Q4 2024 The Goodyear Tire & Rubber Co Earnings Call
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Margo: Good morning, My name is Margo and I'll be your conference operator today at this time I'd like to welcome everyone to Goodyear's fourth quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise. After some opening remarks, there will be a question and answer session. You may registered to ask a question at any time by pressing the star one on your telephone keypad, we withdraw.
Speaker Change: All yourself into the queue by pressing star two. Please note. This call may be recorded it is now my pleasure to turn the conference over to Greg Fink Senior director of Investor Relations. Please go ahead.
Margo: Yeah.
Speaker Change: Thank you Margo and good morning, and welcome to our fourth quarter 2024 earnings call today on the call we have Mark Stewart, our CEO and President and Christine as of Tomorrow, Our executive Vice President and CFO.
Speaker Change: During this call we will refer to forward looking statements and non-GAAP financial measures forward looking statements involve risks assumptions and uncertainties that could cause actual results to differ materially from those forward looking statements for more information on the most significant factors that could affect future results. Please refer to slide two.
Speaker Change: One of the supporting presentation for today's call and in our filings with the SEC. These materials can be found on our website at investor Goodyear Dot Com, where a replay of this call will also be available they.
Speaker Change: A reconciliation of non-GAAP financial measures discussed on today's call to the comparable GAAP measures is also included in the appendix of the presentation.
Mark Stewart: With that I will now turn the call over to Mark.
Mark Stewart: Thank you, Greg and good morning, everyone 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 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.
Mark Stewart: And alongside of it it's an exceptionally strong free cash flow relative to our past few years. It was a fitting in 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.
Mark Stewart: 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 million of transformation benefits through relentless program execution and follow through.
Mark Stewart: It's a truly remarkable outcome given the program kicked off in November of 'twenty three.
Mark Stewart: 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 target each and every quarter. This past year. The end result is together we generated a turnaround in our earnings with full year segment.
Mark Stewart: <unk> income growth of $350 million over $200 million, excluding the benefits from the insurance recoveries.
Mark Stewart: 2024 was the first year that Goodyear has grown segment operating income and margin since 2015, excluding the recovery year immediately following COVID-19. Our commitment to continued progress is clear throughout the entire company. We will continue to drive execution to unlock goodyear's full potential.
Mark Stewart: As we move forward.
Mark Stewart: 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.
Mark Stewart: Yes.
Mark Stewart: 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, our unprecedented looking to the U S market low cost.
Mark Stewart: Imported tires are largely sourced from southeast Asia, including from a number of countries that are either not subject to anti dumping 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 counter act unfair foreign subs.
Mark Stewart: <unk> in our industry.
Mark Stewart: It remains to be seen how the tariffs in our markets. The rule evolves. This year in 2025, the tier one tire manufacturers, including good year source our volumes from factories located in all three U S. M C. A countries to support both the OE as well as the replacement customers in the U S. As.
Mark Stewart: 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.
Mark Stewart: 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.
Mark Stewart: And may be fluid and we'll be fluid, we'll remain agile and execute efficiency.
Mark Stewart: We will also remain steadfast on our execution of the Goodyear forward, which are bolster our topline and our cost performance with benefits of 750 million U S. Dollar planned in 2025. This is continuing on the foundation that we executed in 'twenty four and will allow us to continue that.
Mark Stewart: Forward on several fronts. This year, we're going to take advantage of the strategic moves we made in 'twenty four 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 where we refresh our U S portfolio of offerings, while also increasing our coverage to a much broader spectrum of high end high margin SKU.
Speaker Change: Hughes, 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.
Speaker Change: On the manufacturing side, we're increasing our capabilities in our Oklahoma facility with a modernization project that will add about 10 million units of new capacity for premium tires in 'twenty five and 26.
Speaker Change: 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 strength.
Speaker Change: And our overall value proposition for our customers.
