Goodyear Tire (NASDAQ:GT) & Rubber Co. reported its fourth-quarter 2024 results, showing a 3% decline in sales to $4.9 billion. Despite this, the company's stock surged by 20.13% following strategic announcements and robust free cash flow exceeding $1 billion. The company also highlighted plans for new product lines and a significant modernization project at its Oklahoma facility.
Key Takeaways
- Goodyear's Q4 2024 sales fell by 3% to $4.9 billion.
- Stock price increased by 20.13% after earnings call.
- Introduction of five new product lines in 2025.
- Modernization of Oklahoma facility to add 10 million units of premium tire capacity.
- Free cash flow exceeded $1 billion in Q4.
Company Performance
Goodyear Tire & Rubber Co. experienced a decline in sales during Q4 2024, reflecting broader market challenges. However, the company's ability to maintain a strong segment operating income of $385 million and achieve significant free cash flow highlights its operational resilience. The company's strategic focus on premium tire segments and digital sales enhancements positions it well against competitors.
Financial Highlights
- Revenue: $4.9 billion, down 3% year-over-year.
- Segment Operating Income: $385 million.
- SOI Margin: 7.8% (6.7% excluding insurance proceeds).
- Free Cash Flow: Exceeded $1 billion in Q4.
Market Reaction
Goodyear's stock price rose sharply by 20.13% following the earnings call, reaching a new level compared to its 52-week range of $7.27 to $13.86. InvestingPro analysis reveals the stock has shown significant volatility, with a -30.29% total return over the past year. Based on InvestingPro's Fair Value analysis, the stock appears slightly overvalued at current levels. This positive market reaction reflects investor confidence in the company's strategic initiatives and future growth prospects, with analysts expecting net income growth this year.
Outlook & Guidance
Looking ahead, Goodyear anticipates a decline in segment operating income in the first half of 2025, with modest volume growth expected in the second half. The company also foresees a $350 million raw material cost headwind in the first half of 2025 but remains committed to generating positive free cash flow and continuing balance sheet deleveraging.
Executive Commentary
CEO Mark emphasized the company's progress, stating, "2024 was the first year that Goodyear has grown segment operating income and margin since 2015." He also noted, "We successfully navigated a very challenging landscape in 2024," underscoring the company's strategic resilience.
Risks and Challenges
- Raw material cost pressures, with a $350 million headwind expected in early 2025.
- Volatility in the U.S. market due to increased low-end tire imports.
- Potential tariff impacts on global pricing strategies.
- Restructuring and cost-saving execution risks.
- Competitive pressures in the premium tire segment.
Q&A
During the earnings call, analysts questioned Goodyear's pricing actions across different markets and sought clarity on volume expectations by region. The company also addressed its restructuring strategies and potential tariff impacts, providing insights into its future operational focus.
Goodyear's strategic initiatives and robust financial management have positioned it well for future growth, despite current market challenges. For deeper insights into Goodyear's financial health and growth potential, investors can access comprehensive analysis and 10 additional ProTips through InvestingPro, including detailed Fair Value calculations and expert financial health scores.
Full transcript - Goodyear Tire & Rubber Co (GT) Q4 2024:
Mark, CEO, Goodyear: Welcome to our Fourth Quarter Earnings Call. I'd like to begin today by thanking our associates, our customers and all of our suppliers for helping us to deliver an outstanding year in 2024. As I'm sure you've seen in our release, we delivered fourth quarter segment operating income ahead of expectations and alongside of it, some exceptionally strong free cash flow relative to our past few years. It was a fitting end to the year marked by transformation as we set out to strengthen Goodyear's financial foundation and position the company for long term success. Looking back over my first year with the company, I'm really energized by all we've accomplished.
Across our organization, we put the emphasis and the full force of our talented team on Goodyear Forward, and together, we executed nearly $500,000,000 of transformation benefits through relentless program execution and follow through. It's a truly remarkable outcome given the program kicked off in November of twenty twenty three. To put this effort into perspective, we've now successfully delivered five consecutive quarters of margin expansion under our Goodyear Forward plan. We accomplished this growth by exceeding our Goodyear Forward targets each and every quarter this past year. The end result is together we've generated a turnaround in our earnings with full year segment operating income growth of $350,000,000 over $200,000,000 excluding the benefits from the insurance recoveries.
