GT - Earnings call transcript Q3 2019 | The Goodyear Tire & Rubber Company

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Operator

Good morning. My name is Keith, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Goodyear's Third Quarter 2019 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. Instructions] [Operator

hand Please to go now Director, Mitchell, program Relations. Investor ahead. the will Nick over Senior I

Nick Mitchell

Thank you, I'm Keith, Executive and us by for Chief and Kramer, Officer; thank you, third Richard Executive XXXX everyone, and quarter Financial Darren earnings Vice and Officer. call. Chairman joined Wells, available today Goodyear's here instructions replay Chief for President be website at our included supporting presentation of call earnings earlier The this on release slide Replay for this found today's later will our in morning. be And were call a today. can issued investor.goodyear.com. joining

If could the suggested are statements I our future now your and affect comments materially would about by Goodyear's Safe presentation today's the that significant with two, results remind I to results our could earnings on most future participants differ performance. attention those statement filings our to SEC like factors Goodyear's call slide from The today. forward-looking could release. draw in some outlined on that in Harbor Actual includes

any any or The revise update otherwise. or future a statements, new whether obligation as to disclaims intention result events or of company forward-looking information,

the are basis. presentation. the to in basis, a on cases, on slide GAAP equivalent discussed some U.S. the our non-GAAP Our GAAP to call of results The financial appendix measures presented financial reconciled non-GAAP and on are part as

that, with call I'll over And now turn Rich. to the

Richard Kramer

morning, everyone. Good Great. Nick. Thanks,

for review quarter. results financial discuss Darren each share fourth and SBUs. some of key of call, I'll our a the our perspective quarter on performance follow performance During of in with our will expectations offer the today's the third operating themes behind highlights and our

equation the industry the turned of lower in in in we the years demand point inflection price industry at the positive, The replacement environment materials on in was recent that stronger in demand three representing global operating decreases As And industry have have most our quarters albeit improved weighed the stabilized during first tire versus the consumer markets. time OE an raw Consumer major cycle. levels. for quarter. anticipated,

the both in improving capitalize began in teams capture Segment in demand in grew market gained share business Pacific we've better able these to Our regions actions were income and our to units. costs moderating and value taken volumes conditions. market stabilizing trends, operating market. raw the reflecting on Americas and more We the Asia material

we points margins channel the However, with our EMEA difficult sequentially expected basis experienced challenges Despite region industry than increased the well XXX distribution. second from a our Europe, in our as more quarter. environment as challenges

we Americas, year. the in In experienced premium of our by on share continued performance of growth top was previous XX% with rim of Shipments diameter tires market. the U.S. consumer large the up X% outpacing increased business This segments driven double-digit in gains significantly in strength industry. replacement high-margin shipments the the

combined icy We're the XX leading one products award-winning a our Outstanding, this performance wet outperform other resistance category tire Exhilarate with and handling service in earned our and the roads rating best-in-class Earlier the performance impressive to benefiting from magazine. dry, coveted number Eagle Eagle all-season tires. breaking allowed on consumer from ultrahigh Exhilarate hydroplaning and the offerings. month,

competitive more market. victory than and of And a the the to line extension and significant winning commitment testing committed Eagle segment for develop our our beyond research a newest product the to important excellence is extends This years of reflects and three this products. of for

Goodyear consumer timeliness is such Service be named of brands. of America's of Auto time attributes five February, This Best repair. Service our crowded Service awarded a been its industry. status. quality Customer magazine Recently Newsweek in to reflect In has top chain, Goodyear recognized leading second Service, automobile for the on These and Auto achievements out list best-in-class one named a Goodyear stores emphasis Auto to as standing courtesy, a

consumer from Auto a than difference. stars it's XXXX that the recognition notices clearly stars for world ratings to than with media and Goodyear ever, soaring competitive are X.X scores In the Service four not in reflecting advantage. this where today. stores just reviews more more a And Online ratings our are initiatives is important also

the Our quarter Goodyear- from strong demand throughout period. U.S. both offerings. our reflects with the strength performance commercial XX% share customers driven of our sellout in customers fleet Kelly-branded saw solutions our products. replacement business up continued fleet see and the strong by to gain our approximately and We in offerings value The

able seeing healthier we Brazil, America, political dynamic channel. consumer and in Shipments were X% environment our largest growth increased economic volume In growth by driven trends we trends. deliver the volatile in replacement as started to X% market Latin and despite a industry

limited We the our over there volume third momentum the days. production We'll situation. factory quarter. for by also our saw continue our the in continued has consecutive which OE at last business, Chile, to recently, commercial digits as double we've seen in increased monitor several disruption More

Our top as navigate priorities period. through this associates are with we our

in business, strength in momentum gives of along months the The into with our the positive solid consumer these markets, important the replacement us final continued Brazil, year. as we U.S. growth in head

Africa and perform Our not Europe, did to potential. businesses in Middle East their

our declines X%, fell businesses. in driven shipments overall Our consumer by

by affected vehicle OE choices. fitment production strategic Our was lower volume and negatively

softer-than-anticipated performance tires. European technology stronger strengths much of the falling The lack our backdrop, capable both value industry market channel, advantages. in business the and EMEA alignment of expectations. delivering conditions the of our of distribution played replacement, of short of In challenging our our to is consumer to strategy characteristics Notwithstanding contributed the and performance competitive consumers Goodyear our results. and European

test design sophisticated products by is OE and to magazine and are outstanding through scores recognized manufacturers significant manufacture ability advantage. a that Our

build than a foundation Our product is to stronger portfolio upon. ever, provides strong for us which

best-in-class tires of distances strength, Performance+ overall a XX evidence delivered braking magazine. the our snow. outperformed Goodyear UltraGrip tire and As car by prestigious named product tire winter best was the on German The other

we're the winter also of endorsement win a strong premium competitive our making improve Auto hard marketplace. The the expansion our our the that Germany further tires. capacity in also This in better the the meet added replacement capacity improving in in to of ranked test, works pipeline have tire facility position. position the UltraGrip evidence our We're as well that The engineers' Slovenia support as is needs talents. growing will Performance+ This high-margin our of in Goodyear and dealers supply products Xst us and market. investments tire-building premium to Express' coveted in capabilities to we OE manufacturing rapidly changing will our

our in Germany, of Hanau, modernization as remains and plants Fulda The well. on track

significant which cost manufacturing structure enhance further EMEA's region the projects, improve will generate to expect our these competitive remain from our We in We about savings future. positive and position.

