GT - Earnings call transcript Q4 2017 | The Goodyear Tire & Rubber Company

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Operator

Good morning. My name is Keith, and I will be your conference operator today. At this time, I would like to welcome everyone to Goodyear's Fourth Quarter and Full Year 2017 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. you. Thank Instructions] [Operator like Vice the President, now Christina over Zamarro, Goodyear's Investor to would program hand to I Relations. Please go ahead.

Christina Zamarro

Thank for joining this thank you, our and call morning. you, conference us Keith, for everyone,

Rich earnings in Safe Kramer, instructions of Executive replay website issued slide at presentation our includes results this on affect Thompson, comments that that call future some and any draw presentation performance. Joining available our me be morning. statements included today’s President Goodyear's I earlier I today release Chairman call today. on our Chief can any If whether factors later filings and are Goodyear's suggested Vice The with Executive today. Officer. of The as today's on differ The outlined or events participants could this otherwise. Financial a by our about X, were call a or investor.goodyear.com Actual and could new Chief results from for and Laura forward-looking Officer; your to intention future materially Company those our supporting in significant revise found are Replay statements, forward-looking or most remind like result attention Harbor will could in update release. Slide earnings future to obligation information, the would now SEC and disclaims to statement the be

turn of over call basis reconciled the a part call slide in financial non-GAAP on Rich. financial cases, GAAP GAAP discussed The and to that, And measures with the U.S. to equivalent to results are presented are I'll presentation. the Our non-GAAP the basis. appendix some the as on a

Richard Kramer

allocation highlights good results. for will the then today. targets. quarter longer-term questions. morning, through our fourth targets and lay of our our and plan a morning, year detailed ask Then review quarter fourth call plan with joining Christina, opening business of back XXXX I’ll I units us and to Laura for and Laura us Thanks the each full our our you, walk Thank will and before review discuss financial capital our out finish to and This everybody. come your

strong Our of and U.S. across volume our XX-inch-and-greater results We the rim performance These the in highlighted replacement in our by power pleased consumer Goodyear were were fourth-quarter brand recovery market. EMEA. double size almost we of the regions. where with rate the results particularly reflect the in grew all segment

performance. operating $XXX which Our volume income fourth this quarter was million, segment strengthened by was

basis fourth margins runrate with significantly segment $X.X driven units volume the year in delivered basis, In growth three records billion the business activities year-over-year in operating cash unit raw our Moreover, in tire our of addition, from our operating On Asia-Pacific headwinds. increasing material income strength in consumer China. the by and we segment both and more $X.X flow quarter billion. saw business all-time from continuing income significant quarter third during operating a our full than income operating Two despite showed continuing segment improved XXX points quarter. in sequentially of

opportunities in Looking ahead, growth about our I optimistic continue the to be for markets.

to define segment designed is rim equal Our larger the in size trends the the segments is particularly industry, or industry. strategy in which market, take XX-inches. This the shaping to total advantage of our to we of greater long-term growing as multiple than

advantage. for value can that on our value market our is mixing pool Goodyear and to market. the of of brand, is its the customers and these demonstrate where bring retail all continues that increasing capabilities with our drives in growing combination distribution elements part and Goodyear and is the that add and we up. strategy network our where align technology, competitive our bear for focus strengths and profit Our consumers This The the to simultaneously

and business confidence feel We in year the We build the about right we our for environments. remains way very undeterred. Over in positioned fourth the momentum no have confident be the have The and and time, and in in the have in rebuilt we future executed and long-term. we will company progress during ability remain that positive on that challenging have reshaped momentum my different ahead. we to against strategy our quarter our business the

including we is generate significant unwavering we clear and are believe markets positioned cash in raw our flow and XXXX challenges over increases segment costs, Our despite strategy long-term. in the income and in to material operating

I’d to results. like walk through that, over the with the to Laura quarter to call turn Now fourth

Laura Thompson

and Rich, everyone. you, good morning Thank

Turning statement X% a quarter year-over-year. income replacement Strong EMEA by was unit X% Slide at more to offset up our the consumer and fourth U.S. volume on OE. than growth and the driven X, decline

driven Our X% of up and fourth in of quarter mix sales a billion by the benefit were $X.X X% volume. price increased improvement

margin was operating segment and XX% was margin XX%. gross Our

was earnings basis quarter net fourth a $X.XX. diluted on a of share per Our loss

were XXXX to influenced a significant million million. were net mix million. charge on was adjustments, by was revaluation Increased a $XX positive cost tax X overhead After quarter driven of earnings share material step Net $XX per our a for offset U.S. actions saving translation impact our $XXX XXXX. than the higher million the $XX foreign of $X.XX. and that million $XXX existing one-time million negative tax volume results cost Our and million impact. improved absorption Slide more $XX of was assets The non-cash segment of currency raw The rate. unfavorable $XX items was of price tailwind deferred fourth walks operating certain to chart by including fourth income was quarter new lower

the Net Slide $XXX end sheet third cash and cash the quarter $X Turning of nearly at than on equivalents to X, lower the million quarter. was balance billion. the were debt

on at Our global slightly is of X. year. the was flow liability million, year Slide down prior from the end cash $XXX pension unfunded the Free shown

repurchase capital. operating activities in billion free in billion quarter $XXX the benefit $X.X million $XXX $X.X common $X.X billion million cash of generated The of during Cash shares. flow, full in a X.X the from during we by strong fourth the quarter cash quarter, the for flow year driven was and or our about For the generation XXXX. quarter working supported stock the million

from higher were production versus offset price mix quarter, impact fourth segment raw reflecting the Slide quarter Turning of approximately million operating XXXX. in to XX.X and overhead up volume decrease sales increased Americas $XXX third by Unit was $XX unabsorbed sales X% adjustments. resulting in income fourth to more quarter The an reported the X, positive million cost tires, and material million from or XXXX. than XX% of

