Q3 2025 The Goodyear Tire & Rubber Co Earnings Call
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It is now my pleasure to turn the conference over to Brian Reed Vice President Investor Relations. Please go ahead, Sir thank.
Thank you and good morning, everyone welcome to our third quarter 2025 earnings call.
With me today are Mark Stewart, CEO, and President and Kristina Tomorrow, Executive Vice President and CFO.
A couple of notes before we get started during this call we'll make forward looking statements and refer to non-GAAP financial measures.
For more information on the most significant factors that could affect our future results and for reconciliations of non-GAAP measures. Please refer to today's presentation and our filings with the SEC.
Good morning. My name is Katie, and I'll be your conference operator today.
All our earnings materials can be found on our website at investor Dot Goodyear Dot com.
at this time, I would like to welcome everyone to Goodyear's third quarter 2025 earnings call
A replay of this call will also be available.
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I'll now turn the call over to Mark.
After some opening remarks, there will be a question and answer session.
Thank you, Brian and good morning, everyone. Thank you for joining our call as outlined in our press release, we delivered revenue of $4 6 billion and segment operating income of 287 million in the quarter.
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Slightly ahead of the revised expectation, we shared with you all on our last call.
It is now my pleasure to turn the conference over to Ryan Reid, vice president investor relations. Please go ahead sir.
It's important to view these results in the context of an industry environment that remains challenging, particularly given continued volatility in global trade flows.
Thank you and good morning, everyone. Welcome to our third quarter 2025 earnings call.
Even in that environment, we achieved meaningful sequential earnings and margin expansion driven by the continued strong execution of the Goodyear forward initiatives.
With me today are Mark Stewart, CEO and president and Christina zimmaro, Executive, Vice President and CFO.
Last quarter I emphasized our focus on controlling the controllable and that approach continues to guide our actions here a good year.
Couple notes before we get started during this call, we'll make forward-looking statements and refer to non-gaap financial measures.
With yesterday's announcement on the chemicals business. We've now completed our planned divestitures and we're bringing the balance sheet back to a position of health, we've introduced more premium product lines than ever before while improving organizational agility and sharpening our focus on margin and profitability were positioning the business to be able to leverage those strengths as the market.
For more information on the most significant factors that could affect our future results. And for reconciliation of non-gaap measures, please refer to today's presentation and our filings with the SEC.
All our earnings materials can be found on our website at investor.gov where a replay of this call will also be available.
I'll now turn the call over to mark.
[noise] environment begins to normalize.
With the remainder of my time today I'll discuss what we're seeing across the industry and in each of our business segments also how we're responding after that I'll hand, it over to Kristina to walk through our third quarter financial results and how we're thinking about the outlook for the remainder of twenty-five.
Thank you, Ryan and good morning everyone. Thank you for joining our call. As outlined in our press release. We delivered revenue of 4.6 billion and segment, operating income of 287 million in the quarter results, slightly ahead of the revised expectation. We shared with you all in our last call.
Let's start with the Americas in the Americas, the consumer replacement market continued to experience disruption similar to last quarter on the consumer OE side volume performed well supported by strength in light truck and SUV. Fitments. Additionally, we've won additional fitments driven by OEM preferences for U S. M C. A compliant supply.
It's important to view these results in the context of an industry environment, that remained challenging particularly given continued volatility in global trade flows.
We expect OEM resourcing to remain a positive contributor for us going forward.
even in that environment we achieved meaningful sequential earnings and margin expansion driven by the continued strong execution of the Goodyear forward initiatives last quarter, I emphasized our focus on, controlling the controllables and that approach continues to guide our actions here at Goodyear,
As you all know with U S tariffs on consumer tires effective in may the domestic replacement market saw a surge of low cost imports coinciding with the implementation of increased duties. During the first half of this year in.
In the third quarter U S. Non U S. T M. A member imports were up an estimated 2%.
With yesterday's announcement on the chemicals business. We've now completed our plan to best teachers and we're bringing the balance sheet back to a position of Health. We've introduced more premium product lines than ever before. While improving organizational agility and sharpening, our focus on margin and profitability.
Which is actually a positive development compared to the significant growth. We saw in the first half of this year more recently, we are hearing that the low end imports may have slowed further though it may take more time to confirm that trend given the current government shutdown, which impacts the reporting of the imports.
We're positioning the business, to be able to leverage those strengths as the market environment. Begins to normalize.
As we look at the drivers for the industry at a macro level U S. Vehicle miles traveled are trending up about one percentage point year to date, while industry sell out is roughly flat, suggesting consumers are extending their replacement cycle.
With the remainder of my time today, I'll discuss what we're seeing across the industry and in each of our business segments, also how we're responding after that, I'll hand it over to Christina to walk through our third quarter Financial results. And how we're thinking about the outlook for the remainder of 25.
Meanwhile, dealer and distributor channel inventories remain elevated with pre buy and we expect the consumer replacement environment to stay challenging in the near term.
Our focus in that environment has been on and introduced a new high margin product lines, the 18 and above rim size and targeted product line extensions to drive our earnings in the coming year.
Let's start with the Americas in the Americas. The consumer, replacement Market continued to experience, disruptions similar to last quarter on the consumer. OE side, volume performed. Well, supported by strength and light truck and suv. Fitments, additionally, we've won additional fitments, driven by OEM preferences for usmca compliant, Supply. We expect OEM resourcing to remain a positive contributor for us, going forward.
In October we revitalized our altering product portfolio with the launch of three new product lines that were designed for SUV light truck and off road applications. The new lineup includes the Goodyear Wrangler outbound E T. Goodyear Wrangler, workhorse 82, and the Goodyear Wrangler Electric drive a T. We've also.
As you all know with us tariffs on Consumer Tires effective in May, the domestic replacement Market saw a surge of low-cost Imports, uh, coinciding with the implementation of increased duties during the first half of this year.
In the third quarter us 9 us TMA member Imports were up an estimated 2%.
Revitalize our famous Goodyear Eagle F. One lines with our new all season tire for the high performance segment as well.
Our products are absolutely second to none and the consumer feedback during launch events has been exceptionally strong.
Which is actually a positive development compared to the significant growth. We saw in the first half of this year more recently, we're hearing that the low-end Imports may have slowed further, though it may take more time to confirm that Trend given the current government shutdown which impacts the reporting of the Imports.
We're also better aligning distribution and retailer partnerships to ensure priority availability and service for our most profitable products.
Our company owned retail stores, we are upgrading the store and the customer experience through multiple enhancements, including the addition of more products more financing options and a complete refresh of the environment in select locations around the country.
As we look at the drivers for the industry at a macro level us vehicle miles, traveled are trending up about 1. Percentage Point year to date. While Industries sell out is roughly flat. Suggesting consumers are extending the replacement cycle.
Meanwhile dealer and distributor Channel inventories remain elevated with prey. And we expect the consumer replacement environment to stay challenging in the near term.
As I've mentioned previously we've been able to achieve meaningful earnings growth in our retail business over the past year through increasing same store service revenues and through the addition of new last mile Mega Fleet business with this proven success in our existing footprint, we plan to open a slate of new brick and mortar store fronts in the coming quarters strengthening our <unk>.
Our focus in that environment has been on, introducing new, high margin product lines, the 18 and above rim size and targeted product line extensions to drive our earnings in the coming year.
Retail footprint will help our retail business, the even more of a differentiator for us in the future.
Conditions in the Americas truck business were similar to the second quarter heavy truck builds in the U S declined over 30% as Oems adjusted production amid reduced end market demand driven by the uncertainty over EPA emissions mandates in the replacement imports remained elevated during the third quarter as the commercial tire I E.
High performance segment as well.
Our products are absolutely second to none and the consumer feedback during launch events has been exceptionally strong.
Tariffs were implemented in August.
As we finished the year, we expect fourth quarter industry conditions in the U S to broadly reflect the same dynamics as the third quarter with elevated channel inventories and potential for some incremental reductions in OE volume given multiple OEM customer supply chain challenges. We continue to expect momentum to return as we worked through some of the transitory.
We're also better. Aligning distribution and retailer Partnerships to ensure priority, availability, and service for our most profitable products in our company-owned retail stores, we are upgrading the store and the customer experience through multiple enhancements including the addition of more products, more financing options and a complete refresh of the environment in select locations around the country.
The headwinds we're seeing today.
Let's turn to EMEA similar to the U S dynamics M. A S consumer replacement industry was driven by a pre buy of imports ahead of the tariffs are expected early next year, while domestic manufacturers lag the industry. We reached an important milestone for our EMEA business. We returned the business to profitability following a weak for.
