Q1 2025 The Goodyear Tire & Rubber Co Earnings Call
Please stand by, your program is about to begin.
Stephanie: Good morning, my name is Stephanie, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Good Year's first quarter 2025 earnings call.
Stephanie: Onlines have been placed on mute to prevent any background noise
Stephanie: After some opening remarks, there will be a question and answer session. You may register to ask a question at any time by pressing star 1 on your telephone keypad.
Speaker Change: You may withdraw yourself from the queue by pressing star 2. Please note this call may be recorded. It is now my pleasure to turn the conference over to Greg Shank, senior director and investor relations.
Greg Shank: Thank you and good morning everyone. Welcome to our first quarter 2025 earnings call. Today on the call we have Mark Stewart, our CEO and president and Christina Zamarro, our executive vice president and CFO . 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. Thank you very much.
Greg Shank: For more information on the most significant factors that could affect future results, please refer to the Disclosure Sections.
Greg Shank: of the supporting presentation for today's call and our filings with the SEC. These materials can be found on our website at investor.goodyear.com, where you replay this call will also be available.
Greg Shank: A reconciliation of non-gape financial measures discussed on today's call to the comparable GAAP measures is also included in the appendix of that presentation. With that, I will now turn the call over to Mark.
Mark Stewart: Thank you Greg and good morning everyone and welcome to our first quarter earnings call.
Mark Stewart: We're building on our momentum with a strong start to the year driven by a solid operational execution during the first quarter. As we look at our results, Goodyear Ford Workstream delivered 200 million US dollars of benefit to single highest amount we've realized in any quarter as part of the program since we launched.
Mark Stewart: At the same time, we're progressing on our planned asset sales and positioning the company's balance sheet for competitiveness as we move forward.
Mark Stewart: This kind of consistent execution is critical. As we work through significant inflation in our raw material cost in the first half of this year, it's also what creates the power behind our full year outlook and what gives me confidence in our ability to deliver on our Goodyear Forward target at the end of this year. Thank you.
Mark Stewart: Turning to the business environment, light vehicle production has become significantly more uncertain in the near term as the industry reacts to friction and global trade.
Mark Stewart: We remain well-positioned in our consumer OE business with our mix of luxury, EV and light-truck fixed winds. As you've seen in our results, we continue to demonstrate significant growth in the OE market share in the U.S. as well as AMIA.
Mark Stewart: Importantly, we remain confident in the continued strength of our value proposition with our OEM customers going forward.
Mark Stewart: In consumer replacement, first quarter industry volume followed recent trends with the low end and imports outperforming industry members in both the U.S. and in Ameya.
Mark Stewart: With that as a buck drop for us in the first quarter, we gained share in the more profitable 18 inch and greater rim size. And that segment, as you know, is very important for us and we outperformed industry members in the quarter.
Mark Stewart: Delivering out-size growth in this profitable segment is key to our strategy and we're making tremendous progress as we work towards fully unlocking our potential to maximize the larger rent-size opportunities.
Mark Stewart: To do that, we're demanding efficiency in our manufacturing operations and achieving that. We're leveraging the strength of our global business and our product offerings and partnering with aligned distributors to ensure our products are available to consumers across all market channels.
Mark Stewart: We've also assigned David Ankhart to be our product strategy leader, coming from a strong background in engineering as well as consumer sales of Maya. David is leading the charge for that with us, together with our engineering leader, Chris Huffle.
Mark Stewart: As we shared with you on our last call, one of the ways we're driving growth in the premium segment is through unprecedented number of new product launches.
Mark Stewart: As one example, this quarter we extended the lineup of our industry leading ultra high performance summer tire, the Good Year Ego F1 asymmetric 6.
Mark Stewart: We will increase this line's offering to nearly 250 skews this year, making it the largest ultra high-performance summertime offering ever in Goodyear's history.
Mark Stewart: and this tire comes with an entitlement to compete. Our products are perfectly positioned and continue to set the benchmark in the industry. The asymmetric six was recently awarded at AutoBuild's top spot in this year's Summer Tire Test.
Mark Stewart: It has also propelled Goodyear to be named the top manufacturer of the year for the 25 summer season.
Mark Stewart: As you all know, we have planned for multiple product launches in the US this year as we build out our suite of power lines, we're also growing our offering of Cooper products as well.
