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F500-2021-246-Goodyear Tire & Rubber

Well known for its long-running advertising campaigns featuring the "Goodyear Blimp," this company is the largest U.S.-based tire manufacturer. It sells tires and related products around the world under the Goodyear, Dunlop, Kelly, and Sava brands among others, and its tires are used on everything from cars to airplanes to mining equipment. Goodyear dropped 30 places in this year's rankings as its 2020 revenues fell by 16.4% to $12.3 billion.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-216-Goodyear

The tire manufacturer with facilities across the world had annual sales of $14.7 billion in 2019. The company also announced a venture capital fund, Goodyear Ventures, with $100 million to invest in "future mobility technology" in the next decade.

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Goodyear Tire &amp; Rubber is the third largest tiremaker in the world by volume after Michelin and Bridgestone. To pay down debt and bolster its balance sheet, the company announced in late 2023 three major divestments in conjunction with activist investor Elliott Management. In February it exited its Off-the-Road tire business before completing in May its sale of the Dunlop brand for combined gross proceeds of $1.6 billion. Under this Goodyear Forward transformation initiative, it still plans to sell its synthetic rubber operations, enabling the company to double its operating margin to 10% by the fourth quarter of 2025.

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Goodyear Tire & Rubber (GT): Company Profile, Stock Price, News, Rankings

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Goodyear Tire & Rubber

goodyear tire & rubber

Good morning. My name is Nikki, and I will be your conference operator today. At this time, I would like to welcome everyone to Goodyear's first quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After some opening remarks, there will be a question-and-answer session. You may register to ask questions at any time by pressing the star one on your telephone keypad. You may withdraw yourself from the queue by pressing star two. Please note this call may be recorded. It is now my pleasure to turn the conference over to Ryan Reed, Vice President, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to our first quarter 2026 earnings call. With me today are Mark Stewart, CEO and President, and Christina Zamarro, Executive Vice President and CFO. A couple notes before we get started. During this call, we'll make forward-looking statements and refer to non-GAAP measures. For more information on the most significant factors that could affect future results and for reconciliations of non-GAAP measures, please reference today's presentation and our SEC filings. Our earnings materials, including a replay of this call, can be found at investor.goodyear.com. With that, I'll hand the call over to Mark.

Thank you, Ryan, and good morning, everyone. We appreciate you joining our call. As we look at the quarter, you'll hear Christina and I walk through how we are staying disciplined as market dynamics continue to shift and how we're managing through the current environment. With that, let's start with our results. For the Q1 summary, first quarter operating results were largely in line with our expectations and reflected industry declines in both consumer OE and replacement demand in many of our markets.

In that environment, both EMEA and Asia Pacific regions showed year-over-year segment operating income growth and SOI margin improvements. Condition in the Americas were challenging. Weak consumer and commercial demand, retailer and distributor destocking, and increased manufacturer promotion weighed on the results. At the same time, Goodyear Forward savings continued to exceed plan. We generated $107 million of SOI benefits during the quarter.

While Goodyear Forward was launched as a two year program, the actions we took simplifying the business and improving productivity continued to deliver benefits for us today. The conflict in the Middle East has introduced more uncertainty, particularly around raw materials and potential end market demand. When you add that to already weak industry trends, it creates a challenging backdrop for the coming quarters, one we're well-prepared to manage. In the Americas, consumer OE industry demand declined, reflecting lower OEM production.

Even in that environment, we grew our OE market share by about two points in the quarter. That progress really reinforces our confidence in our OE strategy and continues to build a strong pipeline for future premium replacement demand over time in the replacement cycle. On the consumer replacement side, U.S. industry demand declined, driven by harsh winter weather and a cautious consumer. As I mentioned earlier, manufacturing promotions carried over from the fourth quarter, given a weak demand environment.

Against that backdrop, we stayed disciplined on price mix, and we did not chase near-term volumes. America's first quarter volumes also reflect planned actions that rationalize low margin, non-core brands, non-core product lines as we continue the work to streamline our portfolio of product offerings in the marketplace. As we look to the second quarter, we expect consumer replacement volume to improve from first quarter levels, given the sharp destocking we experienced in Q1 and new assortment wins achieved by our sales team with key U.S. customers.