of alignment to have our an faces the value and a Asian and in However, distribution opportunity recent channels our is proposition the including business, several region tremendous some imports where influx of in area lack years. recent improve we challenges. of challenges, an address Distribution these our of

several of premium benefits that advantage accelerate the opportunity, improve improve our we expect actions increase supply to investments take of plans high-margin we and These the making should distribution to full to capture our we next of are years. the marketplace the ensure performance. To over that on the brands tires the in focus

and positive structure strategy execute industry-leading to to our continue developing will on on our products cost continue and we believe our potential margins distribution. we EMEA's long-term improve achieve be and We strengthen we as stronger

increased tire In rose volumes China, our than OE throughout as relative the replacement Asia Shipments during by and quarter consumer Pacific, and in grew team the commercial shipments accelerated more well. In best truck performance and a the digits region's our turned in our growth year. X% quarter. double

launch local fitments the we The Meanwhile, our brand three with the than During aiding stores XXX its manufacturers opened replacement are quarters and winning the OE dealers businesses strength. China OE several to through in on first right is benefited quarter, the in platforms. and Asia of with of we fitments, year. new retail recognized distribution from success new leverage Goodyear-branded our portfolio highly diversifying more improved having want Goodyear the is the reflecting

the year momentum relative we anticipate to and inventories fourth in positive their China quarter. continue Channel are in the lower previous to

navigate industry our Solid tire a execution in the and challenging results. have China. macroeconomic we're over which headwinds environment traction in our through helped are remains these of seeing with significant good positive profitability. years, internal us Several greatly affected our initiatives, faced The few what OE has abating past combined impact a with challenges

Segment operating share income is by Pacific, in stabilizing in the Americas aided and Asia geographies. both gains

We our improving the into fourth to in quarter. continue expect the business momentum

do to strategy rapid we're a this that with our work before level relevant We that our but I'm is change. time of confident, in at potential, performing remains have consistent

strong around the world. is brand Our

push We to continue and levels. best-in-class to innovation develop products new

choose sold, we capacity strengthening distribution. globe investing Goodyear. the our tires how premium changing in competitiveness easier way the new leading manufacturing for improving are to are making around and it are and footprint consumers in existing tire-building bought and the of our We We're

I'm convinced any winning this companies combination a that few, is can tire match. if

to positioned look in be we for adjustments markets. we'll recovery the and As strengths our leverage ahead, are necessary to where markets continue we'll make weaker healthy

value initiatives and margins targeted enhanced I'm volume segments growth, in our allow confident conditions operating along stronger in with shareholder that years. our industry will us and strategy deliver improving coming to

Now I'll over turn the Darren. to call

Darren Wells

Rich. Thanks

the for I Rich. as quarter with characterized to be could results our third While have agree best mixed,

Pacific we largely -- better Americas the and expected build we and achieved finally We of strengths Asia can a of largely lot ahead to have raw on in and what we've materials. with pricing volume and

challenges expected, negative from inventory to impact levels. production as including cuts some Also saw we out a cost balance

the discussed back of presentation As areas you however, our couple are in see not we with there in expeditions a were that July. aligned materials

in This revenue our tire First therefore per tire hurt volumes were winter Europe, our lower. and mix. volumes particularly

on in the than all the we Europe can't blame weaker forecast, While of was industry industry. this

Our volume premium terms weak and performance share in terms in our was relative well, of of tires. in both as

of performance Europe, in While these of share business. our issues address one we know European in several to results need solid this weak is quarters see market we we replacement evidence after only consumer quarter in

to brand the is and asset. While quality objectively, our Goodyear product we a huge know none and is second technology

channels difficult to and move know it get sales to We us full to remain also volume. sales for to our making product our difficult market, our product our value through distribution problematic, for difficult predict

a on addressing we're our come issue. few I'll action very back focused in but minutes, this plan to

performance. The differed from our second area our expectations that mixed was

because flat per While essentially of revenue remained continued our tire pricing solid, mix. in weakness remained our

sales quarter our quarter, year's channels about last but driven driven by talked product costs. in in beginning with the by North mix mix channels, not we distribution business weak American We consumer lower-margin last higher through fourth experienced

excluded equity While mix TireHub during not. which quarter, channel are mix improved from did from now losses the

and saw quarter. America our mix We North Latin also commercial adverse America truck in in the businesses

macro the still businesses. evidence environment ease two good in to weren't quarter two of these of It the the trend materials recovery inflection. impact the while areas, was better happy and earnings we So improvement three was raw of our see see volume to and see an of in adverse important to

