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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.

Q2 2026

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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 Brittany, and I will be your conference operator today. At this time, I would like to welcome everyone to Goodyear's Q2 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 a question at any time by pressing 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.

Thank you and good morning, everyone. Welcome to our Q2 2026 earnings call. With me today are Mark Stewart, CEO and President, and Scott Deakin, Interim 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 our presentation and our SEC filings. Our earnings materials 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 in with us today. Before we get started, I'd like to recognize and thank all of our associates around the world. This past year has brought its share of challenges for our industry, and the stabilization we're seeing at Goodyear is a result of our team's focus, execution, and commitment to our customers. To all of our associates, thank you for all that you do. Now we'll look at our performance for the quarter, and I'd like to spend some time discussing the actions we're taking to strengthen our competitive position and how we're setting Goodyear up for long-term success. Let's head into the quarter two recap. Overall, Q2 performance was in line with the expectations we shared on our last call with you.

Our global tire volumes stepped up sequentially, and though some pockets continued to be weak, we saw more market stability overall in Q2 compared to Q1. Additionally, channel destocking moderated from the Q1 as sell-in more closely reflected customer sell-out. EMEA and Asia Pacific both improved financial performance over the prior year. Asia Pacific was again a really bright spot for us, achieving volume growth across both consumer and commercial, as well as OE and replacement businesses. Asia Pacific also delivered both revenue growth and margin expansion during the quarter. Performance in the Americas remained challenging, driven by a competitive marketplace combined with soft consumer backdrop. However, as the channel destocking moderated, the region delivered sequential volume improvement in the quarter. As I reflect on the quarter operationally, two things stand out to me.

First, all regions continued to increase the share of 18-inch and above rim sizes in their consumer portfolios. Across Goodyear, that mix increased four percentage points year-over-year, matching the fastest pace of expansion since we started disclosing the metric. Additionally, we grew OE volumes as well as market share in all regions during the quarter. This OE growth in particular stands out against a weak consumer OE production backdrop across the regions. The greater stability we're seeing across the business gives us confidence in the step-up in the SOI we expect to deliver in the H2. Thinking longer term, it's clear to us that heightened competitive pressure isn't going away. This continues to validate the actions we're taking to strategically reposition our business. Our priorities are very clear.

We're working to strengthen our product portfolio, improve the competitiveness of our manufacturing footprint, and enhance our go-to-market strategy. Let me expand on each of these areas. First, on product portfolio. Over the past two years, we've made deliberate choices about where we believe Goodyear can contribute the greatest value within the marketplace. That means becoming more disciplined about retiring SKUs that do not generate acceptable returns. It means we're also continuing to invest in the products, brands, and innovation that differentiate Goodyear and align our offerings with the most attractive segments of the market. That strategy continues to take shape through product pipeline. In Q2, we brought products to market in EMEA, including our Vector All Season 4. This tire builds on our legacy of innovation in a category we helped pioneer nearly 50 years ago when we introduced the first all-season tire.

We've also expanded our Cooper portfolio in EMEA, introducing new all-season and winter tires across passenger cars, SUVs, and light commercial vehicles, as well as new summer tires for passenger cars in the SUV segments. This is where Goodyear science really comes in. The same innovation tested in some of the world's toughest environments, from commercial aviation and military aircraft to lunar missions and the racetrack, helps deliver the tires and solutions customers' trust. We're proud that differentiated capability is being recognized in the industry. One of the ways we know we're on the right track is through the recognition of our products that we continue to receive. For example, Auto Bild named Goodyear the Top Manufacturer of the Year for summer tires. In a recent test, Tire Rack recognized Eagle F1 All Season as the leading ultra-high-performance all-season tire in the market.

Looking ahead, we remain focused on the fastest-growing, highest value segments in the market, including ultra-high-performance tires, larger rim sizes of 18 and above, and strong product offerings in the all-weather and all-season segments. In fact, later this year, we have new Cooper products set to launch in the U.S. and Canada, and a new Goodyear product in Latin America to advance this strategy. Our new product introductions, coupled with continued portfolio optimization to eliminate the lower margin SKUs, demonstrates our commitment to investing in the products and segments where we can compete most effectively. As our portfolio evolves, our manufacturing footprint needs to evolve with it. The footprint actions we've taken over the last few years haven't solely been focused on reducing costs. They are a direct response to where we're headed.