As I've mentioned previously we've been able to achieve meaningful earnings growth in our retail business over the past year through increasing same store service revenues and through the addition of new Last Mile Mega Fleet business with this proven success in our existing footprint. We plan to open a slate of new brick-and-mortar storefronts. In the coming quarters, strengthening our retail footprint will help our retail business be even more of a differentiator for us in the future.
First half this improvement was driven by 20% growth in our consumer OE volume representing more than three points of market share gain at the same time OE profit per tire in EMEA is increasing so we are making the right choices with our OE partners as well our OE portfolio is a testament to our industry, leading tech as well as our.
Performance. We also completed two major factory restructuring actions in the region during the quarter, which strengthens the foundation for continued operational performance and EMEA.
Conditions in the America's truck business. We're similar to the second quarter heavy truck, builds in the US declined over 30% as oem's. Adjusted production amid reduced. In-market demand driven by the uncertainty over EPA emissions mandates in the replacement Imports remained elevated during the third quarter as the commercial tire. AA tariffs were implemented in August.
Looking ahead, our winter order book and channel inventories are healthy and we are optimistic as we think about EMEA is earnings potential in the fourth quarter.
Turning to Asia Pacific.
Execution in Soi margin remained strong over the course of this year, we've exited less profitable skus and continue to increase our mix of high margin product lines in the region in the third quarter, we outpaced the consumer replacement industry as far as growth in our Goodyear brand 18, and above it rent rim sizes in China as our recent or.
As we finish the year, we expect fourth quarter industry, conditions, in the US to broadly reflect the same Dynamics as the third quarter with elevated Channel, inventories and potential. For some incremental, reductions in, OE volume given multiple OEM customer supply chain challenges. We continue to expect momentum to return as we work through some of the transitory headwinds. We're seeing today,
Let's turn to a Maya similar to the US. Dynamics Mas consumer. Replacement industry. Was driven by a pre-b buy of imports ahead of the tariffs expected early next year.
Fitment wins with Julie VW, and Toyota ramp through the fourth quarter, we expect to return year over year OE growth and further improve soi and margin from today's levels.
For clothing, I'd like to add that even with the uneven market backdrop, our steady and consistent execution of our Goodyear forward plan has been even more important for us to position the business for near term stability as well as long term success.
While domestic manufacturers lag the industry, we reached an important milestone for our Mia business. We returned the business to profitability following a week. First half, this Improvement was driven by 20% growth and our consumer, OE volume representing more than 3 points of market share gain at the same time, OE profit per tire and AA is increasing. So we are making the right choices with our OE Partners as well. Our OE portfolio is a testament to our industry-leading Tech as well as our product performance.
Again to acknowledge the efforts and the results of all of our associates around the world and thank them for what's been accomplished thus far did you forward is much more than numbers on a sheet of paper. This program defines the evolution of the company and how we will continue to create value going forward with that I'll turn it over to Christina.
We also completed 2 major Factory. Restructuring actions in the region during the quarter which strengthens the foundation for continued. Operational performance in. Aha.
Looking ahead, our winter order book and channel inventories are healthy and we are optimistic as we think about as earnings potential in the fourth quarter.
Turning to Asia Pacific.
Thank you Mark and good morning, everyone.
Third quarter results shows our cost with the benefit of Goodyear forward and a significant reduction in debt, we are well positioned for growth as the broader economy strengthens in 'twenty 'twenty six pre buy channel inventory tied to tariffs is depleted.
And the implementation of tariffs in the U S and potentially in Europe begins to reshape market dynamics in our favor.
Turning to the financial results on slide nine third quarter sales were 4.6 billion down three 7% from last year, given lower volume and the sale of O T are partly offset by price mix improvement.
Execution and SOI margin remains strong. Over the course of this year. We've exited less profitable skus and continue to increase. Our mix of high margin product lines in the region in the third quarter, we outpace the consumer replacement industry as far as growth in our Goodyear, brand 18 and above rim, rim sizes, and China. As our recent 08, fitment wins with gly VW and Toyota ramp through the fourth quarter. We expect to return year-over-year, OE growth and further improve SOI and margin from today's levels.
Unit volume declined, 6%, reflecting lower consumer replacement volume.
Segment operating income was 287 million decreasing from last year, but reflecting an increase of 128 million compared to the second quarter.
Before closing, I'd like to add that even with the uneven Market backdrop, our steady and consistent execution of our Goodyear, forward plan has been even more important for us to position the business for near-term stability, as well as long-term success. I'd like again to acknowledge the efforts and the results of all of our Associates around the world and thank them for what's been accomplished thus far.
Goodyear net loss of $2 2 billion was driven by noncash nonrecurring items, including a deferred tax valuation allowance and a goodwill impairment in the Americas.
Good. Your forward is much more than numbers on a sheet of paper. This program defines the evolution of the company and how we will continue to create value. Going forward with that. I'll turn it over to Christina.
Thank you, Mark and good morning everyone.
The valuation allowance against our tax assets does not limit our ability to utilize them in the future.
After adjusting for significant items, our earnings per share or 28 cents compared to 36 cents last year.
Turning to the segment operating income walk on slide 10.
The sale of the off the road business reduced earnings by $10 million.
After this change in scope or segment operating income declined 49 million versus last year.
Our third quarter results, show lower costs with the benefit of Goodyear forward. And a significant reduction in debt, we are well, positioned for growth as the broader economy strengthens in 2026 prebby, Channel inventory, tied to tariffs is depleted and the implementation of tariffs in the US and potentially in Europe, begins to reshape market dynamics in our favor.
Lower tire unit volume and factory utilization were a headwind of $90 million and price mix was a benefit of 100 million driven by our recent pricing actions and Rmi contracts raw materials were a headwind of 81 million.
Turning to the financial results on slide 9 third quarter sales were 4.6 billion down 3.7% from last year given lower volume and the sale of OTR partly offset by Price mix improvements.
Could you for where it contributed $185 million of benefit during the quarter.
Unit volume declined. 6% reflecting lower consumer replacement volume.
Inflation and other costs were a headwind of 137 million other costs include approximately $40 million of tariffs.
$5 million of manufacturing inefficiencies related to factory closures and lower production and $20 million of increased transportation and warehousing costs.
Goodyear net loss of 2.2 billion. Was driven by non-cash non-recurring items including a deferred tax valuation allowance and a Goodwill impairment in the Americas.
The non recurrence of insurance proceeds received last year was $17 million and the other soi was a headwind of $16 million.
The valuation allowance against our tax assets, does not limit our ability to utilize them in the future.
Turning to the cash flow and balance sheet on slide 11 cash flow from operating activities was about flat for the quarter, including third quarter Capex free cash flow was a use of $181 million.
After adjusting for significant items, our earnings per share were 28 cents compared to 36 Cents last year.
Turning to the segment. Operating income walk on slide 10.
As I mentioned last quarter, our year to date free cash flow includes a portion of the proceeds from asset sales, reflecting the value of long term supply agreements and a prepaid for Dunlop inventories that will transfer at the end of the year. The remaining amount will be amortized into soi over roughly six years.
The sale of the off the road business reduced earnings by 10 million after this change in scope our segment, operating income declined, 49 million versus last year.
We expect our year end benefit in operating cash flow related to the various supply licensing and transition agreements to be approximately $370 million inclusive of the chemical sale.
Lower Tire unit volume and Factory. Utilization were a headwind of 90 million and price. Mix was a benefit of a 100 million driven by our recent pricing actions. And RMI contracts, raw materials were a headwind of 81 million.
Goodyear forward contributed 185 million of benefits during the quarter.
Pro forma for the chemicals transaction, our third quarter debt declined about one $5 billion, which reflects asset sale proceeds net of fees, partly offset by cash used for working capital and restructuring over the last 12 months.
Inflation. And other costs were a headwind of 137 million, other costs include approximately 40 million of tariffs.
25 million of manufacturing and efficiencies related to factory closures and lower production.
And 20 million of increased, transportation and warehousing costs.
We continue to expect to generate significant free cash flow in the fourth quarter consistent with our historical seasonality.
The non-recurrence of insurance proceeds received last year was 17 million. And other SOI was a headwind of 16 million.
Moving to the SBU results on Slide 13, America's unit volume decreased six 5% driven by consumer replacement.
U S consumer replacement industry sell in was down 4% during the quarter with industry members declining and low end imports up 2% importantly year over year growth in imports has slowed from both Q1 and Q2.
Turning to the cash flow and balance sheet on slide 11 cash flow from operating activities was about flat for the quarter. Including third quarter capex, free cash flow was a use of 181 million
Our Americas consumer OE volume grew 4%, reflecting industry recovery in the U S, where we continue to outperform the industry and our share of Fitments.
