Goodyear announces growth plan, says it will repay outstanding debt

Jan. 1, 2020
The Goodyear Tire & Rubber Company recently announced that it is planning major global investments to fuel growth and plans to repay additional debt, which has been made possible by the recent sale of its engineered products business and the comp

The Goodyear Tire & Rubber Company recently announced that it is planning major global investments to fuel growth and plans to repay additional debt, which has been made possible by the recent sale of its engineered products business and the company's successful equity offering.

Goodyear also announced that it is considering the construction of new tire factories in Eastern Europe and Asia in addition to the company's previously announced intent to invest in existing tire factories to increase high-value-added capacity by 40 percent globally and increase capacity in existing low-cost plants by 33 percent. Together, these investments would drive the company toward its strategy of having 50 percent of its global capacity in low-cost countries by 2012.

The investment program includes modernization in North America to Goodyear's Fayetteville, N.C., and Gadsden, Ala., tire plants for increased high-value-added capacity, both supported with investment incentives by local and state governments.

"Consistent with what we have been telling investors, the successful completion of the sale of engineered products combined with our equity offering in May allows us to expand our future growth investments," says Goodyear Chairman and Chief Executive Officer Robert J. Keegan. "We will continue to use a disciplined approach in allocating capital to high-return investments."

In addition, Keegan said Goodyear has given notice to its lenders that it will repay its $300 million third lien term loan on August 16. The repayment will result in annualized interest expense savings of approximately $26 million, of which about $10 million will be realized in 2007. The secured loan matures in 2011. The company's debt repayment plans also include the early repayment, in the first quarter of 2008, of $650 million in secured notes that are due in 2011.

Keegan said these early repayments coupled with the company's $315 million redemption of senior notes in June will save Goodyear more than $125 million in annual interest expense.

In a related announcement, Goodyear confirmed progress against its Four Point Cost Savings Plan. The company announced in April it now targets gross cost savings of $1.8 billion to $2 billion by the end of 2009.

Goodyear indicated it had achieved nearly $750 million in cost savings against this target by June 30, just 18 months into the plan.

More than $500 million of these savings are a result of continuous improvement initiatives. While announced savings from eliminating high-cost manufacturing total $135 million, only $35 million of this was reflected in results through June 30. Sourcing raw materials, equipment and products from Asia and other low-cost countries has resulted in savings of $60 million and selling, administrative and general expense (SAG) savings-to-date total more than $150 million.

"We remain on track to achieve our targeted savings. While some of these savings are offset by currently elevated inflation levels in areas such as energy and some manufacturing inefficiencies in advance of footprint reductions, we are confident structural savings will be achieved on a net basis, particularly in North America," Keegan says.

Goodyear is one of the world's largest tire companies. The company employs about 70,000 people and manufactures its products in more than 60 facilities in 26 countries around the world. For more information about the company, visit Goodyear's Web site.

Sponsored Recommendations

Best Body Shop and the 360-Degree-Concept

Spanesi ‘360-Degree-Concept’ Enables Kansas Body Shop to Complete High-Quality Repairs

ADAS Applications: What They Are & What They Do

Learn how ADAS utilizes sensors such as radar, sonar, lidar and cameras to perceive the world around the vehicle, and either provide critical information to the driver or take...

Banking on Bigger Profits with a Heavy-Duty Truck Paint Booth

The addition of a heavy-duty paint booth for oversized trucks & vehicles can open the door to new or expanded service opportunities.

Boosting Your Shop's Bottom Line with an Extended Height Paint Booths

Discover how the investment in an extended-height paint booth is a game-changer for most collision shops with this Free Guide.