In our portfolio-driven manufacturing strategy, we're aligning our footprint with the segments we believe Goodyear can most effectively compete in, strategically producing the right products in the right facilities. The decision to close our Fayetteville facility reflects this strategy. It's another step towards building a manufacturing network aligned with our portfolio and positions Goodyear to compete more effectively over the long term. We expect production to wind down by the end of 2027, with volume transitioning to other facilities across the network. That will improve utilizations, strengthen the competitiveness of our manufacturing footprint, and reduce structural costs to the Americas by $90 million in 2027 and $270 million thereafter. As we continue to reshape our portfolio, it's essential that our manufacturing capacity evolves alongside it. We'll continue evaluating our footprint to ensure it remains aligned with our portfolio strategy.

We're making targeted investments across our global manufacturing and supply chain network to strengthen critical capabilities. These investments will help us increase flexibility and resilience, improve efficiency, and better position Goodyear to meet customer demand in higher value segments, including the 18-inch and above market. At the same time, we're simplifying our network, expanding automation, and improving utilization and productivity, all to strengthen our competitiveness, support financial performance, and better serve demand in premium and high-value segments. Our goal is to have a manufacturing network that supports the long-term strategy by efficiently serving the growing demand in premium, high-value segments and positioning Goodyear to deliver stronger business performance over time. Building a stronger portfolio and a more competitive manufacturing footprint is only part of the story.

Our path to long-term value also depends on our ability to win with our customers and deliver the products and services they rely on every day. Central to that are our OE partners. When leading vehicle manufacturers choose our tires for their new vehicles, it expands our brand with millions of drivers, strengthens our competitive position, and creates a pipeline for replacement sales down the road. That's how a single OE win can become an important driver of sustainable value creation for many years to come. Additionally, we're continuing to strengthen how we compete across the replacement market through stronger channel partnerships and investments in digital capabilities, as well as tools that make it easier for customers to do business with Goodyear. You've heard me talk about our focus on our portfolio, manufacturing footprint, and go-to-market strategy. We see these priorities as deeply connected.

Progress in one area creates lasting value if it's matched by progress in the others. Over the past two years, we've taken meaningful actions to strengthen Goodyear and build a more focused company. Through Goodyear Forward, we did what we said we were going to do. We strengthened our balance sheet, we increased our strategic focus and operating discipline, and implemented opportunities to create the greatest value, and that work continues today. As we look ahead, we're focused on delivering the financial performance expected of an industry leader by building a more competitive, more profitable, and more resilient Goodyear. You'll continue to see us making deliberate choices about where we invest, where we compete, how we allocate capital, and always with the objective of improving returns and building a stronger Goodyear.

The imperative is to ensure every major decision, from product development to manufacturing investments to sales execution, supports the same strategy: concentrating our resources behind the markets, products, and opportunities where Goodyear can create the greatest long-term value. Together, these efforts and results, along with our commitment to innovation, serve to differentiate us in the marketplace. From our role in supplying advanced lunar tires for the Pegasus LTV as part of NASA's Artemis program, to creative collaborations like Toy Story 5 fitments with Porsche, we're bringing Goodyear science and technology to life in ways that capture attention and connect with customers. These moments do more than reinforce our brand. They show how we're leveraging our unique strengths to stand out in the marketplace. Finally, I'd like to welcome Scott Deakin as our interim CFO. Scott brings a deep public company finance and operating experience.

We're pleased to have him in the role and look forward to continuing to work closely with Scott. I'll now turn the call over to Scott. Thank you.

Thank you, Mark, and good morning, everyone. Since joining the company, I've had the opportunity to spend time with a good many of the team up and down the organization. What stands out to me is the tight alignment and focus across Goodyear in addressing both the challenges and the opportunities ahead. The enthusiasm and urgency focused on continuous improvement and forward progress is compelling. Turning to our results, I'll begin with our Q2 financial performance before discussing cash flow, the balance sheet, and our outlook. Turning to the income statement on slide six. Q2 sales were $4.3 billion, down about 5% from last year, given lower volume and last year's divestitures of the chemicals business and the Dunlop brand, partially offset by price mix improvements. Excluding the divestitures, sales were down about 1% organically.

Unit volume declined 4%, driven by lower consumer replacement volume in the Americas and EMEA. Although tire unit volumes remained down year-over-year, we saw improvements compared to the Q1, reflecting stabilizing industry demand and the benefit of lapping our product and SKU rationalization actions taken last year. Gross margin decreased by one percentage point, primarily due to lower volumes and unfavorable fixed cost absorption. SAG increased about 1.5%, which continued to be explained by the foreign exchange effects of the weaker US dollar on sales, particularly against the euro. Excluding currency, SAG on a dollar basis was relatively flat. All considered, segment operating income was $36 million. Similar to the Q1, one item to call out is our unusually high tax expense, which was driven by the regional mix of where earnings were generated during the quarter.