The America's commercial truck tire business continued to be impacted by tough comps and a continued weak freight environment during the quarter, showing meaningful declines versus last year. Volumes remained at very low levels, and operating results in our Americas commercial business continued to be challenged given the multi-year downturn in U.S. freight activities. Our focus here is clear: improving the trajectory of earnings through price mix and a strong focus on cost. We believe our industry-leading cradle to grave fleet solutions business model will help us win with our customers.

Turning to EMEA, where our consumer OE business continued to gain share, growing by roughly two points despite industry volume in both OE and replacement declining in the region. In fact, Q1 marked the ninth consecutive quarter of OE market share gains in the region. EMEA's consumer replacement volume was lower, driven primarily by two factors: increased competition in low rim size tires and, like the Americas, our strategic portfolio rationalization of low margin products.

Importantly, the Middle East represents a very small portion of our EMEA sales, and we did not see a material volume impact from the conflict during the quarter. In EMEA commercial truck, industry demand improved somewhat with replacement demand up slightly and OE increasing following gains in the second half of last year. We continue to see opportunities to improve our commercial business this year through price mix and through increasing operational efficiencies in our solutions business.

Finally, as we shared with you on our last call, we completed two major factory restructuring actions in Europe in 25. Another is underway this year. EMEA's cost base has seen improvement, and we expect high utilization across our consumer capacity in the region. We also expect a final decision on the EU tariffs on Chinese consumer tire imports this summer. In Asia Pacific, SOI margin was very strong. With share remaining relatively flat in the quarter, our volume performance reflected underlying market conditions.

Our strategy to expand in rim sizes 18 and above continues to gain traction. We're encouraged by our progress. Premium over 18-inch tire sizes now account for 55% of our consumer sales in the region, a four point increase over Q1 of last year. Across our SBUs, our teams have taken decisive actions to strengthen our portfolio. In EMEA, we've relaunched the Cooper brand with a refreshed product lineup with first quarter volumes exceeding expectations. Just this past weekend in the U.S., we introduced our new Fast Is In Us brand campaign in support of our Eagle Tire launch.

Both reflect where we're choosing to invest in strong brands and products that meet our customers' needs. It's encouraging to see these efforts translate into tangible improvements in two of our three regions, despite the challenging market conditions. This highlights the strength of our execution and positions us to drive value creation with a more premium product portfolio. Taking a broader perspective on the market, we've been consistent in our conviction that execution on price mix and cost are critical components of long-term value creation.

We remain committed to that strategy. Both the macro backdrop and industry dynamics have proved to be somewhat more turbulent than we anticipated at the start of the year. We're responding accordingly, remaining disciplined in our strategic priorities, taking a pragmatic approach to managing the business in the near term. As we think about the path forward, demand and inflation will largely depend on the duration and direction of the current geopolitical conflict and its impact on consumers.

Historically, periods of elevated oil prices have had negative impact on vehicle miles traveled, with even modest changes in VMT translating into meaningful shifts in the consumer replacement industry demand. In addition to raw material and other cost pressure, the current environment introduces the potential for supply chain disruption. We're actively monitoring this across our supply base, and we're well-positioned due to both our purchasing scale and long-term relationships with our supply partners, and we are planning for a range of outcomes to support continuity of supply.

In response, we're gonna focus the actions that we can directly influence to manage through uncertain environment. As we've shared with you before, it's about controlling the controllables. We have meaningful carryover SOI benefits in 2026 from Goodyear Forward actions. Additionally, we're accelerating the new cost actions that build on the transformation work we began two years ago. That includes a continued emphasis on simplifying the organization, improving efficiency across our manufacturing footprint, and strengthening the structural cost profile of the business.

We will continue to take action, proactively adapting our cost structure as conditions evolve, and we'll provide additional detail as those actions are finalized. In addition to the actions on cost, it's even more critical today that our product development efforts sustain the momentum we've achieved over the last two years. This will help ensure our product coverage aligns with the most differentiated and the most profitable segments of the tire market. In closing, we continue to align our portfolio towards the most attractive segments of the tire market, even in a highly dynamic environment.

