Earnings call transcript Q2 2023

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Operator

Good morning. My name is Nicky, and I will be your conference operator today. At this time, I would like to welcome everyone to Goodyear's Second Quarter 2023 Earnings Call. [Operator Instructions]

Today, on the call, we have Rich Kramer, Goodyear's Chairman and Chief Executive Officer; and Christina Zamarro, Chief Financial Officer.

will forward-looking Goodyear financial and call, measures. this refer statements to non-GAAP During

risks, that and results statements assumptions Forward-looking involve uncertainties materially those to from could forward-looking statements. differ actual cause

that the on SEC, be most refer information which the section investor measures available. non-GAAP replay a of can quarter call A where disclosures be found reconciliation be on investor Goodyear's important the of future filings letter included more measures For and to investor.goodyear.com, call significant factors their at results, website the could discussed financial will the this may please is that to second XXXX also their of on in affect letter. with today's the comparable also GAAP

and questions answers. This call focus will on

Operator

first we'll James go Instructions] from Please, Paribas. take Picariello BNP [Operator ahead. our question with And

Unidentified Analyst

This Hi, James. calling [Jake] guys. for in is

talk want the First, to quarter I about bridge items. is just third

get XQ. implied sure $XXX thinking at work about if about And then the it million those, full make million. [indiscernible] to it's to want looking year in we looks SOI that that just right. like So through guide, about I I'm I

quarter? some can the just for puts fourth So, and you takes the of about talk

Christina Zamarro

Yes. is Sure. Christina. Hi, Jake. This

at in obviously more like fourth how earnings as destocking obviously out, also consumer the has impacts QX third our in I commercial. and and say I'll on as into recently but look the seeing start and we trends due quarters, we about So SOI industry we in in if our you transitory more the would layering think look in played in to outlook are that factors we're this

still of destocking, is to up that our for fourth due that a QX over additional in with what and the in quarter. means flat yet And some half approximately back the is Europe to plan volume in volume particularly weakness so, lot

wins, below obviously I about of We've million we've industry QX lower for think mean well. the overhead production the excluding impact laid fourth our we'll SOI about drivers assumptions that When to you will I values the quarter. out those unabsorbed have think of four as block, you I given units,

Price the than full-year heart I all pretty million the it's said half, as $XX second big offset in significantly in that's more that and pretty say of question, impact fourth your second an true declines what inflation basis we commercial in the I'd not mix in mix a impact to QX truck, think gets that quarter at in quarter. our well. materials versus other on maybe about raw should cost is and If this much

I look obviously at take We do strong like say would effect. small there I what When that is relatively versus benefit. XX% have would here is really mix fourth beginning fourth raw price quarter, lower material raw something material I and that But in is materials index say benefits still to costs. raw RMI quarter of the

hopefully helpful. So that's

Unidentified Analyst

to pretty reverse. the And Thank then should we start quarter. trend that drag looks very expect channel When big Thank a helpful. destocking was you. That's on to like you. it

Christina Zamarro

some in that essentially we're I is by winter of so in more EMEA destocking all way back the ago weakness U.S. we're Yes, complete but consumer still to the of levels a driven the higher about year inventories replacement the year. versus last Latin that's quarter that slightly, in of mentioned demand in [indiscernible] in America destocking Jake I'm down in just the third continue half minute the seeing thinking incremental

volatile spot truck, year. for And obviously event think then in Big we still commercial us. rates market so immediate a XX% declines dealers even And last type of though destocking I about with precipitously, the tough industry planning spot the see segment commercial distributors. June for more in in so we're had QX of month and Europe did of year, the as because happening we were our declined destocking this and an for down of so rates truck just lots freight

will we saw what quarter. still but as on into not QX, severe continue nearly That second in as the

in So happening to that's with and in more in bit just down in down truck freight It's in that's in XXX,XXX something miles then volume in a the U.S. unit and QX little truck something going feel will like Europe. commercial normalize to units. QX XXX,XXX was and ton line XXX,XXX slightly by what's

Unidentified Analyst

Good color. Thank you.