As I mentioned, for the last quarter, our year-to-date free cash flow includes a portion of the proceeds from asset sales reflecting the value of long-term supply agreements and a prepayment for Dunlop inventory that will transfer at the end of the year. The remaining amount will be amortized into SOI over roughly six years.
Q3 marks the seventh consecutive quarter of OE share gains in the Americas.
Americas commercial OE volume declined 33% as the Oems decreased production given continued weakness in freight market conditions and uncertainty surrounding the implementation of 2027 E. P. A mandate.
We expect our year-end benefit in operating cash flow related to the various Supply licensing and transition agreements to be approximately 370 million inclusive of the chemical sale.
The U S commercial replacement industry saw nonmember import growth of 64% during the quarter. Just ahead of August effective date for I E. P. A tariff implementation.
Pro-forma for the chemicals transaction. Our third quarter debt declined about 1 and a half billion dollars which reflects asset sale proceeds. Net of fees partly offset by cash used for working capital and restructuring over the last 12 months.
We continue to expect to generate significant free cash flow in the fourth quarter, consistent with our historical seasonality.
Moving to the sbu results on slide 13.
The Americas segment operating income was $206 million, a decrease of 45 million compared to last year, driven by lower volume and partly offset by Goodyear forward benefits.
America's unit volume decreased 6.5% driven by consumer replacement.
Turning to slide 14, EMEA third quarter unit volume decreased 2% driven by declines in replacement volume given pre buy of low end imports in the E U.
Us consumer replacement industry. Sell-in was down 4% during the quarter with industry members, declining and low-end imports up to percent importantly. Year-over-year growth in Imports. Has slowed from both q1 and Q2.
We expect the EU to make its final tariff determination early next year as a reminder, proposed tariff rates are 41% to 104% and we expect that the terrorists may be applied retroactively through the end of October.
Our America's consumer, OE volume grew 4% reflecting Industry Recovery in the US.
Where we continue to outperform the industry in our share of fitments.
Q3 marks the seventh consecutive quarter of OE share gains in the Americas.
In the third quarter, we announced the relaunch of the Cooper brand in EMEA to fulfill customer demand following the sale of Dunlop the availability of the Cooper brand across our regional network will ensure our portfolio provides a comprehensive and competitive offering.
America's commercial OE volume declined to 33%, as oems decreased production. Given continued weakness in Freight market conditions and uncertainty surrounding the implementation of 2027 EPA mandates.
EMEA is consumer OE continues to be a bright spot where volumes grew 20%, reflecting continued OE share gains like in the Americas. This is the seventh consecutive quarter of OE share gains in EMEA.
The US commercial replacement industry, saw non-member import growth of 64% during the quarter.
Just ahead of August effective date for iea tariff implementation.
Segment operating income was $30 million for the region up $7 million driven by price mix benefits.
Turning to Asia Pacific on Slide 15, third quarter unit volume decreased 9% driven by consumer OE and replacement volumes.
America segment. Operating income was 206 million, a decrease of 45 million compared to last year, driven by lower volume and partly offset by Goodyear forward benefits.
Lower consumer replacement volume was driven by actions, we've taken to reduce low margin business and realign our distribution and retail strategy in the region.
Turning to slide 14 EMA's third quarter unit volume decreased 2%, driven by declines in replacement volume given pre-b buy of low-end imports in the EU.
We expect the EU to make its final tariff. Determination early next year.
<unk> volume was lower given our customer mix with aggressive new car promotions in China, mostly supporting opening price point vehicles.
As a reminder, proposed tariff rates are 41% to 104%, and we expect that the tariffs may be applied retroactively through the end of October.
Segment operating income was $51 million and over 10% of sales.
As Mark mentioned earlier for Asia Pacific, We expect to return to volume growth during the fourth quarter, driven by the ramp up of new Fitments and higher replacement volume.
During the third quarter, we announced the relaunch of the Cooper brand in emia to fulfill customer demand. Following the sale of Dunlop. The availability of the Cooper, brand across our regional network will ensure our portfolio provides a comprehensive and competitive offering.
Turning to our fourth quarter outlook on slide 17.
We expect a meaningful sequential increase in soi in the fourth quarter with all regions contributing to the step up in earnings and on a year over year basis, We expect Q4 soi growth in the mid single digit range. Excluding the impact of this year's divestitures in consumer we expect replacement volume to be impacted by high churn.
EMA's consumer. OE. Continue to be a bright spot where volumes grew. 20% reflecting continued. OE share, gains. Like in the Americas. This is the seventh consecutive quarter of OE share gains in emia
Of 7 million driven by Price mix benefits.
Inventories in the U S and EU.
Consumer OE volume growth is expected to be consistent with the third quarter.
Turning to asia-pacific on slide, 15 third quarter unit, volume decreased 9% driven by consumer OE and replacement volume.
Our expectation for commercial truck volume is extremely modest given the ongoing industry challenges over.
Lower consumer replacement volume was driven by actions, we've taken to reduce low margin business and realign our distribution and Retail strategy in the region.
Overall, we expect global volume to be down about 4%. In addition, we expect higher unabsorbed fixed costs of $70 million, reflecting lower production volumes of 2 million units in the third quarter.
OE volume was lower, given our customer mix with aggressive new car promotions in China, mostly supporting opening price point vehicles.
In addition, with the industry volatility we've experienced this year, we expect our fourth quarter production to be as much as 4 million units lower than last year.
Segment, operating income was 51 million and over 10% to sales.
Fourth quarter price mix is expected to be a benefit of approximately $135 million driven by pricing actions taken earlier in 2025.
As Mark mentioned earlier for Asia Pacific, we expect to return to volume growth. During the fourth quarter driven by the ramp up of new fitments and higher replacement volume.
Turning to our fourth quarter outlook on slide 17.
Material costs will be a slight benefit given current spot rates and Goodyear for forward will drive benefits of approximately $180 million during the quarter.
Inflation tariffs and other costs are expected to be a headwind of approximately $190 million in the quarter, reflecting higher costs, given U S tariff impacts and a global inflation rate of about 3%.
We expect a meaningful sequential increase in SOI in the fourth quarter, with all regions, contributing to the Step Up in earnings and on a year-over-year basis. We expect Q4 SOI growth in the mid single digit range, excluding the impact of this year's devest
In consumer, we expect replacement volume to be impacted by high Channel inventories in the US and EU.
This amount includes tariff costs of approximately 80 million and above average increases in freight rates and increase manufacturing inefficiencies related to lower production.
Consumer OE. Volume growth is expected to be consistent with the third quarter.
Our expectation for commercial truck, volume is extremely modest, give an ongoing industry challenges.
Based on rates and in fact today, our annualized tariff costs are expected to be approximately $300 million, which is $50 million lower than we decided last quarter as Canada eliminated tariffs on imports coming in from the U S effective September 1st.
Overall, we expect Global volume to be down about 4%. In addition, we expect higher unabsorbed, fixed costs of 70 million, reflecting lower production volume of 2 million units in the third quarter.
We continue to expect proceeds from business interruption insurance related to a fire at our factory in Poland in late 2023.
In addition with the industry volatility we've experienced this year, we expect our fourth quarter production to be as much as 4 million units lower than last year.
This benefits should mostly offset the non recurrence of $52 million of insurance proceeds received last year.
Fourth quarter, price, mix is expected to be a benefit of approximately 135 million driven by pricing actions taken earlier in 2025.
And finally, the sales of OTR and chemical will be a headwind of approximately $30 million in the fourth quarter.
Raw material costs will be a slight benefit given current spot rates and go to your 40 forward. Forward will drive benefits of approximately 180 million during the quarter.
Turning to slide 18, our other financial assumptions include some puts and takes including an update to our assumption for 2020 five working capital given second half volume and an increase in restructuring given our new Q4 program with all of the work we've done to improve the balance sheet. This year.
Inflation. Tariff and other costs are expected to be a headwind of approximately 190 million in the quarter, reflecting higher costs given us tariff impacts and a global inflation rate of about 3%.
We are focused on driving strong free cash flow through the end of the fourth quarter.
This amount includes tariff costs of approximately 800 million, and above average increases in Freight rates and increased Manufacturing in efficiencies related to lower production.
Finally, as a reminder, the $2.2 billion in proceeds from asset sales will be reduced by fees and taxes. We previously guided total transaction fees, including indirect fees related to carve out administration as well as taxes at approximately $200 million the majority of which are.
Based on rates and effect today, our annualized tariff costs are expected to be approximately $50 million, which is $50 million lower than we cited last quarter, as Canada eliminated tariffs on imports coming in from the U.S. effective September 1st.
We'll be paid this year.
These costs will be included in operating cash flow.
We continue to expect proceeds from business, Interruption Insurance related to our fire at our Factory in Poland in late 2023.
So as you think about how to account for asset sales in your modeling on our cash flow statement.
