forward initiatives towards that $1,600,000,000 number that we've shared. We look forward to sharing our continued progress with you guys as we proceed through the year.

[Mark Stewart, President & CEO at The Goodyear Tire & Rubber Company]

And thank you, guys, and have a great day.

[Operator]

Thank you for joining Goodyear's first quarter twenty twenty five earnings call. This concludes today's conference. You may now disconnect.

Participants

Executives

• Greg Shank, Senior Director of Investor Relations
• Mark Stewart, President & CEO
• Christina Zamarro, Executive VP & CFO

Analysts

• James Picariello, Director & Sr. Automotive Analyst at BNP Paribas
• Itay Michaeli, Equity Analyst at TD Cowen
• Ryan Brinkman, Equity Research Analyst at JP Morgan
• James Mulholland, VP - Equity Research at Deutsche Bank
• Emmanuel Rosner, Managing Director - Senior Autos & Auto Technology Analyst at Wolfe Research LLC
• Wesley Brooks, Analyst at HSBC