Slide to offset foreign price/mix. billion third and improvements sales the These were X% $X.X lower down currency chemical our partially effects from were X, unfavorable last third-party translation volume. reduced of quarter year impact sales Turning in reflecting by

volume a strategic continued impact X% decline volume OE decline Europe. in X% taking and the OE our with reduced vehicle we're U.S. a Unit in of in the The the that OE and reflected even global actions to decreased improve portfolios shipments. production

indirect last tax weakness down in This $XXX the and first excluding for significant million in in Americas from percentage from our benefit increased year more improvement year's Pacific $XX EMEA. million income and dollars than Replacement Segment half strength $XX a performance was an a year-over-year operating offsetting million both of with quarter or settlement shipments was Asia the X% results in ago Brazil. terms.

volume year. this from last much Asia. in certain was The benefit less the overhead adjusting The a influenced income items, were in cuts from segment after production by were items in for step than and chart the Slide quarter versus earnings share QX, operating change by basis nine results per negative $X.XX. but Our on significant on these unabsorbed was diluted offset summarizes and impact EMEA

$XX currency, foreign million cost reflecting material driven from unfavorable of than non-feedstock by by to $XX offset mix pricing million the cost more continued savings Americas. the by higher Raw million. of well in negative favorable transactional costs. as as benefit Price/mix actions was offset Inflation $XX $XX million increased impact

in of million by were the tax savings benefit a cost Remember settlement from year. $XX indirect negatively nonrecurrence the Brazil last impacted

more and impact net compared our this cost than quarters the improved savings to Excluding two inflation. offset previews

chemical other operations. effect $X of category of tire-related currency $X by decline including $XX U.S. businesses, interest also negative million million. quarter, which the our our foreign TireHub, improved in other this in driven by weaker Similar our equity in better category than The quarters. translation million in the previous recent was totaled to results The the impact includes

XX. from increase sheet Europe units to inventory balance capital, Pacific. ago, in the higher-than-planned year reflecting quarter demand. to Net Turning due to reduced previous by billion primarily Asia on an partially up million the $X.X billion, third a debt $X.X in slide inventory, We levels, weak the working industry year versus totaled including in address approximately X.X production and

profile approximately with remained billion cash $X.X end credit at liquidity of strong the in available quarter Our the

XX our million, less Capital for activities Net down year million cash last driven expenditures Slide up operating were flows. million by $XXX summarizes cash $XXX from generated $XX by $XX working cash used was million. capital.

in shipments an were by replacement slide increased on Turning Strong XX, results, Americas commercial to our volume principally strike OE in to reflected in OE X% older an million. and drop XX.X weakness September. the in weakness fitments This in in of customer a continued large production consumer the the increase offset from volume growth unexpected U.S. out segment and beginning OE resulting OE rotation at

was over Brazil pricing the last million by explained raw offset our discussed of than the $XX million costs non-recurrence to and improved benefit material utilization The tax positive our continue from operating than was in partly These year. offset The new positives adverse the past $XXX year favorable decline plant. impact a were year. at Segment by Americas we more mix earlier. factory higher from indirect contributions more settlement down last of from actions income

Middle declines last driven Turning Europe, with lower versus Africa's operating by to replacement higher East and income $XX cost XX, down unit volume, million. businesses. year, XX.X units, roughly in million both and sales our unabsorbed X% overhead. OE The was inflation totaled was decrease slide and Segment

to slide XX. Turning

several an increase tire X% in India. a Consumer rose growth reflecting units has ASEAN in million, more China as double-digit industry Pacific the in year. declining than a This offset X% quarters. X.X prior significant Asia for OE inflection last volume was totaled been which from change in the and China continued Asia softness countries

Consumer in increased a slightly was million growth X%, year shipments China. ago. operating replacement double-digit income below $XX tire Segment including

than align pluses a quarter made and minuses more by inventory with While factory we the there cuts few decline utilization lower the in were could reflecting to be primarily production explained second demand. the

fourth comments, anticipate fundamentals improving opening that my we continue quarter. will from in mentioned I As we benefiting in the

the exception Slide largely on puts the final volume with quarter. in in takes the as and The our year. previous in The summarizes increase that listed longer the see of quarter for EMEA XX items fourth we the the notable we are consistent are is for no showed those we confident call.

is many to alignment reflects situation earlier, from by of mentioned exacerbated the in we been address poor this This performance less America decade ago. representing that a here lack is We the I distribution well. able volume to it As Europe will similar a as cases, made in address situation were channels. to distributors. This there our we In that it here in profitable some of has North results brands able actions a too distribution and result we taken for our brands. be have faced

looking While preparation our to now stages focus each distributors for been we're on these time has plan accelerating some changes. potentially fewer the at in geography in

years. see this growth, two restructuring we while our business benefit our to another our what being while we year-end, We'll margins. to and actions issue improving saw detail three plans can over transition disruption by improve provide we addressing we at America, our achieve opportunity this year may along the this as dealer's create but next North to earnings more volume regarding we also While next see in with the similar OE

for Before we questions, changes open just it of couple to up small assumptions. our I'll mention a financial XXXX

Also reflect expenditures revised. capital $XXX to actions push anticipating projects the $XX now growth due certain timing $XXX market are be million been to to million, of conditions. million industry assumptions We to have to our out note down

Europe Industry reflect to have been conditions. estimates for softer reduced

imports, We really consumer a and doesn't an decreased increased our slightly reduced industry, in for reflecting been U.S. volumes. which Expectations low-cost has impact slightly. replacement further also have commercial forecast U.S. decline have the have our U.S. for OE replacement on

open-up questions. we'll line the Now, for

Operator

[Operator ahead. Please with Ryan Brinkman go Instructions] to JPMorgan. go We'll question first

Your line is open.