We expect cash flow from investing activities to reflect proceeds of approximately $1 9 billion in cash flow from operating activities to reflect $370 million of proceeds that will be amortized into soi over roughly six years.
This benefit should mostly offset the non-recurrence of 52 million of insurance. Proceeds received last year,
And finally, the sales of OTR and chemical will be a headwind of approximately 30 million in the fourth quarter.
Offset by up to $200 million in fees.
With that we'll open the line for your questions.
Thank you if you would like to ask a question. Please press star one on your keypad.
To leave the queue at any time, please press star two.
Turning to slide 18, our other Financial assumptions include some puts and takes including an update to our assumption for 2025 working capital given second half volume and an increase in restructuring given a new Q4 program. With all of the work we've done to improve the balance sheet this year. We are focused on driving strong free cash flow through the end of the fourth quarter.
Once again that is star one to ask a question, we'll pause for just a moment to allow everyone the chance to queue.
Thank you. Our first question will come from <unk> Mackay Mckee with TD Cowen. Your line is now open.
Thank you and good morning, everybody.
First question just on some of the consumer OE market share gains that you've been reporting I'm. Just curious how we should think about that going forward.
Finally, as a reminder, the 2.2 billion in proceeds from asset sales will be reduced by fees and taxes. We previously guided total transaction fees including indirect fees related to carveout Administration, as well as taxes at approximately dollars. The majority of which will be paid this year.
These costs will be included in operating cash flow.
To what extent is it just a function of prior wins and do you sort of have a view on kind of how your OE volume may track just relative to the industry going forward.
so, as you think about how to account for asset sales in your modeling on our cash flow statement,
We expect cash flow from investing activities to reflect proceeds of approximately 1.9 billion.
No. Thanks. Thanks.
As we look at it always been one of the key focus areas since I joined the company and we looked across I'd say across the world and what was our current percentages of OE.
In cash flow from operating activities to reflect 370 million of proceeds that will be advertised into foi over roughly 6 years.
Offset by up to $200 million in fees.
With that, we'll open the line for your questions.
Versus replacement and so there was definitely an opportunity for us to move up.
In that and create that nice pull through on those first and second replacement cycles. You know, we had not had enough exposure to the premium larger rim sizes and the very best way for us to affect that change in a fast manner is through the enhanced OEM partnerships and it absolutely is about more premium pricing larger.
Thank you. If you would like to ask a question, please press star 1 on your keypad.
To leave the Queue at any time, please press star 2.
We will pause for just a moment to allow everyone the chance to queue.
Sizes larger margins. So we know we can get out there and win with our we are we've been really pleased as Kristina mentioned you know we've got seven quarters in a row of growth in both the Americas and in EMEA on that consumer OE business and as we look to it you know the partnerships that we've gotten with our strategic Oems around the world.
Thank you. Our first question will come from etai M McKay with TD. Cowen, your line is now open.
Thank you. Good morning everybody.
Um,
<unk> two to get stronger on the technology Road map as well as winning on the right Fitments.
first question, just um, on on some of the consumer, OE market share, uh, gains that you, you've been reporting. I'm just curious how we should think about that going forward. You know to what extent is it just a function of Prior wins and and and you sort of have a view on kind of how your OE volume May track just relative to to the industry going forward?
And the right platforms around the world.
The other piece as I've mentioned in our in my opening part of the of the session. You know, we we've definitely seen a preference from the Oes in the Americas, specifically around the U S. M C. A compliant and and so we've seen some nice nice tailwind is coming forward with that as well.
Terrific, that's great to hear and just secondly, I appreciate the detail on the Q4 kind of Soi drivers I was hoping we could just talk a little bit about 2026 puts and takes particularly around kind of price mix in raws into what that might look like at the current steady state as well as any kind of early thoughts on some of the other.
Other cost movements, we should kind of just be thinking about in our models for next year. Thank you.
Hi, you take good morning so.
So we'll be able to be a lot more specific on 2026 on a conference call in February but we do know a handful of factors based on our Goodyear forward programs and as you mentioned based on where current rates are today. So as we think about Soi I'd take Goodyear forward carryover.
No thanks. Thanks for you know with we looked at it always been 1 of the the key Focus areas, you know, since I joined the company and we looked across actually across the world and what was our current uh percentages of OE uh versus replacement. And so there was definitely an opportunity for us to move up uh in that and create that nice pull through on those first. And second replacement Cycles, you know, we had not had enough exposure to the, the premium larger Rim sizes and the very best way for us to affect that change in the fast manner is is through the the enhanced OEM Partnerships. And uh, it it absolutely is about more premium pricing, larger sizes, larger margins. Uh, so we know we can get out there and win with OE. Uh, we've been really pleased as Christina mentioned. You know, we've got 7 quarters in a row of growth in both the Americas and in Amaya on that consumer, OE business.
Cost benefits should be at least $250 million of course, we're looking at all levers to pull ahead cost reduction.
Flow through of pricing based on actions, we've taken to date and the market will be around $100 million, that's before rmi indexed agreements kicking in next year, which will reduce that somewhat of course, Mark mentioned a lot of the new skus coming in so we will continue to push price mix in a positive direction next.
And and as we look to it, you know, the Partnerships that we've gotten with our strategic, oems around the world, uh, continues to, to get stronger on the technology road map, as well as winning on the right fitments, uh, and the right platforms around the world. Uh, you know, the, the other pieces I'd mentioned in, uh, in my my opening part of the, of the session, you know, we we've definitely seen a a preference, uh, from the OES and the Americas specifically around the usmca compliance. And, uh, and so we've seen some nice nice, uh, Tailwind coming forward with that as well.
Year as well.
Was at current spot rates will be a benefit of $200 million and that's inclusive of the chemical transaction, meaning the portion of internal supply that moves external is now included in our raw material base, but even with that headwind raws should be a benefit.
Or, uh, kind of SOI drivers. I was hoping we could talk a little bit about 2026 puts and takes, uh, particularly around kind of price.
And raws.
Well as any kind of early thoughts on some of the other costs movements, we should kind of just be thinking about in our models for next year. Thank you.
Hi, you take good morning.
200 million.
And then inflation typically sits around on our cost base $200 million to $225 million of a headwind.
So we'll be able to be a lot more specific on 2026 on our conference call in February, but we do know a handful of factors based on our Goodyear forward programs. And as you mentioned based on where current rates,
I'd also expect tariffs carryover costs at current rates of course, a lot is moving around but tariff carryover in the range of $150 million to $160 million next year.
Are today. So as we think about SOI, I'd say Goodyear forward. Carryover um cost benefits should be at least 250 million. Of course we're looking at all levers to pull ahead cost reduction.
And then we have an insurance collection, we're expecting in the fourth quarter, which we would have a non repeat.
I think that that gives you most of the puts and takes excluding the asset divestitures.
Divestitures of which there are different impacts from most notably EMEA will have a a headwind related to the sale of Dunlop and the range of $65 million.
The reduction in our earnings related to chemical.
Is going to be about $35 million plus some stranded overhead of about 15 million now all of that will be partly offset by amortization of that $370 million that we talked about earlier in the prepared remarks that what should be a benefit of about 60.
Flow through pricing, based on actions, we've taken to date in the market will be around a hundred million dollars that's before RMI index agreements kicking in next year which will reduce that somewhat. Of course, Mark mentioned a lot of the new skus coming in, so we will continue to push price, mix in a positive direction next year, as well was. Um, at current spot rates will be a benefit of 200 million and that's inclusive of the chemical transaction. Meaning, the portion of internal supply, that moves external is now included in our raw material base. But even with that headwind, Roth should be a benefit of 200 million.
Next year so.
And then inflation typically sits around on our cost base 200 to 225 million of a headwind.
A lot of puts and takes a lot of reasons to believe that you know we have some tailwind.
That will be able to capitalize on in 2026.
Terrific. Thank you all that detail. Thank you.
I'd also expect tariff carryover costs at current rates. Of course, a lot is moving around, but tariff carryover in the range of 150 to $160 million next year.
Uh-huh.
Thank you. Our next question will come from James Mulholland with Deutsche Bank. Your line is open.
And then, um, we have an insurance collection. We're expecting in the fourth quarter, which we would have a non- repeat.
Alright, Thanks for taking my questions guys. I was wondering if you could give us an update on the commercial vehicle environment, and whether you've seen any kind of improvement or stabilization in the deck.
You mentioned that U S. Commercial replacement was up but it was driven pretty much entirely by low cost imports. So I guess the question is it is a similar dynamic playing out there as in light vehicle for the last few years, where low cost imports are coming in they're taking significant share and what I guess do you expect that to eventually put margins on commercial vehicle, which is.