2024 was the first year that Goodyear has grown segment operating income and margin since 2015, excluding the recovery year immediately following COVID. Our commitment to continued progress is clear throughout the entire company. We will continue to drive execution to unlock Goodyear's full potential as we move forward. In addition to our progress on earnings, we have also completed the divestiture of our OTR, the Off the Road business, and announced an agreement as well to sell the Dunlop brand, both part of our strategic review process. It's a clear demonstration that we're focused on delivering the plan and positioning the company for future growth.
As with all transformation, it hasn't come without some challenges. As we look at the top line this past year, we've seen growth in the low end imports impacting the consumer replacement industry in The U. S, Europe, as well Brazil. The inflows at the low end of the market over the last two years are unprecedented. Looking to The U.
S. Market, low cost imported tires are largely sourced from Southeast Asia, including from a number of countries that are either not subject to antidumping or countervailing duty tariffs or whether the production has been shifted to avoid the level of tariffs that The U. S. Has sought to impose in order to counteract unfair foreign subsidies in our industry. It remains to be seen how the tariffs in our markets will evolve this year in 2025.
The Tier one tire manufacturers, including Goodyear, source our volumes from factories located in all three USMCA countries to support both the OE as well as the replacement customers in The U. S. As you would all expect, we have been quite active in our discussions with government officials, emphasizing the significance of Goodyear having the largest manufacturing footprint in The U. S, as well as the quality, the safety and the technology that we bring to consumers with our products and our services right here in The U. S.
Marketplace. We look forward to continuing our collaborations with the leaders in Washington as we work to address these critical issues impacting our business. In the meantime, we're working across our operations to mitigate any potential near term impacts of tariffs related to our Canadian and Mexican supply. As the tariff situation may be fluid and will be fluid, we'll remain agile and execute efficiency. We will also remain steadfast on our execution of the Goodyear forward, which will bolster our top line and our cost performance with benefits of USD $750,000,000 planned in 2025.
This is continuing on the foundation that we executed in 2024 and will allow us to continue to push forward on several fronts this year. We're going to take advantage of the strategic moves we made in 2024 to advance new products, modernize our manufacturing footprint, enhance our sales effectiveness and evolve our regional operational models. In The U. S, we will accelerate the introduction of new products to more effectively compete in the premium tiers and capitalize on blank space opportunities. In our last conference call, I shared how we will refresh our U.
S. Portfolio of offerings, while also increasing our coverage to a much broader spectrum of high end, high margin SKUs. We will introduce five new product lines in The U. S. This year, each with significant improvements in the large RIM SKU coverage than the predecessor lines.
On the manufacturing side, we're increasing our capabilities in our Oklahoma facility with a modernization project that will add about 10,000,000 units of new capacity for premium tires in 2025 and 2026. We will ensure we're running at the optimal level of output and efficiency and we're running the products that will yield the highest opportunities for profitability this year. As we look to our new portfolio in the market, we're also investing in our sales capabilities, both in strengthening our customer service through global digital platforms, as well as strengthening our overall value proposition for our customers, all with a clear objective to grow with the products our customers and consumers demand across the Goodyear family of brands. On the cost side, we're lowering our SG and A or SAG and optimizing our manufacturing assets as we look at both footprint as well as plant optimization. In early January, we announced the addition of Don Metzler as our SVP of Global Manufacturing and Supply Chain reporting directly to me.
Don brings more than thirty years of experience in developing, transforming and leading complex multi site world class manufacturing operations, he'll be instrumental in taking our global manufacturing capabilities to the next level. We have a significant opportunity as we look across our KPIs to drive both higher output and lower cost. In addition, Alon Conan has joined our organization from our European manufacturing operation. Alon has many years with the company and a demonstrated strength in leading manufacturing. Alon is now leading our manufacturing in The Americas.
