Goodyear Tire & Rubber Q2 Earnings Call Highlights

Key Points

• Goodyear’s second-quarter sales fell 5% to $4.3 billion, with tire volumes down 4% year over year and the company posting an adjusted loss of $0.61 per share. Demand was weakest in the Americas and EMEA, while Asia Pacific delivered 5.3% volume growth and stronger margins.
• The company plans to close its Fayetteville, North Carolina, plant by the end of 2027, expecting structural cost savings of approximately $270 million annually beginning in 2028. Goodyear also issued about $1 billion in senior notes to refinance 2027 debt and extend maturities.
• Goodyear expects third-quarter volumes to be roughly flat, with price-and-mix gains and Goodyear Forward savings partly offset by higher inflation, raw-material costs and fixed-cost pressures. Full-year free cash flow is forecast to remain negative at approximately $200 million to $300 million.

Goodyear Tire & Rubber NASDAQ: GT reported second-quarter sales of $4.3 billion, down about 5% from a year earlier, as lower tire volumes and the prior-year divestitures of its chemicals business and Dunlop brand outweighed price-and-mix improvements. Excluding those divestitures, sales declined about 1% organically.

Segment operating income totaled $36 million in the quarter. After adjusting for significant items, including rationalization charges and discrete tax items, the company reported a non-GAAP loss of $0.61 per share. Interim Chief Financial Officer Scott Deakin said tax expense remained unusually high because of the geographic mix of earnings.

CEO and President Mark Stewart said the quarter performed in line with the company’s prior expectations, with global tire volumes improving sequentially and channel destocking moderating from the first quarter. Still, unit volume declined 4% year over year, primarily because of lower consumer replacement demand in the Americas and Europe, Middle East and Africa.

Regional results show uneven demand

The Americas remained the company’s weakest region. Unit volume fell 9%, principally because of lower U.S. consumer replacement demand and Goodyear’s decision to exit lower-margin product lines. Americas segment operating income was a loss of $10 million, reflecting lower volume, tariff costs and inflation, partially offset by price and mix improvements and Goodyear Forward savings.

Deakin said consumer sell-in and sell-out volumes in the U.S. replacement industry were both down between 1% and 2% during the second quarter, indicating that channel destocking had improved. Goodyear’s original-equipment volumes in the region grew despite softer industry conditions, aided by market-share gains. Commercial original-equipment volume rose in the mid-teens percentage range, although commercial replacement demand remained below the prior year.

In EMEA, unit volume declined 2%, as consumer replacement conditions remained soft. Consumer original-equipment market share increased for a tenth consecutive quarter, while commercial volume improved in both replacement and OE. The region posted a segment operating loss of $17 million, though operating income improved by $20 million after adjusting for the sale of the Dunlop brand.

Asia Pacific was the strongest segment, with unit volume rising 5.3% on improved consumer demand in both OE and replacement channels, particularly in Japan and China. Segment operating income increased to $63 million, or 12.7% of sales, with margin expanding 330 basis points from the prior year. The company said its sales mix of consumer tires with rim sizes above 18 inches increased by 500 basis points year over year in the region.

Across the company, the mix of 18-inch-and-above consumer tires increased four percentage points from a year earlier. Stewart said Goodyear also grew OE volumes and gained market share in every region during the quarter.

Factory closure aimed at reducing structural costs

Goodyear announced plans to close its Fayetteville, North Carolina, manufacturing facility, with production expected to wind down by the end of 2027. The company plans to shift production to other plants in its network.

The closure is expected to reduce structural costs in the Americas by approximately $90 million in 2027 and about $270 million annually beginning in 2028. Deakin said the company expects roughly $200 million in cash costs associated with the action: about $40 million in 2026, $100 million in 2027 and the remainder in 2028.

Stewart said the Fayetteville closure is part of a portfolio-driven manufacturing strategy designed to align production capacity with higher-value product segments and improve plant utilization. He said the facility had capacity for between 7 million and 8 million units at its peak.

The company is also investing in manufacturing modernization, automation, digitalization and supply-chain capabilities, according to Stewart. Goodyear has continued to reduce low-return product SKUs while expanding its lineup in premium, ultra-high-performance, all-weather and all-season categories. New Cooper products are scheduled to launch later this year in the United States and Canada, while a new Goodyear product is planned for Latin America.

Cash flow, debt refinancing and outlook

Free cash flow was a use of $69 million in the second quarter, an improvement of $318 million from the prior year, driven by more efficient working capital and lower capital expenditures. Net debt declined by more than $700 million year over year, reflecting debt repayment at the end of 2025.

During the quarter, Goodyear issued approximately $1 billion of senior notes. The company intends to use the proceeds to repay its 2027 senior notes, extending its maturity profile and supporting liquidity while it executes its manufacturing restructuring plans.

For the third quarter, Goodyear expects global unit volumes in its remaining business to be roughly flat from the prior year. The company expects a $57 million year-over-year operating-income reduction from earnings associated with previously divested businesses and approximately $70 million of higher unabsorbed fixed costs tied to lower second-quarter production.

• Price and mix are expected to provide an approximately $110 million benefit in the third quarter.
• Goodyear Forward savings are expected to contribute about $70 million.
• Raw-material costs are expected to rise by about $20 million as higher commodity costs related to the Middle East conflict begin to flow through results.
• General inflation is expected to add about $60 million in costs, while tariff-related headwinds are expected to decline to roughly $10 million.
• Third-quarter tax expense is expected to be about $50 million.

For the full year, Deakin said raw materials are expected to be essentially neutral, while price and mix should contribute more than $200 million. He said Goodyear Forward benefits are expected to offset inflation and other cost increases, but lower volumes and related fixed-cost absorption remain the company’s largest headwind. The company expects free cash flow to be negative by roughly $200 million to $300 million in 2026 and anticipates continued, though moderating, cash use in 2027.

About Goodyear Tire & Rubber (NASDAQ:GT)

The Goodyear Tire & Rubber Company is a leading tire manufacturer and rubber products supplier with more than a century of innovation in its portfolio. Founded in 1898 by Frank Seiberling in Akron, Ohio, the company has grown into a global enterprise known for its engineering expertise and quality standards. Over its history, Goodyear has pioneered advances in tire technology, from early pneumatic designs to modern high-performance and fuel-efficient solutions.

Goodyear's core business encompasses the design, production and distribution of tires for a variety of markets, including passenger cars, commercial trucks, off-the-road vehicles, aircraft and specialty applications.

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