Our consumer OE share gains positions us very well for premium replacement demand in the years ahead. We believe much of the destocking is behind us. As that headwind eases, it should provide a more stable backdrop for volumes. In addition, we're accelerating the initiatives that build on the success of Goodyear Forward, further strengthening our cost structure.

This will require us to make some difficult but very necessary decisions to ensure the business is aligned with the environment we're operating in. We have consistently demonstrated strong capabilities to drive those cost transformations. We are confident this approach will position us well over the long term. With that, I'll turn the call over to Christina. Thank you.

Thank you, Mark. While our operating performance in the quarter was in line with our expectations, the conflict in the Middle East will materially impact our costs. With a high degree of uncertainty around the duration of the conflict, our approach is similar as to how we've navigated earlier macro pressures. We are proactively preparing for a wide range of scenarios. We're implementing further profit-enhancing actions and have already initiated prudent steps on cost management. As events continue to unfold, we'll maintain the flexibility to adjust our approach as needed.

I'll come back to the outlook in just a few moments. Turning to the income statement on slide six, first quarter sales were $3.9 billion, down about 9% from last year, given lower volume and last year's divestitures. Unit volume declined 12%, driven by lower consumer replacement volume in Americas and EMEA. As Mark mentioned, consumer OE volume increased, driven by share gains in both of those regions.

Gross margin improved by half a point, which includes a $46 million tariff adjustment related to the IEEPA Supreme Court decision in February. SG&A increased $18 million, which was more than all explained by the weaker US dollar, particularly against the euro. Excluding currency, SG&A decreased $10 million. Segment operating income was $95 million. I'll note that our effective tax rate was unusually high given our country mix of earnings. After adjusting for significant items, including new rationalizations and discrete tax items in the quarter, non-GAAP earnings per share was a loss of $0.39.

Turning to the segment operating income walk on Slide seven. Our 2025 earnings base was lower by $37 million due to last year's divestitures. After this change in scope, our 2025 SOI was $158 million. Lower tire unit volume and factory utilization were a headwind of $159 million. Price mix versus raw materials was a benefit of $103 million. Goodyear Forward contributed $107 million of benefits during the quarter, and inflation, tariffs, and other costs were a headwind of $117 million, which includes a $46 million IEEPA tariff adjustment. Foreign currency and other were a tailwind of $3 million.

Turning to Slide eight, free cash flow was a use of $893 million in the quarter, consistent with our seasonality and largely in line with last year's levels after excluding operating cash received in the first quarter 2025 from the sale of OTR. Net debt declined almost $900 million versus a year ago, reflecting debt repayment at the end of last year. Moving to the SBU results on Slide 10. Americas unit volume decreased 17%, driven by lower U.S. consumer replacement volume.

Commercial volume was also significantly lower than last year, following trends in recent quarters. U.S. consumer replacement volume reflected a couple of different factors. First, the external environment. We saw destocking at our retailers and distributors given weak industry sellout trends, as well as market share losses following aggressive competition for shelf space, particularly in the less than 18-inch rim size segments. The second factor was our own planned exits of low-margin product lines, which amplified our volume decline in light of the difficult industry environment.

We will lap the majority of our product exits by the end of the second quarter, and it's important to note that our premium products continued to perform well as we look at our market share at retail sell out. Having said that, competitive market share losses in structurally vulnerable lower tier segments requires that we accelerate actions to reduce footprint costs. Turning to the commercial truck business, replacement volume declined 22% and OE volume was down 5.5%, but relatively stable compared with the fourth quarter.

Americas segment operating income was $37 million, reflecting the impact of lower volume, partly offset by price mix versus raw material benefits and Goodyear Forward savings ahead of cost inflation, net of the IEEPA tariff adjustment. Turning to Slide 11, EMEA's first quarter unit volume decreased 8.5%. Consumer replacement volume declined, reflecting a weak sell-in market, low-end portfolio rationalizations, and increased competition, partly offset by the relaunch of the Cooper brand in the region.

Consumer OE was a continued area of strength, and commercial volume improved, driven by replacement. Segment operating income in EMEA was $1 million in the quarter, reflecting an increase of $13 million adjusted for the sale of the Dunlop brand. I'll also note that in March, we announced a rationalization plan to streamline our sales and distribution model and our business processes that should deliver $50 million in annual savings. The plan should be complete by 2028. Finally, as Mark noted, our direct volume exposure to customers located in the Middle East is relatively immaterial.