Don Metzler is one of six leaders I've added to the leadership team over this last year. These leadership changes have been crucial to our business transformation and creating a culture of high performance in the company. In addition, with the right leadership in place, we will capitalize on opportunities to streamline our operating model and address duplication of effort and excess costs that are inherently incur under our current decentralized structured model. Today, we operate from within three regions, meaning each region manages their own product portfolio, their product development, sourcing and manufacturing. By aligning our structure and process globally, we will be able to innovate and operate with speed around the world, leveraging the benefits of standardization, optimization and our key assets, meaning our people around the world.
This new structure will translate to better products, lower costs, better service and quicker refreshing of our products across the world. The transition will take some time, but the model is one that many companies are already leveraging and will shape the future of Goodyear as well. Looking ahead, we will continue to prioritize Goodyear forward and advance several strategic initiatives to ensure we're positioned for long term growth for our shareholders. We successfully navigated a very challenging landscape in 2024 and our focus on discipline and execution will continue to support us as we work to further strengthen our financial and our operational foundation in the coming years. Next (LON:NXT), I'll turn it over to Christina and she'll take you through the financials and we'll move on to the Q and A.
Thank you.
Christina, CFO, Goodyear: Thank you, Mark. Twenty twenty four was an important year for us as we've executed on our transformation plan while continuing to build our savings pipeline for 2025. We feel very good about where we stand with respect to our targets as we look at both the goal to attain 10% SOI margin in the fourth quarter and net leverage of two to 2.5 times by the end of the year. I'll begin the year end review with the income statement on Slide eight. Fourth quarter sales totaled $4,900,000,000 down 3% from last year driven by lower volume.
Unit volume was 4% lower versus last year in line with our expectations given growth in low end imports in The U. S. SAG declined $77,000,000 driven by Goodyear forward work streams. As a percent of sales, SAG declined one full point versus last year. Segment operating income for the quarter was $385,000,000 and SOI margin increased to 7.8%.
After adjusting for significant items, including the final settlement of an insurance claim related to storm damage we incurred in 2023, our earnings per share were $0.39 Excluding insurance proceeds, SOI margin was 6.7%. Turning to the segment operating income walk on Slide 9. Lower tire unit volume and factory utilization were a headwind of $81,000,000 in the quarter. Net price mix versus raw materials was unfavorable during the quarter driven by increases in our raw material costs. Price mix was unfavorable $36,000,000 Now pricing was stable, but mix was negative given declines in commercial replacement volume and an increase in our consumer OE volume.
Continued strong execution on Goodyear Forward contributed $195,000,000 against inflation that was $50,000,000 in the quarter. And as I referenced earlier, we collected $52,000,000 of insurance proceeds in the final settlement related to our twenty twenty three tornado claim. Other SOI was favorable $41,000,000 driven by lower incentive compensation, the recovery from last year's fire at our factory in Poland and higher earnings in other tire related businesses. Turning to the cash flow and balance sheet on Slide 10. Free cash flow exceeded $1,000,000,000 in the quarter driven by strong working capital inflows.
As we shared in an earlier press release, we finalized the sale of OTR on February 3. Pro form a for that transaction, year end net debt was $6,100,000,000 and our net leverage was three times, down nearly a full turn from year end 2023. We intend to repay the $500,000,000 principal outstanding on our 9.5% notes later this month and the remaining proceeds from the sale will reduce our variable rate debt. Together, these actions should generate $70,000,000 in annual interest expense savings. Finally, earlier in January, we announced a definitive agreement to sell the Dunlop brand to SRI.
That transaction is expected to close mid year and the related upfront proceeds of about $700,000,000 will be used to further reduce our leverage in 2025. The strategic review of our chemicals business remains in process. Moving to our SBU results and starting on Slide 13, Americas unit volume decreased about 1,000,000 units driven by consumer replacement. As we look at the industry, The U. S.
Consumer replacement industry declined about 2%. Low end imports outperformed the industry and grew 11%, rising to an all time high as a result of channel stocking and pre buy activity related to potential tariffs. On the other hand, our U. S. Consumer OE volume grew approximately 20%, driven by new fitment wins and the recovery from last year's UAW strike, resulting in year over year share gains of approximately four points.