Speaker Change: All with the clear objective to grow with the products, our customers and consumers demand across the Goodyear family of brands on.
Dan: On the cost side, we're lowering our SG&A our S E G 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 Dan brings more than 30.
Dan: Years of experiencing developing transforming and leading complex multi site world class manufacturing operations will 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 costs.
Dan: In addition, Alon Conan has joined our organization from our European manufacturing Operation Alon has many years with the company and a demonstrated strength and leading manufacturing align is now leading our manufacturing in the Americas.
Dan: So I'm not as familiar as 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.
Dan: The address duplication of effort and excess costs that are inherently incur under our current decentralized structure 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.
Dan: To innovate and operate with speed around the world leveraging the benefits of standardization optimization and our key assets meeting our people around the world. This new structure will translate to better products lower cost better service and quicker refreshing of our products across the world.
Dan: 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.
Dan: 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 'twenty, four and our focus on discipline and execution will continue to support.
Dan: As we work to further strengthen our financial and our operational Foundation.
Dan: In the coming year.
Dan: Next I'll turn it over to Kristina and she'll take you through the financials and then we'll move on to the Q&A. Thank you.
Kristina: Thank you Mark 2024 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 coal to attain 10% Soi margin in the fourth quarter and net leverage of two <unk>.
Dan: Two and a half times by the end of the year.
Kristina: I'll begin the year end review with the income statement on slide eight.
Kristina: Fourth quarter sales totaled $4 9 billion down 3% from last year, driven by lower volume.
Kristina: Unit volume was 4% lower versus last year in line with our expectations given growth in low end imports in the U S.
Kristina: <unk> declined $77 million driven by Goodyear forward work streams as a percentage of sales <unk> declined one full point versus last year.
Kristina: Segment operating income for the quarter was $385 million and Soi margin increased to seven 8%.
Kristina: 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 39 cents.
Kristina: Excluding insurance proceeds Soi margin was six 7%.
Kristina: Turning to the segment operating income walk on slide nine.
Kristina: Our tire unit volume and factory utilization were a headwind of $81 million in the quarter.
Kristina: Net price mix versus raw materials was unfavorable during the quarter driven by increases in our raw material costs.
Kristina: Price mix was unfavorable 36 million now pricing was stable, but mix was negative given declines in commercial replacement volume and an increase in our consumer OE volume.
Kristina: Continued strong execution on Goodyear for what contributed $195 million against inflation that was $50 million in the quarter.
Kristina: And as I referenced earlier, we collected $52 million of insurance proceeds in the final settlement related to our 2023 tornado claim.
Kristina: Other soi was favorable $41 million 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.
Kristina: Turning to the cash flow and balance sheet on slide 10 free cash flow exceeded $1 billion in the quarter driven by strong working capital inflows.
Kristina: We shared in an earlier press release, we finalized the sale of the OTR on February 3rd pro forma for that transaction yearend net debt was $6 1 billion and our net leverage was three times down nearly a full turn from year end 2023.
Kristina: We intend to repay the 500 million principal outstanding on our 95% notes later this month and the remaining proceeds from the sale will reduce our variable rate debt.
Kristina: Together these actions should generate $70 million in annual interest expense savings.
Kristina: Finally earlier in January we announced a definitive agreement to sell the Dunlop brand to Esri.
Kristina: That transaction is expected to close mid year and the related upfront proceeds of about $700 million will be used to further reduce our leverage in 2025.
Kristina: The strategic review of our chemicals business remains in process.
Kristina: Moving to our SBU results and starting on Slide 13 America's unit volume decreased about 1 million units driven by consumer replacement as.
Kristina: 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 in pre buy activity related to potential tariffs.
Kristina: On the other hand, our U S consumer OE volume grew approximately 20% driven by new fitment wins and recovery from last year's UAW strike.
Kristina: Elting and year over year share gains of approximately four points commercial OE and replacement volume declined following industry weakness.