Mark Stewart: Sellout of Cooper-branded products during the first quarter at retail was strong. In fact, it's been gaining momentum. We have very high expectations for this offering and the coming quarters.
Mark Stewart: Turning our views on the US replacement industry moving forward, we don't yet have a clear read as to whether import flows coming into the US are slowing based on recently announced tariffs.
Mark Stewart: Our base case assumes there's still some lag due to the long supply chains, particularly out of Southeast Asia.
In any case, the timing is right.
Mark Stewart: The timing is right to evolve and to build out our product portfolio. Likewise, the timing is right, as we discussed with you last quarter, for the ramp-up of our U.S. factory modernization programs, increasing our capacity by 10 million additional premium tires.
this year in 25 and next year in 26.
Mark Stewart: The timing is also right as we've made major upgrades as to how we're connecting with our consumers You may have noticed we recently launched an awesome marketing campaign called Still Good Year
Mark Stewart: which launched during the NFL draft a few weeks back. It's truly a powerful testament to Goodyear's legacy and our excellence in performance and innovation.
Mark Stewart: In short, we're focused on each of the elements critical to driving success in our US business. And we are ready to capture all opportunities for profitable volume as the year unfolds.
Mark Stewart: Before I move on from replacement, I wanted to briefly comment on our Asia-Pacific business where we saw the majority of our replacement volume declined during the quarter.
Mark Stewart: Asia Pacific's lower volume was largely driven by intentional choices we made as a team to exit that less profitable, low margin replacement business outside of China.
Mark Stewart: Like our other region, AP is focused on power line introduction in new luxury and EV products, where we saw 25% growth in volume during the quarter. With this momentum, we expect to see sequential improvements in Q2.
Mark Stewart: with a gearing again towards growth in the second half of the year. As we look at Asia-Pacific's performance for the quarter and after adjusting their results for the sale of the OTR business, the region delivered year-over-year earnings growth and SOI margin improvements of about 200 basis points.
Mark Stewart: Looking ahead, it's nearly certain that we will continue to see some volatility in our markets related to US trade policy for good year. As the largest US manufacturer already delivering on a turnaround through a major transformation program, it's also clear that we have a lot of opportunity in front of us.
Mark Stewart: Underpending all of the improvements we are making to the core business is our success of the Goodyear Forward Program. We are now six quarters in and we have met or exceeded each of our quarterly targets along the way. Thank you very much.
Mark Stewart: It is not only that we're delivering on our planned savings, we're also changing the expectations to a culture of high-performance Tire & Rubber Co.
to one of no excuses.
Mark Stewart: and to one where we are always focused on winning as we've defined winning.
Mark Stewart: We will continue to diligently adapt to the global trade landscape and development in the macro economic environment.
Mark Stewart: Ensuring we take action to mitigate headwinds when required but more importantly ensuring that we are squarely lined up to take advantage of every opportunity the market affords going forward.
Mark Stewart: Now I'll turn it over to Christina to take you through the financials and we'll move on to the Q&A. Thank you.
Mark Stewart: Thank you and good morning everyone. As Mark mentioned, we've made significant progress on our de-leveraging goals this year, with the sale of our OTR business in February , and as we announced last night, the finalization of the sale of DEMOP to SRI. Thank you to all of our associates who have worked to deliver these tremendous outcomes as part of Goodyear Forward.
Mark Stewart: Under the Dunlop sale agreement, Goodyear will continue to manufacture, sell and distribute Dunlop branded consumer tires in Europe through a transition period that will last through the end of this year. During this time, we'll pay a royalty to SRI on Dunlop sales, but we'll otherwise retain all profits.
Mark Stewart: Beginning next year, we'll supply tires to SRI under-and-off take agreement for a period of up to five years. Further details about the transaction can be found on our investor website in a separate presentation. Thank you very much.
Mark Stewart: I'll note that the chemical business remains under strategic review and we are engaged with multiple interested parties on this potential transaction. We'll share more as we're able to in the future. We continue to expect to generate gross proceeds of at least $2 billion for massive sales as part of Goodyear Forward.
Mark Stewart: Turning to our first quarter results, I'll begin with the income statement on slide 9. First quarter sales were 4.3 billion, down 6% from last year, given lower volume and unfavorable foreign currency translation.
Mark Stewart: Unit volume was 5% lower, driven by declines and consumer replacement volume in Asia-Pacific and America.