Commercial OE and replacement volume declined following industry weakness. Segment operating income for The Americas totaled $262,000,000 or 9.1% of sales. Americas earnings reflect unfavorable net price mix versus raw material costs and lower volume, partly offset by Goodyear forward benefits and insurance proceeds. Moving to Slide 14, EMEA's fourth quarter unit volume increased 2%. Our volume reflects growth in the consumer replacement market driven by a strong winter tire selling season.
The robust market was in part due to new regulations in Germany that require three peak mountain snowflake labeling on both winter and all season tires. Our OE volume was about flat in consumer, but was down about 10% in commercial given industry weakness. Segment operating income was $41,000,000 Goodyear forward benefits more than offset net price mix versus raw material cost headwinds and general inflation. Turning to Asia Pacific on Slide 15. Fourth quarter unit volume decreased 9% driven by actions to reduce lower margin business in key markets and channel destocking in China.
Segment operating income totaled $82,000,000 and 13.5% of sales, an increase of $14,000,000 compared to last year. Turning to our outlook, we expect that our first half SOI will decline based on prudent assumptions around our volume, carryover effects of production cuts in the fourth quarter and significant increases in our raw material costs. In the second half, we expect modest volume growth and price mix to more than offset raw material inflation, which when combined with Goodyear forward benefits should support earnings and margin growth, particularly in the fourth quarter. In addition, we expect consulting fees and other costs related to Goodyear Forward to decline by about $80,000,000 versus last year. As we look at risks to our 2025 plan, a further step up in raw materials later this year could limit our earnings growth in the second half as it typically takes us time to offset increases in our raw material costs with price and mix.
Similarly, potential tariff impacts related to Canada and Mexico are difficult to predict, including both primary and secondary effects. In any case, we'll manage near term volatility with the benefit of the stronger cost base we've gained under Goodyear Forward. Sources of upside to our plan include growth in volume and price mix related to the potential for U. S. Tariffs impacting countries outside of those currently contemplated.
Similarly, we also anticipate that the European Commission may make a tariff determination as to unfair competition related to consumer tire imports in the coming months. Finally, we could see raw material prices decline if pre buy and channel stocking of low cost inventory abates. As we look at the outlook drivers specific to the first quarter, we expect global unit volumes to decline approximately 2% to 3% versus last year, reflecting elevated wholesale channel inventories in The U. S. And consumer OE declines as a result of lower OE production.
In addition, we expect higher unabsorbed fixed costs of about $25,000,000 driven by lower production during the fourth quarter. Price mix is expected to be a tailwind of about $65,000,000 driven by pricing actions we have implemented and raw material index contracts with OEM fleet customers. Raw materials will increase approximately $175,000,000 dollars driven by natural and synthetic rubber price increases. At current spot rates, we would expect to see raw material cost increases of about $350,000,000 in total in the first half of twenty twenty five with about $50,000,000 of that driven by transactional currency impacts. Goodyear forward will drive approximately $200,000,000 of benefits reflecting continued progress across all work streams.
Inflation and other costs are expected to be a headwind of approximately $75,000,000 reflecting increases in transportation rates over and above core inflation. Foreign exchange will be a headwind of $15,000,000 and the non repeat of costs related to the fire in our Dembitza, Poland facility last year will be an $11,000,000 benefit. Also for modeling adjustments related to the OTR transaction, Our full year 2024 OTR revenue was about $600,000,000 and SOI was $65,000,000 Depreciation and amortization was $18,000,000 We expect the transaction to reduce 2025 SOI by approximately $80,000,000 inclusive of stranded costs, primarily in Asia. Other financial assumptions on Slide 18 have been updated to reflect our footprint actions announced under Goodyear Forward, including a recently announced plan in our Danville, Virginia facility. With major cost programs announced in three of our factories this year, we expect to incur some transitory manufacturing costs approximately $30,000,000 in the second half of the year.
With inflows in working capital and lower CapEx spend relative to 2024, we expect to generate positive free cash flow in 2025, consistent with our deleveraging objectives. With that, we'll open the line for your questions.
Conference Operator: Thank you very much. We'll take our first question from James Picariello with BNP Paribas (OTC:BNPQY). Please go ahead.