I think that that gives you most of the puts and takes excluding the asset. Um, the vestures of which there are um different impacts from most notably emia will have a uh a headwind related to the sale of Dunlop and the range of 65 million.
<unk> traditionally been very strong.
Yeah, maybe I can start and then and then we'll turn it to Christina you know when we think about the commercial P. B, you're you're you're right right. There there has been some trade down, particularly with with smaller fleets are the ones. The onesie twosies types of of ownership if you will.
Our our overarching fleet business that remains very strong right in the subscription market that we have as well as our rollout of the tires as a service that is a little bit ahead of schedule. When it comes to Europe, and it's just come into the U S market, but we think about you know.
That will should be a benefit of about million dollars next year. So a lot of puts and takes, um, a lot of reasons to believe that, um, you know, we have some Tailwinds, um, that we'll be able to capitalize on in 2026.
Thank you. Our next question will come from James moholland. With Dolce Bank, your line is open
In 24 overall unit sales about 11 million units, including OE and replacement in the commercial market.
Great. Thanks for taking my questions guys. Um, I was wondering if you could give us an update on the commercial vehicle environment and whether you've seen any kind of improvement or stabilization, uh, in the deck.
We continue to focus on premium fleet customers that really drive that pull through through the oes, but we have seen as well in the marketplace.
The typical pre buy we would see on the emission changes on engines on the on the commercial truck World has been very low right and it's a win.
With the questions around the emissions and and what is really happening with that so a lot of the large fleets are most of the large fleets have opted to to extend the life of their current and some of the feedback we've gotten from customers that their cost of ownership for them. At this moment is to hang on to those those trucks.
You mentioned that U.S. commercial replacement was up, but it was driven pretty much entirely by low-cost imports. So I guess the question is, is a similar dynamic playing out there as in light vehicles for the last few years, where low-cost imports are coming in and taking significant share? And what do you expect that to eventually put on margins in commercial vehicles, which have traditionally been very strong?
They have for an extra period of time, which in terms of our subscription modeling actually is.
Okay for us for that side, right, but but when we look at it you know over the last several years you know peak margins were kind of high single digits.
Yeah, maybe I can start and then, uh, then we'll turn it to Christina. You know, when we think about the, the commercial pbu, you're you're right right there. There has been some trade down, uh, particularly with, uh, with smaller fleets or the onesie onesie 2z types of of ownership. If you will uh our our overarching Fleet business, though, remains very strong, right? And the subscription Market that we have as well as our roll out of the tires as a service.
During the 13 and a half to 14 million unit volume and and just given the current freight environment and this regulatory uncertainty I mentioned you know, it's it's been definitely a challenging marketplace for the entire industry globally, probably unprecedented actually.
Got it okay. So I guess my second question is you know I was wondering if you could just doubleclick I guess on the broader channel dynamics and what you're seeing a few months ago, we were sitting.
Sitting here, we were talking about the eventual low cost inventory digestion following that that massive inflow that we saw around tariffs on but it doesn't feel like that digestion is really materializing, yet I know Kristina said, we're probably going to see at least a little bit further before that starts to hit but do we have any line of sight on on when you think that might.
Start to flow through or is that really going to be something that could be here for quite a bit longer.
That is, uh, a little bit ahead of schedule when it comes to Europe and is just coming to the US market. But we think about, you know, in 24 overall, unit sales, about 11 million units, including OE and replacement in that commercial Market. Uh, we continue to focus on premium Fleet customers, uh, that really drive that pull through through the OES. Um, but we have seen as well through the marketplace, you know, the, the typical prey, we would see on the emission changes on engines, on the on the commercial truck world, uh, has been very low, right? And it's, uh, it with the questions around the emissions and, uh, and what is really happening with that. So a lot of the large fleets, most of the large fleets have opted to, to extend the life of their current. Uh, and some of the feedback we've gotten from customers that the cost of ownership for them at this moment is to hang on to those uh those trucks that they have uh for an extra period of time.
James Thanks for the question I would say just given the fact that the U S industry was negative in the third quarter sellout continues to trend more positively we're beginning to see some of the channel inventory sell through.
With the current data that we have we would say that that the remaining excess in the channels would take at least through the end of the fourth quarter to sell through in consumer replacement to your point a little earlier in commercial there's just been this continued glut of pre buy in through the third quarter.
Which in terms of our our subscription modeling actually is uh is okay for us for that side, right? But uh, but when we look at it, you know, over the last several years, you know, Peak margins were kind of high single digits uh during a 13 and a half to 14 million uh unit volume and uh and just given the the current Freight environment and this regulatory uncertainty I mentioned you know it's it's been definitely a challenging Marketplace for the entire industry globally. Probably unprecedented actually
Sure.
And I think that'll take longer on into Q1 of 2026, I think that the.
The commercial side of the business as Mark was just mentioning.
Actually tends to see a significant portion of supply on a run rate basis coming from imports and so over the longer term I think you know commercial trends will be healthier, but we will need to work through the excess imports over the course of the next couple of quarters in commercial.
Got it. Okay. So I guess my second question is, you know, I was wondering if we could just double click, I guess on the the broader Channel Dynamics. And what you're seeing a few months ago, we were, uh, we were sitting here we were talking about the eventual low-cost inventory, judge question, following that, that massive inflow that we saw around tariffs on, but it it doesn't feel like that digestion is really materializing yet. I know Christina said, we're probably going to see at least a little bit further before that starts to hit. But do we have any line of sight on on when you think that might start to to flow through or is that really going to be something that could be here for quite a bit longer?
Alright, Thank you very much guys.
Thank you. Our next question will come from Ross Macdonald with Citi. Your line is open.
Yes. Thanks for taking my question, it's Ross Macdonald at Citi. Two questions from me first one on EMEA. It looks like very strong OE performance I know E tail already asked on this but given the 20% volume growth in EMEA original equipment in <unk> could you maybe just drill into if there is any specific.
That forms are products that are taking the lion's share of that volume growth or is this broad based market share gains, we're making in <unk> would be very interesting I think to understand.
Dave, thanks for the question. I would say just given the fact that the US industry was negative in the third quarter sellout continues to Trend more positively, we're beginning to see some of the channel inventory sell through, you know, at our, with the current data that we have, we'd say that that the remaining, um, excess in the channels would take at least through the end of the fourth quarter to sell through, in consumer replacement to your point of a little earlier in commercial. There's just been this continued glut of prey in through the third quarter.
What's underlying that and then Mark you mentioned that the profit per tire in EMEA.
Is improving.
And I think that'll take longer on into q1 of 2026. I think that the commercial side of the business, um, as Mark was just mentioning
Could you just elaborate on how much of that reflects specifically the winter tire strengths that you've called out in Europe versus how much of that improving profit per tire and EMEA should reasonably should we reasonably expect to carryover.
Into 2026, so that's my first question on EMEA.
And then secondly, I see in your Q4 indications.
actually tends to see a significant portion of Supply on a run rate basis coming from Imports. And so over the longer term I think you know commercial Trends will be healthier but we will need to work through the excess Imports over the course of the next couple quarters in commercial.
Right. Thank you very much, guys.
A comment around potential further rationalizations could.
Could you maybe elaborate on if theres a new plan that we should expect in the fourth quarter or any details of what that might look like and if that's focused on any one particular region.
From Ross MacDonald with City, your line is open.
Thank you very much.
Sure. So let me maybe just to start as.
You know I would say that to the first part of your question I think you've got three and instead of two Ross by the way, but I don't know.
Sorry about.
No worries how good the when you look at the EMEA market. It's it's actually broad you know we have been moving up with the players one of the the difference is that when we rolled into our our longer range planning coming into the start of 25, when we put our David and cardin over our product.
Yes, thanks for taking my question, it's Ross MacDonald City, uh, 2 questions from me first. 1 on Mia looks like very strong, OE performance. I know ETA already asked on this, but given the 20% volume growth in a Mia original equipment in in 3Q. Uh, could you maybe just drill into if there's any specific, uh, platforms or products that are taking the line share of that, volume growth? Or is this is this broad-based
And product planning roadmap in conjunction with Chris helpful and engineering was really making sure that we've got the right relationships the right the right OEM strategies and the right technological partnerships with those Oes and again, where we're seeing the benefit of that on the go forward, but in the here and now.
Market, share gains. You're making in OE, be very interesting. I think to understand what's, what's underlying that and then, Mark, you mentioned that the profit per tire in Amia is, is, is improving. Could you just elaborate on, how much of that reflects specifically the winter tire strength that you've called out in Europe? Um, versus how much of that improving profit per tire in Amia should reasonably, uh, should we reasonably expect to carry over?