Richard Kramer

Ryan. Good morning,

Ryan Brinkman

question. taking for good Hi. my my Thanks for – taking Thanks morning.

the coming versus chart a simply how inflection Just talk previous relative the price already price/mix of known announced much It'd to to XX, backdrop, be broader to much increases spread helpful on the can environment, prices in ability of slide you reflection of inventory realize positive and coming would ability versus to price about into raw if tire is How versus may visibility turning about your maybe further in commodity and in talk trends is quarters? anticipated macroeconomic price doing the great what sort volume, raw impact increases? are here. if the upon guess shipment, your the as dependent you channel competitors higher turn

Richard Kramer

But I'll we start into business. to probably days, and mix jump can XX we've in relative last as in pricing particularly I the well. consumer our say, particularly price over probably Ryan, environment U.S., price, XX a to seen the would replacement on healthier Yeah.

now QX, well. announced benefits price to QX an Remember, actually as increases, we we experiencing expect six things around we're as some last that well we've go -- over the effective some back last year, as -- if Q as had you of about when those done would right the months

X.X I'm mean you know work raw still billion. know good others have increases back we remember go a I know, about about to XXXX, feeling if to material and we lot we're pretty And I of So, that. up to do.

that momentum that move still in but have regard. we positive So we as ahead, to overcome

October of in price as of increase well. X% also effective September up to a We Xst beginning announced

at focused are see sure tell value our the we out making that when our things in you'd would of recover still on this cycles marketplace. costs for we the in think think terms nothing of the ability our I value about for products any me makes again, differently our ultimately I marketplace. look the to you, other brand, in And get I the than investments So, cycle

more last anything we from year. where So if were a again, bit positive

Darren Wells

Yeah.

more I'll only of maybe -- because sort of and is really less some -- XX the price momentum expecting So Ryan, hit price, materials where a just little to which therefore hit and materials point point of and for. an little mix sort looking point ahead the well a least the on obviously materials here, jump we've I raw where and we've quarter, now headwind is price been slide mean inflection that at raw a on for on getting addresses are raw and in

us At time, from half including a mix third we expect over to that the adverse were in quarter. are improve -- of year the fourth things perspective. those are again the of areas And the the first in profitability that for in even the there same and time quarter

address it's And and to last an in doesn't what that first our of quarter the expect products the $XX point market. do fourth while million we still million million of about of or XX, that being mix and we by - a $XX the directly that value that million quarters for in we had part get get to would positive. important the we the chart it negative we call two in we’ve talked $XX $XX to that the So, of year,

a shipments. mix a got customer resulted winter of in to market context, X% tire commercial the those on -- shipments That's in some less Europe shipments. those the against winter price and put in both in worked worse mix. when in things on of down winter an just fact, hit Lower soft them adverse little mix, commercial we're quarter, Brazil significant the us tire U.S. bit against in or factor. tires in Less benefit business in we to winter And did us maybe in the So we mix. working have X%

that while losing mix. It And high are us then sake in of hurt volume quarter use the production tires value. eventually we And that our shift our can resulted even the in to U.S. replacement light It third truck some OE the strike the volume. pretty that for on some us. hurt that hurt

prepared still have distribution then which some we I lower-margin my in from pressure some our channels cost And -- remarks -- mentioned where through is channels sales higher.

there improve a not have So for few the forward. for will us third in that quarter we we that were still working things us expect going

premium We continue strong to growth segments see U.S. in in the

continue we get $XX to continue to as with thought may expect expect the Yes, work And the a we'll it it as will be. as in million $XX million not fourth so to It not going back be So mix quarter. be was we make positive previously, but think mix. we may positive to communicated us. that still regard it for high positive. But -- to as to to so be for I progress to

Richard Kramer

about ago and me, well. prior, really Excuse for Overall, serves. out see year Yeah. there ago there from year certain that's as continues down remember pretty as say, close tight Ryan, the tires We where they to a they environment would premium my out in be supply the your last an maybe if I year in inventories just a inventories. were And channel same on memory healthy that they were question U.S. the to remain

days -- sales were really are at there where we this up. where in good significantly is in look hand remember they year thing as an a environment on are shape against below Same China, And ago.

So pretty things the given there we're balance facing are there. in that situation good economic

really going to they finally a which -- need good we're we inventory now, closer good. tending are need to seen channel. have, the below a instance, seeing relying in we results snow they're -- then in now they're -- is well little of say as bit think dealers selling in where the have meaning a that buy channel a And that's trend -- should them. year, again are This lower wholesalers lower But the I below should guess, is say of looking Europe a and And I think tires would for some and purchase pretty continuation in bit our a we or I are sense in for last little are low on it. demand overall to waiting pull until to I inventories Europe,

Ryan Brinkman

share lastly U.S. though Okay. highway decline my even commercial It the also truck some will again OE large measured of and you vehicle. the Americas if market or the America follow-up, just be a OE within strong That's versus next of that replacement great industry just commercial great on can market, expectations remind color. are overall in continues North as materiality Thanks. of for closely build, generally tires context business your truck. And Americas maybe to commercial year, the and us it follow then track of by who concentrated materiality that your forecasting potentially then as own North America Class A in

Darren Wells

Yeah.

in of OE year serve because related. OE gone market the replacement of truck actually we that the as of way got through So to is approaching -- XX% commercial business truck our have And then in would XX% just take the to we've truck be I that bit we part that put the top-line strength of constrained we ability a to related want. the our commercial would been build of The little if business the context, guess and itself a that's the this around business. the business we've has commercial higher

remains backlog is orders but -- We truck being the the do now been has summer. right peaked The last strong worked build understand down.

projections next commercial, quarter fourth OE expecting industry well. we're shipments for So them most decline OE year as in to to be are -- and expect the down into the

replacement do I to us Now allow is thing the serve the will first to mean better business.