Mark Stewart: Growth margin declined 70 basis points. On the other hand, SAG costs were lower 46 million, which relates to Goodyear Forward.
Mark Stewart: Sigmund operating income for the quarter was $195 million and slightly ahead of our expectations.
Mark Stewart: Goodyear Net Income increased to $115 million, driven by a $260 million gain on the sale of the OTR business.
Mark Stewart: Our results were impacted by other significant items, including rationalization charges of 81 million. After adjusting for these items, our loss per share was 4 cents.
Turning to the segment operating income walk on slide 10.
Mark Stewart: The sale of the OTR business reduced earnings 12 million during the first quarter. After this change in scope, our segment operating income declined 40 million versus last year.
Mark Stewart: Lower Tire Univolium and Factor Eulization, where headwind of 52 million . . .
Mark Stewart: Price Mix was $68 million driven by pricing actions across our key markets. This partly offset higher raw material costs of $181 million.
Goodyear Forward Initiatives contributed 200 million.
Mark Stewart: Inflation and other costs were 55 million, and other SOI was a headwind of 8 million.
Mark Stewart: Turning to the cash flow and balance sheet on slide 11, our free cash flow use was relatively stable versus last year and reflects seasonal increases in working capital.
Mark Stewart: Proforma for the Dunlop transaction, our first quarter net debt declined almost $1 billion, which reflects the proceeds from asset sales this year, net of cash used for working capital and restructuring as part of Goodyear Forward over the last 12 months.
Mark Stewart: Early in the quarter, we use the proceeds from the sale of OTR to repay 500 million outstanding on our nine-and-a-half percent note.
Mark Stewart: and the remainder was used to reduce balances on our revolving credit lines.
Mark Stewart: We'll use the proceeds from the Dunlop sale to dress up coming debt maturities
Mark Stewart: Moving to the SBU results on slide 13, America's unit volume decreased 600,000 units driven by consumer replacement.
Mark Stewart: The US Consumer Replacement Industry was relatively flat in the quarter, although low end imports outperformed the industry and grew approximately 10%. In this environment we continued to focus on the premium segment of the market, driving growth ahead of US TMA members in the larger room sizes. [inaudible]
Commercial OEM replacement volume declined following industry weakness
Mark Stewart: Segment operating income was 155 million, or 6.2% to sales, a decrease of 24 million compared to last year.
Mark Stewart: On slide 14, EMEA's first quarter-univolium decreased 2%, Europe's consumer replacement industry We grew 5% reflecting high single-digit growth of low-end imports
Mark Stewart: Segment operating income was a loss of 5 million, decreasing 13 million versus last year driven by higher raw material costs.
Mark Stewart: Turning to Asia Pacific on slide 15, first quarter uniform volume decreased 12%, driven by replacement volume, which reflects a strategic decision to exit less profitable business and channel destocking.
Mark Stewart: O.E. Volume was also lowered despite overall industry growth given our own customer mix.
Mark Stewart: Sigmund Operating Income with 45 million and 9.5% to sales. Excluding the sale of the OTR business, Asia Pacific's Sigmund Operating Income increased slightly and SOI margined nearly 200 basis points.
Mark Stewart: Before we turn to the outlook, I wanted to provide some context on the impact of Section 232 on the industry and on our own business based on the rates effective today.
Mark Stewart: In total, the US Consumer Tire Industry includes about 300 million tires in OE and replacement. And we estimate that just over 50% of that supply is sourced from non-USMCA countries.
Mark Stewart: We sell about 60 million units in the US annually. As for our own sourcing, about 12% of our supply for the US is sourced from non-USMCA countries. Our factories in Canada in Mexico are fully compliant with USMCA.
Mark Stewart: In effect, this means that Goodyear's US tariff exposure equates to about one quarter of the average for the industry. This is no doubt a significant advantage for our US business going forward.
Mark Stewart: In addition to tariffs on consumer tires, we will also incur tariffs on imported raw materials and to a lesser extent commercial tires.
Mark Stewart: As we look at our outlook for 2025, we continue to expect to deliver our Goodyear Forward targets of 10% SOI margin and net leverage of under two and a half times in the fourth quarter of this year and earnings in line with the 1.3 billion reference during our fourth quarter
Mark Stewart: We've assumed price mix of about 150 million in the third and fourth quarters which reflects the realization of our announced pricing to date. We've also assumed our second half volume will be about flat as we prioritize our revenue to retire to offset higher costs.