X% saw the strong and channels the which I’ll some was in lower the was OEM in rim replacement up driven in that by we consumer in down up production XX% XX-inch-and-greater Our sell-out was note U.S. X% and by growth including in U.S. improved channel. volume the replacement major and performance segment, wholesale OE Consumer XXXX. restocking impacted be the U.S. volume versus to all continue size

confidence volume Brazil’s more to have look and Our ahead. Brazil, in the we OE commercial unit up the height up up commercial market, healthy strong while OE not to and XX% XX% was volume the was volume us recovered as we show growth than X% back improvements replacement was give continued volume of quarter. In

rim size in million the the consumer X, higher cost business increasing $XX the SOI the EMEA’s industry unit an replacement by cost quarter in million by and and improved quarter focus translations. increase volume EMEA’s Turning and relates commercial volume and fitments. both Europe, higher with in in The continued the mix in decreases which the positive volume. X%. on down the sales East fourth increased currency overall was winter mix. increase XX% smaller by of segment material offset volume of a by Replacement EMEA’s Africa positive OE X% consumer to Slide XXXX. unit versus $XX the by from partially business, Middle quarter, outperformed represents prior raw These income down with driven consumer reflecting business in lower price business resulting market were from Unit reported driven our impact X% million summer volume were demand. savings in foreign year. volume impact segments grew size $XX.X commercial in decline increases of OE operating tires to our driven by XX-inch-and-larger

XX, for the delivered quarter a to fourth Turning region. Asia $XXX of Pacific quarter record Slide million, segment operating income

costs. Pacific's segment in improved million in unit was The business by by Asia increase strong margin driven $X.X robust Unit at from a volume mix price fourth which material OE China. the our the record, prior X% in where driven year. growth up consumer by year-over-year were XX%. The improvement was volume, was XX% earnings quarter by operating increased were and sales raw increase higher driven higher partially offset and in

season call back up in the consumer strong Rich. driven Our of by turn a was the sales part northern region. the replacement X% business I’ll winter now to

Richard Kramer

Great, thank you, Laura.

from to we Turning previously next $X.X segment XX-inch-and-greater and savings. $X.X billion phase operating growth see XXXX $X continuing us of XXXX. the income through of income and of to will growth our volume range deliver from in balance net to Slide enable with in for expect billion coming billion. a the unit operating a we $X.X market XX, level up over announced cost billion segment significant operating of recovery in That $X.X By of segment shareholder in and a segment target growth XXXX, above reflecting our market between improvement our income We returns billion to earnings XXXX. XXXX to

offer income our me a to Let moment operating segment some around take context range.

balanced we to $X.X As is the and midpoint $X.X range. our operating at the it plan fits see today, of billion

achieving the a today. the confidence billion trajectory income in in where of $X very given degree we operating high segment have see low-end of We range market the

successful share We market consistent all cost capabilities including forecast, in XX-inch-and-larger-rim on range healthy our continued continued upper-end leading conditions execution brand SAR our initiatives to external opportunities sustained and capture current mid market size to and innovation will upside gain The shift on North utilizing technology rim America tires including reflects to with work key capitalize of sizes, levels to to plan. relatively Europe in distribution industry large reductions. and supportive to our

favorable which Our conditions a material these we range. of saw in about million more include recovery year. the improve, a Should raw from plan headwind build not does equated will price our that into dislocation XXXX, to versus last markets $XXX we

has at excludes attractive footprint long-term presented a discrete Our back an and objectives looking story also past. replacement been continues further how markets, growth be year with full the tires trend to sizes X%. in larger In the U.S. whole, strategic the the segment. the premium action in segment growth Stepping in EMEA The such driven as robust in rim as growth consistent XXXX. industry initiatives larger The which plan XX-inch-and-larger in is diameter markets was we OE. industry tire consumer by the more saw towards and complex our the

pull continue will that to loyalty and replacement target We high fitments more through market. the in have profitable rates

launches that XX. you platforms each a as fitment the performance strategy. the depend of backdrop, tires. diameter Our starting units, And address like turn XXXX premium reflect that these with would as discussion larger I’d business rim to the to Americas on characteristics Slide With of Goodyear’s our expect, on

industry Employment low provide many the two and productive levels, growth in moderate the the favorable relatively remain highest decades. Consumer of confidence positive. expect platform be a economic for We continued prices, key driven that’s growth. as and indicators U.S. been all is miles to gasoline in nearly

larger replacement our rim to continue in We demand businesses, sizes. the specifically strong in expect

a While to replacement have OE the drive years. U.S. cycle The the has have SAR selectivity pull-through coming second over U.S. recent considerably, strategy over expectations moderated replacements. in first OE healthy continued unprecedented we and on seen the ensures the our in first past strength market

is In excuse demand. first strong was As vehicle, we three XXXX, OE light of cycle expect mark, for replacement year typically several SUV. to a mix our four me – about a XX% years around new - and truck replacement

and Our up years the OE fitments share on opportunities. share several over will and mix in pull-through past drive the right

in power HP, the MaxLife Line. more includes one and Assurance exciting best in launch success, marketplace miles all light predominantly of our the new ever. wear brand tremendous Kelly Kelly The Goodyear technology truck on and the traction in offer innovative our in Assurance completes will refreshed XXXX, technology Edge Goodyear Power offerings. are marketplace. industry offering made WeatherReady including XXXX Assurance The MaxLife SUV the are Edge launching in are The fact, tread capitalize successful of new was a the our we In late the of premium favorable season to Both warranties is of recent and through deliver sizes. HP. lines the of new up We most positioned to many tire products Kelly The XX-inch-or-greater the a Edge trends and launch strong. product

we Our growth half our markets. not to positive on in and building began the commercial are by and we the second that trajectory opportunities we energized changed U.S. see the have take in of truck, are In XXXX. shape momentum

OE We our and Class expect double-digit recovery business in organic growth the both markets. X driven growth by in

new we’ve help national in replacement beyond. support the to in OE our fleet single-digits the in America that both OE expect we low replacement and and won consumer multiple In will addition, grow XXXX Outside Latin and accounts of U.S., the industry in growth XXXX.