our to recent our benefit ship of demand going tires. ability to increase so improved was that. OE I a normalizes, we've as off business We result to supply think from actually we So got is it of premium going the replacement peak. as And think truck think comes it the

initially. I some going question that the it's understand got freight OE in help we've address mean, for that And just least I where benefit any think determine now, get in So will to decline ultimately but cyclical a that'll we'll at a commercial we some replacement goes build. be then that opportunities level business it's from cycle. us right of of

Richard Kramer

just add in -- of Ryan -- commercial America Yeah. team tire have through industry the in very you down. And tire in cycles I'd that. the managing we've lot a or Americas of go our at builds excuse McClellan the particular worked his Steve up They're have and business me North where and through good OE

I that about we on those on the calls we're that the cyclicality one better are point us of side. the type to initiatives doing weather things Darren's And I add the also side, ago might of and talked help through replacement one goodyeartrucktires.com the think or two of industry particularly the replacement

about that. good we feel So

Ryan Brinkman

helpful. Very Thanks.

Operator

Please from go next We'll question Healy John Research. Northcoast ahead. with take our

Darren Wells

John. Hi,

John Healy

release of the Hi, one the I encouraging thought today in performance of Asia. guys. just you. things most Thank was the

was view Just of the maybe kind you and of bit the quicker of want bounce you to if surprised the back volumes get performance segment than your kind little thought? a in

reached secondly, in bottom it and too or do call, the are make as market the And volumes Asia early as moving could is Asia profits, the that we the to that? trend it to you line probably start than think thinking we've that ready -- that in you that lower? well Is higher then rather do

Darren Wells

as look to tell in quarter down business pleased been we're Because still it be business Well, you industry now. I'll remains I China, you very encouraged OE very of sure. challenging by the we particularly start. the and has know at the performance the the in will as very where

the in It down as X% approximately I quarters X% a the was year annualizing ago it's think about five straight. Remember quarter. that's well. down

continues tough environment. to So a be

that. the more we'd a of we those And supplying planning our it some of the OE see just second then companies call, last year. remember quarter it the amongst that in assumption And, in and think we We said competition last business back was that on course, of bit half about of that intense bounce I OEMs talked didn't tire gets the because happening see hasn't. original

look and a OE things, business by industry the we OE your point to to John, really including of really business OE. If a work margin. the some really maybe two that launch That's really combination out considerable in our fitments several on our hard fitments outperformed right But new back team. on the to getting a goes being of the market our at focus the on three of

we we And momentum continue that our really we're manufacturers, with diversify would steps that business secondly, as consumer expect our the that it's reflecting well. more would in to domestic taking would working. base That's And growing continue QX really there.

the industry. again, side benefiting we there. really really the that lot of And on did something in And improvements feel And distribution we think past. about really And our making that. in intentionality I with that's the outperformed we that's good a replacement from

seeing impacts We're we've basis of positive benefits aligned market. there, taken a the terms of we've on We're in where go of around of lines the we distribution taken of that. relative initiatives some our actions some hard some seeing the how to

that think like now brands. stores It and for in are And our And metrics is their new right remiss an didn't also all-time China we're in if well. shop Goodyear sign brand, to the awareness be I shows consumers really, brand have on I'd the been retail I our up at brand high like Dealers stores the -- opening. say very strong. as

of terms positives manage seeing there business. a in how we're the of teams the So out lot

around think, are still mean of of that of are a going lot out terms In I is now. still still the variables there there. see moving call, I in terms -- forecast right OE we what a making

in one we that's surprises that well. get you, really about -- as So year-end tell in the on in performance call actually a as had India. the something our prepared better drag talk of I be to was think slowdown the I quarter, that the will we to was business despite we'll the

And business business suspect that on been in the been down the run is, I rate And I about that's XX% OE good think very you of was know September. business has And for us. decreasing. particularly a OE there in

issues India their goes as back. come right capital had well. now, Remember, back. India on that's little We through in But a of of expect as we while a that it bit made investment us a some impact an will

OEs a us tires able to for look investment to HVA been that's at. supply they India with the of the And be really in the good sort

work one next so of through outlook to that come the more as have we terms on that's in well, to So call.

John Healy

fourth Great and of the for a And is about me, what in impact in there you in kind the guys that quarter, to in think third question strike final then of Americas? of just that terms SOI the the the quarter? is caused dollars recoverable way

Darren Wells

our -- the first so we of days about volume John, in yeah about estimate Americas the strike the OE or units. XXX,XXX So impacted by X% XX yeah the

that premium GM sales of just tires large-diameter $XX, tires our and while have of is OE business this thumb rule for SUVs margin is And trucks. lot a under pickup

the than business. impact actually So per-unit higher in is that Americas the

Operator

our from Wolf Thank Lache go next Research. Rod take you. with We'll question Please ahead.

Rod Lache

morning, everybody. Good

Darren Wells

Rod. Hi,

Rod Lache

raw provided material versus In view raw on bit you've more full beyond. can I elaborate QX your price/mix was hoping, impact. and material a is expectations year on for the what the past you little just

about materials at today of should thinking spot magnitude tailwind be see we lag, we that the a kind we keep raw prices for what XXXX? spot And of incorporating -- and based tailwind on if the

Darren Wells

Yes.

