Goodyear Tire & Rubber Company (GT) sold its 43-year old tire manufacturing plant in Union City, Tennessee to Titan Tire Corporation at an undisclosed price. Titan Tire Corporation produces tires for large earth-moving equipment, farm implements and other off-road vehicles.
The closure of the plant would put 1,800 Goodyear employees out of work. However, the U.S. Department of Labor announced a $3.4 million grant to the Tennessee Department of Labor and Workforce Development that would help provide re-employment services to about 850 laid-off workers.
Titan plans to utilize the plant for mixing rubber. However, the company has not provided any production plans for its new acquisition.
Goodyear is one of the largest tire manufacturing companies worldwide, selling its products under the Goodyear, Kelly, Dunlop, Fulda, Debica, Sava and various other “house” brands as well as private-label brands.
On a worldwide basis, there are two major competitors for Goodyear – Bridgestone, Japan, and Michelin, France, who command about 55% of the global market together. Other significant competitors include Cooper Tire & Rubber Co. (CTB), Continental Tires, Pirelli, Toyo Tires, Yokohama Tire, Kumho Tires, Hankook Tire and various regional tire manufacturers.
The company reported a profit of $161 million or 60 cents per share in the third quarter of 2011 in sharp contrast to a loss of $20 million or 8 cents per share in the same quarter of 2010.
Excluding special items, profits leapt to $195 million or 72 cents per share from $32 million or 13 cents in 2010 quarter. It was significantly higher than the Zacks Consensus Estimate of 25 cents. The increase in profit was attributable to improved price/mix and sale of new and innovative products.
Sales went up 22% to $6.1 billion on flat tire unit volumes of 47.7 million. However, it was lower than the Zacks Consensus Estimate of $6.2 billion. Sales and profits (non-adjusted) were the highest ever achieved by the company in any quarter.
Sales in the quarter were positively impacted by strong price/mix, increase in sales in other tire-related businesses (primarily chemical sales in North America), and favorable foreign currency translation of $175 million.
Segment operating income was $463 million in the third quarter, up $229 million from $234 million in the year-ago period. It was favorably impacted by improved price/mix of $739 million, which was more than offset by $506 million in higher raw material costs (net of raw material cost reduction actions).
Goodyear expects the global tire industry to continue to grow in full year 2011. In North America, the company expects the consumer replacement industry to be flat, consumer original equipment to grow 6%, commercial replacement to go up 13% and commercial original equipment to surge 50%.
In Europe, the company anticipates the consumer replacement industry to grow 4%, consumer original equipment to rise 5%, commercial replacement to increase 1% and commercial original equipment to soar 50%.
The impressive results and promising outlook have led the company to retain a Zacks #1 Rank on its stock, which translates into a short-term (1–3 months) rating of “Strong Buy”.
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