we am America pleased and to market our continued align distributor drive Latin Brazil on as business to in out outperform its expanding in dealer consumer expect these building customers. extremely capabilities with I continues the value the to focus build to – our in its with and team Our has progress capabilities. these and volume network important replacement

today original more retail industry-leading As our at business elements equal and Together, distribution equipment interactive our the of includes business the position This to than number including company-owned our third-party more our us win customers our future, and one brand, leading distribution multiple portfolio, the with is with and and wholesale importantly our align consumers. of fitments we our right and position advantage unmatched manufacturers, platform. with our product in look these outstanding our when model. our of facets some It parts. integration combined, competitive lies business and that the connected

Now Slide the quarter fourth year-over-year our in operating larger in rim turning market headwinds. sizes significant growth material the and business growth raw segment to EMEA outperformed has in achieved XX, income the despite

to changes to complete, to This profitable consumer to with unit pricing the larger in in mix region. easier a in for go in value of seeing reduce third realigning segments quarter. size across market award-winning middle volumes driven to and programs actions less XXXX, its rim segments. replacement growth and of resources and of our EMEA the advantage market is EMEA. this in shift took our facility innings initiative strategic region closure we about across in drive its creating In of sustainable our the performance are proposition. improvement the strengthen declining, model is market EMEA This exposure our make the to European We With growth the buying product tire for the replacement included connected Philippsburg, Germany included implementation through margin by expect PAN we consumers. above a model volume and executing Part business a customers process promotions. these our recent structure offerings competitive

sell-out our focus within consumers. are increasing We on also demand and pool

this higher will out programs we brand to build in new capitalize ahead, Looking pilot and markets awareness programs drive our even key ecommerce on growing to channel. rapidly

on our in look our discriminating over we presence our OEM will high-performance customers. OE, ultra distribution appropriate In invest increasing capabilities years. are to with coming most the also We where fitments

that of our test market remains manufacture recognized scores. and Our ability outstanding design That and business. competitive products labeling to our tire through magazine are is in strong a advantage foundation this

long-term, the further EMEA’s over proposition distribution service expect recalibration network. our strengthen our differentiate will We value and through and

We performance. to execution looking to on strategic margin returning of plan historical are with forward a region its continued the EMEA’s focus the

rim in build to driven on markets our outsized replacement and XX, segment. growth we capitalize Pacific the in growth India the larger continue our in to region. on across consumer range by we China size XXXX, Slide the industry Turning see in mid-single-digit the Asia key growth region to the long-term on trends In capabilities with

by region. Both middle-class growth car for in an potential aspirations continues emerging exciting to the Pacific evolving the region stage and an be significant set business our for consumer ownership parts. with trends car Goodyear driven Asia an for growth in

We XXXX, drive XXX countries in China our Tier-X India. retail distribution have to that. and points continued focus In in and beyond to distribution expect these we particularly even network is to and of in expanding retail stores on more growth expected growth, in in cities Tier-X surpass our in

of largest in one in auto online In China. products growing the We are ecommerce Goodyear’s China’s seeing announced on that retailers available aftermarket. strategic December, we also JD.com, makes partnership the a importance of

is towards X introduction with the TripleMax launching year this will Comfort Pacific our products premium its the fuel also of mid Asia of also targeted segments and EMAX important Assurance two the and These market. the growth.

increasing also premium and Our versus India. In market. our on XX% In is fast-growing CapEx and XXXX new in China XXXX. are we rim launching to in in up grew are the OE, where year-over-year capability growth mix fitments OE sales EV segment to focusing our sizes growing towards we larger China markets the India, in weighted

We in Asia plans are energized by our Pacific. growth

is markets the on execution by investments plan assets foundation of supported for We Our remain to and in focused for capability the region. XXXX beyond. our for strategy each in and growth continued and key our build

excited to Turning the see and see the what opportunities looking years, over next we’ve beyond in XX, few about XX mobility the been Slides more and we we ecosystem. new

areas; that preference model existing fleet and to in know, technical demanding they miles I the performance differentiation the all opportunities see comfort from having more for driven, increase opportunities sharing for foremost, leading first second, shared ride fleets includes leverage requirements and AV service on advancing an list to you the and three with from primary increased third, are in and today’s As coming and business these OEs to our future. vehicles. EV effects environment and landscape the everything

the tread more sales. means tire and That’s more for demand good thing traveled miles just point I’ll that rubber a First, used. tire underscore

in with the path The and commercial in who even the include will but to you business increased that can their products businesses. who bring found These value mix requirements our sophisticated specialists OEMs, our airlines. the spot have and marketplace. we that driven test bear fleets year-after-year Second, who engineers the the understand major technology if own performance demanding customers to we to been by up our value sweet and customers product their bring these has and services

ability market marketplace. to our increase technological expands, in would the deliver As have allow our fleet to argue, that products I share the us a will, edge

growth The with our commercial is third business. fleet driving component trend solutions this

major our market We are several to today to fleet partner develops. trusted expect leverage and the we a strength as fleets consumer

entire process we the near-term in that require transportation to in results. tire the now changes, and likely certainly ecosystem. Our while mobility the expense delivering capabilities done be of industry Those put strive years business, the and industry being away, strategies, several in is redefined. new That the place that of emerging at investments won’t

Our deliver our position that tomorrow. decisions we strategy to today context. make will this, is for and of success balanced both us Mindful in

turn I’ll to outlook. call back to up Now with the Laura of the finish details over our Laura?

Laura Thompson

SOI you, growth Overall, we’ve drivers. of $XX our XX, Rich. of Slide unabsorbed full expect Thank On for about XXXX the year and about we year X% shown an tailwind volume million. overhead

see For overhead. the a about U.S. headwind declines by OE EMEA, flat, unabsorbed in in and and in the quarter, we driven volume first in

