Goodyear to close 92 U.S. stores, cut jobs
DETROIT (Reuters) - Goodyear Tire & Rubber Co said it would close 12 percent, or 92, of its company-owned U.S. stores and cut 600 full- and part-time jobs as the U.S. economic downturn put more pressure on the company.
"In the current economic condition, people are driving less and it obviously affects every facet of the U.S. auto industry, including how often they replace tires or buy new cars," Goodyear spokesman Keith Price said on Tuesday after the announcement.
"The current economic condition further impacted the stores, but they were not performing well before this year. And we don't expect them to perform well," Price said. Goodyear owns 742 stores in the United States.
Goodyear, the largest tire maker in the United States by sales, said it would take after-tax charges of about $30 million in connection with the closings, half of which would be recorded in the third quarter.
The company said the closings would enable it to eliminate $9 million in annual losses.
In July, Goodyear said it was confident it would be able to navigate the near-term economic challenges, especially in North America. At that time, the company said second-quarter net income rose to $75 million, or 31 cents per share, from $56 million, or 26 cents per share, a year earlier. Revenue rose 6.5 percent to $5.24 billion.
Goodyear attributed the better-than-expected results to strength in international markets, which overcame pressure from the downturn in the North American auto market.
Sales rose 18 percent overall in its three international business units, and operating income rose 19 percent.
In North American Tire, Goodyear's largest unit, second-quarter operating earnings fell by more than half to $24 million, while sales fell 6.4 percent to $2.13 billion as demand softened from car makers and the low end of the replacement tire market.
U.S. auto sales fell to a 16-year low in July as Americans abandoned trucks and SUVs as energy costs, a weak housing market and tight credit weighed on the U.S. economy.
Earlier this month, Japan's Bridgestone Corp said it expected North American demand for new passenger car tires to fall 5 percent this year because of the decline in new car sales.
In July, Michelin, the world's No. 2 tire group by market capitalization after Bridgestone, said that in a "troubled and difficult global environment" its operating income before non-recurring items was 17.8 percent lower at 708 million euros.
Michelin said it has a market share of 17.2 percent, equal to Bridgestone and ahead of Goodyear's 16.0 percent share.
Raw material costs for tire manufacturers have also risen.
Goodyear told investors in June that it would expand in key markets over the next several years and that it aimed to have half of its tire production in lower-cost manufacturing countries by 2012.
In 2005, Goodyear undertook a plan to cut costs and expand in regions where costs were lower. It said in June that it had raised its target for cost cuts by more than 11 percent to more than $2 billion by 2009.
(Editing by Tim Dobbyn, Toni Reinhold)