In addition, before the beginning of the conflict, we had fixed about 75% of our energy rate exposure in EMEA for the current year. Finally, EMEA should see much less of an impact from rationalized product lines in Q2. Turning to Asia Pacific on Slide 12. Segment operating income increased 27% to $57 million or 12.5% of sales, expanding three full points compared to the prior year. Growth in earnings was driven by strong execution in price mix versus raw materials with our premium product lines up nearly 30% year over year.

Asia's first quarter unit volume decreased 3.8%, driven by lower OE volume, particularly in China, given lower EV incentives versus last year. Turning to our 2026 outlook. The direct impacts of the conflict in Iran on the tire industry and our earnings largely depends on its duration, related impacts to customer and consumer demand, and tire commodity costs, all which make the outlook for the balance of the year unclear. At current spot prices, raw materials will be a headwind of $200 million in the second half, which represents a headwind of about $300 million from our prior forecast.

We have a consistent track record of offsetting raw material inflation with price mix, and we are fully committed to new and meaningful operating and structural cost reduction. While there is very clear pressure on our near-term earnings, I am confident in our team's ability to manage through various scenarios that might unfold over the coming quarters with both price mix and cost actions over time. As we look at the second quarter on slide 14, we would expect lower year-over-year volumes, but improving from the first quarter, all else equal.

This expectation is rooted in new assortment wins with key customers, actions we implemented during the first quarter, and a more natural alignment of sell-in relative to sell-out. It's not clear what demand volatility we may see due to the Middle East conflict. Our second quarter industry assumption for consumer replacement is down about 3% in North America and China and down about 2% in EMEA. For commercial, we expect the industry in North America to be down 12% and down 3%-4% in EMEA.

Given production cuts in the first and second quarters, including actions to manage our cash flow during this period of uncertainty, unabsorbed overhead will be a headwind of approximately $90 million and negative again in the third quarter. Price mix should continue to be positive and step up meaningfully from the first quarter given stronger volume and our mix of new fitments, all else equal. Raw materials should be a benefit of roughly $100 million. Goodyear Forward will drive benefits of approximately $90 million in the quarter. Inflation, tariffs, and other costs will be a headwind of approximately $200 million.

On a full year basis, these will be about $420 million higher, which is a reduction of about $80 million from our February call, driven by the IEEPA tariff adjustment of $60 million, $46 million of which we recorded during the first quarter. Finally, the sales of Dunlop and Chemical lowers the base of earnings by $43 million in the second quarter. Other financial assumptions are shown on slide 15. Given the uncertain environment, we have reduced planned capital expenditures to $725 million.

Our global tax rate will continue to be unusually high and sensitive to changes in country mix. Finally, while our working capital for the year could be shaped by both timing and levels of volume and commodity rates, we will continue to target a working capital inflow at year-end. With that, we will 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, press star two. Once again, that is star and one to ask a question. We will take our first question from James Mulholland with Deutsche Bank. Please go ahead. Your line is open.

Good morning, thank you for taking my questions. I just wanted to dig in a little bit on the raw materials headwind in the back half of the year. Given the volatility, I was wondering if you could share some thoughts on the sensitivity of SOI based on oil prices. I mean, we've seen a pretty material move yesterday and then again this morning, so it'd be helpful if we could ballpark the impacts on the guide. I guess put another way, I'm not sure what the oil price the current guide incorporates is, but if oil were to change $5 or $10, could you give us some sense of what that sort of benefit might look like?

Hi. Good morning. This is Christina. Thanks for the question. Our spot prices that are noted here in our first quarter conference call are pooled as of April 29th. That equates to a crude oil closing price of about $106 per barrel. Obviously with the volatility we've seen yesterday, you know, some impact on the forward outlook. Obviously, there's been a significant amount of volatility. We do provide, in our supplemental information on our website, sensitivities to changes in raw materials.

With oil in particular, you're going to wanna pay attention to synthetic rubber inputs like butadiene and styrene, which are levered more toward oil than some of the other input costs. We also see a strong correlation to pigments, chemicals, and oils, which are also a significant portion of our raw material buy.