After adjusting for significant items, including rationalizations and discrete tax items in the quarter, non-GAAP earnings per share was a loss of $0.61. Turning to the segment operating income walk on slide seven. Our 2025 earnings base was lower by $44 million due to the sales of the chemical business and the Dunlop brand last year. After this change in scope, our 2025 segment operating income was $115 million. Lower tire unit volume and the associated pressure on factory utilization were a headwind of $132 million, driven principally by lower consumer replacement volume in the Americas. Price and mix versus raw materials were a benefit of $123 million. The continuing favorable contributions of Goodyear Forward accounted for $95 million of benefits during the quarter. Inflation was an unfavorable impact of $53 million. Tariffs were a headwind of $32 million, and other operational costs were higher by $68 million.

Foreign currency and other were a combined headwind of $12 million. Turning to slide eight. Free cash flow was a use of $69 million in the quarter, improving $318 million compared to the prior year, driven by both more efficient working capital and lower CapEx. Net debt declined over $700 million versus a year ago, reflecting debt repayment at the end of last year. During the quarter, we successfully issued approximately $1 billion of senior notes. We intend to use those cash proceeds to repay our 2027 senior notes, thereby extending our debt maturity profile and further strengthening our liquidity position. This transaction provides the financial flexibility to continue executing the actions we've outlined, including the manufacturing footprint optimization underway, without being constrained by near-term maturities.

We believe we've positioned the company with the liquidity and runway necessary to execute our strategy, the team is aligned around continuing to strengthen the balance sheet as those improvements are realized. Moving to the SBU results on slide 10. Americas unit volume decreased 9%, driven principally by lower U.S. consumer replacement volume. As Mark discussed, we continue to prioritize our strategic decision to exit low-margin product lines. These actions primarily drove our volume decline during the quarter. Specifically, within the U.S. consumer replacement industry, we saw the rate of destocking improve as both consumer sell-in volumes and sell-out volumes were down between 1% and 2% during the Q2. While Goodyear's consumer replacement volumes were down during the quarter, OE volumes grew despite market softness as we achieved market share gains. Commercial volume remained lower than last year, driven by replacement.

Commercial OE volume grew in the mid-teens percent, driven by rising freight rates and improving fleet confidence. Americas segment operating income was a loss of $10 million, reflecting the impact of lower volume, tariff costs, and inflation, partly offset by price and mix versus raw, together with the continuing benefits of Goodyear Forward savings. As Mark noted, we recently announced the closure of our Fayetteville, North Carolina facility. This action will improve the structure of the Americas business as it better aligns our footprint strategically with the markets where we intend to compete, while also reducing our fixed cost base. We expect cash costs from this action of roughly $200 million, with approximately $40 million in 2026, $100 million in 2027, and the balance in 2028.

We believe this action will sustainably improve Americas' SOI by roughly $90 million in 2027 and about $270 million annually in 2028 and thereafter. Turning to slide 11. EMEA's Q2 unit volume decreased 2%. Consumer replacement volume declined, reflecting soft sell-in conditions in the region. Consumer OE, however, was a continued area of strength, where we achieved market share growth for the tenth consecutive quarter. Commercial volume saw improvement as well in both replacement and OE. Segment operating income in EMEA was a loss of $17 million in the quarter. When adjusted for the sales of the Dunlop brand, however, SOI improved by $20 million. Turning to Asia Pacific on slide 12, Q2 unit volume increased 5.3%, driven by improved consumer volume across both OE and replacement, with particularly notable increases in Japan and China.

Our Asia Pacific OE growth stands out against the backdrop of a meaningful decline in the China OE market during the quarter. Growth in earnings was driven by strong execution in price and mix versus raw materials. Our price and mix actions and results reflected our focus on the premium segment of the market, where we achieved growth of 500-basis points year-over-year in greater than 18-inch rim size tires as a percentage of total consumer sales. Segment operating income increased to $63 million or 12.7% to sales, expanding 330 basis points compared to the prior year. Turning to the Q3 outlook. First, the non-recurrence of earnings from previously divested businesses will reduce SOI by $57 million compared to the prior year.

We expect global unit volumes on the remaining business to be roughly flat versus the prior year as the Americas consumer replacement market continues to stabilize. In addition, we expect higher unabsorbed fixed costs of $70 million, reflecting lower production during the Q2. Price and mix, however, is expected to be a benefit of approximately $110 million, driven by the benefit of recent pricing actions and continued improvements in product mix. Raw material costs are expected to increase by approximately $20 million as higher commodity costs associated with the conflict in the Middle East begin flowing through our P&L, consistent with our typical four to six-month lag. Goodyear Forward is expected to deliver benefits of roughly $70 million in the Q3. General inflation of roughly 3% is expected to increase costs by approximately $60 million.