Mark Stewart: We are presenting a more balanced view for the near term given an expectation for cell through pre-by in the second and third quarters and the potential for increased competitive pressure in our international businesses, particularly as tires originally destined for the U.S. may be redirected to other locations.
Mark Stewart: I'll note that we continue to anticipate that the European Commission may make a consumer tired tear of determination as to unfair competition in the coming months.
Mark Stewart: Turning to the second quarter outlook, we expect global unit volumes to decline approximately 2% given elevated wholesale channel inventories in the US and lower volume in Asia Pacific.
Mark Stewart: In addition, we expect higher unabsorbed 6th cost of 20 million, driven by lower production during the first quarter
Mark Stewart: Price Mix is expected to be a benefit of about 135 million driven by the benefit of recent pricing actions and raw material index contracts with OEE and Fleet customers.
Mark Stewart: Raw material costs will increase approximately 180 million driven by natural rubber price increases in currency transaction costs.
Mark Stewart: At Current Spot and Currency Rates, Q3 raw materials will be a headwind of 50 million, and Q4 raw materials will flip to a benefit of about 25 million.
Mark Stewart: Goodyear Forward will drive benefits of approximately 190 million reflecting continued progress across all of our workstreams.
Mark Stewart: Inflation, tariff and other costs are expected to be a headwind of approximately 120 million reflecting higher costs given US tariff impact from finished goods and raw materials and a global inflation rate of about 3% .
Mark Stewart: In addition, this amount captures increases in transportation costs and transitory manufacturing costs associated with the announced facility closures.
Mark Stewart: If current tariff rates hold, these costs will be approximately $175 million in Q3 and about the same level in the fourth quarter.
Mark Stewart: Ford Exchange will be a headwind of approximately 10 million. Other will be a headwind of 15 million driven by increases in marketing and other miscellaneous costs.
Mark Stewart: Finally, the non-recurrence of insurance proceeds received last year, it will be $63 million and the sale of OTR is $23 million.
Mark Stewart: Looking beyond Q2, we expect significant benefits in price mix and from Goodyear Forward which will support solid earnings growth, positive free cash flow generation for the year, and significant margin expansion.
Mark Stewart: Other financial assumptions on slide 18 have been updated to reflect our latest estimate for working capital, which has been adjusted for the impact of tariffs on our working capital. With that, we'll open the line for your questions.
Mark Stewart: Thank you. At this time, we will open the floor for questions. If you like to ask a question, you may better see Starkey, followed by the one key on your telephone keypad.
Mark Stewart: If you'd like to remove yourself from Q, you may press star two [inaudible]
Speaker Change: Again, that is star one to ask a question. We'll go first to James Picariello with BNP Paraboss.
James Piccarello: Hey, good morning everybody. I appreciate all the great color on the call this morning. So
James Piccarello: I just want to clarify that that was pretty crystal clear but what price makes in the third quarter and fourth quarter, it's 150 million year of year in the bridge for each quarter That's right.
That's right, James. Okay.
and that's...
Speaker Change: Are you seeing other, you know, your competition also follow through on price, I imagine.
James Piccarello: Everybody, you know, is pricing to an extent, right, with tariffs right in front of it, but
Yeah, he just need to provide some competitive interviews.
James Piccarello: Color on the price because raw materials are now guided about a hundred million lower for the full year.
Yeah, if you can speak to that, thanks
James Piccarello: Yes, sure James. I mean, we won't comment on any individual competitors. I'd say across the board.
James Piccarello: We've seen very significant price increases among the competitive set. I mean, I think that's all just in relation to the tariff exposure.
James Piccarello: that we described in our prepared remarks. Our own exposures are probably about a quarter of what others will see. When you look at the $300 million that we laid out, I'd say you could think about.
James Piccarello: 80% of that flowing through into our consumer business that equates to about $4 per tire.
James Piccarello: And I think that, you know, based on our analysis of the competitive set, our competitors will be anywhere in the area of three or four times that level of exposure. And so there's a big need to go out there and offset some of this cost. There's just so much many imports coming into the US.
Yeah, and given your predominant U.S. footprint.
