The Goodyear Tire & Rubber Company (NASDAQ: GT) today announced cost savings actions in response to a challenging industry environment and cost pressure driven by inflation.
Planned rationalization and workforce reorganization would result in an approximately 5% reduction in salaried staff globally, or about 500 positions.
“Our fourth quarter results fell short of our expectations given a significantly weaker industry backdrop, particularly in Europe,” said Richard J. Kramer, chairman, chief executive officer and president. “While our businesses have performed at a high level through the volatility of the past several years, the uncertain near-term macroeconomic outlook and continuing impacts of inflation make these difficult actions necessary to position our business for future success.”
Global replacement tire industry demand remained weak in the fourth quarter, led by a 12% decline in EMEA. When coupled with the impacts of inflation — including significant increases in energy costs — the Company expects its EMEA business unit to report a fourth quarter segment operating loss of approximately $80 million. EMEA had reported positive segment operating income since the second quarter of 2020.
While raw material and certain other input costs have declined recently, the Company seeks to drive efficiencies to help offset inflation in other areas like wages and benefits.
The rationalization and reorganization are expected to be completed during the first and second quarters with a portion in international businesses subject to required consultation with relevant stakeholders. These actions are in addition to cost synergies related to the integration of Cooper Tire.
The Company expects to record pre-tax charges associated with these actions of approximately $55 million, primarily relating to cash severance payments that are expected to be substantially paid during the first half of 2023. The rationalization and reorganization will result in a quarterly run-rate benefit of approximately $15 million beginning in the second quarter. Savings in the first quarter are expected to be $5 million.
These actions follow the Company’s earlier announced plans to close its Melksham, United Kingdom, manufacturing facility and exit its TrenTyre retail operations in South Africa to support EMEA’s overall competitiveness.
The Company will report fourth quarter and full-year 2022 financial results after market close on Wednesday, Feb. 8, followed by an investor conference call at 8:30 a.m. EST on Thursday, Feb. 9.