Kristina: Segment operating income for the Americas totaled $262 million or nine 1% of sales.
Kristina: Americas earnings reflect the unfavorable net price mix versus raw material costs, and lower volume, partly offset by Goodyear forward benefits and insurance proceeds.
Speaker Change: Moving to slide 14, EMEA 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 and Jeremy that require three peak mountain snowflake labeling on both winter and all season.
Kristina: Tires.
Kristina: Our OE volume was about flat in consumer but was down about 10% in commercial.
Kristina: Given industry weakness.
Kristina: Segment operating income was $41 million could you forward benefits more than offset net net price mix versus raw material cost headwinds and general inflation.
Kristina: 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.
Kristina: Segment operating income totaled 82 million and 13, 5% of sales an increase of $14 million compared to last year.
Kristina: Turning to our outlook, we expect that our first half Soi will decline based on prudent assumptions around our volume.
Kristina: [noise] over 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.
Kristina: In addition, we expect consulting fees and other costs related to Goodyear forward to decline by about $80 million versus last year.
Kristina: As we look at risks to our 2025 planned a further step up in raw materials. Later this year could limit our earnings quest in the second half as it typically takes us time to offset increases in our raw material cost with price and mix.
Kristina: Similarly potential tariff impacts related to Canada, and Mexico are difficult to predict including both primary and secondary effects in any case for managed near term volatility with the benefit of the stronger cost base, we've gained under Goodyear fault way.
Kristina: 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.
Kristina: 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.
Kristina: Finally, we could see raw material prices decline, if pre buy and channel stocking of low cost inventory abates.
Kristina: 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.
Kristina: In addition, we expect higher unabsorbed fixed costs of about $25 million driven by lower production during the fourth quarter.
Kristina: Price mix is expected to be a tailwind of about 65 million driven by pricing actions, we have implemented and raw material index contract with OE and fleet customers.
Kristina: Raw materials will increase approximately $175 million driven by natural and synthetic rubber price increases.
Kristina: At current spot rates, we would expect to see raw material cost increases of about 350 million in total in the first half of 2025 with about $50 million of that driven by transactional currency impacts.
Kristina: Goodyear for forward will drive approximately $200 million of benefits, reflecting continued progress across all work streams.
Kristina: Inflation and other costs are expected to be a headwind of approximately $75 million, reflecting increases in transportation rates over and above core inflation.
Kristina: Foreign exchange will be a headwind of $15 million and the non repeat of costs related to the fire in our den Beecher Poland facility last year will be an $11 million benefit.
Kristina: Also for modeling adjustments related to the OTR transaction, our full year 2024 O T. Our revenue was about $600 million and Soi was $65 million.
Kristina: Depreciation and amortization was $18 million.
Kristina: We expect the transaction to reduce 2025 S O Y by approximately $80 million inclusive of stranded costs primarily in Asia.
Kristina: Other financial assumptions on slide 18 have been updated to reflect our expectations for 2025 interest expense will be approximately $60 million lower than last year driven by debt reduction.
Kristina: Higher restructuring reflect footprint actions announced under Goodyear forward, including our 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 million in the second half of the year.
Kristina: 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.
Kristina: With that we'll open the line for your questions.
Thank you very much ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad, you may withdraw yourself from the queue at any time by pressing star two and once again that is star one for a question. We'll take our first question from James Picariello with BNP Paribas. Please go ahead.
Speaker Change: Hi, everybody.
Kristina: Hi.
Kristina: My first question is just on.
Kristina: Your price mix expectation for for the year I know it's.
Kristina: Harder to call the farther out but yeah can you just confirm.
Kristina: 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.
Kristina: And have you seen any pricing actions from your peers, thus far given the rather substantial raw material headwinds that the industry space.
Kristina: Yes, sure James I'll start and I'll have mark follow up on on the pricing environment. When we look at our Soi bridge for 2025.