And where a for as slight -- So are at I mean, be the still quarter. negative us they'll you raw mean, I say, Rod in the a materials fourth -- moderating. we're point

million from something benefit with of negative. around current it's costs we'd spot in to see So order then XXXX. And feedstock rates, at start magnitude XX

I continuing which also. would recovery raw think commodity to see then, price way. guess we whether then some see to improve, and we're to has ourselves volume I the And start is likely asking materials recovery some that in our we push other the industry. We're real question that volume see the

And volume stay that's offset one we we're part lower we'd would a a of next at a feedstock would and get. get and from scenario faced lower volumes year. the the could that benefit looking the In costs. another scenario be little But benefit with demand we weaker -- soft for

get Organization's will The emission is the prices, up Maritime costs our higher feedstock carbon due start stricter may that for as suppliers. which standards, the Jan at trying which drive other International look we're tell to thing I'll minds that sulfur black possibility for we around, next black costs to on the you X, feedstock of year, carbon

question a out still there. that's that's think, I

we significant. that your I agree pretty while with -- year we're have at think, I point next prices be that benefits So, would spot would

bit the be probably I that against that volumes those next balancing raws think, we'd volumes up. stable, raws implies year. stay will are if expectation that weaker stay if a come And down back

play on call. and XXXX come way will way the I back our all into the think of we that we on it about So, and think comment yes, next

Rod Lache

the ball today? are set lot kind there these next level is persist factors on play now. of on got your the If a of were prices what commodity -- Yes. no one's based I prices into and magnitude are just we right role. tailwind to where a spot to a But understand crystal year, that'll mix of the

Darren Wells

Yes.

I spot around So year. would it million prices be in today's think, $XXX next

Rod Lache

Yes.

you couple this sense. makes more just, color can EMEA in And ago is get there's is short years great memory what when here XX fixed expecting the sort be could My maybe, and that not America. little for relatively better? a that this That company this business on Okay. But in is a then years? thinking, last give structural for something of this challenge happened that to you're can something of bit us Or a you're order? that North

Darren Wells

as put things Americas that look than and it as going the year the longer take will is doing it I'd are us this be us in the something be I positives of think, a in so Well, to horizon, because we to for did well. that for Yes. we'll time that three-year category at two

you but the went through in there, a us the of And partnering of mean, and in distributors number on I in number certainly some in business. reduction what went of We factors I turnaround there approach a and we were closely our were were significant America business distribution through way. different there, part quite there and changes with along North went the real Americas a were think our with. that the earnings we

it better value result helped And better the get predictability and product in our as a for of that, marketplace. us

are that the ready is look would we Europe. And there new, And are plan but start for lessons there not Europe is this think so some getting to in apply actions. I to -- these this we in even some of

transition as temporarily, actions, reduction And will any until we often start in these one gets we result realigned. the recognize supplier sell-in inventory a I do to another from of volume in think that

ultimately -- our larger distributors we the of do. got point part to So that to think brands. what have to I focused business more retail need get but where their ultimately looking Goodyear's to And that's who dedicated brands representing at are we've on and a we're who

require terms those transitions some between do distributors discussions Those how of work. will us transitions some those for require them they and changes and in

I So we think, that. feeling to that move certainly forward we're strongly need on

aligned distributors channels yes, Some the a consolidation even we've objectives Europe that with objectives. got that that who sure market of the have are to in using want so in route make probably make distribution more urgent, we to our

-- I mean, So we'll I think that get there. we'll

well there. brands product great We've Our got play technology still there. very

that to So we work. building make blocks got the

to to that we're confident that. do we're going be able So

we -- the our in and while make savings that was we we're same And addressing clearly big two there. it's think the German other at in that against we've down working some will But road significant cost the that which on, the it is we're it third time can our have issue something manufacturing and quarter improvements structure. and continuing restructuring -- deliver us some factories business of yes, cost European the got we

Rod Lache

can for the of me Yes. vis-à-vis savings? -- you've my got restructuring what pipeline was you question, remind That kind last in

Darren Wells

Yes.

and we've eliminated actually we capacity or factories, of low-value million Now, German will two so we as announced effectively rather which through X.X than upgraded about that. downsized a plant move closure,

us it's couple of a takes So a project years. that

million get increased We'll the successful of savings the for $XX some capacity addition in $XX have in Germany project, there. discussions that to Council And Works with getting been from high-value million to tires.

So we've on action. got restructuring alignment those

years to business. we're couple move be big them. difference And make over to on the going able EMEA forward So us going that's to of for the next in a

Rod Lache

million $XX to over years, that that's $XX million? But Okay.

Darren Wells

Yes.

look at that I that think something starts to we benefits as XXXX, deliver XXXX.

Richard Kramer

Exactly. Yes.

Rod Lache

Thank right. All you. Got you. Okay.

Darren Wells

Great. Thanks Rod.

Operator

We'll ahead. James Instructions] [Operator Picariello Capital next Markets. with go Please to go KeyBanc

James Picariello

Hey, hello. morning, guys. Good

Darren Wells

Good morning.

James Picariello

Just related seen what on some We've provide restructuring cetera. color intentions your can severance, in et the initial topic, U.S.? news headlines to are the actions some any on obviously you on

update So, yes, just wondering what the is there.

Darren Wells

the on second that and that as the should options beyond are the timetable. for discussed call quarter mentioned Americas at least we just in as savings that restructuring Sure. Yes, I we great at I looking there similar several deliver the German ones a mean,

offered voluntary one at the So associates buyouts we've factories of step, our as one U.S. in to

have to The until buyouts. for until of those applications the eligible one associates the end month or submit November

but to delivering of type going all So we of determined that to to additional There look need buyout. are – Americas. at the the be is actions amount of improvements. savings of in we've cost the record have there that do the yes, the part size by we'll got that what will strong be track And of obviously a

some but put additional today. forward to So nothing taking we'll actions, anticipate further

James Picariello

than lower-margin mean higher anticipating I I on it. the the bit exiting the because behind understanding Got a be And volumes U.S. what there dynamic maybe the it's think Okay. U.S. to was mix, just quarter that were then channel in were channel little mix, largely last slated Goodyear. my like that you

the wondering to So expected those are What actions go are -- just now in volumes fourth away the quarter? there? be