James Piccarello: Yeah, I imagine market share opportunities will be, you know, will be.
will present themselves
James Piccarello: One clarifying question as well on tariffs within the 120 million inflation and other bucket for the second quarter. What constitutes tariffs specifically there and then for the full year, the same question. Thanks.
Sure, so I'll take you through.
James Piccarello: All of the basket of inflation tariffs and other costs, and I'll start with the annual James.
James Piccarello: Our annual inflation runs about $225 million, that's 3% on our cost base. And then the tariff, we've already said $300 million in annualized cost.
James Piccarello: We also then, and if you do the math on Q2 for modeling, you should get to a number of close to 50 million in Q2 and then it that will take a step up in Q3 and Q4.
James Piccarello: Other cost inflation, though, also includes any excess cost over and above inflation. You'll see that that increases a bit in the second half of the year, particularly as we have.
James Piccarello: One in the US, and that temporarily creates inefficiencies in our factories, increases our costs, but that's all included in that guidance for 175 in the third quarter, and then in the fourth quarter as well.
Much appreciate, thanks [inaudible]
Hello
Speaker Change: Thank you. We'll move next to you, Tay McCally, with Titi Kallen.
Itay McKellie: Great things, good morning everybody and appreciate all the details as well.
Speaker Change: Just two questions for me, first on the parathy impact, the 300 million, just curious whether there's some potential for mitigation for that over time, just given your strong US.
Itay McKellie: Cassidy, Opportunity, and maybe other offsets that you might explore for that.
Speaker Change: Yeah, so maybe I can start and then Christina can kind of reiterate a few of the things and say good morning to you.
You mentioned that we...
Christina Zamarro: We feel we're in a really favorable, strong position, having the largest U.S. footprint.
Speaker Change: from that side as well. I think as we've shared with you guys on earlier quarterly calls, we've already been embarking on this journey really over the last couple of years but in 25 and 26.
Speaker Change: We're going to be continuing to upgrade our UMS facilities with about 10 million of high value high
Speaker Change: You know, high rim size and the bigger profit pool size tires to more competitively compete and when in that marketplace as we shared as well, you know, with a tremendous amount of new high rim sizes being launched in the US.
Speaker Change: Coupled with the fact that we do have that large US footprint. We're looking for those opportunities but we also want to be.
Speaker Change: You know, want to be really mitigate that factor, if you will, by just by watching this on a month by month basis, working with our customers, and working with the, you know, the distributors and the retailers on it.
Speaker Change: The second question, I'm hoping you could just expand a bit more in some of the assumptions in your second half volume assumption that you mentioned the kind of flat volume year over year. Maybe just talk about assumptions on share, macro, maybe a little bit if you could share the regional view within that outlook as well. Thank you. Thank you very much.
Speaker Change: Recovery in Asia Pacific, turning to a growth in the second half. We had a really negative first quarter driven by choices we made to exit some of the lower end of the market in Asia Pac that helped boost margins. We'll still see a drag in Asia Pacific.
Speaker Change: Pacific in the second quarter. But then I think we'll begin to get some growth.
Speaker Change: in Emia. I think that our first quarter volume was just slightly negative. Our expectation is, you know, a strengthening volume over the course of the rest of the year, of course, in the U.S. I think we still have a really rough...
Speaker Change: The channels and so I think the US will still be pretty tough. I also think Latin America volume will be tough as well and that a lot of volatility still around.
Speaker Change: OE, and I think we all appreciate that, but the expectation is that we will continue to grow a lot of market share, just like you've seen from us here over the last couple of quarters, just given our fitment wins on the SUVs, light trucks and EVs over the last couple of few years.
Speaker Change: Yeah, and that's what I should flow through as well, they take from, you know, just to call a few of those out, right? We have been winning with the winners in the marketplace with like Chevy Silverado, Dodge Ram, the Ford F-150s.
Speaker Change: and James in the first quarter we had about a half a point of shared growth in that OAS segment and that that should flow on through in the replacement cycles as well. So.
Speaker Change: Yep, absolutely. That's all great to hear. Thanks a lot detail. Thank you.
Thank you. We'll move next to Ryan Brinkman with JP Morgan.
all in this room.
Speaker Change: to $300 million of higher annualized costs. Given your costs will increase less than the overall industries, are you expecting, and I think it would be very reasonable expectation, are you expecting the pricing gains to be, well, an excessive $300 million, or maybe you'll...