Got it. Thank you. I guess recognizing that you do have index pricing agreements in place for OE tires, but that's on a lag, so you won't probably see any help there at least until fourth quarter. Our sense is that some competitors have started to push through price increases on replacement to help offset any raw materials impacts for the year. Understanding there was a 4%-6% price increase last year in North America, would you look to do something similar, and could we expect a benefit from that in the back half of the year to help offset some of those headwinds?

You're right. I would say about a third of our business is linked to indexed agreements for increases in raw materials. Those do reset on a lag. On average, that takes about six months or so. We do have this timing mismatch with a significant increase in raw materials that you're pointing out. That's the first point. Up until now, I can say we have announced price increases in EMEA for consumer. That's about a 4% increase, and in commercial, about a 7%-8% increase earlier in April-May timeframe. We will obviously look to continue to increase a price mix to offset the headwinds that we're seeing in raw materials as well as, you know, take action on costs to manage through the current volatility.

Thank you. We will move next with James Picariello with BNP. Please go ahead. Your line is open.

Hey guys, this is Jake on for James. Just at a baseline, how are you thinking about volumes in the second half? I realize, you know, this is a tough question to answer just given some of the volatility. Just based on my math, if we assume, you know 1% OE and replacement growth in the second half, SOI for the year should be somewhere in the $600 million range. Are we thinking about that right? Thank you.

Maybe I'll start and Mark can chime in. I would say the overall forecast hasn't changed materially when we think about the flow, in that we do expect volume to improve sequentially each quarter on an absolute basis. We still should get to year-over-year improvements in the second half. Obviously, still dependent on consumer demand and some volatility we may see in VMT just related to gas prices. Having said that, we are annualizing some of the Q1 share loss in Americas, which equates to about 2 million-2.5 million units lower volume in the second through the fourth quarter versus our February outlook.

Yeah, maybe just to tack on to that, right. As far as what did happen in the first quarter, right. When you think about the Americas volume specifically, and it is, you know, it's about a third, a third, a third. When you think about destocking is about a third of the volume delta in the Americas. Our optimizing the portfolio, as we've shared with you guys over the last two years, you know, moving out of the lower to no profit pool, lower rim size pieces, is, you know, we had planned for that through the process. So that's about 33% of it.

Then we saw a definitely increased competition in the fourth quarter, particularly on the lower rim sizes with very aggressive pricing in that. As we've shared with you guys as well, we are not chasing profit into a non-profitable zone, right? We, sorry, chasing volume into a non-profitable zone. We've continued our, you know, absolutely our roadmap of moving up and proof points to believe, as we shared, you know, we released 40% more new products in the higher rim size last year around the world. Proof points on AP, right? We were substantially up. We were up nearly 3, 4 percentage points. I think 4.

We moved from 51%-55%, 18 and above, with record SOI and AP for the quarter. In EMEA as well, great proof point there of moving up. As well, we've launched the Cooper to replace the Dunlop volumes. We're marching ahead of our launch ramp program with great, really great receipt from customers and end consumers. We feel very positive about EMEA and really securing that strong tier two marketplace for EMEA. In the Americas, again, we continue our mix-up there. We have moved up from a 42%-50% greater than 18 and above year-over-year in our consumer replacement.

We continue to launch the new products into the marketplace. Just last weekend, we had our big launch on our new Eagle tires globally, but starting here in the U.S., to fill those white spaces we've shared with you guys before. We feel very good that we've got the right products, especially as we think about kind of a K-shaped economy, of the more resilient pricing and a little bit more Teflon proof, shall we say, in terms of the pricing in those upper rim sizes.

Thank you. Could you just provide an update on the trade environment? Based on our tracking, it looks like tire imports into the U.S. are finally starting to fall off a little bit. In EMEA, it looks like the European Commission might be set to implement some duties on Chinese imports on the next couple of months. You can talk about both what you're seeing and what the potential benefit could be there. Thank you.

Sure. Maybe just to start on the EMEA front. By mid-summer, we're anticipating that the EU will give their ruling in terms of the tariffs on Chinese tires coming into Europe. You know, we hope we'll have news for that as we do our second quarter announcement, but that's the latest info we have, is mid-summer they'll be making the announcement on that. In terms of the U.S., with the lower imports, we did see some destocking.