Unidentified Analyst: Hi, everybody.
James Picariello, Analyst, BNP Paribas: My first question is just on your pricemix expectation for the year. I know it's harder to call the farther out, but can you just confirm what the expectation is for the first half, if you already provided that? And then thoughts on the second half, raw materials, should we assume neutral or an additional headwind potential based on spot pricing? And
Unidentified Analyst: have
James Picariello, Analyst, BNP Paribas: you seen any pricing actions from your peers thus far given the rather substantial raw material headwinds that the industry is facing? Thanks.
Christina, CFO, Goodyear: Yes, sure. James, I'll start and I'll have Mark follow-up on the pricing environment. When we look at our SOI bridge for 2025, your price mix should grow from the first quarter on into the second and third quarter. A part of that is the realization of our OE RMIs and our raw material index contracts with our fleets. Those generally repriced on a six month in six month arrears.
And so we don't have nearly the full run rate here in Q1. There's also been pricing actions that we've taken in our key markets around the world in the first quarter as well. And I'll let Mark follow-up on that. When we look at the raw materials, what I would say is the $350,000,000 is baked based on current spot rates for the first half. If spot rates hold, we could see a headwind of about $100,000,000 to $150,000,000 in the back half of the year.
Of course, raw spot prices have been pretty volatile, so we'll continue to update you on that. But again, looking for price mix to grow into Q2 and Q3 before leveling off or just depending on what happens the rest of the year with raws. Mark?
Mark, CEO, Goodyear: Yes, James. Yes, just talking through some of our pricing actions that we've already happened as Christina mentioned, right. Since the third quarter call, pricing actions we've taken, we've done multiple rounds of pricing globally, commercial tires in Turkey, for example, across the Latin American countries, as well as consumer pricing in Europe, as well as Middle East. And then across The U. S.
On specific product line, we've taken product actions, both in quarter four as well as rolling into quarter one. So we'd expect to see the benefit of that going into the quarter two time period as that flows through the system. We continue to watch things to make sure that we are competitively priced based on our upgraded marketing intelligence. As we've mentioned, it's a big area we focused on in 2024 was our scraping and making sure that we're benchmarking that we're in the right price position across each of the categories and really taking a look at that from a consumer facing thing so that we are competitive in the marketplace.
James Picariello, Analyst, BNP Paribas: Got it. That's helpful. And then I just have a quick two part question. One on volume, you have the full year industry volume assumption, consumer flat, commercial up 3% at the midpoint again at the industry level. Just your thoughts on Goodyear's volume performance for the year, we could see the down 2% to 3% for the first quarter.
Just curious what the expectation is for the second half? Is on easier comps, is there a good pathway for likely growth given channel inventory levels at this point? And then just the in your Goodyear forward savings in the fourth quarter, there was obvious upside. So just had a question on what drove that upside? It seems like it might have been in the margin expansion effort.
Is that just your pricing actions? Thanks.
Mark, CEO, Goodyear: Yes. Let me talk about volumes to start and then we can talk about Goodyear Forward with Christina. Again, as you mentioned in the consumer replacement side, we expect overall global growth in 2025 with a stronger marketplace in Europe and Asia and continue to see we expect to see volatility in The U. S. Market relative to the imports.
In the South America or Latin American countries and Brazil, we expect to see some declines in the imports as new tariffs have gone into impact there starting in October. But for the consumer OE, we think there will be a flattish first half with growth on the second back end, as you mentioned, on The U. S. Side. As we look at commercial, from a replacement demand, we think that's going to stabilize progressing throughout the year with non imports declining at the tariffs that were recently announced begin to take impact, especially those coming out of Thailand.
And then, so overall commercial OE side, first half, I think will be relatively soft, continuing on from last year. And then second half being stronger with the new GHD regs going into place and the fleets beginning their pre buy activities before those new regulations go into place. And then your second question and secondary part of that, how are we going to address those lower volumes? So we're doing that on multi fronts. As we shared in quarter three, we are aggressively growing.
