Goodyear to Cut Work Force 10%
Goodyear Tire & Rubber Co., the world’s biggest tire maker, said Wednesday that it’s eliminating about 10,700 jobs, or 10% of its work force, over two years because raw material costs are rising and auto makers are producing fewer vehicles.
The cuts are in addition to 3,500 made last year. The new staff reduction is expected to reduce costs by about $150 million this year and help cut costs by $500 million annually by 2005.
The company’s loss from operations was $16.5 million, or 11 cents a share, compared with profit from operations of $47.6 million, or 29 cents, in the year-ago fourth quarter. Sales fell 4.1% to $3.53 billion.
Analysts on average had expected a larger loss of 16 cents, according to First Call/Thomson Financial Corp.
The company took a fourth-quarter charge of $93.7 million, or 59 cents a share, for the job cuts and plant consolidations, resulting in a loss of $102 million, or 65 cents.
Goodyear’s plan is the latest attempt in the last three years to restructure operations and boost sales in the face of rising costs. The price of crude oil, which represents about 25% of the costs for building tires, has tripled since January 1999.
To help trim costs, the company will eliminate about 20% of its tire lines and sizes and is cutting inventory by about $140 million in the first quarter.
Compensation of Goodyear’s sales force and executives will be linked to profit. Union workers also agreed to take stock options rather than a pay raise during recent contract negotiations, Chief Executive Samir Gibara said.
Goodyear expects to take $64-million in additional charges in the first quarter for the job cuts and the consolidation of product lines.
Goodyear gained about 3 percentage points in consumer market share in the fourth quarter because of the safety investigation into Bridgestone’s Firestone brand tires, Gibara said, although it wasn’t enough to offset the rise in raw material costs.
The company expects profit to be at least $4 a share after 2002, Gibara said. He wasn’t more specific.
Shares of Akron, Ohio-based Goodyear fell 22 cents to close at $24.20 on the New York Stock Exchange.
The stock, which traded as high as $76.75 in March 1998, has risen 10 percent in the past year.
At a Glance
Other earnings, excluding one-time gains or charges unless noted, include:
* Campbell Soup Co. said fiscal second-quarter earnings fell 3.5% to $271 million, or 65 cents a share, a penny higher than expectations, as it increased advertising spending for its soups and saw sales rise just 2.1% to $1.96 billion. The company also said it estimates a third-quarter profit of 28 cents to 30 cents a share, rather than the 32 cents analysts forecast, as it continues to boost ad spending.
* Global Crossing Ltd.’s fourth-quarter net loss widened to $454 million, or 58 cents a share, from a loss of $240.6 million, or 34 cents per share, a year ago, as the high cost of building its undersea and land-based communications networks offset surging sales of data services. Excluding one-time items, the company lost 70 cents, much less than the 89 cents analysts anticipated. Revenue rose 43% to $1.54 billion.
* Newell Rubbermaid Inc. reported a 23% drop in the fourth quarter to $117.6 million, or 44 cents a share, on flat sales of $1.76 billion, and said earnings in the first quarter and the year will miss estimates. The results matched analyst forecasts.
* Tricon Global Restaurants Inc. said profit from continuing operations fell 2% to $120 million, or 81 cents a share, beating forecasts of 79 cents. The operator of the KFC, Taco Bell and Pizza Hut chains said sales fell 6% to $2.18 billion as a result of its program to sell company-owned restaurants to franchise partners to save money.
* VoiceStream Wireless Corp. said its fourth-quarter loss widened to $807 million, or $3.49 a share, from $151.7 million, or $1.58 a share, a year earlier, as it added a record number of new customers and costs surged. Sales climbed to $650 million from $164 million. Separately, VoiceStream said it would provide access to AOL Time Warner Inc.’s America Online service on VoiceStream phones and the high-speed wireless Internet service it plans to offer.