As you guys know, last year, there were the pre-buys around the tariff. There were lots of things with the tariffs moving a lot throughout the year and a big stocking of product. We do see that starting to destock. Christina?

I don't have a lot to add. I can maybe layer on some statistics. You know, the non-member imports in North America were down about 7% in the first quarter, which is a positive trend. Having said that, they do remain at a relatively high level compared to historical periods. I think when you couple that with the elevated raw material costs, we think that's constructive as we think about, you know, the layout for imports in the coming quarters.

Thank you. We will move next with Ross MacDonald with Citi.

Yes, thank you. Three questions from my side. The first one just on that destock that you're calling out in North America. How far through that process do you think you are? Maybe you could talk a little bit about whether there's further destock ahead of us in Q2, or if that process is largely done now. Then within that, how you would assess the Goodyear inventories within the dealer network in the U.S. and whether there's some opportunity to gain back some share in Q2 by topping up dealers. Second question on mix specifically.

I know you don't guide on mix, given the points you called out, Mark, around the K-shaped economy, the higher rim size share gains that you're making, how should we think about mix more structurally within Goodyear? Is there any steer you can give us for 2026 and beyond on sort of structural mix benefits from that work you're doing cutting the lower value add SKUs?

Then just a final question on U.S. trucks. You know, looks like on some of the freight data that the activity troughed around January. Just be curious what you're seeing maybe on April trading, if there is a little bit of momentum coming back to the freight activity. Linked to that, whether you're also giving up some share on the truck side and trying to avoid sort of lower value add products or if that's specific to the consumer business. Thank you.

which is destocking. I think particularly in North America or the U.S., we did lay out, you know, our outlook for the consumer replacement industry in the second quarter, which is significantly better than Q1, but still negative. I think that indicates that maybe there's slightly more destocking yet to go because it's a little bit more than the weakness we're seeing currently in sell out. Dependent all still on the price mix environment.

Sometimes we do see pre-buy if there is a significant move in overall pricing across the industry, that can instigate some pre-buy. Having said that, with the uncertainty around the consumer, uncertainty around vehicle miles traveled, I'm not sure that I would say we're expecting that here over the course of the next couple quarters.

The second question was on structural mix over the course of the rest of the year. As we talked about this on our fourth quarter call, we did say we would expect mix to improve and stabilize in the second half of 2026, largely due to the fact that we're comping through the commercial truck weakness that began in the second quarter and third quarter of last year. Structurally, we should see a much stronger mix for us coming out of the second quarter. The third question was on truck. Maybe I'll turn that one over to Mark.

Yeah. For truck. As we look at the commercial trends, right? The fundamentals of the market are definitely looking better. We need to see that sustain in quarter two and on through the rest of the year. It obviously takes some time for that to flow through the market. We've seen the capacity of the trucking industry tightening up, the freight rates improving. We're starting to see the OEMs increasing their builds. You know, the PMI or the purchasing index has been above 50 now for quite a few months, which is a key towards that freight activity picking up.

In talking, you know, closely with our customers through our solution business and our fleet services, you know, we again, we see the OEM piece moving up substantially over a low number, granted, but moving up substantially. We get a nice pull from our fleet customers. We know there's a lot of talk from them in terms of being more positive in their thinking and in terms of the buy. What we have To your last point, question was really around the lower end of the products. We have been just like the consumer side, right?

We have specifically been rationalizing those low margin products and getting out of those to really focus on our premium business, particularly the tractor tire business, you know, for the truck drive itself, the drive tires, as well as our retreading operations, and really working to robustly improve our efficiencies around the world from our solution and service business.

We, you know, we've got a big lift that we're working on. The team is super focused on our cost structure and the value proposition for our fleet customers around the world. So far, we're on track with those plans through the year, and it looks that we'll continue to improve that through the year.

Thank you. Our next question comes from John Healy with Northcoast Research. Please go ahead.

John, your line is open. Please check your mute.

Sorry about that. You'd figure I'd figure that out by now. Wanted to ask about the competitive position. I think when you look at the release and I know you guys kind of expected a slower start on the U.S. replacement market. In the categories in which maybe like for like tires are being kind of moved at certain dealers or with certain partners, is there a way to think about just like kind of what your organic SKUs were doing and maybe how those performed? We could kind of, you know, put your performance kind of in more what I would say reasonable parameters to judge that.