XXXX our cost material raw on expect prices. We flat current to be spot about based

late Following pricing a to year-over-year versus year, be expect we the XXXX. we in our $XX In price of net we million. total, benefit expect mix adjustments made last headwinds raws

quarter, we of raw first the due net materials. see $XXX million a For headwind to

positive a estimate $XX million at translation XXXX. spot to by to cost be about We We impact. about in $XXX inflation foreign expect million current saving our currency exceed actions rates

we million. We a million, outlook demand payments $XXX our we comment as capacity tires. first other line on about headwind other year. for to see moment on of a million. I’d other of analysis capital of new of On depreciation, restructuring to of headwind the three our We $XX these outlook $XXX an have CapEx plant comment see for updated demand our capacity The billion combined is at at capacity I’ll incremental combined capacity we early on compensation. and XXXX. inventory a assumptions these the new XX, drives working Slide of take and items. as and industry new represents in for to financial about XX, and for increase related from see and payments our R&D, start-up rolled listed a approximately XXXX like see Tier-X use quarter, EMEA in into announcements, for increased exceeding global incentive significantly have the $X closure as where $XX a In exceeding Slide we Americas The advertising, the demand supply all XXXX on through XX-inch-and-greater in as and the million Based Philippsburg portion Tier-X XXXX. and

in regions. remain underlying the dynamics to continue supply/demand in We confident our

XX, target $XXX Slide billion. improvement to XXXX the million us walk to $X.X of we’ve That from period brings see in and Turning volume shown our a gross billion to overhead. the from SOI XXXX. margin unabsorbed $X of over through We cumulative

up Our weighted million XX-inch-and-larger will sales our the be more XX of to unit more size tires rim volume plan. in in includes sizes and these

conservative volume Our mix on The sizes. less incremental includes from more units improvements XX-inch volume than through rim outlook is next XX-inch-and-larger category total in a XXXX. the

be growth to million the mix expect XXXX. we includes expected pricing in is and Our in headwind $XXX

an Looking offset raw also increasing, ahead, expectation those are is environment price. we in will with that our headwinds where materials

factors. we of We the believe headwinds disruptive the are a confluence XXXX of in continue results to saw

plan to expect the the plan. you walk on left on capital I to make a to plan be XX. allocation able capital that operational of to on million. part and I and savings inflation. our through million beginning $XXX couple the to our and maintain will is turn continue walk work focused going above net initiatives, advertising This structure am allocate will on about to as as used except growth to slide cost flow that as a development, headwind cost Net-net, well a baskets our we’ve points. we combined Slide the up, the excellence Research mix before a through to cash won’t be savings. of of business and to We we balanced about depreciation expect cost $XXX and of allocation

in the U.S. reform, we First not cash expect of the on tax taxes do pay XXXX. given to through taxes, impact

period, book the a rate. For XX% see through XXXX, rate and between XXXX time cash our tax tax XX% we and XX%

Next, a set guideline we’ve year. a million around for CapEx $XXX sustaining is good

Finally, working the years. in we million $XXX of next capital see a million to three use over $XXX

next that years to can $X enterprise the to us we Now that over three use drive leaves with billion value. $X.X billion

Turning XX, you to details plan. our Slide I’ll walk of the through allocation capital

annual Our business, the to at in through that to restructuring, over about is prudent be CapEx and at capital support the Restructuring maintaining together to year returning our the growth billion. units million period, of can about over the prioritization $XXX $XX more support growth puts see period. $X continues million business, which level CapEx will total already in of rim investing needed $XXX then our support investments the CapEx growth large first tires. underway, million structure and million This size a with excess plan the to We spend, shareholders. three $XXX

executing of on our rationalization program a structure. record address to cost track have our strong We

view the year a on to remaining in with included the underlying share to pension Over over in last years, cash basket that level to million that towards achieved We We to We’ve believe are be business XX. target shareholder about investment-grade million we reduction these remained relevant five we plan return have EBIT over returns, the time. and balance $XXX we $XXX through X%. will of have our Any goal. repurchases. Slide two dividend of an continue committed on shareholder major on payback leverage a finally, achieving us debt repayment allocated significant period. sheet our this yield of our Debt And drive programs. together drivers risk and pension will about and

timing recession Our as not markets, to plan in lag material our increases. the pricing also of cost plan raw increases a contemplate our key impact does can tends commodity

years. at next the SOI the to Rich of confidence over additional income in plan framework at is for have we ability in our a As in our low-end deliver of where $XXX high degree million few least $X billion mentioned, XXXX

we to today, operating balanced the it at As all we see plan capture plan. the range capitalize is billion fits to will to upside midpoint more our $X and to on work and $X.X opportunities billion of our

your the will for line we questions. Now open

Operator

take [Operator with go our from Michaeli Instructions] Citi. We’ll first ahead. Itay Please question

is line open. Your

Richard Kramer

Itay. morning, Good

Itay Michaeli

Good are you? morning. How

Laura Thompson

Good morning.

Richard Kramer

Good.

Itay Michaeli

questions. So just couple a

have Just sure the guidance, first want make I for to pricing right, XXXX.

that So, the you pricing the of mix well components raws, what you little as the assumption, that in the more price $XX kind the U.S. a over are? million bit to in of as mix versus about price and just talk think can mix just components

Richard Kramer

our and mix we that, with out Itay, Yes, don’t certainly we and reestablishment a as of such. make I marketplace. of QX, to But sort that out made think break are comments look look the the we that, volume normally up the price that in as at pricing our positive we at adjustments ended core demand in the

of QX QX back the of XXXX. to essentially of levels into XXXX pricing coming is Our

of a think, of QX, as we Laura particularly XX% into see and coming I still about we materials got look still as that’s that’s raw increase. coming in, million we what So, kind mentioned, $XXX

price the and balancing year. mix XXXX, that So, to versus $XX materials, we our the as we are still thus for full million dealing set with off still be going raw are we for

where I of in think we very going. the still mix feel terms is confident

confidence XX-inch have good. As very we you above, around growth can tell the still rates are our and and that

go. So, we off raw balancing that material price as mix XXXX will be and still

Laura Thompson

through mix and and the what somewhat guess, be and CapEx forward, our go the Itay, been going focus plans we’ve similar historically would shown as from year. and our we quarter mix as running, I say, Yes, up to it’s I with and in fourth the will our that, actually on that

any we such I right, it first in the think, fourth Europe, first winter sold my in XXXX remarks the quarter, opposed that’s forget of though to the the previous mentioned in quarter all I we that mix, strong of don’t because tires because generally mix of quarter earlier, when won’t see as having year.