This was an area that we were behind on. We took a step back. We reorganized ourselves in terms of our engineering SWAT teams, our go to market teams and have dedicated focus on bringing 100 and some odd nearly 200 additional SKUs into the marketplace in the high end, highly profitable segments of the market that are going to generate the returns and greater value for us and also at a premium price. So that's a key area of focus for us. We've got five new power lines coming in to the marketplace around the world, our WeatherReady IIs, our Wrangler workhorses, the ASIM6s we discussed that are the really on the premium side of our high value UHP market, the Eagle F1 all season as well in the high segments and MaxLife two, right, all of which are coming into the marketplace throughout this year, which again is why we feel good towards that second half as these all are coming into the marketplace at volume and the right number of SKUs in each of those power lines, James.
Christina, CFO, Goodyear: And James, just to follow-up your question then. I mean, there's a lot of time Mark just spent on price mix actions and a lot of that started in Q3 last year. And so you're seeing that in the Goodyear Forward program, especially in the premium end of the market.
James Picariello, Analyst, BNP Paribas: Appreciate it. Thanks guys.
Conference Operator: We'll take our next question from Emmanuel Rosner with Wolfe Research. Please go ahead.
Emmanuel Rosner, Analyst, Wolfe Research: Thank you. I was hoping to actually follow-up on the same topics, which is volume, pricemix outlook, first half versus second half. So it seems the outlook contemplates decline in SOI at least in the first half, but then growth in the second half. Can you just maybe just go back over for both volume, price and mix? What will be the anticipated drivers of improvement in the second half?
And I guess how much visibility and conviction do you have on this at this point?
Christina, CFO, Goodyear: Sure. Hi, good morning, Emmanuel. I'll start out with the SOI bridge for 2025. And if you look at the puts and takes as we've talked about them, our 2024 SOI was about $1,300,000,000 If we adjust that for insurance proceeds, we are at $1,200,000,000 Now Goodyear Forward, of course, going to add $750,000,000 for us against a base inflation of $225,000,000 We said we're also going to have headwinds in other costs outside of core inflation and that's mostly driven by transportation. That's going to run $20,000,000 a quarter.
We also have three factories that we are ramping down or decreasing production in the third and fourth quarter of this year. So that will increase our manufacturing costs through some transitory inefficiencies in the third and fourth quarter by about $30,000,000 We've talked a lot about raw material headwinds, about $350,000,000 in the first half, about $100,000,000 maybe up to $150,000,000 at current spot prices in the second half. And then spent a lot of time already on the call about how we're thinking around price mix. We've given you the first quarter, but that should grow pretty materially in Q2 and Q3 and get to a run rate by Q4. And that's driven by pricing actions that we've implemented in the first quarter already, pricing through our OERMI index agreements with fleets as well.
And then obviously, Mark just spent a lot of time on the new product development, new product lines we're bringing into the market, which should also support our mix. OTR should be a headwind. We've outlined that in the presentation, dollars 80,000,000 on a full year basis and then it does come down to volume. What we've laid out is lower first half driven mostly by The U. S.
Channel stocking of low end imports and lower OE volumes just following OEM production broadly and then moderate growth in the second half for us driven by very low comps and a recovering industry broadly in commercial and in consumer OE. And so once you put all of that together, I think it's safe to say you should be able to model a level of SOI that's in line with our current year, including the insurance, which means that we should be demonstrating a very strong level of underlying growth in the business, something on the order of 10%.
Emmanuel Rosner, Analyst, Wolfe Research: That is super helpful. Thank you so much. And then just so in line with currency, I mean, in line with 2024?
Christina, CFO, Goodyear: In 2025,
Emmanuel Rosner, Analyst, Wolfe Research: would it be in line with 2024, including the proceeds you got last year?
Christina, CFO, Goodyear: Yes. So like the 1320 level.
Emmanuel Rosner, Analyst, Wolfe Research: Got it. Yes. That was our understanding as well. Perfect. And then if you could just help us out with the free cash flow walk as well.
And then you called for positive free cash flow. I assume that this is before restructuring. How should we think about restructuring, which I think you quantify for this year, but also how much more is there to spend as part of the overall plan?