Speaker Change: It's the reason to reassess the 10% SOI margin target longer term, what do you think?
Speaker Change: That was a mouthful, Ryan. We'll take a shot, but maybe just one quick comment.
Speaker Change: and I'll let Christina pick up from some of the other details to the going forward for it. Christina, if you want to cover the rest of that section, I'll chime in some more hints.
Christina Zamarro: Sure, so Ryan, we talked about the 300 billion and 240 million of that will flow through to replacement.
Speaker Change: So we've announced price increases as Mark just mentioned already in the U.S. Effective May 1 and that's 4% which and using our modeling assumptions that would be worth $220 million.
Speaker Change: You know, we've thought about the flow through of pre-buy carrying through until the third quarter. We have not yet...
Speaker Change: Seen, a decrease in imports. I think that that tariffs.
Speaker Change: are effective May 3rd and so we may begin to see that after May 3rd but have not yet seen for example ocean freight rates out of Southeast Asia coming down which would be an indicator to us that some of those some of those tires.
Speaker Change: You know, the Goodyear branded products have done really well, your Mark reference that the growth in the capacity that were
Speaker Change: and so our plan already includes a lot of good growth in Goodyear branded products. The supplied demand dynamics there have been strong and so that's an area where we're going to focus on driving higher revenue per tire through price and mix.
in those instances. We do have some extra capacity.
Speaker Change: We're going to work through the economics of price mix and volume just to maximize our earnings and Cooper doesn't directly compete with Tier 3 and Tier 4 tires but because it has such a attractive value proposition, certainly some opportunities for us there.
Speaker Change: Okay, thanks. Maybe just an update on the disposition process. Now that you've got two of three finished, I'm sure you're limited what you can say with regard to chemicals, including about overall proceeds, because you know we can do a process of elimination mass. But you know, previously I think investors have regarded chemicals to be maybe the easiest to get done over the shortest time from just because there seemed to be so many more potential interested buyers and they tend to be of deep pocketed in just up and down the petrochemical space, right? And yet it's the one that remains.
as well.
Speaker Change: Thanks, Ryan. I mentioned in the prepared remarks that our chemical process is ongoing and of course we're continuing to evaluate how best to maximize the value of that business. I'd say it was, you know, three major programs that we've been working on over the last. [inaudible]
Speaker Change: 18 months or so. This one was the last one in the market. I think you're right. I think the current environment, whether you're looking at
Speaker Change: This business for us is more valuable today than say it was six months ago. It's the only major synthetic rubber manufacturing sites supplying tire manufacturers in the US. And so that makes it inherently more valuable. But as part of that strategic and operating review committee...
Speaker Change: that we held back in 2023. We did conclude that the Ken Business was non-core and so the work in front of us is ensuring that we deliver the right strategic value for Goodyear and for our shareholders and we'll continue to do that and update you more when we can.
Okay, very helpful. Thank you.
Speaker Change: Thank you. Our next question will come from Edison, you would avoid your bank.
Speaker Change: Good morning, this is James LaHolland on for Edison. Two quick questions from me. On this skewer rationalization that impacted the Asia segment volumes in the quarter, should we expect something similar to that to happen in the other geographies throughout the year or is that going to be predominantly an Asia story and it's going to be relatively complete after the second quarter? [inaudible]
Speaker Change: You know, as we've shared with you guys in the past, we've been really marching forward with our common platforming, if you will, of certain skews.
Speaker Change: Looking as well at the retiring of some of the older skews as we bring the newer skews into the marketplace and really pleased with the results of that with the wins we're getting in terms of the performance in terms of
Speaker Change: of consumer take rates and so forth. So yeah, we absolutely are continuing to do that.
Speaker Change: as part of that and is announced with David Ancart being the head of our product technology roadmap. It really is you know one of our key areas there is looking at the right number of skews and complexity within our manufacturing footprint to optimize efficiency but also the right messaging that we take with our marketing teams out into the marketplace so that we've got the right.
Speaker Change: The right product for the right folks across the market and not crowding out but in fact cleaning things up so you'll see more of that.
Speaker Change: Great, got it. That's very helpful. And then my second question. So based on your math, let's just say in the US about six million tires, Giptech are non-USMCA.
Speaker Change: Would you look to fully offset those with the 10 million units coming online from the plant optimization or should we view that as a source of exports or maybe market share games just how should we think about that extra 10 million units.