Kristina: Price mix should grow from the first quarter on into the second and third quarter are part of that is the realization of our OE Rmi and our raw material index contracts with our fleets those generally reprice on a six months in six month arrears and so we don't.
Kristina: Have nearly the full run rate here in Q1, there's also been pricing.
Kristina: Pricing actions that we've taken in our key markets around the world.
Kristina: In the first quarter as well and I'll, let I'll, let mark follow up on that when we look at the raw material. What I would say is the 350 is baked based on current spot rates for the first half.
Kristina: If spot rates hold we could see a headwind of about $100 million to $150 million in the back half of the year of course spot prices have has 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.
Kristina: Level ing off or just depending on what happens the rest of the year with Roth Marc Yes, James just thinking talking through some of our pricing actions that we've already happened as Kristina mentioned right since the third quarter.
Kristina: Call.
Kristina: Pricing actions, we've taken we've done multiple rounds of pricing globally.
Kristina: Commercial tires in Turkey for example across the Latin American countries as well as consumer pricing in Europe, as well as as Middle East and then across the U S. On specific product line, we've taken product actions in both in quarter four as well as rolling into quarter. One so we would expect to see.
Kristina: See the benefit of that going into the quarter two time period.
Kristina: As that flows through the system, we continue to watch things to make sure that we are competitively priced based on.
Speaker Change: Our upgraded marketing intelligence says we've mentioned he is a big area. We focused on in 24 was our our scraping and making sure that that we're benchmarking that we're in the right price position across each of the categories.
Speaker Change: And really taking a look at that from a consumer facing things. So that we are competitive in the marketplace.
Speaker Change: Got it.
Speaker Change: That's helpful and then.
Speaker Change: A quick two part question one on volume.
Speaker Change: The full year industry volume assumption.
Speaker Change: Consumer flat.
Speaker Change: <unk>, 3% at the midpoint again at the industry level.
Speaker Change: Your thoughts on good years volume performance for the year, we could see the down two to three for the first quarter just.
Speaker Change: Just curious yet.
Speaker Change: Whats your expectation is for the second half.
Speaker Change: Yeah on easier comps is there.
Speaker Change: Pathway for for likely growth given.
Speaker Change: Channel inventory levels at this point and then just the.
Speaker Change: And 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 in the margin expansion effort is that just your pricing actions.
Speaker Change: Okay. Yeah, Let me, let me talk about volumes to start and then we can talk about Goodyear forward with with Christina.
Speaker Change: So again as you mentioned in the consumer replacement side, we spent expect overall global growth and 25 with a with a stronger market place in Europe, and Asia and continued to see we expect to see volatility in the U S market relative to the imports in the.
Speaker Change: South America, or Latin American countries in 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'll be a flattish first half with growth on the second sight second back in as you mentioned on the on the U S side.
Speaker Change: As we look at commercial you know.
Speaker Change: From a replacement demand, we think that's going to stabilize progressing throughout the year with non imports declining as the tariffs that were recently announced begin to take it back impact, especially those coming out of Thailand.
Speaker Change: 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 GST regs going into place and the fleets beginning their pre buy activities before those new regulations go into place and then you saw.
Speaker Change: Second question in secondary part of that you know how are we going to address those lower volumes. So we're doing that on a 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 are reorganized ourself in terms of our engineering Swat teams, our go to market teams and ER.
We have dedicated focus on bringing you know 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 that's a key area of folk.
Speaker Change: For Us we've got five new power lines coming in to the marketplace around the world are weather ready twos, our wrangler workhorses. The ACM six as we discussed is that are the really on the premium side of our high high value U H P market. The Eagle F. One all season as well in the high segments and Max life too.
Speaker Change: All of which are are coming into the marketplace. Throughout this year, which again is why we are we feel so 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.
Speaker Change: And James just to follow up with your question and then I mean, there's a lot of time, Mark just spin on them price mix actions and a lot of that started in Q3 last year and so you're seeing that in the Goodyear forward programs, especially in the premium end of the market.