Operator

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

John Healy

you, Thank John.

little in we've pricing there gotten two is Europe. a any of and that a status raw end with seeing. ask with of into that to or some now environment that to of Thank little continue about wanted in pricing tears you. operators different bit I years. But environment, can in level Obviously your bit coming sort any signs remain know of the that U.S. Just materials or over consistent. last the pretty erosion the you're where the what's And don't of by either the confidence behavior pricing year. it is

Richard Kramer

I higher we, everyone and as And has other a look think that's think price John. what seen I costs the mean sorry, we I the still raw as at costs. and across Thanks, today material it's because really question. holding is we're inflationary relevant seeing industry

seeing deal still holding is with what that's that very in to very that and that tire in and holding So you're pricing I well. per think revenue well having is we're

hold turns first year we tailwinds in look last hold materials raw half had question half. things ahead, over for happens, come this this seen had we second you, in relevant into in periods we the how XX% If material historical us. some to see as that in And We of when I We cost we've increases. will the before that period, raw down. sort see headwinds the traditionally up. prices will we're able the becomes tell our

sticking is that I really think relevant more even around. inflation that that's probably given now

alone, got our right we've we've we now. have we've costs that - costs, costs, dealing past labor other look the energy higher we've but materials in ahead if got So are sticky with inflationary got more raw you other been now

at this, think as through seen I of recover the costs pricing input I reversal we need So that to action. think a we've market all don't our look

So at. where we feel that's about still pretty good

and I as area you of point Now, tiers, I know that's on always mean, mean that. that move this, not Tier know been to where as competitive by and always play well. price your Tier that's cognizant have But where X, we X units price we're an you

John Healy

And out sort positioned you're and question any uncertainty years? as Great. thought of thoughts on just to of labor what positioned of the year you're how how previous Thank maybe manufacturers, about the And a on to process you. potential preliminary you're model kind or timeframe? kind is that and or kind relative guardrails you're two for how then sort the approaching of just any - just coming OE of fall well business, as the on 'XX on

Richard Kramer

Yes, on Europe regions. that so rate volume on and done we've lot all the a the our alluded will we missed the and talked highly and the quarter towards the across think Obviously was higher the working the in to the models of a and work truck win you with European bright in in that's that's on remember EVs a, XX% of forward still factor weighted and new we've sort and about is this. both OE I in replacement that tell business Christina OEMs volume make to A that the OE spot and like side, U.S. still coming I we're of was range, at sure a margins.

very positive. promise. - And work would I think I us, OEMs And for really that of also lot continuing has a that tell with shown you trend would is the I our

of them digital with. we've where submissions some move think tire that forward three and virtual then a new did our where to I quarter one we built and just build I had away that a dealt fitments fitments for actually have taking did competitors. from we we that tires, done we think been fitments only actually haven't even submissions and And sort to now

done OE what really that very continues say move confident to So I way. a in we've would positive in

John Healy

you. Thank

Operator

And we'll Bank. Rosner take Please our go Deutsche question Emmanuel with next ahead.

Emmanuel Rosner

Good taking the morning. questions. Thanks for

you on provided context wondering for if company us free full in you'd in you've the the was second year I to be obviously so cash the quarter. scenario Christina seen essentially indulge the thoughts quarters and the me latest of previous and pressures update your flow So kind in

continuing free cash them in your what third, of front flow? Some on would year mix do the that and full the for especially

Christina Zamarro

go business for generate top and for priority Emmanuel and our forward. flow what in remains we question. as think about also able have environments I a should certainly as cash free think about thanks leverage be and say we to us to normalized our Yes,

free at As year until we some we cash now this to look before. albeit now expect less than right flow continue 'XX positive

all set free flow slightly So term for focused this cash, in it year to XXX program, sale for when up. spoke, coming we smaller from positive in out of, contribution that you million an actions cash letter the that from of XXX are generate call a last transactions. that we on some we should proceeds what additional help cash maybe With the frame leaseback had the so cash expectation near expected the free million included flow including we and investor we those to drivers

that that that term say should that as our planning. get free to of our think cash we'll do to of all underlying flow in is it's go next I we continue earnings generate thought we business focus our But earnings keep business year's one the near to into and and process will improve power understand on that our really the and see important