Speaker Change: Yeah, that 10 million units is actually going more to your first question, right? It really is about us moving into the higher rent sizes and the higher value at a proposition piece to it. And then we'll utilize that as well as opportunities would come up.
Speaker Change: in the marketplace of other Tire's coming in. But we would, you know, part of that 10 million is really centered primarily around our Law and Facility where we've been doing that massive modernization activity.
Got it. Alright, thanks guys.
Speaker Change: Thank you. Our next question will come from Emmanuel Rosner with Woolf Research.
Emanuel Rosner: Thanks so much. Good morning. Thanks not for all the details around the outlook. Christina, I was hoping you can maybe just help us put a final point on a couple of ridges. In particular, maybe sequentially in a Q2S Y doesn't look all that different from...
Emanuel Rosner: If you want, but in many ways it's a little bit backward looking. So what would this sequential bridge look like towards your double digit? So I margin by the fourth quarter and then also curious about sort of an updated free cash flow bridge to the extent that there were a few there were just mainly changes in terms of working capital. So what would you like to do if you want to do that?
Emanuel Rosner: Either in the third or the fourth I'd say, two main drivers and and the growth in earnings is all going to come from higher volume and significantly better price mix relative to raw materials. I think you know as you look at the third and fourth quarters, even in a flat volume environment, which we've laid out.
Emanuel Rosner: The additional growth just coming from volume would be $2 million to $300 million and then the growth that we would see from price mix.
Emanuel Rosner: And raw materials will be a benefit of $100 million in Q3.
Emanuel Rosner: Third and $75 million in Q4, and that's all relative to a headwind in the second quarter of 45 million. So big Big step up in volume even in a flat environment and then yeah significant price mix versus raws relative to the first half and we're just second quarter, taking on a whole lot of cost in raw.
Emanuel Rosner: Materials also now with tariffs, but will begin to get the full realization of pricing in the third quarter, which helps us to fully offset that.
Speaker Change: Thank you and on the free cash flow side.
Speaker Change: Free cash flow I, you know, we what we've done is decrease these source of free cash from working capital our guidance at the fourth quarter call with $100 million to $150 million inflow, we reduced that to an inflow of $50 million just given the impact.
Speaker Change: Of tariffs on our working capital.
Speaker Change: So as you look at our.
Speaker Change: Free cash flow walk, we've said that mm soi should be around the same level as last year. If you back out our corporate other costs and add back DNA, you should get to an EBITDA level of about $2 1 billion.
Speaker Change: And then we talked about the working capital inflow restructurings about 400 million taxes 200 million interest expense I have a range still for maybe it's for 60 interest income $40 million positive there.
Speaker Change: Capex of 950, and then a little bit of financing fees should still give you a positive free cash flow for 2025.
Speaker Change: Got it.
Speaker Change: Thank you and then just a little bit more comments around conceptually and strategically.
Speaker Change: How do you plan on taking advantage of.
Speaker Change: This Paris competitive advantage it looks like.
Speaker Change: Within the full year guidance, you're essentially offsetting.
Speaker Change: Increased costs direct cost to you.
Speaker Change: Was pricing, but it's sort of like the <unk>.
Speaker Change: One for one offset.
Speaker Change: Yet you do have a competitive advantage, where your costs are going up less than most of the competition and so directionally you also mentioned potential for upsides.
Speaker Change: The risk from there so how would you go about once you cover your cost deciding.
Speaker Change: Basically with reallocated.
Speaker Change: Opportunity.
Speaker Change: Yeah, you know, where we're taking a look at it really from multiple angles on a manual.
Speaker Change: <unk>, where we're looking at the pricing in terms of where the products are positioned in the marketplace.
Speaker Change: We're also looking at from our engineering side is we're continuing to bring these these new skus into the market place as well and make sure. We've got the right right pricing position and the value for the customer. So we are we obviously will will take a look and make sure that where we're optimizing that that pricing in that that profitability in the marketplace.
Speaker Change: At the same time, making sure that we're being very cognizant of the consumer in consumer in the marketplace as well right. So all of that is coming together for the value proposition for them well, we'll take a look at it on the OEM side of the house will take a look at it on the replacement side as well. So we are we're really making sure that we we we've got quite a few war rooms as you can.