Speaker Change: Okay. Thanks, guys.
Speaker Change: Sure we'll take our next question from Emmanuel Rosner with Wolfe Research. Please go ahead.
Emmanuel Rosner: Thank you I was hoping to actually follow up on the same same topics switches.
Volume price mix outlook.
Emmanuel Rosner: For SaaS first half versus second half so.
Emmanuel Rosner: It seems the outlook contemplates decline.
Emmanuel Rosner: So at least in the first half, but then.
Emmanuel Rosner: Gross.
The second half can you just maybe.
Speaker Change: Just go back over for both volume price and mix, which 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.
Sure Hi, good morning, Emmanuel I'll start out with the Soi bridge for 2025.
Speaker Change: And if you look at the puts and takes as we've talked about them are 2020 for Soi was about 1.3 billion. If we adjust that for insurance proceeds we at 1.2.
So Goodyear forward of course going to add $750 million for us against the base inflation of $225 million. We said, we're also going to have headwinds and other costs outside of them.
Speaker Change: Core inflation, and that's mostly driven by transportation, that's going around $20 million a quarter.
Speaker Change: We also have three factories that we are ramping.
Speaker Change: Ramping down or decreasing production in in the third and fourth quarter of this year. So that will increase our manufacturing cost through some transitory inefficiencies in the third and fourth quarter by about $30 million.
Speaker Change: We've talked a lot about raw material headwinds about $350 million in the first half about 100, maybe up to 150 million at current spot prices in the second half and then spend a lot of time already on the call about how we're thinking around price makes it we've given you the first quarter, but that should grow pretty materially.
In Q2 and Q3.
Speaker Change: And get to a run rate by Q4, and that's driven by pricing actions.
Speaker Change: Actions that we've implemented in the first quarter already.
Mark Stewart: Pricing through our OE Rmi indexed agreements with fleets as well and then obviously Mark just spent a lot of time on the new product development, new product lines were bringing to market, which should also support our mix.
Mark Stewart: OTR should be a headwind we talked we've outlined that in the presentation $80 million on a full year basis, and then it does come down to volume.
Mark Stewart: What we've laid out is a lower first half driven mostly by.
Mark Stewart: The U S channel stocking of low end imports.
Mark Stewart: And lower OE volumes, just falling OEM production broadly and then I.
Mark Stewart: Mod moderate growth in the second half for us driven by very low comps and recovering industry broadly in commercial and in consumer OE.
Mark Stewart: So once you put all 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%.
Mark Stewart: Right.
Speaker Change: That is super helpful.
Mark Stewart: Thank you so much.
Mark Stewart: And then just so in line with currency in line with 2024.
Mark Stewart: In line, where you thought it would be in line with 24, including the proceeds you got last year.
Mark Stewart: Yeah, so like the $13 20 level.
Mark Stewart: Got it.
Mark Stewart: That was our understanding as well.
Mark Stewart: Perfect and then if you could just help effect would be.
Mark Stewart: The free cash flow walk as well.
Mark Stewart: And then you called for positive free cash flow I assume that this is beef.
Speaker Change: Before restructuring how should we think about.
Restructuring, which I think you quantify for this year, but also how much noise in there to expand this part of the overall plan.
Speaker Change: Yeah sure. So the positive free cash flow includes a $400 million of restructuring so we intend to be positive including restructuring.
Speaker Change: This is really driven by that Soi, we just talked about and you you should get to an EBITDA of call. It about $2 1 billion.
Speaker Change: Well you know after you go through that the model that we just talked through on Soi working capital be a benefit we've laid that out restructuring of course against that taxes, a couple hundred million dollars.
Speaker Change: $400 million in restructuring sorry, and then interest expense is coming down on a year over year basis.
Speaker Change: Interest income will offset that will have.