Yeah, maybe I would start, John, make sure I understand the question right. Is the You know, if we think about what Christina said in terms of, you know, sell out was stronger than sell in, right? There was the destocking that happened from the buildup over quarter three, quarter four of last year. You know, we were still as well in contract negotiations with some of our larger customers that have been settled out. From that standpoint, as we look through that, in terms of the volume profile going forward, we're very pleased with our mix up.

If I understand organic SKU, right, of our mix with our power lines in terms of products like MaxLife 2, right? The Eagle that I just mentioned, that we've, completely, you know, product development's done a super job to reinvigorate and bring new products into the marketplace for that, as well as our WeatherReady twos, obviously performed very well in the marketplace.

On those power lines, those 18 and above that we have been launching over the course of the last 18 months, and we've got another 36 months of a very robust pipeline coming in, that's why we feel very strong to the You know, in terms of the organic growth of our SKUs, if we will, that we are much more meaningfully participating in the higher profit pool, and that will continue to grow as we've got our marketing plans behind it, we've got our sales enablement teams out in the marketplace, and we've got the products to do it with.

That's helpful. Just two quick follow-ups. I know Walmart's always been a big customer of yours, and was wondering if you could talk to the relationship there, if anything has changed there or you're working with them as kinda, you know, moved along in a certain direction, just if that's impacting the numbers in a meaningful way at all. Secondly, are there any further, like, price increases baked into kinda some of the numbers that you guys have talked to us about the price mix headwinds? Thanks.

We, you know, we don't normally share on a particular customer on this call, right? We can provide some additional color. What I would say is as we look to across all of our portfolio, again, we are purposefully mixing up the portfolio, refreshening specific SKUs in certain rim sizes where the profit pools are. What I can say, they're a great customer and have been for 40+ years, right? We have a very strong relationship and continue to do so. And as we look at that and the growth of brick-and-mortar-- sorry, the growth of e-com along with brick-and-mortar, we're being pretty successful in that arena with them as well.

Thank you. We will move next to Itay Michaeli with TD Cowen. Please go ahead.

Morning. Wanted to ask a question on some of the, I guess, upcoming cost or maybe footprint actions you alluded to. I'm curious if maybe you can roughly size those relative to the original Goodyear Forward plan. Ultimately, I guess what I'd like to try to get at is as you plan these next actions, what's the timetable that you're trying to target in this new environment to get back to a 10% SOI margin?

Itay, I'll start. We talked a lot about footprint actions in this call specifically. Obviously, we're targeting restructuring actions that have a very near-term payback. The restructurings that we've completed over the last several years have all been focused in other regions outside of the Americas. Just given where volume is, in particular in the Americas this quarter, you know, our restructuring is gonna be focused there, which will, just because of the nature of the high cost base, usually deliver a very fast payback. That would be point number one.

A lot of our other initiatives, nearer term that we're adding to the coffers as we think about cost outs over the next several quarters and on through 2027, we're looking at raw material consolidation to help bring meaningful cost out. Simplification within our factories, driving efficiencies. Indirect spend, control cost towers on a lot of the different levels of spending across the organization. Of course, optimizing all other SG&A as well.

Maybe just to tack on, Itay, right? It's, you know, we're in execution mode of building on the, you know, the integrity and the credibility that we've built with you all, with our shareholder base, and our associates around the world of the Goodyear Forward program, right? As we've shared before, we really have it embedded in our DNA, in our governance, in our KPIs, in our actions, and we have a very robust roadmap of what we're doing.

While we don't have a formal announcement today, of what the details of that are with you, obviously being very sensitive to that, you know, it is our intention to share with you guys coming up on the specific cost out value creation plans. It is absolutely in keeping with the principles that we've had in Goodyear Forward.

It's, as we shared, right, we continue to top off the cost reduction value creation actions that we had in Goodyear Forward on a very disciplined way, function by function, as Christina mentioned, direct material, indirect material, our product rationalization, making sure that our footprint and specifically our cost flexing is in line with volume demand. It's the continued journey that we're on there, and we continue to be confident in our ability to execute that credibly as we've been doing here over the last two and a half years.