As well as we look at some of the Oems are coming back stronger in them in EMEA that we were actually on some really good fitments broad based across Europe, which is why I think you'd see that seven quarters of growth in EMEA on the consumer OE.
Into 2026. So that's my first question on on Amiya and then, secondly, I see in your Q4 indications. Um uh a comment around potential further rationalizations um could you maybe elaborate on on if there's a new plan that we should expect in the fourth quarter or any details of what that might look like? And if that's focused on any 1, particular region,
As well as you know.
Uh, thank you very much.
It's a conscious decision as well right. We are continuing as we've mentioned not only Americas, but around the world as we globalized our product development to fill the blank spaces with premium product and.
And specifically the larger rim sizes, and we're deprecating the skus that are lower margin that we don't make money on and so we're seeing a partial lift from that as well as the new skus coming in and also some of the Oes coming back in the second half, but as well you are right. The second half in the winter mix would be.
Really pleased with our order performance from our.
<unk> on the on the winter mix as well so all of those are looking good on the second piece. The rationalizations you know we have a we've completed basically a call. It a 4.5 I think is the right way to say that three in EMEA, one in Asia and I a significant.
Our restructuring and one of the U S plants are to really focus.
Sure. So maybe maybe just to start. As you know I would say that to the first part of your question. I think you got 3 and instead of 2 roses but I don't know. Sorry about that. No worries. All good. The when you look at the the AMA Market, it's it's actually broad, you know, we we have been moving up with the players 1 of the the differences that when we rolled into our our longer range planning coming into the start of 25 when we put David anchored in over our, our product Tech and product planning roadmap, uh, in conjunction with Chris hustle and Engineering was, you know, really making sure that we've got the right relationships, the right, the right, OEM strategies, and the, the right technological Partnerships with those OES. And again, we're we're seeing the benefit of that on the go forward, but in the here and now uh, as well as we look at some of the oem's uh coming back stronger uh in a in a Maya that uh, you know, we're we're actually on some really good fitments broad-based across Europe.
From that side of it so all of those actions are on track as we committed to the Goodyear forward plan and the restructuring activities as.
Which is why I think you see that 7 quarters of growth uh in ama on the consumer Oe.
As we get into quarter, four and get ready it really as we go into probably the February results. As we are we can ensure that our with you all were continuing to top off in refill our Goodyear forward as we look to a 2.0 and it's just embedded in our DNA of how we're running the business and we continue to look and scan.
Uh, as well as, you know, it, it's a conscious decision as well, right? We are continuing, as we mentioned, not only in America, but around the world as we globalize our product development to fill the blank spaces with premium product. Uh, and specifically the, the larger Rim sizes and we're deprecating. The skus that are lower margin that we don't make money on and so we're
What other things, we do to move things from a fixed cost environment to a flex cost environment. So we are we're working very diligently with that around the world.
Just with respect to the guidance the increase the restructuring basket was for a new program.
The U S in the fourth quarter.
Very helpful. Thanks, very much.
Sure.
Thank you once again, if you would like to ask a question. Please press star one on your keypad now.
Our next question will come from James Picariello with BNP Paribas. Your line is open.
Seen a a partial lift from that, as well as the new skus coming in. And also, some of the O's, uh, you know, coming back in the second half but as well, you are right. You know, the the second half and the winter mix. We've been really pleased with our order of performance, uh, uh, from our customers on the, on the winter mix as well. So all of those are looking good. Uh, on the second piece to the, the rationalizations, you know, we have uh, we've completed basically I call it a a, a 4.5, I think is the right way to say that. Uh 3 and Omega 1 in Asia and a significant restructuring and 1 of the US plants uh to to really focus
Hey, good morning, everybody.
And then just just hoping to clarify.
The insurance collection in the fourth quarter or is this a new item or was this always.
Embedded in the full year outlook.
So James we we first brought up the insurance recovery.
Recovery in the fourth quarter on our second quarter conference call. So it's.
I'm not new we didn't have line of sight to it at the beginning of the year.
However.
uh from that side of it. So you know, all of those actions are are on track as we committed to the Goodyear forward plan and the restructuring activities. Uh, as we get into quarter 4 and, and get ready really, as we go to probably the February results as we, uh, we come and share that, uh, with you all, you know, we're continuing to top off and refill our Goodyear forward, as we look to a 2.0. And it's just embedded in our DNA of how we're running the business, and we continue to look and scan at what other things we do to move things from a fixed cost environment to a flex cost environment. So we, uh, we're working very diligently with that, uh, around the world.
Okay, and it's about $50 million.
Brazil.
Correct, Yeah, that's related to business interruption from the beta fire back in 2023, and we had called out about that amount as part of you know the disruption related to the fire.
Just with respect to the guidance that the increase in the restructuring basket, was for a new program. Um, in the US in the fourth quarter,
Very helpful. Thank you very much.
Sure.
Understood. Okay. Thanks, and then.
Thank you. Once again if you would like to ask a question, please.
With terrorist at an annualized rate of $300 million can you just help us better understand what drives the seasonality to this because.
Question will come from James piccirillo with BMP, parabas, your line is open.
The third quarter was a full clean quarter of all tariffs generally came in at $40 million.
Hey, good morning everybody.
The second quarter was I think $10 million whats implied for the fourth quarter and then yes just.
Just help us understand the seasonality to this.
So broadly the seasonality should follow our volumes, which tend to be a little lower in the first half, particularly out of the first quarter and then seasonally stronger in the second half of the year, what I would say about the third quarter tariff amounts coming in right around $40 million, a little bit less than we had expected some of them.
Your outlook.
So James, we we first um brought up the um Insurance Recovery in the fourth quarter on our second quarter conference call, so it's um, not new. We didn't um, have line of sight to it at the beginning of the year.
however,
That was a basket ing issue as we look to pull tariffs out of raw materials.
Okay, and it's about $50 million.
And we over estimated the amount of tariffs for Q3 and underestimated raw materials you can see it's a it's a net there.
Or so correct. Yeah that's related to business Interruption from the Beats of fire back in 2023 and we had called out about that amount as part of um you know the disruption related to the fire.
Also because of days inventory you know lower volume in Q2, lower volume in Q3 tariff costs, a little pushed into Q4, so James what what I would say right now based on rates, we see today fourth quarter tariff cost should be about $80 million and then the flow.
Understood. Okay, thanks. And then
Through into next year looking around $160 million, mostly weighted to the first half and so I'd say something on the order of $60 million to $65 million each in Q1 and Q2.
With tariffs at an annualized rate of 300 million, can you just help us better understand what drives the seasonality to this? Because you know the third quarter was a full clean quarter of of of all tariffs and only came in at 40 million. Uh the second quarter was I I think 10 million like what what's implied for the for the fourth quarter and then yeah just you know, just help us understand the seasonality to do this. Thanks
Got it.
If I could squeeze in one more.
Yeah.
Appreciate it.
In regards to the chemicals divestiture.
You can see the guided seven 7 million of lost gave it for the two months post sale can you just clarify what the expected.
So broadly, this seasonality should follow our volumes which tend to be a little lower in the first half, particularly the first quarter, and then, um, seasonally stronger in the second half of the year. What I would say about? Um, the third quarter tariff, amounts coming in right around $40 a little bit less than we had expected. Some of that with a basket getting issue. Um, as we look,
Annualized impact is for that chemical sales because it sounds as though there is an element of the divestiture and that will show up in.
Raw material headwind for for next year is that just opened up clarify what what does say Heidelberg.
Looked to pull tariffs out of raw materials. Um and we overestimated the amount of tariffs for Q3 and under estimated raw materials, you can see it's a it's a net there.
First internal buckets look like thanks, Yeah, no. That's right. So it's gonna show in a couple of different baskets part lost earnings and S. O Y part and increase in raw materials as we move to third party sourcing I think about this total impact of being something in the order of magnitude.
About $120 million all in.
The earnings the lost earnings James will be about $45 million of a headwind on an annualized basis.
Also, because of days inventory, you know, lower volume in Q2 lower volume in Q3, you know, tariff costs a little pushed into Q4. So James, what what I would say right now, um, based on rates we see today, fourth quarter, tariff cost should be about 80 million and then the flow through in the next year, looking around 160 million, mostly weighted to the first half. And so I'd say something on the order of 60 to 65 million each in q1 and Q2.
Can think about doubling that and the other the other portion would then show up in raw materials, maybe with some additional margin for a new supplier and then stranded costs will be about $15 million in conjunction with the transaction of course, we're going to look to flex.
Squeeze in one more. Um, and I treat.
Costs as part of our ongoing savings initiatives next year.
Got it thank you.
Sure.
Thank you. Our next question will come from Ryan Brinkman with Jpmorgan. Your line is open.
Hi, Thanks for taking my questions.