Speaker Change: Our normal financing fees, and then Capex is significantly lower than 2025, and all of that should get you to a fairly positive.
Speaker Change: Free cash flow for expectation for 2025, and then she think through to next year.
Speaker Change: We.
Speaker Change: We should see restructurings normalize.
Speaker Change: There's a little bit of carryover from Goodyear forward thinking restructuring next year will be on the order of $100 million to $200 million, we'll see further interest expense savings once we close on the Dunlap transaction and finalize the strategic review of chemicals. So.
Speaker Change: So we would be in a position next year to drive cashless significant positive cash flow reflective of the underlying earnings run rate of the business.
Speaker Change: Great. That's Super helpful. Just final point is it is the overall spending on on the restructuring low lower than initially anticipated.
Speaker Change: Maybe just my memory doesn't suffer you're right, but it sounded to me that.
Speaker Change: The total budget could have been sort of like north of $1 billion now we're talking about just 400 this year and maybe 100 to 200 next year. So is it just an overall lower bill than expected.
Speaker Change: I think yeah EMEA, all we had set aside about $1 billion as part of Goodyear four for restructuring.
Speaker Change: And as I've just laid it out we spent 202024.
Speaker Change: The.
Speaker Change: The capital that we're going to allocate in 2025 is about 400, and then up to 200 next year. So we're we're probably going to land right around 800 million or so as part of the overall program I think some of that is.
Speaker Change: Terrific negotiations with our constituents around the world I think a part of that also is I'm.
Speaker Change: Just the the execution that we've seen in what March describing about.
Speaker Change: Generating efficiencies in the factories to increase our volumes and so no no other announcements planned nothing else in the pipeline if anything changes, we'll keep you updated.
Speaker Change: Alright, thank you so much.
Speaker Change: Thank you and our next question comes from Doug Karson with Bank of America. Please go ahead.
Doug Karson: Great. Thanks, so much for the detail in the slide deck.
Doug Karson: I want to maybe just good.
Speaker Change: Good morning, I wanted to.
Doug Karson: Maybe turning to the balance sheet for a moment here.
Doug Karson: Net leverage now as it's three times almost a turn below what you had last year.
Doug Karson: So the.
Doug Karson: The forward program is certainly working and Im just kind of pull up your ratings.
Doug Karson: B, one and B plus seem pretty underrated relative to the progress you've made on the balance sheet have you had a chance to kind of refresh with the rating agencies to have them take us.
Doug Karson: Newer look at at where the balance sheet is headed.
Speaker Change: That's my first question.
Doug Karson: Yeah. Thanks, Doug for your 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 million more of gross proceeds that we intend to use to deleverage.
Doug Karson: 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.
Doug Karson: Look at our forward forecast I think there was a lot of emphasis placed on our 2024 of free cash flow, which you can see them was slightly negative because there's a lot of the restructuring programs that we had in place and so I think as we look ahead, we would expect.
Doug Karson: More positive outlook and sentiment from the rating agencies, just given the progress so far.
Speaker Change: That's great that's well deserved.
Doug Karson:
Doug Karson: I was impressed to see that.
Doug Karson: Close to 50% increase in the.
Doug Karson: Good your forward cost savings up to 750.
Doug Karson: And as I look at the environment. We're in there's so much volatility between tariffs and raw material fluctuations.
Speaker Change: You may be just help us think about some of those big line items you have three.
Doug Karson: 300 million for.
Doug Karson: Footprint optimization and 200 million for purchasing.
Doug Karson: Are some of these.
Doug Karson: <unk> less.
Doug Karson: Less at risk more at risk given the environment there.
Doug Karson: Trying to be thoughtful about the 750.
Doug Karson: Yes.
Doug Karson: Doug we feel we feel really really positive about them.
Doug Karson: The look ahead right, we executed very strongly in 'twenty four we were able to put.