Emmanuel Rosner

in - My - last approaching sequential quarter. or not in see the the if to there. us just factors based in in shareholder very time. outlook half improvement back third is and case the that for have it to quite this soft on the It least, I around of that's over the could I the I didn't X% SOI of though if be directionally some margin sure it just get second guess could would question you outlook you on sharing you're like the in your quarter, you is probably you're get of the the than letter certainly quarter for some the thinking there on the third I'm like time fours year. a not reiterated is, appreciate it. in saying going weaker seems - comments the we bit at the closing letter is or even change seems is I language with -

your So can timing. you thoughts maybe towards path on X% that share and

Christina Zamarro

in consideration the in I would end outlook rate half and back run really more where way of at given second a first The the that Emmanuel. Where for have our by was of industry think the EMEA's I we rate were EMEA to just earnings when change sure the quarter, the mid-year into expectation. run we right earnings talked think about a weakness last the from quarter Yes, now the would we have position we take historical half that year. gotten the scenario over downgraded past thought

Americas a are big a great in again the where above a to So and volatility, certainly to into into this QX. I going and both QX businesses these subject or what a then EMEA improvement and say still very QX see but recovery margin target and scenario in deal is, at in realistic we Pacific strong be of sequentially X% Asia would still remains of means

And strong so, improvements our also relative margins in couple think the and I to of least half really businesses. a at mean first I it's

Richard Kramer

in rates well. XX% the to actually in was is in up and and Asia channel that the we Yes inventories. we stronger we as points it QX be. in than reiterate to would good Christina. of for was in, at the economy about to Listen probably and I those U.S. that and U.S. the in was down, XX% exit I When QX the add the think well terms businesses add That bodes our destocking I look inventory thought it think is VMT still heading are Americas again pretty feel I'll point, going the jump where

as So well. about where we still pretty to feel we're be - in going we the and Asia feel good U.S.

I for speak think numbers themselves. the there

about it hit that continues be on and QX the to down in worse was on industry. got focus declining need our truck mean down harder Europe I passenger another expectations was than was XX% sell-out We on. area to The QX was sure. it was for QX a much was, down and we consumer industry as about well. down about, X% in XX in

that malaise I indicative economic sort think of the seeing we're of over that's there.

of in those things will that coming see to we that rate One, that settlement the special Having we're the about had in Europe alluded from talk and per following get move to quarter. actions said our already back cost quarter play, from any are you'll million footprint need the run Elliott. that a talking business in taking. saw planned this that we an some process everything into more volume last in are over on we're do in perspective that, some the our took need sure it good $XX the folder over back perspective, we on And that committee do some of of SAG to we're we're we structure agreement work aggressive with make to from there get there we we doesn't to both it, of fact about of we to focused you that that and action were Those doing.

front And We center structure there. the we and can't live the Europe just is that. have on cost and results with over

Emmanuel Rosner

And then one final maybe speaking with Elliott. the agreement of one

regions So also guess but isn't what investment terms hired number that like of strategic core could Would review the the of committee, banks or table week in options for of about it strategic this be part just as higher you a you Can what that on operational you've for directionally on businesses sort of set the of the on as maybe last you process. in your to up, that table the that may business is or or is be sale, review. part review is announced it adjacent talk of strategic work, of terms assets isn't us of not I some review? within

Richard Kramer

leverage. I'll see margins they And have agree when obvious I discussions us had step you balance improved maybe reducing that with expansion, if and been, Emmanuel, very an look I tell that back they would constructive And we've - I would think a we've we for say speaking and one at for better that the just margin you on Elliott opportunity reasons. will, sheet collaborative. team Yes take been with the suggest and

where that's So we stand.