Darren Wells

Yes.

of fourth there as well. addressed I a in expecting have to I quarter and improvement through So be saw that commercial we're do think think will I the in improvement third that quarter are we mean some things couple we discussions. There -- directional the

need selling get a got cost highest and been taking terms there translates that us have some to our a I And place higher discounts tires lower So that distribution effectively of distribution we -- we've costs. customers in volume larger through we're through our where so and distribution some are here channels for be mean, to that net. which cases of efficient

secondary We also as refer have of customers who we number used a have what supply. to

but directly, and delivery third not own keep -- taking through pay low, those they're their they third it parties inventories order taking those we in are for deliveries. So parties to

work So out. things that can commercially these I mean are we

that things are have keep think to do on line. way in that looking getting them of are but that. We a we work who to per that, to figure-out working help customers focused capital the that own while our still And tire there targeting. we're clearly team understand to our there are make some going to And we're I their do revenue

I progress. we some think see

in to think I expect us the improve to that mix do for fourth the there's opportunity more quarter.

James Picariello

the Got maybe but what TireHub distribution the can in quarter spend quantify within what ramps was Is for what And it. down? tailwind an spend more regarding year? that is that the of in -- this you and build-out terms that And That's importantly you're as maybe that next equity the JV? progress helpful. loss just missed incremental I expecting of level

Darren Wells

Yes. think versus overall Well this to to expect we next year benefits I TireHub continue get from year.

in performance things that to continue will So be that in of will Americas. category improve the help our the

that are couple take get -- losses any of place think share and XX% a I we One obviously elements that of reduced And there. is itself. So our there at TireHub that. to losses

to synergies both those get of terms terms and improved of channel for expect continue in mix volume and to mix so also in us. synergies We come

XXXX. are So those both to of things, us in for going benefits I think, be

at losses look did was actually share our therefore losses we think of question in equity see we this asking, the lower. is and I quarter If TireHub you're third and the those reduced

more In quarter But QX million. TireHub million fact better after than we double-digit were sort losses first maybe it in was of, second $X equity losses year. and losses a -- couple for equity of importantly had, last where

the of couple and second from a So quarter. million better year than significantly last down

James Picariello

latest up that say lot some And was channel market Got you over increases square there helpful. inventories In the right could just volumes would assessment the you just but wondering of for maybe that the on I channel And of ahead general a in it. this know September industry agree U.S. across -- touched of replacement would last if you just one. X%. inventories view pre-buying Would now. the how suppliers? you the That's up of price you your very the slate major

Darren Wells

from probably of outlook expecting tell yes, we're a after little tell Yes. replacement bit we're strong Well you in the could I think, you for think for this I business giveback a quarter. U.S. the quarter the third -- can and giving the in consumer the fourth industry

that the lines think you're along suggesting. I may So of be what

James Picariello

Got it. Nice answer.

Operator

go Michaeli ahead. We'll take our next Please question Citi. Itay with from

Itay Michaeli

Great. Thanks. Good everyone. morning,

Darren Wells

morning. Good

Itay Michaeli

you taking years. couple just the on, dividend year initiatives should payments the in talk And free cash the one in lastly, if you of really we whether to dimension next just the on was rationalization takes you how My fourth ultimately or about question cover given of step basis? help expect this the cash year on the about Anything kind flow. restructuring back free then can some a us really to puts do of and quarter that can you're that full and cash we think

Darren Wells

Yeah.

our So to up yeah has -- I bumped restructuring cash the taken. year mean, from bit, a we've We've million. around you've that given little for think it seen this $XX yeah estimate million actions $XX I you've around probably

has the obviously when been been past in allowing, restructurings, we're announced. additional cash we've $XXX going through or So has to That related some restructuring cash restructurings -- the million so.

restructuring's So a these execute that that we've we I up think, there's discussed. could on room bit, go as

we our some and flow CapEx bottom-line continue fourth in the capital allow obviously to If to in we dividends, going quarter. think our to come guess, the for cash improvement to our which for continue working this year, cover get back means the I is believe year that us we'll cash flow I to

is the cash some capital in for year, the our for The positive related return to flow quarter the generally comes fourth free down, is flow. quarter working cash seasonality as -- of

So say further earlier this is us year. would I helping

quarter. capital management. of some place programs third see benefits And in put working some We've to in these improve initiatives did the we

to the quarter those year benefit continue and So they in better were working than in capital a ago, us were QX. investments to we expect third

our down took we CapEx. addition, In

we like a few that the some that we've pushed markets that So environment given have industry investments markets, out, delayed got bit, India Rich we have a mentioned. in

there just that up place investments we've So take to got need quickly. as lined don't

have a we off And those so bit. pushed

think be I comfortable I increasing we're able to that together, this our debt. our without we'll so and you'd net And CapEx, that take our think cover all dividends year

Itay Michaeli

take just need think maybe do guess levels to helpful. and you to quick Maybe it's on a CapEx what follow-up about these that, point very to talk early That's -- at a would Or see of up? But some I that are these XXXX. super sustainable? you

Darren Wells

consider obviously recovery, look some I ahead Yeah. I some of that think, we're to the invest, going and markets to want for in as forward to these we of mean, opportunity recovery. start

our able is of make in XXXX in The advantage to big We position specific given take plans, guidance the that a developing next we're give not still And want I'm I tires. don't for any to I to we're of timing suppose opportunities -- grow premium year. sure to question.

as for additional manufacturing But want our take cost from think to want investments that, we what And markets. I additional growth think additional will actions we we going footprint forward, do. some improve in be a I would expect to to about want actions perspective, what we to take growth there

Richard Kramer

to would that. I And just Yeah. Itay add

levels we've If been to the of higher cycles spend. mean, how think you in through past. manage managed able about lower and I we've

well fairly I example it. we I how relative of prudent And think spend. our think just timing is effectively this investments, the what's another happening in to with and being market

make the investments are there yes And in that in that feel we'll make a we position we them. expect to would be that We to future. need

Itay Michaeli

helpful. so all That's Thanks much. very

Richard Kramer

Itay. you, Thank

Operator

We'll take ahead. Kurian with from our Please next Exane. question Ashik go

Richard Kramer

Ashik. Hi

Ashik Kurian

Hi.