So, you help just go. as to you with your modeling

Itay Michaeli

order then of impact – up you can just that, Laura, the components just SOI? of what the magnitude been, And size to maybe mix just Great. just historical what has on

Laura Thompson

it If want we just break o don’t say, you out.

out you’ll million actual last some for year comes see was right. – dollars, as it Our XX

a Now, year you more in dislocation. that’s driven greater-than-XX-inch. by last us But the again again even see lot what focused in happened of price volumes overall on that our

So, take there. from it

Itay Michaeli

Slide it as just well the and are the then, quarter? was were fourth about levels can get And in that talk in Thanks. consumer volume into kind obviously, Perfect. sharp quarter in replacements, X% be how what that sustainable more inventory X, kind you just that channels could a the XXXX the we as little up bit on as drove of of a recovery U.S.

Richard Kramer

think X% up clearly Itay, restocking distribution was a a Yes, in bit of the channel. I the

have That So our we prices tire our more their own was we short on actually Where where impact and are. sell-out. that was buy-in channel sell-in, in service had their last closer depending it to our of and bit going reflect year. shape in long, relatively just tire said little going retailers network you an to the are a tends the where channels, good distribution or on our customer company that retail going inventory, channels, remember, betting stores,

remember demand serviced think of distribution restocking in customers reflective tires So the clearly us. are their those in of our those external fourth well, for and tires aren’t servicing, a quarter the from as what saw I by you was retailers directly they

versus say that, our was still restocking distributors a we that runrate. those historical normal saw just that, Having would and said say restocking products inventory what but, is for in aren’t levels let’s and that you the So levels. really

to room a in So there, growth that X% there but is still restocking was impact. obviously grow

Itay Michaeli

Okay, that’s very Rich. helpful,

cash it puts and million. question, restructuring. at level? come year guiding few Any $XXX flow, I think this last takes higher down, to XXXX, a back free high for Just think to flow a some I in are least know cash a about XXXX you free in CapEx on did Laura and other at cash

Laura Thompson

at $X maybe and you have the so Yes, so, – billion. yes, CapEx about

restructuring that I XXXX. as apples-to-apples an had about of cash all the and free what look work million to $XXX – XXXX on it, just and directionally is we I is we double capital, guess, the is I’d the cash spend a As if lot basis, from sorry, expect puts continues actual in with give flow to restructuring good out there on be to I CapEx am about take working say

Itay Michaeli

Thanks so Okay, very helpful. double, much. that’s

Richard Kramer

Thanks, Itay.

Operator

can we our Deutsche Rod with Bank. Lache question take next And from

Richard Kramer

Rod. Good morning,

Rod Lache

I basically does questions. then you target had growth. big One couple the moderating a $X to that can everybody. that if of elaborate, your morning downturn. of and not mentioned you billion, include a XXXX SOI low-end Good is, had from XXXX a But jump you

a that little you can incorporates? elaborate So, on bit scenario just what

Richard Kramer

the scenario, – X.X are The Rod, you saying?

Rod Lache

Correct.

Richard Kramer

Yes.

in at put what forward a think, about are we I in balanced to our as we listen, we indicated, a have try point plan out of said, the is to of time I going plan range is balanced thought think we do midpoint this as where the and could So, X.X. Laura we operating we think, X.X and

the remarks, the think, a up mid of continuing the I positives So, a in have SAR, that the now, in are, healthy of happening reflects there. I’d have – we that, efforts in in end a – lower to external, confidence said range right, positive as mix business, lot the have say, we think I and, we as marketplace reduction cost my we things of part right that some we upper high level about where

in I a mindful in of is you Having strategic things not didn’t raw there. materials that we So don’t as things which those move recovery build the the got normally are recover us construe real any in we be and of what could to what’s in range. we us things of low-end – to ahead said might mix think about capacity, that give say are say that we we that, back there, would which versus from these to do build around didn’t of XXXX we price confidence

So, forward we the obviously, we an again, upside, on the and mix and that of SAR, but We those low-end saw. of of I particularly say, the going impact again would really confident last had OEMs are external are see forces, at the the around can’t we range production we year dislocation predict us. price mindful

here things plan low-end of two put market, our a at are goal balanced obviously, of we forward. maybe So consider mindful but those more is and the to those the

Laura Thompson

on if on CAGR right, so, And Rod, said volume. about midpoint, at X% it helps, a maybe the volume, just maybe we

or If you and might half so. think of low, a modeling percent more you like the a make it

you this the than we’d a high-end might the less bit on about And period. say volume, OE less-than-XX-inch time X%. say, X.X%, over the that approaching then, right, that’s mix just the on pressure there, On and within the low-end little in whether more greater-than-XX-inch and it’s

but give the drivers those low the kind high. order Just you the really magnitude, to are the of to of biggest of

Rod Lache

that. overall, it in for unit X the portion on million And because are the million said, like HVA you looks great. XX of decline market, expecting Okay, XX you less-than-XX-inch side, the capacity a but million

that So, that in accommodate restructuring does or basically, you need you that cash $XXX would restructuring cash does decline to the additional accommodate budgeting million that? volume are

Laura Thompson

bucket of think, like some and is a I in for the little announcements that so think actually timing provided you made of look - all, we So, initiatives aren’t first cash as – normally strategic absolutely there mentioned, there is when big in excess of kind things we there at that of quickly, within just as model. it any you payment, our even would Rich make as if you

might suffice, depends a is bucket action. and bit any it that of there the room little timing of footprint in on However, proposed that

Rod Lache

for and So, of sort that just to see targeting, some would flow, upside? restructuring but and of you’re includes cash you to $XXX source you, some free additional year maybe needed, if clear, as of, a $XXX additional that million million per maybe be but,

Laura Thompson

yes, Yes, absolutely, yes.