will things. on about Christina some that start as the special I'll can it together new addition And just put move bit we, we're you looking of at for about the a And So as we an and in we side be committee both little as be talk maybe strategic. some moment to we strategic a our was thinking qualified said, operational very to side think you directors, adding then committee from as and special on jump these that'll in ahead. operational things

looking long we're open to think things to going to company. But menu, add company, Committee been the lay to the I very value for sense at as say, and not get of question should ahead to also we've and assets, but out, the where I our perspective make your been the as with around here decisions I've from

and We think back at look you'll sold look lot we coming mindset farm true. back. getting it's like find I I makes done I record, specific, sense sold our and you this a and get we We've royalty that we're us. wire that if we're suggest into undertake analysis that our attitude track And sold that's the to would a any to and business a our that to business, EPD essentially going without at of you think actions we strategic Remember, that where business. go

we may And a know take will and soon business back will do We'll than those longer be talking little the these but those, let we the operational strategic make achieve to that make obviously things. decisions bit as about you sense goals. for

at. But of in Christina, you're the the umbrella under some that the looking maybe on how we come jump you - want areas operational be at will to about in that least just community the thinking

Christina Zamarro

thanks Yes, sure, Rich.

focus. as side, business, think I at and we're going to So a comprehensive to the multiple across the areas be the Emmanuel, it's facets of organization review take multiple we going of operations look

by a to another understanding leveraging example. productivity increases portfolio capability is time drive we're R&D at that as how I and in R&D And Rich maybe mentioned that little bit earlier, in so, mean our to going work digital that and harnessing looking rationalize what demand. to engineering spend

look skill handling material labor service customer also placements We'll at in like. of supply the That's brands course time our in our SKUs positioning right chain And sure a levels. and some have the our will and to lot spend product we of spend making on changeovers and manufacturing productivity. that we're going for time

course on and all as but might look value well we're portfolio business I redeploy there up as assess Of guess some purchasing brands. in capital, And the area really we and on as we've our in to say an creating of well to always on in we and working I it capital. strategic come that operations. we'll be assets spend time still at just for wrap also what's monetize that's will non-FTE well. And benchmarked SAG, then be long-term comments second the to to mean, I'll Rich's order able what spending

So more come. to

Emmanuel Rosner

Thank you so much.

Richard Kramer

you. Thank

Operator

next move will go We with Instructions] Please ahead. Lache Wolfe Research. Rod with [Operator

Rod Lache

I you volume not into the everybody. Europe. happened to they look for was replacement volume consumer were XX%. down you down replacement - like market being at replacement global X%, consumer were and XX%. consumer X% to The a truck, for I bit about during you In replacement down guided morning, markets I firstly, down letter, what wanted just more investor your one ask little quarter May Good the published clarification guess quarter. when on month had

clear underperformance some noticeable is here. there a So

May accelerate and it are attributing June. you to, seemingly much from underperformance why did so what into specifically and So the

Richard Kramer

a back. we'll I step Rod, take think Yes. maybe

right. you're all, of First

significant. We have changes, it. as they in and And our and industry environment in expected weren't off the what might we just they the own XX%, as I would - have that's show truck and replacement was and XX%, we case we industry you, see truck We America it worse much on in I EMEA weaker had see expected than spoke at forecast look dramatically fall before tell particularly overall didn't were expected, down the And of market, down small to to conditions did didn't was when than industry markets was weaker industry double we Europe the side that. the as had some the markets. in we truck

it to the what so alluded seen Christina side it's of is truck COVID demand on is, before. cycle we We where coming, off that running some before. we I hard happened to of I think know Rod, and it's just very mean as came you've had supply. predict far situation is the the ahead

capacity Finally, and in lower what rates were our saw utilizations as miles. in lower trucking saw we we Christina a saw significantly lower that there. the We mentioned, ton particularly freight industry out June

signs first decrease is saw before what did it's their it they the Europe volume saw, U.S. it's what know - that's that they've that seen what and This that's destocking they distribution true that's truck. and our rodeo. start not and the in is Those did in we in and why coming, away. are right They

up would our is on you very fleet positive I of the the tell holding part business the truck side well. business,

quarter the the all higher one fleet fleets was. tools prices. the In which - business digital very at with proving durable, that fact to what is be is service model even plan the we In whole

in - than will see Christina well positive we'll And as will U.S. on so Europe probably that around the the go. side turn destocking that as in we then still as in QX secondly some more mentioned, but

in that going kind saw and we're need build with sell So to industry dealing and sure we're tires you that's to can truck happened not in moving it that of the what on with move trends, making forward forecast, price. that we're we we

the it. from consideration we'll the industry if So better benefit that's what gets taking we're