Christina, CFO, Goodyear: Yes, sure. So the positive free cash flow includes $400,000,000 of restructuring. So we intend to be positive, including restructuring. This is really driven by that SOI we just talked about and you should get to an EBITDA of call it about $2,100,000,000 after you go through the model that we just talked through on SOI. Working capital will be a benefit.
We've laid that out. Restructuring, of course, against that taxes, a couple of hundred million dollars 4 hundred million dollars in restructuring, sorry. And then interest expense is coming down on a year over year basis. Interest income will offset that. We'll have our normal financing fees and then CapEx significantly lower than 2025.
And all of that should get you to a fairly positive free cash flow expectation for 2025. And then as you think through to next year, we should see restructurings normalize. There's a little bit of carryover from Goodyear forward thinking restructuring next year will be on the order of $100,000,000 to $200,000,000 We'll see further interest expense savings once we close on the Dunlop transaction and finalize the strategic review of chemicals. So we would be in a position next year to drive cash flows, significant positive cash flow reflective of the underlying earnings run rate of the business.
Emmanuel Rosner, Analyst, Wolfe Research: Great. That's super helpful. Just final point, is it is the overall spending on restructuring lower than initially anticipated? Maybe just my memory doesn't serve me right, but it sounded to me that the total budget could have been sort of like north of $1,000,000,000 Now we're talking about just $400,000,000 this year and maybe $100,000,000 to $200,000,000 next year. So is it just an overall lower bill than expected?
Christina, CFO, Goodyear: I think, yes. Emmanuel, we had set aside about $1,000,000,000 as part of Goodyear Forward for restructuring. And as I've just laid it out, we spent $200,000,000 in '20 '20 '4 million dollars The capital that we're going to allocate in 2025 is about $400,000,000 and then up to $200,000,000 next year. So we're probably going to land right around $800,000,000 or so as part of the overall program. I think some of that is terrific negotiations with our constituents around the world.
I think a part of that also is just the execution that we've seen in what Mark's describing about generating efficiencies in the factories to increase our volumes. And so no other announcements planned, nothing else in the pipeline. If anything changes, we'll keep you updated.
Emmanuel Rosner, Analyst, Wolfe Research: Great. Thank you so much.
Conference Operator: Thank you. And our next question comes from Doug Carson with Bank of America (NYSE:BAC). Please go ahead.
Doug Carson, Analyst, Bank of America: Great. Thanks so much for the detail on the slide deck. I want to maybe just turn good morning. I want to maybe turn to the balance sheet for a moment here. Net leverage now as it's three times almost a turn below what you had last year.
So the forward program is certainly working. And I've just kind of pulled up your ratings at B1 and B plus seemed pretty underrated relative to the progress you made on the balance sheet. Have you had a chance to kind of refresh with the rating agencies to have them take a kind of newer look at where the balance sheet is headed? That's my first question.
Christina, CFO, Goodyear: Yes. Thanks Doug for the question and certainly making a lot of progress on the balance sheet. We intend to close on the Dunlop transaction a little later this year and that will bring in $700,000,000 more of gross proceeds that we intend to use to deleverage even further. We do talk to each one of the rating agencies very regularly. Last night in fact was the most recent conversation and I think they do look at our forward forecast.
I think there was a lot of emphasis placed on our 2024 free cash flow, which you can see was slightly negative because of a lot of the restructuring programs that we had in place. And so I think as we look ahead, we would expect more positive outlook and sentiment from the rating agencies just given the progress so far.
Doug Carson, Analyst, Bank of America: That's great. That's well deserved. I was impressed to see the close to 50% increase in the Goodyear forward cost savings up to $750,000,000 And as I look at the environment, we're in so much volatility between tariffs and raw material fluctuations. Can you maybe just help us think about some of those big line items you have, $300,000,000 for footprint optimization and $200,000,000 for purchasing. Are some of these categories less at risk, more at risk given the environment?
Just trying to be thoughtful about the $750,000,000
Mark, CEO, Goodyear: Yes. Doug, we feel really, really positive about the look ahead, right? We executed very strongly in 2024. We were able to put additional projects and they're grassroots projects, right, as well. So really good.