Christina Zamarro: And that we've got things mapped out in that but where we're also watching very carefully right around the inventory in that marketplace, because as Kristina mentioned right. There there is.
Christina Zamarro: You know it feels to be a large amount of the pre buy towards that low end side of the stuff that needs to work through the system at the same time. So that's why we're we're presenting as we are.
Christina Zamarro: Yeah.
Christina Zamarro: Got it thank you.
Speaker Change: Thank you and as a quick reminder, if you'd like to ask a question you May Press Star One now our next question will come from Wesley Brooks with HSBC.
Speaker Change: Hi, guys. Thanks for the color around the terms and.
Wesley Brooks: Your guidance I guess, a couple of questions from me one you talked about the risk obviously of those times being re directed to your other markets could you just remind us your exposure in EMEA and Asia.
Speaker Change: So the tier one versus the mid tier where you'd be more exposed to that and in those markets and if you have any sort of thoughts on the.
Wesley Brooks: The signs of the impact that you could have them.
Kristina: So good morning. This is Kristina I'll do I'll just.
Wesley Brooks: Jump in to say in Europe.
Wesley Brooks: We have.
Kristina: Some <unk>.
Kristina: Lower tier brands I'm, mostly are then beta in our save brands that are focused more in the eastern European countries. Those would be the ones that would be most likely to compete with some of the tier three and tier four product going into Europe, what I'd say on the whole if you look at.
Kristina: But or volume and I'm talking.
Kristina: Talking specifically about 2020 for volumes in consumer four for Europe, I'd say about it.
Kristina: 35, or 40% of it is Goodyear and Cooper branded them. All you know the the remainder you know our 'twenty, let me see.
Kristina: 12% would be yeah. This these brands that I think are are you know.
Kristina: More exposed to those tier three and tier four imports.
Kristina: Okay. Thank you.
Kristina: Yeah, It doesn't feel like the impact in these markets will be anywhere near.
Kristina: Offsetting the positives.
Kristina: And.
Kristina: In the U S. Obviously now.
Kristina: And then my other question was more of a clarification on the guidance I think you have.
Kristina: Our guide for corporate.
Kristina: And others being $165 million in the full year and I just wanted to understand so you had 57 in Q1 grew up $50 million in Q2, so that means on the 30 million run rate in Q3, and four and yes. If we look at the year over year, that's a long way down that just wanted to understand.
Kristina: And you know.
Kristina: What's going on there and what drives the quarterly variance in that.
Kristina: So I would say that's a great question I would say that that variability in corporate other tends to be very typical and it has to do with a lot of the.
Kristina: Incentive compensation accruals that you know based on our performance in any given year.
Kristina: Well will be higher at the beginning of the year or at the end of the year and this year our corporate other is more first half weighted.
Kristina: Yes.
Kristina: Yeah.
Speaker Change: Okay. Thanks, and if I had one last quick one just the chemical business sale.
Speaker Change: The changing environment around tariffs and market does that change your strategy, there or is that still.
Speaker Change: Does that still make sense and do you have any updated visibility on the timing of this.
Speaker Change: Sure. So we chatted about this a little bit earlier, I think yes, and certainly a L a bit more valuable because it is the only major synthetic rubber supplier for tire manufacturer in the U S and just given the tariff environment that that.
Speaker Change: Add some as we think about the overall enterprise value of that business.
Speaker Change: But I don't think it changes necessarily the conclusion at all that you know that we arrived at back in 2023 that this business is noncore and so you're we're continuing I mentioned earlier that this was.
Speaker Change: The last process that we've put into the market, we're talking with multiple interested parties and no other updates well we'll share more when we're able.
Speaker Change: Alright, Thank you very much.
Speaker Change: Yeah.
Mark Stewart: Thank you and there are no additional questions at this time I'd like to now turn the conference back to you Mark Stewart for any closing remarks.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you all for taking the time to join US today for our first quarter earnings call. We continue to build on the momentum that we have from last year and and definitely continuing to deliver on the Goodyear forward initiatives towards at $1.6 billion number that we've shared.
Speaker Change: We look forward to sharing our continued progress with you guys as we as we proceed through the year and thank you guys and have a great day.
Speaker Change: Thank you for joining Goodyear's first quarter 2025 earnings call. This concludes today's conference you may now disconnect.
Speaker Change: Okay.
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