Doug Karson: Additional projects and their their grassroots projects right as well so really good it's coming from our associates from around the World. We've got our dedicated weekly session as part of governance across the five key work streams and you know as I mentioned on the start of the call.
Doug Karson: We've now combined our manufacturing organization into one global organization with our three regional heads reporting to Dawn metzler.
Our new VP there.
Doug Karson: With a very strong 30 year track record I spent a lot of time in this space myself last year with the teams as they went through just again working on the nuts and bolts of manufacturing basics right or is really working on on our efficiencies our operating equipment effectiveness, our scrap rates getting through the material flows and really upgrading.
Doug Karson: 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.
Doug Karson: About our plant optimization, we announced the deal.
Doug Karson: Footprint actions, both last year as well as at the start of this year and our commercial truck off.
Doug Karson: Operation to two.
Doug Karson: <unk> be in a position where we can compete in the marketplace. There at the right cost structure and we continue to drive to drive those work streams in the purchasing side, we're continuing to go through on looking at our cost in the purchasing arena.
Doug Karson: 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 S. A G. Our SG&A however, you want to.
Doug Karson: To refer to that as of.
Doug Karson: Making sure that our overhead structure is is in the right condition, there and continue to look at that.
Doug Karson: 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&D looking at our equipment standards. So looking at how we spend how we negotiate.
Doug Karson: And long story short of it we feel very very strong, but that the improved savings rate are going to continue.
Doug Karson: And it's just really gotten to a point that is embedded in our DNA.
Speaker Change: Okay, Mark. Thank you very much for taking my questions that's very helpful.
Thank you thank.
Speaker Change: Thank you and as a reminder, ladies and gentlemen that is star one for a question. We will go next to Edison <unk> with Deutsche Bank. Please go ahead.
Edison: Hey, good morning, Thanks for taking my questions wanted to ask about the big tenant on the chemical side.
Edison: I know you said you're still on track for a sale has the reception been a bit more muted.
Speaker Change: We speak to different chemical companies and obviously there are some challenges just for the industry. There what are your latest thoughts on.
Edison: Thats.
Edison: Anderson.
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.
It's pretty across all set.
Edison: Sectors, whether you think about strategics or private equity. This one in fact with when we got into the market a little bit later of course, the focus on OTR and Dunlop in the earlier part of 2024.
Edison: Thank you.
Edison: Understood and then just a quick one on the Soi in APAC and I apologize I missed it earlier I was actually very very strong margin.
Edison: Was there anything kind of one offs there.
Edison: Some sort of kind of benefit that doesn't carry I would just just wanted to double check on that.
Edison: No. We've got we just have a really strong operation in either their manufacturing prowess as very strong.
Edison: Pricing in the marketplace very good new fresh products going in winning with the right.
Edison: With the right winners in the marketplace, particularly on the excuse me on the EV front, there and just really operation is doing quite well in AP.
Edison: Got it actually just one quick one last quick one I know you know.
Edison: I heard earlier about the expansion, Oklahoma is that is that in any way kind of.
Edison: Maybe mitigation in case of the tariffs.
Edison: Now we would like to tell you our crystal ball was good enough to do that Doug, but that was not the case right.
Edison: As necessary modernization that we needed to make across our footprint and that's one of our larger facilities are one of the largest actually and we just we're 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.
Edison: And that higher profit higher margin segments.
Edison: Okay. Thank you very much.
Mark Stewart: 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, okay. So I'd like to thank you all for taking the time to join US today for the fourth quarter earnings call. You know we've come a long way here over the last year and I still have a lot on our plate to to action, but feel very good we've got the right leadership team.
Mark Stewart: We've got all the right associates around the world and we want to we're really looking forward to sharing with you all of the progress we make on our Goodyear forward initiatives as we move throughout this year.
Mark Stewart: You all for joining us today and everybody have a great day.
Mark Stewart: Thank you and that does conclude today's conference. We appreciate your participation you may disconnect at any time.
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