<unk> gotten the one about low cost higher imports into the U S. Maybe a similar one but about Europe.
Appreciate. But, um, in regards to the chemicals semester, I I could see the guy at 7, 7 million of Lost TV for the 2 months post sale. Could you just clarify what the expected, uh, annualized impact is for that chemical sale because it sounds as though, you know, there is an element of the domestic share and that will show up in raw material headwind for, for next year. So yeah, just hoping to clarify what what those internal versus internal buckets. Look like, thanks.
Can you provide there with regard to what youre seeing with regard to potential tariffs that could be implemented in that market and then as well as what might be happening with regard to the pre buy of those tires as a tracking any differently to what you saw in the U S. Given the potential I think for tariffs maybe be made retroactive to the date of the opening of the anti dumping investigation.
Yeah. No, that's right. So, it's going to, um, show in a couple of different baskets, part lost earnings and SOI part an increase in raw materials as we move to third-party sourcing. I think about this, um, total impact of being something in the order of magnitude about 120 million dollars. All In
Yeah.
Hi, Good morning, Ryan I would say.
What we're seeing in Europe feels a lot like the U S. Just on a quarter or two lag because the tariff announcement came a little bit later.
We have seen over the course of Q2 and on into Q3.
Lot of pre buy of lower and tire imports and what this means is that our dealers and distributors are saving warehouse space and saving liquidity in order to to stockpile. These imports I think as we look to the fourth quarter not expecting so much of an impact we do not see the same.
just the earnings, the Lost earnings, James will be about 45 million of a headwind on an annualized basis. You can think about doubling that and the other the other portion would then show up in raw materials, maybe with some additional margin for our new supplier and then stranded costs will be about 15 million dollars in conjunction with the transaction. Of course we're going to look to flex um costs as part of our ongoing savings initiatives next year.
Sure.
Jim competitive dynamics necessarily on winter tires that we do in summer are all season, I think we still would say that the EU consumers are very sensitive to making sure that their winter tires come with a very high quality and performance.
I expect that it will take on into 2026 to sell through some of that all season and some are pre buy because it's again not really for winter tire selling.
Hi. Thanks for taking my questions. Uh, you've gotten the 1 about low-cost pirate Imports into the us. Maybe a similar 1 but about Europe. Uh you know what, I think, can you provide there with regard to what you're seeing with regard to potential tariffs? That could be implemented in that market and then, as well as what might be happening with regard, to the pre-b buy of those tires is a tracking any differently to what you saw in the US, given the potential. I think for tariffs to maybe be made retroactive to the date of the opening of the anti-dumping investigation.
Okay.
The look ahead. Thank you for 2026.
Hi, Kristina I think you say $250 million of savings from Goodyear for it I'm just looking at the numbers from slide six it seems like with Goodyear forward savings expected to be at an annualized run rate of 500 million by <unk>. This year and was $750 million of Soi benefit in 'twenty five on top of 480 in 'twenty four and should you should have like 200.
Hi, good morning, Brian. I I would say what we're seeing in Europe. Feels a lot. Like the US just on a quarter or 2 leg because the Tariff announcement came a little bit later.
$70 million I think year over year benefit in 2000, <unk> just from the Anniversarying of what you've already accomplished without any incremental action required on your part is that the right way to think about that then because I heard mark referenced a two point I think a good you've already pointed out I presume and Kristina did you say something about an incremental cost save program here.
And <unk>. So just curious if the overall cost saves could be may be substantially greater than $250 million in 2006 to help defray that.
$250 million to $200 million of inflation general inflation headwind to help ensure that some of these savings go through to that to the Soi line.
I think as we look to the fourth quarter, not expecting so much of an impact. We do not see the same competitive Dynamics necessarily on winter tires that we do in summer or all season. I think we still would say that the EU consumers are very sensitive to making sure that their winter tires come with a very high quality and performance. Um, expect that it will take on into 2026 to sell through some of that all season and summer pre-b, buy because it's again, not really for winter tire selling.
Well, it's certainly looking ahead, our goal is to make sure or not.
<unk> never done with self help and the $270 million flow through is exactly the right number based on the math and the calculations for flow through and as I mentioned earlier, we're going to look to accelerate cost reduction into next year I think we'll be able to share more about our plans as part of our February call.
Call for 2026, but as Mark has mentioned in the past this is a lot about making.
Making cost savings a lot about the way we work, making it part of the company's DNA and how we will position growth for the company going forward.
Okay. That's helpful. Thanks, and then just lastly, I know you said strong cash flow in the fourth quarter, you always have extremely strong cash flow in the fourth quarter as any sort of way to dimension that are providing an update on the puts and takes and how you expect the full year to shake out in 2005.
Okay, then and and on the look ahead, thank you for uh 2026. Um I Heard uh Christina I think you say 250 million of savings from Goodyear forward. I mean just looking at the numbers from slide 6. It seems like with Goodyear forward savings expected to be at an annualised run rate of 1500 million uh by 4 q this year and it was 750 million of SLI benefit in 25 on top of 480 and 24. And I'm sure you should have like 270 million. I think year-over-year benefit in 26 just from the anniversary of of what you've already accomplished. Without any incremental, action required on your part. Is that the right way to think about that. And then because I heard Mark, uh, reference, I thought a 2.0. I think a good year forward 2.0. I presume and and Christina. Did you say something about a an incremental cost save program here um, in in 42? So just just curious. If the overall cost saves could be maybe substantially greater than 250,
Sure So if you're looking.
Looking at the drivers of S. O Y I think he should.
And uh in 26 to help to fray that uh you know, 250 million or 2 200 million of inflation in general, inflation headwind to help ensure that you know some of these uh savings go, you know through to the to the SOI line.
Get to a level of about 370 $375 million in the fourth quarter that should bring you inclusive of corporate costs and DNA to an EBITDA of about $1 $8 billion on.
On the operating side and our free cash flow drivers there were several puts and takes but everything we've laid out pretty much as a net so on an operating basis I would say free cash flow is about breakeven.
Breakeven and then what what we set as part of this call is that our asset sale fees.
Which we've.
Indicated will be about $200 million are going to flow through operating cash flow. This year and so as you think about the geography, we should show cash flow from investing activities proceeds from our asset sales of about $1.9 billion, and then breakeven cash from operations.
Well, certainly looking ahead. Our goal is to make sure we're um, not never done with self-help and the 270 million flow through is exactly the right number based on the math and the calculations for flow through. And, as I mentioned earlier, we're going to look to accelerate cost reduction into next year. I think we'll be able to share more about our plans as part of our February conference, call for 2026. But as Mark has mentioned in the past, this is a lot about, you know, making um, cost savings a lot about the way we work. Making it part of the company's DNA and how we will position growth for the company going forward.
Yeah, that's helpful. Thanks. And just lastly I mean I know you said strong cash flow in the fourth quarter you always have extremely strong cash flow in the fourth quarter is any sort of way to Dimension that or provide an update on on the person takes, you know, how you expect the full year to shake out in in 25 years?
Excluding $200 million of fees that will also flow through there as well.
Sure. So if you're um, looking at the drivers of SOI, I think you should
Very helpful. Thank you.
Thank you. Our next question will come from Emmanuel Rosner with Wolfe Research. Your line is open.
Great. Thank you so much.
Actually hoping to pick up right here, which is.
Get to a level of about $370 million to $375 million in the fourth quarter. That should bring you, inclusive of corporate costs and DNA, to an IBA of about $1.8 billion.
You were very helpful with the puts and takes early puts and takes of Soi and through 2026, just curious about how to think about.
The early puts and takes on the free cash flow compared to what you. Just described so 2025 it sounded like at least on an soi versus the expectation of modest growth. This year. When I quickly added your puts and takes but anything that you're seeing in terms of.
On the operating side, in our C free cash flow drivers, there were several puts and takes, but everything we've laid out pretty much is a net. So, on an operating basis, I would say free cash flow is about, um, break even. And then, um, what we said as part of this call is that our asset sale fees.
The free cash flow items and in particular that portion of the asset sales that flows into the cash flow from operations. This year.
Would it be missing next year.
So emmanuel on cash for 2020, six we know that restructuring flow through from Goodyear forward.
Which we've, um, indicated will be about $200 million, are going to flow through operating cash flow this year. And so, as you think about the geography, we should show cash flow from investing activities proceeds from our asset sales of about 1.9 billion dollars and then break, even cash from operations.
So it would be about $200 million to $250 million is significantly less cash outlay than we saw in 2025 also interest expense will be a lot lower obviously, we've been doing a lot of hard work to get to that lower leverage.
Excluding $200 million of fees that will also flow through there as well.
Very helpful. Thank you.
Thank you. Our next question will come from Emmanuel rothner with wolf research. Your line is open.