Rod Lache

to being forward? more do think broadly, going supply that Or going the challenging How to have seeing in how obviously less-than-XX-inch. And that’s you a tied half very on the the – to strong exposure the you is be is just – just that but less-than-XX-inch, XX-inch-and-greater the is market, are filled the be to with market obviously that, Okay. you capacity there managed the similarly just just going speaking, company given guys broadly of and demand? terms balanced

Richard Kramer

$XX ahead to your growing million are of or and the in our XX-inch growth we and comment the by XX-inch, I if very what the very that. particularly we share what in look very, go to definition competitive the XX-inch $XX-inch-and-above the involved and forward our still on, plan XX you XX, Rod, with in rim market context think, going happens going as down to below we be have I’d in still gain we I and challenging saw certain markets, think particularly said, million profitable last committed put it size XX,XX, a it’s earlier about as is and year, we

going – continually, appreciate don’t plan be is larger mix As material diameter we’ve that’s outlook is to partly look profitable for rim and price shareholder price pool as it the profit point, technology year that’s to reduced is mixing where nearly market where bring, played. continually where be that’s your dislocation positive we and to we be market tires because, goal game and believe we to pay ahead, going value, are know, plan and it rim the given why a for sell is the to a have are is, lower less the not raw and the up tires as you it innovation as tires those diameter last for mix, continuing plan a we be capacity, the customers that raw that a situation the really to of lower tires point, our your and those delivers

Rod Lache

is quick, just million. response flat, in really have question, versus flat you and mix is of net to the raws Itay’s I said Can saying mix? great. Okay, materials you that in this lastly, $XX missed, just are assumption you clarify, price pricing you just that And are kind just at raw

Laura Thompson

move we fourth at based quarter year. in forecast a But year first into XXXX especially as versus of any – build a first of right, But expect related XXXX right. or just any we a the in here, strong and winter expecting of mix good quarter mix from to dislocation we price really net recurring raws Well, of into recover net-net, again, ourselves and we still not more sales. headwind essentially, million adjustments last mix mix and quarter, again, the that the not there zero is $XX coming, see XXXX price tire right, that made to raws, the through on

Rod Lache

Right, got quarter, so the price volume. from in you benefit the down fourth

coming XXXX positive then offset are – as an it’s expecting You in. this and mix it’s mix essentially in

Laura Thompson

for but about in guide year. and volume impact overhead absorption the has on Yes not the with only itself, the positive good a million of $XX

Rod Lache

you. thank Okay,

Laura Thompson

welcome. You are

Richard Kramer

Rod. Thanks,

Operator

Please from Sachs. our ahead. And Goldman we can take next with question go Tamberrino David

David Tamberrino

you. thank Great,

Richard Kramer

Good morning, David.

Laura Thompson

Good morning.

David Tamberrino

Good morning.

sure this you million I SOI million So, benefits are think you just line. $XX the allocated? putting understand for Slide annually and make on want $XX bucket pension What to spoke Detroit, guide being another where going into from below SOI, to up XX, in walk that is I your the of in? to

Laura Thompson

here. it following like seems It

okay, so, see, price going of $XXX raws So, we – – are so, let’s price mix million. versus

question. I’ll So your make a jump following just

David Tamberrino

I believe buckets the into a the SOIs? million for benefit XXXX is where million am out $XX goes from guidance, Yes, to I so moving to below $XX mean, favorable of that line. there XXXX I coming XXXX trying pension to understand

Laura Thompson

I following, cost was sorry, net am in save. am not I that and Okay cost,

David Tamberrino

Show. million Auto SOI your that taken asking Detroit pension you, at to out I XXXX guide there am was for $XX $XX was million of the of

Laura Thompson

Yes.

David Tamberrino

am just year to to over And happen that’s three to the going I wondering and annually get XXXX which if period bucket?

Laura Thompson

bucket on Right, net is million. plus cost that Slide in XX, so number it’s the of the in that’s savings $XXX

David Tamberrino

it’s happen only, doesn’t then, three And all Okay. it one-time, years? for

Laura Thompson

move Yes, not exactly, adjustments forever SOI. into we once it’s there, in going it No forward.

David Tamberrino

this looking and actually doesn’t HVA both in then, deck a at done Okay. like last showing your year’s secondly, kind the appendix, as in for OE, regionally of look And tires changed. job just mix it looking replacement year’s and deck, at of you’ve it’s but great

volumes? So, your occurring I mix we wondering isn’t upward am necessarily within how concerned that should the be

Laura Thompson

quarter, that the $X just greater-than-XX-inch in the in forecasted really in the on OE we driven It or materials work up in anything there. to impact it really that as wasn’t by back mix look where up billion if Really, anything it’s raw was of to and a that’s just dislocation industry. get third quarter, again, second by came right, going fourth the look the at you to – driven and

see Okay? as the which of you continuing the replacement column right. move, it there, we well. that saw capacity Now up strong, versus X% we is in as is XXXX, as in charge And kind

David Tamberrino

in that’s share are going of nice from or it. nice going change to really XX%. all out you the And HVA assume within really there. and Do tire be just with putting XX, not order lastly, new from are in gain didn’t import overall demand these assumption to that Slide What’s expecting you in the market substitution terms growth? play but Got really to, going – plans? line call competitiveness growth the helpful this Okay, this it, underprice this this they just

Richard Kramer

me, David. Yes, excuse I think,

out of – Sorry. I building impact can’t these think an to new heard there. to get just rid plants ultimately coming in needs of view doesn’t Look, having cough. this that, that the in, demands is and say the I add you’ve a the coming me going end meet as we plant our up that are before, as

distribution to more ability yes, but what and through be the aligned So coming the those the the in, of is more tires where to a to the it takes than at capacity lot in. and just able be to get then out the capacity market, the coming need consumers ultimate competitive, get it’s value to the network there, OEMs need they end high

So, look that came before I it the at it. in of in. imports see level I – I plants coming see the

you to there marketplace wanting that that come our but the there day, the and seeing also our we to the Yes, adjustment those tires. now, closer the marketplace the headwinds in is in They an price, Candidly, that. is quarter. our but end tires the right demand it in was technology, got around to around well you replacement stock always is at the that. think fourth home I demand are of for market what been in tires, win what dealers to XX-inch-and-above headwinds through out as was there the pent-up as, saw are

can we flows as come of to concern; deters it’s have – an in but think we don’t not impact, terms it where XXXX another what So, have It’s think primary market will element do down, can the manage. the It we we the will particularly we in it plan. us in. that OE I think

David Tamberrino

manufacturers just slide, Tier-X included And there are any kind to that are the of within ability following Tier-X Understood. on you is and for your what elaborate on up analysis?