That's all very helpful. Thank you for that detail. Maybe just two quick follow-ups. First, on the CapEx cut up for the year, maybe talk a little bit about where that's coming from and how sustainable that is going forward. A second quick housekeeping, is the IEEPA adjustment expected to be also a cash benefit this year?

Sure, Itay. On CapEx in particular, you know, obviously we're reacting somewhat to the current demand environment, which brings down the need. As we think about maintenance in the factories, utilization rates are lower than we would have expected, and we are also applying a new best cost methodology across all major categories of capital spend to help control costs. More to come on that, but hopefully, as we even move into next year and years beyond, we're able to take capital spending to much lower levels than you've seen from us historically.

On IEEPA, in particular, you know, the cash inflow, very, very difficult for us to say if that comes later this year or early next. You know, we have, you know, booked the receivable based on the Supreme Court ruling, and we'll continue to update you as we move through the rest of the year.

Maybe just to tack on to the CapEx piece as well. You know, again, as Christina mentioned, right, we've done a lot of work, you know, over the last, let's say, year and a half, with our advanced global engineering team towards developing of those best cost solutions, but also best spec solutions, right? We have completely rethought how we go to market for CapEx in terms of bundle buying, in terms of looking at, yeah, efficiency of where to have it made, but also looking at what we truly need in the operations as we modernize factories and work on our cost footprint.

You know, we're seeing significant reductions in our CapEx for the ability to produce same as, if more, same as or better quality. We feel very good about that our CapEx dollars will go much further. I wouldn't think about it as much of a big reduction in the CapEx bill of starving the future. It really is about feeding the future on a much more efficient base.

Thank you. Once again, that is star and one on your touch-tone phone if you would like to join the queue. We will move next with Ryan Brinkman with JPMorgan. Please go ahead.

Hi. Thanks for taking my questions. I wanted to continue, you know, with these questions asking around the impact of raw materials, commodity prices, offsets, et cetera. Firstly, maybe starting with the indirect impact of higher commodities, because I recall during the pandemic, you actually met quite well with the challenge of passing along the higher raw material input prices, but obviously found it more challenging to contend with all of the unusual indirect impacts of the higher costs of higher diesel, freight, ocean shipping, logistics, electricity, natural gas, et cetera.

I think there were some unique aspects of that particular environment. I just wanted to check in with regard to how these other costs might be tracking, which in some ways do find their way back to the same Middle East conflict impacting, you know, raws more directly. You know, I think you account for this mostly, in the when it exceeds the general inflation rate in the other costs and tariffs bucket, I suppose, of the SOI bridge. How should we think about that driver trending going forward?

Thanks, Ryan, for the question. We have headwinds of about $40 million, mostly in increased transportation, a little bit of energy in that other cost bucket, just as you pointed out. That is more than offset by the IEEPA tariff refund adjustment, as well as some other cost reductions as we've been discussing so far on this call.

I think, you know, largely when we also think about energy in EMEA, I mentioned in the prepared remarks that we have hedged out or fixed a lot of the contractual agreements for our energy costs in EMEA pre-war. That's 75%-80% of those rates were fixed before the war. We feel really good about the position, and we'll monitor, you know, the environment for volatility and continue to update you as we move through the year.

Okay, thanks. With regard to the offsets of restructuring and price mix against all this headwind, maybe starting with restructuring, obviously, I see you've increased the Goodyear Forward impact here from 335. It's only $25 billion versus the raw net degradation for the full year looks, you know, $300 million-ish, $312 million or something. You dug deeper with Itay just now on the allusions in the prepared remarks, right, with regard to the restructuring actions. The payback activity, payback timing I thought was interesting.

Sounds like maybe workforce reductions in Americas that you're looking to maybe not pull the trigger on if the environment quickly resolves, is that how we should think about it? Also, what about magnitude? Because, yeah, it seems like really price mix, and that will be my next question, is the only thing that can really offset this headwind. What's the outlook for company-specific restructuring actions kind of under your control to be able to offset, like, how much of this incremental raw mass headwind, say, when we annualize it to next year, for example?

Goodyear Tire & Rubber (GT) Q1 2026 Earnings Call Transcript

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