And we would expect that interest expense to fall in the range of 425 million, that's down about $100 million since the end of 2023 and since we first started Goodyear forward.
When I look at the amortization of the $370 million I'd expect about $60 million beginning in 2026.
Okay, and so I guess, putting it all.
Putting that altogether compare to.
That.
Breakeven on an operating basis that.
You're speaking about for 2025.
Yeah.
Directionally.
Great. Thank you so much. Um I was actually hoping to pick up uh right here which is um um you were very helpful with the puts and takes early puts and takes of uh SLI into 2026. Just curious about how to think about um the early puts and takes on the free cash flow um compared to what you just described for 2025. It sounded like at least on an Sy basis. You know, the expectation of models growth this year when I quickly added your puts and takes but uh anything to think of in terms of uh the free cash flow items and in particular that portion of the asset sales that flows into the cash flow of operations this year. Um, uh, would would it be missing, uh, next year?
Where would that leave us with 26.
So mayo will be able to be a lot more specific as to our drivers of soi drivers of free cash flow on our February conference call. We have volumes down in the second and third quarter also anticipating that in the fourth quarter wanting to see some of this industry industry disruption workers.
You are on cash for 2026. We know that restructuring flow through from Goodyear forward.
The way through the channels before we guide into next year.
Okay understood.
And then one question on <unk>. So I appreciate all the color on the impacts this year and sort of like the annualized <unk> into next year can you talk about.
Is there any room for mitigation efforts.
In terms of.
Either moving things around or just sourcing you differently.
Should be um about 200 to 250 million. So significantly less cash outlay than we saw in 2025. Also interest expense will be a lot lower. Obviously, we've been doing a lot of hard work to get to the um, lower leverage. And we would expect then interest expense to fall in the range of 425 million. That's down about 100 million dollar since the end of 2023. And since we first started Goodyear forward, when I look at the amortization of the 370 million, I'd expect about 60 million dollars. Beginning in 2026,
Okay, and so I guess putting it all.
<unk>.
A quick update please on any way to sort of reduce that flow in on a go forward basis.
Yes, so we're really working on it on on all fronts on it.
When do you think about them anywhere from we're Super first of all were Super active in D. C on a regular basis.
Putting that all together compared to uh that uh, you know, break even and operating basis that um you're speaking about for 2025. Um you you know directionally uh what would that leave us to 26?
Making sure that we've got our.
Our our viewpoints in fact points in and and we've got really strong working relationships with our with the right folks in D. C around that can help us on the right implementation of the tariffs and the and how to do that to have best our best foot forward for for Goodyear and our strong U S footprint.
So Emmanuel we'll be able to be a lot more specific as to our drivers of SOI drivers of free cash flow on our February conference call. We have volumes down in the second third quarter. Also anticipating that in the fourth quarter wanting to see some of this industry industry. Disruption work its way through the channels before we guide into the
Next year.
On the EMEA side as well I think our lobbying efforts. There are also to the really the.
<unk>.
The anti dumping I would call it but really the tariff impact there. We are the teams have been working very hard with the EU on that end.
And cooperating with that aspect when it comes to the rest of your question right. We we absolutely. That's one of the reasons, we created and I didn't move to get US set up under done Metzler for global manufacturing. So that we can constantly be polling and looking at best landed cost around the world.
Okay. Understood. Um, and then 1 question on task please. So I appreciate all the caller on the, uh, you know, the impact this year and, and sort of like the annualization into next year. Um, can you talk about? Um, is there any room for mitigation efforts? Um, in terms of, uh, you know, either moving things around or just, you know, sourcing it differently. Um, just, uh, a, a quick update please on. Uh, any way to sort of like reduce that load on the go forward basis.
We've we've shared on earlier calls right. We continue the journey of moving from a cost center approach to a P&L approach at each of our factories around the world to make sure that we're we're flexing cost structures that we are absolutely. The most competitive we can be and so as I mentioned before I think we see a we saw a lot of positive.
Momentum and sourcing from Oems in the U S market, preferring that U S MCA compliant footprint.
That it.
<unk> takes effect going into next year, and then in the coming years as well when we look at that sourcing of that preferential.
Really more preferred to the U S. M C. A side so absolutely we're doing all those things and relocating things too.
Moving within the footprint to have the best best landed cost.
In the region or in some cases it is still shipping from other locations, but we try to preference for in the region for the region wherever possible.
Yeah, so we're we're really working on it on on all fronts on it. Uh, when you think about it manual from we're, we're super. First of all, we're Super Active in DC on a regular basis. Yeah, making sure that, uh, that we've got, uh, our, our viewpoints in fact points in and, uh, and we've got really strong working relationships with, uh, with the right folks in DC, uh, around that can help us, uh, on the right implementation of the tariffs. And, uh, and how to do that to have best best foot forward for, for Good Year and our strong us footprint. Uh, on the AMA side as well. I think our our lobbying efforts there. Uh, also to the really, the, the, uh, anti-dumping I would call it but really the, the Tariff uh impact there. We, the teams have been working very hard with the EU on that and uh, and cooperating with that aspect, when it comes to the rest of your question, right? We we absolutely
Great. Thank you.
Thank you. This concludes our question and answer session I will now turn the meeting back to Marc Stewart for any final or closing remarks.
Okay. Thank you and thank you all for joining the call today are so that's a wrap for Kristina and I am sure will have some other conversations with you guys over the course of the week clearly while the short term conditions have been pretty turbulent right with a lot of global trade volunteer volatility, but we are absolute.
We are laser focused on controlling the controllable right that is absolutely our mantra. It is about us continuing to to drive the Goodyear forward to conclusion, and keep the pipeline refilled and and making sure that we are staying absolutely on our toes and all of our folks around the world continuing to implement.
And make sure that we're monitoring our cost at the same time, making sure that we are are being absolutely focused on bringing the new skus into the marketplace around the world of the higher rim size, the premium room sizes and deprecating low end volume.
It's 1 of the reasons, you know, we created and I did the move to to get us set up under Don Metzeler for a global manufacturing so that we can constantly be pulling and looking at best landed cost around the world. Uh, you know, we've we as we've shared on earlier calls, right? We continue the Journey of moving from a cost center approach to a p&l Approach at at each of our factories around the world to make sure that we're, we're flexing cost structures that we are absolutely the most competitive we can be. And so as I mentioned before, I think we see a we saw a lot of positive, uh, momentum and sourcing from oems in the US market, uh, preferring that usmca compliant footprint, uh, that uh, that takes effect going into next year and and then in the coming years as well. When we look at that sourcing of that preferential, uh, really more preferred to the usmca side. So, uh, absolutely, we're we're doing all those things and relocating things to, uh, moving within the footprint to have the best
Best best landed costs. Uh, in the region or in some cases, it is still shipping from other locations, but we try to preference for in the region for the region wherever possible.
Great. Thank you.
In terms of the margin play we've completed our planned divestitures, we've restored our balance sheet to health and we for sure are driving sequential earnings growth were cross actions as well as our share gains.
Thank you. This concludes our question and answer session. I will now turn the meeting back to Mark, Stewart for any final or closing remarks.
Our OEM volume growth as we've talked a lot about on the call today our.
Outpacing our 18 inch and above.
The world, particularly in China, and and then we're really excited about the new wrangler and the Eagle off one launches here in the in the U S marketplace and the strength of our winter tire orders in EMEA as we mentioned so we're sharpening our portfolio, we're expanding our retail operations and we can Tintin you to position ourself to til.
Leverage as the markets.
Resume normalcy.
You guys for joining today.
That brings us to the end of today's meeting we appreciate your time and participation you may now disconnect. Thank you.
And keep the pipeline refilled and, uh, and making sure that we are staying absolutely on our toes. And all of our folks around the world continue to implement and make sure that we're we're monitoring our cost. At the same time, making sure that we are are being absolutely focused on bringing the new skus into the marketplace, around the world of the higher rim size. The premium Rim sizes and deprecating, low-end volume. Uh, in terms of the margin play, you know, we've completed our plan to vesture, we've restored, our balance sheet to health and we for sure are driving sequential earnings growth. We are a cross actions as well as our share gains, you know, our OEM volume growth. As we've talked a lot about, uh, on the call today, uh outpacing, our 18 inch, and above uh, around the world, particularly in China and uh, and then we're really excited about the new Wrangler and the eagle F1 launches here in the, in the US Marketplace and the strength of our, our winter tire orders in a Maya as we mentioned. So we're sharpening
A portfolio. We're expanding our retail operations, and we continue to position ourselves to to leverage as the markets
Resume a normaly. So thank you guys for joining today.
That brings us to the end of today's meeting, we appreciate your time and participation you may now disconnect. Thank you.