Richard Kramer

morning. Good

Ashik Kurian

Thanks question. morning. Good for taking my

QX, you expected would the It trying your your significant cover and technically in least working on the then looks at quarter that on one the fairly to a comments get dividend. like capital to your SOI need in flow. drivers me fourth the First demand just cash in U.S. for improvement free to

being I get about that your earlier to destocking? And how or -- level inventories much know made of of comments some you is trying driven in by comments And the down.

the expense in the whether, and fourth some quarter. might will limit quarter So you just support some come of SOI at in cash free the the of wondering recovery fourth flow destocking, that of will get

Darren Wells

Yeah.

that's there's year. by the our we end And reduced plan. that. We've taken part been expect production to support So of to question, inventory the of have actions no help

inventory. benefit, part payable, production also cuts our or that say I'll so down. in come level of given in progress that of -- our quarter And would the -- improvements fourth part the accounts of the recent be the has

from -- benefit payable. we're had accounts So we've less

That's as first ready production something improve get quarter. ramp we we year-end, up the to expect also a bit for by

things couple compared a be there quarters. few are I the helpful there us, of different So that where think will for to they've last as been

very our And is at purchases. typical of down that receivable the timing tends customer The and other is year. is generally end just that thing the of to come this balance

Richard Kramer

yeah. Exactly

Ashik Kurian

more announced Okay. destocking of you no a to the plan have level couple fair a know bit QX. But Because of I there's normal in that destocking. than peers do of

Darren Wells

Yes.

are to back versus we're last couple us I levels been Ashik, we think it destocking quarters. But where business. gets that appropriate an are for doing, the So be it the that have will more improvement the of

So, of compared it an are now, years. is improvement where than is more prior it an improvement to we right

Ashik Kurian

the and OE in for seem have coming is I for the And Europe Okay. And positive even market for mean know, and to mean I the most North more likely great. question, then down coming too just But doesn't next replacement both and North year I Europe in potentially America. volumes broad again, truck spend one both bearish -- on last much put assumptions America did a you NAFTA. people truck outlook do volumes

more it be volumes sort know, in contingency other do a I means on side? than margins on at mean do take should truck protect tires looking truck to sharper what tire to restructurings we volumes have year downturn? were Or be the if I you plan? you to Just next truck a -- downturn take plans curious what will mean, do of your what's especially the the side have if sharper

Richard Kramer

Ashik, good I a think question. it's

manage key about help I think, element and going we is of to selling we how where at might maybe of talked well. fleet whole context a in we've look past, that sort business to them and retread a truck our our the selling cradle up service anywhere tires, our tire, a the And selling as in of essentially whole a selling in and system U.S. than get being the fleetHQ, a tire running XX minutes. grave replacement them able new less to little

on managed I that. done -- that. million calls we've We've think, we're two over

riding than the a or OE going going the think, sticky up the in up direction about off And we very markets, I down insulate it another. I and does simply think from that to in be lot truck our and a calibrated economic changes sort And of build it fleet think, more value of or I act waves balance far make think but if and to one a lot business well and tire business, the of you sure we don't too cyclical of down. go doesn't have certainly model or truck consistent business more

that the OE to to past, going as That's in It truck volume. And is, by is a not be sense down tends I were mean to capacity available And and goes going. the it insofar as replacement that that also -- think the we side. the in the of challenges same usually I of good time mix presents lot selling at side what build capacity for runs dedicated the a the that had OE fleets. OEMs as in your

susceptible better to these dedicated not less have managed balanced I very through better, means swing, but and less off that that's won't our the well we we think, we're we've balanced replacement there we of I more OE that dedicating cycles. think And we've off volume an business. As that have to how impact,

terms downturn more making be ourselves I very premium much proactive actions make again, up to we're that we we'd volume no the win fleet we in severe that think reason see we're that and sure cash be will of shown with to factory market we I managing But would helps than foresight, how if And back. if demand, the if marketplace. the anticipating, about happen, we're because, volume a production side of us would managing And it'll again, tires, really in Now, off set think that that good in we properly. come managing a -- sure wouldn't good very I demand we think that downturn temporal is balancing with that that think weather the know better. you have

Ashik Kurian

Okay.

different put from Just side. or the my side what it increases comment a weak, to can Anything through last announced the question makers challenging and Europe given from you your more is do markets exercise on so consumer in have that are few you clearly have planning are price done timings already tire A that side. with in price to Europe, increases?

Darren Wells

taken European in business. our a be increase Yes. fourth the No effect price we've quarter starting effectively in in

Ashik Kurian

Thank you. Cool. Okay.

Darren Wells

it. Appreciate Ashik. you, Thank

Operator

Call. conclude And like Q&A as this We'd as session you well you may disconnect. Goodyear's Have concluding and for to will today's Earnings Quarter day. your now thank Third XXXX participation a great

The Goodyear Tire & Rubber Company (GT) 25 Oct 192019 Q3 Earnings call transcript