It's coming from our associates from around the world. We've got our dedicated at the start of the call, we've now combined our manufacturing organization into one global organization with our three regional heads reporting to Don Metzler, our new VP there with a very strong thirty year track record. I spent a lot of time in the space myself last year with the teams as we went through just again working on the nuts and bolts of manufacturing basics, right, of us really working on our efficiencies, our operating equipment effectiveness, our scrap rates, getting through the material flows and really upgrading things in terms of just the diligence and the few KPIs that make the most difference in terms of us really getting ourselves to a super strong position there. So we feel very good about our plant optimization. We announced the footprint actions both last year as well as at the start of this year in our commercial truck operation to be in a position where we can compete in the marketplace there at the right cost structure.
And we continue to drive those work streams. In the purchasing side, we're continuing to go through on looking at our cost in the purchasing arena, working with our supply base, both on current programs as well as future programs and a strong drive and efficiency improvement in our indirect and MRO activity. So we feel again in that area very strong. We've taken actions throughout last year as well as early this year in our SAG or SG and A, however you want to refer to that as, of making sure that our overhead structure is in the right condition there and continue to look at that on a monthly basis as we take a look to say what are things that we can do more efficiently than we've been doing it. So those activities along with our R and D, looking at our equipment standards, looking at how we spend, how we negotiate and long story short of it, we feel very, very strong that the improved savings rate are going to continue.
And it's just really gotten to a point that is embedded in our DNA.
Doug Carson, Analyst, Bank of America: Great. Mark and Christina, thank you very much for taking my questions. It was very helpful.
Conference Operator: Thank you.
Christina, CFO, Goodyear: Thank you.
Conference Operator: We'll go next to Edison Yoo with Deutsche Bank (ETR:DBKGn). Please go ahead.
Unidentified Analyst: Hey, good morning. Thanks for taking our questions. I want to ask about the on the chemical side. I know you said you're still on track for a sale. Has the reception been a bit more muted?
We speak to some chemical companies and obviously there's some challenges just for the industry there. What is your latest thoughts on that?
Christina, CFO, Goodyear: Edison, we don't have a lot more to say other than that. That review remains in process. I think that generally speaking, I think the interest has been pretty across all sectors whether you think about strategics or private equity. This one in fact was when we got into the market a little bit later, of course, the focus on OTR and Dunlop in the earlier part of 2024. Thank you.
Unidentified Analyst: Understood. And then just a quick one on the SOI in APAC and apologies if I missed it earlier. It was actually very strong margin. Was there anything kind of one off there, some sort of benefit that doesn't carry over? Just wanted to double check on that.
Mark, CEO, Goodyear: No, we've got we just have a really strong operation in AP. Their manufacturing prowess is very strong, pricing in the marketplace very good, new fresh products going in, winning with the right winners in the marketplace, particularly on that excuse me, on the EV front there and just really operations doing quite well on AP.
Unidentified Analyst: Got it. Actually just one quick one, one last quick one. I know you know I heard earlier about the expansion Oklahoma. Is that in any way kind of maybe mitigation in case of the tariffs?
Mark, CEO, Goodyear: No. We would like to tell you our crystal ball was good enough to do that, Doug, but that was not the case, right? It's just necessary modernization that we needed to make across our footprint. And that's one of our larger facilities or one of the largest actually. And we just were taking all the right actions we needed to take there in terms of moving more into the higher rim sizes, additional volume for the marketplace in that higher profit, higher margin segments.
Unidentified Analyst: Great. Thank you very much.
Conference Operator: Thank you. And we have no further questions. I'd like to turn the call back over to Mark for any final or closing remarks.
Mark, CEO, Goodyear: Okay. So I'd like to thank you all for taking the time to join us today for the fourth quarter earnings call. We've come a long way here over the last year and still have a lot on our plate to action, but feel very good. We've got the right leadership team. We've got all the right associates around the world.
And we want to we're really looking forward to sharing with you all the progress we make on our Goodyear Forward initiatives as we move throughout this year. Thank you all for joining us today and everybody have a great day.
Conference Operator: Thank you. And that does conclude today's conference. We appreciate your participation. You may disconnect at any time.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.