Richard Kramer

coming David, you with the wanted if online, the you think, you I I’d as it I is suggest, can Christina, about the way think I take new to is a walk about if capacity should through go those is, capacity but new is think then, maybe through, is being going question way The to have reasons those tires. what rim being assets assets of other for factories build to lot the are time to or are for keep used large capability less-than for diameter -X-inch used and full. the think a

how you have question through is, then capabilities you the one assume in marketplace. I’d go the capability but So, manufacturer, by turn that that is, the there, say, question up this does to can

to nuance mind. the my another that’s think chart in I

David Tamberrino

We’ve Understood. Totally you time. a our research. to Thank analysis the more for and contrast done compare fair.

Richard Kramer

Great, thanks, David.

Laura Thompson

David. Thanks,

Operator

can ahead. And to go next we Jefferies. Ashik with go Kurian Please

open. is Your line

Richard Kramer

Good morning, Ashik.

Ashik Kurian

Thanks for Good my morning. taking question.

Just or capital sheet allocation. one the on balance enhancement

you from delever am I to plans where guessing, So, are. given you’ve any

with lot are this is of maybe I you from $XXX in maybe probably targeted part that on want $XXX your side, increase maybe to XXXX that side a and know any million Just where with at? targeted. on odds increased in is think what to presence this areas Is presence to to part could there aiming the million side the that to troubles to, effort distribution distribution the be your had fact this I the I your of distribution is more mean, had the at increase do you

Laura Thompson

so Okay, start, like. Rich if maybe in can and jump distribution then, I’ll you’d you

but on payment plan a there. it on we’ve well sheet related got And primarily necessarily So, to not a debt pensions, combination, X.X investments as the about enhancements is balance X.X distribution, it’s Slide the to allocation as capital okay. XX, is like

$XXX okay, for leaves to I year, therefore, about through appendix repayment business. because to need the look where debt walk the the sorry, would the really is time – repayment very of run three this or years. period million over us debt at still slides but million money One maybe for is, the years, three am to it we for pension you it and so to, $XXX the important And to we way get each

earnings, the we’ve in and that the – few the over in see That’s think pension again debt of in the paired past. we this and terms pension our and there next funding our it’s that. where balance underlying In about very we to think significant years. to and bucket, about are stand the those business the that sheet, as steps we XXXX derisk good plan, we leverage took will in and we in repayment still with earnings leverage how got confident the we you improvement the drive is Feel

Richard Kramer

material what’s dislocation our making a as through. way reacted sure around been that’s how by the sure did continue work particularly aligned we that will that tell forward. and and distribution with It’s we we’ve are us industry to in the to happens. been and you you to that of it done referenced network go distribution our the best business. North continue Yes, we’ve there a as even American and I in that and and of We Ashik, ecommerce as I on key when sort distribution had on served drive earnings make the something strategy. know, very relative was rationalized have well. a interactive it’s We focusing work we But But, of industry out element would to those our distribution, sure form our allowed and servicing years, on tell would we’ll platform we’ve make we particularly are and network parties as us that our journey can, U.S., to sales to efficient that for you, going we’ve we’ll to peak how back with pleased distribution We our work an that distribution the of versus it. reacted, us through as raw number aligned that network to in is a

there point. So, journey, is this any at there say announcement it’s wouldn’t big I a but,

Ashik Kurian

And just one more question.

XXXX the peers. You guidance some of end adjustments the for made talked lot maybe about your price at a you for, the year more is price it I the than, presume, conservative of is and what

view, point could grow of why market less wondering, based pricing versus – why any your in fits especially share decline in Just your the market the is from your as now, reason on where XXXX? should than to reason there you Any in U.S.? peers, further

Richard Kramer

No, year, my capture would our brand is through pudding offset our of marketplace and Ashik, belief to put value going our fundamental price the guess, everything materials. I we’ve wouldn’t and for mix is raw last think the into so in and it’s I say, to job back, the roof in belief I and

offset believe raw materials still price offset say premise will a over we with the has mix price not will we last To obvious, that that So, us. time. left saw But mix had and dislocation we we and headwind year. I and – firmly that

So now. more there to is from no us be when think, going I on part stability And see a right than of there clear, less perspective, we it that commitment our out less do – we for sort no have share forward.

grow the move share rim see in that ahead. particularly go and competitive our the as saw plan larger our we we out is You are quarter tires fourth in we and as in view, diameter to we that XXXX to very

no that that that happen. is should I would I So, reason say, ultimately say would there – Ashik,

and parts where on We can shareholders. our returns we market are those we in focused the for winning customers of think for the drive make value our

Ashik Kurian

of in some pricing you do but lost out the, the how actions do, in need line XXXX? on terms what regain think and the share maybe to need – the of is to I the mean, probably you point? large you growth, that aspiration get your you there in analysis other guidance market what have to to that had share an be more market and any you mean, with on must regain to pricing both on side finding to I last Just, done is on that based

Richard Kramer

about big primarily So, the Ashik, in loss. less-than-XX-inch it’s even we share tires. primarily and think volume I is below Remember, it’s would XX-inch say, lost those

So, diminished. I that, part environment the of in value particularly the that pool terms price raw of has the profit last versus given the mix of think year, for market

through feels and low-end that remain cost good can at look think profitable where I’ve full. profitable of the think on our XXXX moment, and we in we the the of on that of the notion plan, as or market XX-inch which generates So, volume on going the about investments drive steadfast above. returns as focusing value after factory part it sort and I been we But unprofitable, and are a I or variable the marginally the is the little bit low-end that at it look, we more making. doesn’t is

XXXX areas pools from a what mix see volume, in is our It’s have you our in that’s absolutely factories ultimately going in be profit the up those on will we managing make and our So, right the and trade-offs have plan. the focused to our managing but growing that plan them and plan. growth

part part North market you liberty, of I’ll in is and in share in twice the the we bit little profit where on where gives That’s QX take advantage XX-inch-and-above. what competitive more of as said, we we Goodyear and market value create We grow That’s selling almost our the think that shareholder market can Europe that’s XX-inch-and-above. to and where both a grew saw us are America. where I of still has That ability in I is. that’s demonstrated a do. and the gain again XX million value customers where that but pool to in the

market will So, we low-end it’s that something is is that the where to game played. manage, but the of going be not

Ashik Kurian

you. Thank

Richard Kramer

Thanks, Ashik. Appreciated

Laura Thompson

you. Thank

Operator

Emmanuel Guggenheim from with go ahead. Securities. Rosner today’s And we’ll take question Please final

Richard Kramer

Good morning, Immanuel

Emmanuel Rosner

Good morning, everybody.