XX%. industry me. And then side, excuse I we side, after what it's XX% members the being down down the mean Right, on kind I the saw on for said, passenger Europe us of

are impact you'll as of about of well. to those that last market, making think in in had is lot market, their XX%. actually market a And I imports end perspective but way of the on coming XX% came the low an year see a from lot the certainly following overall imports now on a the that member

we as inventory about distribution we're and going last on just had forever, sell money. people seeing out spending we I to their and continues still not causes than And that we're they're weak well. then But long what Rod. is our the That's cautious consumers on go on equally weren't economy mean people more cause worse be it we're will important, now, buying to not What how to doing mix. expected. cause was candidly and really that's right as to change, maybe and strong that's one, it price to

into Our with European But well come raw those have quarter. then We'll inflation time business I cost mentioned that take and That's think, on over Christina, for those material offset actions the back we positive. to I we raw earlier. tailwinds second material year see a price a the first mix.

we're So rather to the felt we was it. certainly weaker market going but still, sit and not

Rod Lache

specific you're Rich, about saying I about I'm underperformance. Goodyear market. really asking what understand the

down So is the XX% when XX% you're and was in XX%. industry were the down members the commercial X%, down consumer you're market replacement and down down replacement XX%,

the that of the industry what isn't imagine versus the expectations factor partly weaker, I industry delta the too? So magnitude was is, but to underperformance your a that the obviously, relative it's

Christina Zamarro

of year maybe I'll quarter last this the our was of page, in industry. reflections second gained in share letter versus in we of Europe, the but the a Rob, Well, summary and lot on here, the quarter jump noted in

was just normalization as share. a year sell of in this more So

picked last up versus a the happening but of what's Now a points year, this is a of couple reflective industry. sell-out, share in we

was major essentially levels. volume competitors. our our in back, at year than but industry our albeit much we're stronger So This that better giving plan that

Rod Lache

I as mean, if Europe Goodyear has the to a wondering I've I'm the company just, that the for whether from that, side, just strategic as alternatives that challenge strategic covered you actually And long that there's that lastly could is for and and some business create value believe region. Okay. just from ultimately on been company

Richard Kramer

are to portfolio to we Well market look the have going that brand to there say play from to the that in. Rod, alternatives to in of I at segments terms we have everything

well I to those at be is perspective, think the table. some on and lead have to as question a trends not of being all perspective think question up, technology. lead, of take complex from be have we things to a vehicle that to on the that's in plays it's solely there technology at, we most have the to I But answer best we OEMs there. have How technology to place at we but there continue mobility work over I that market your where to turn problems our look they strategic, it think some tend look they very look the and and but tend the that a that we Europe we a our

Europe it So footprint you over rather Western towards low-cost you have know or there. this, taken countries. as ourselves absolutely is time, actions know tilted that there market, an you as Europe said, difficult look to we than Rod say, Eastern a the other have and we and incredibly at we and That we've be

on been back time. acting from can [indiscernible] go beyond I in We've labor worse Our inflation that COVID. factories costs out taking higher and from are Philipsburg got with

footprint, the put there referred time, recognize have technology we think to at last later. things and out come that coming what continue we'll those business when look in you as the continue do look to the We it at you'll than to slow continue coming that right-size bottom more economy, our advantages we're and that's make will volume see we sure But can we at are line. you and to against. around the and We sooner you a we have look the actions struggling where place I to high-cost the going to we're to

Rod Lache

all Okay, right, you. thank

Richard Kramer

Thank you, Rod.

Operator

your you conclude does this call. well any Q&A all may And our as participation conference you Thank as for at session, disconnect and time. our

The Goodyear Tire & Rubber Company (GT) 3 Aug 232023 Q2 Earnings call transcript