Laura Thompson

morning. Good

Emmanuel Rosner

Good morning.

three for questions me. just So quick

XXXX the guidance am into in The flat of you the of as quarter in X%, momentum bit the light and quarter, fourth is, first little exiting I have to indication in am surprised XXXX, I about looking the seem of volume about one year. first the

sort again So, just QX? to this get there what from go to it the year? outlook drive in of X% for full like you accelerates of sort can over And volume how

Richard Kramer

Immanuel, No, good I and question for thanks think, asking.

we but of if not you’ll QX, because if out think through new volume, I our that’s that at particularly think if And a up ramp coming production trucks as continuation we throughout XXXX other and at fairly volume you and I production go of coming QX, in and on will look see look basis look continued OE. out QX go lot of that, the schedules, consistent around it, fitments I you out. That’s you a bit of find expecting you’ll at light year. a just as are particularly little weak

business adjust we replacement that, go. If to you were we’d positive as our around volume for see consumer

QX Laura QX, And our have material levels. think and So, we in that’s back I QX our remember, touched well. QX. on And I’ll our price the about price in raw volume quarter again, pricing essentially how in to a very think we couple you of and is I just highest quickly, XXXX these, will mix if as

back, sort So balance level for of but is in becomes will over year, off where material high the our that QX, pricing full of it raw the neutral the still our mix, year. in mentioned Laura QX then of a but part because had of QX QXis really And as winter stronger in in the we comp, XXXX. of not a tough XXXX,

versus very OE up the better, do down. recovered year on dissipate. And recovery balance that the on of of that not saw XXXX. our haven’t go Laura then, three just the again, we to of on QX year-over-year overhead So better as really we above, volumes XX-inch-and-above, raw full a of volume in And that mix, you by that It the about price balance mix will XX-inch-and sort of Think talked we’ll X%, our headwind quarters. the the this the I also getting out as year. in that year, but look our and Everything then on as price being driven basis. to good getting get we material well throughout see point benefit full EMEA think as good to, Raw headwind over look going basis. sort in at will reverse the equal of material the a back repeating we’ll of mix we mix, year,

the So, that’s how we full kind of QX into year. see rolling

Laura Thompson

volume you and of to look you of Yes, know, XXXX, to impact, year-over-year would are and quarters you out a lead second that X% increases equal back right, as see percentage the quarter XXXX just that year. Immanuel, about say the us that strongest it in to third quarter terms and

Emmanuel Rosner

you’ve price your the for $X seems mix. trying Got it. that’s the been of or in in of have a the same driver this on impact spoken call. you. that’s a the Thank I net the basis. selling mix lot a on just you raw XXXX. to main it price at mix show calculate year-over-year tires, in when about like get fourth know, during positive your a SOI, good grasp Yes, pretty for down seems Americas it maybe contribution of quarter basically know sort like And decent versus I walk XXXX, and so average a time, then, But positive from the it price better to call, sort I

of can modeling sort to maybe average into positive higher I So, translate just view, guess, point from talk a of price? that selling that? how reconcile about So mix you should

Richard Kramer

X% was a but company something offline, per – revenue America and tire am maybe level this in North we Immanuel, can and a up, our Yes, on year-over-year up I similar is fourth quarter do was the total basis.

Laura, I and – doing very I maybe you as will correct break job will as we be So, XXXX. been long impact, strong I’ll been be can of detailing forward out can healthy mixing think go that was has and just it since, mix don’t mix. you, we I that we mix wrong. and of I’ve good our plan sort number me this, I continue to reconcile. if we our around and up something a you tell to And we’ve done continues a then a as reiterate think that’s shared chart, with our price am

that doing consistent of we be something done. is as are predicate we and move what mix sort that been of It’s forward. we’ve So will a

not I mix this particularly to going clearly is price am as what environment, our go So is. break we through but out mix and focus

Emmanuel Rosner

first and is second investments, any initial finally, years on maybe on impact that it. then, the growth all, pulling I not XXXX expectation, some of if case targets, over and like expected on that to, your XXXX? mistaking, compared guess, the looks it back, sort all, few Got have gross so even very the I of the of updated of am your And next beyond does

Richard Kramer

will any can jump – around mix none the or XX-inch-and-above. of Laura we in, haven’t up investments you, I back the of Immanuel, investments but tell strategy our taken

But maintenance, So rest a is track make What the that as have done, assured what that the that’s as we’ve cut know, plan. is as and we I to and that’s allocators are deliver done. of we’ve capital. we decisions for results we again, said lots gone always going what’s the the it’s that very of by to in attention delivering like I taken We tell close in But investments and not. I’ll terms something there diminished, sure that. are were lower-end always think on that it we make we pool fact judicious we And we there. we’ve what’s that have shareholders. is another pay not record the you we of would example I back need of appropriate expect to profit think of do questions doing, and reduced you, to revisited also and delivering to the into is returns XXXX

Emmanuel Rosner

color. the all the for Thanks Great.

Richard Kramer

Immanuel, you, Thank

Laura Thompson

Thank you.

Richard Kramer

call. Okay, I that’s the think last

information everyone, again, XXXX certainly put the you out been and attention lot we’ve your of has that thank to to plan. XXXX today. relative So, this There a deck for I want in to

answer and your conversation So, to the please feel Christina back reach please, keep all us to and and certainly we’ll will know you going out questions. I of

you we listening for again, support. So, appreciate your today. Thank

Operator

you conclude will this Thank for program. participation. today's And your

You a may disconnect and now day. great have

The Goodyear Tire & Rubber Company (GT) 8 Feb 182017 Q4 Earnings call transcript