Other costs from transitory manufacturing expenses and operating costs above general inflation are expected to increase by $15 million. Tariff related headwinds are expected to reduce to approximately $10 million during the Q3. Other is expected to be a headwind of $20 million, primarily due to our non-ERT businesses and other miscellaneous costs. Finally, on a non-operating basis, we do continue to expect tax expense to remain elevated relative to pre-tax income due to our current regional distribution of earnings. For the Q3, we expect tax expense of roughly $50 million. With that, we'll open the line for your questions.

Thank you. If you'd like to ask a question, 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'll take our first question from James Picariello with BNP Paribas. Please go ahead. Your line is now open.

Hi. Good morning everybody, and welcome aboard, Scott, in your new role. Congrats. I want to first ask about replacement versus OE volume expectations for the Q3, which I assume entails sustained OE growth, likely at a lower rate and with less pronounced replacement declines, to get your total volumes flat year-over-year per the outlook. Depending on whether I have that right, just how you're thinking about the Q4 within both channels. Thank you.

Sure. Thanks, James. Good morning. If we go from quarter one to quarter two, we saw a meaningful change in the volume. In the unit volume, it was down about 12% in Q1 as we shared. That was kind of broken into thirds. A third of it being our SKU rationalization to get out of those low margin products. A third of it was de-stocking coming into the year where we saw distribution with heavy loads of inventory to work through. A third of it was the competitiveness and the kind of the crappy weather situation. In Q2, we're down to 4% on that. Meaningful change in terms of the volume there. Two-thirds of that was really around the low end SKU rationalization. In terms of we've seen meaningful sequential improvement Q1 to Q2.

Our outlook for the H2 is not dependent on a sharp change in the market. The biggest improvement we've had has been in the Americas consumer replacement. Scott shared the strength we've got in Asia Pacific. Both on the OE side as well as the replacement. In EMEA, we've got great traction with our Cooper going into the tier 2 marketplace to replace Dunlop. In the Americas, we've got a lot of great proof points in terms of things really ticking up in quarter three in terms of those volumes. To the Americas, again, the quarter volumes were impacted by weaker demand. That severe winter weather as we talk about quarter one, that's clearly not there now and the channel de-stocking. We largely see that channel de-stocking behind us.

We see also the anniversary or the lapping of a lot of our SKU rationalization from the Q1 and then finishing that up in quarter two. The H2 is really a much better comp in terms of us having rationalized those low-end SKUs. To your point on OE, the growth that we've seen all around the world, three, four, and five percentage points year-over-year, and the strength of our consumer OE, particularly as we look compared to our competitive set. We've been really excited about the growth in consumer OE that's setting us up right for the future, James. All in the 18 and above premium rim sizes. On the commercial side, we're seeing some really positive trends there as things start to look up there.

Well, that's great. I appreciate that color. If we can you discuss the major bucketed items for the full year or speaking specifically to the Q4 right away? Does overhead absorption finally turn the other way in the Q4 or not yet? How should we be thinking about price mix versus raws for the Q4? Any color you're willing to share on the non-raw mats inflation as well. Thanks.

Sure. Thank you. I can speak to that. If you take Mark's point, just in terms of the volume dynamics, again, Q3, we guided a roughly flat for Q4. We'd expect maybe slightly better to that. If you really look at the starting point, 2025 SOI was about $1 billion. If you factor in the divestitures that we talked about, that gets us to about $800 million. Walking through the puts and takes from there, our take is that raw materials will be essentially neutral on a full year basis. Offsetting that price and mix should contribute more than $200 million as bucket one. Bucket two is Goodyear Forward benefits are expected to offset inflation and other cost increases, which puts us with the largest headwind overall is volumes and the resulting impact on fixed cost absorption.

That together, ultimately we believe is going to reduce SOI for the full year to the tune of about $350 million. Again, on tariffs, we think the full year impact of that, even though getting better over the course of the year into the H2, is a full year impact of about $50 million.

James, just to reinforce, I think that everything that Scott just walked through lands us essentially in the same place as we communicated the outlook to you guys last time. That's true of the volume outlook as well. I think last call we talked about obviously a headwind in the H1 turning into flat to slightly up in the H2. Essentially what we saw in Q2 was fairly in line with our expectations, the H2 is really a continuation of that.

Understood. Yeah, the similar SOI for the full year of around $600 million, I believe was where we all arrived at.

Maybe a touch higher than that, but I think that's certainly in the ballpark.

Yeah. Okay. Thank you very much. Appreciate it.

Thank you. We'll take our next question from James Mulholland with Deutsche Bank. Please go ahead. Your line is open.

Great. Thank you, and good morning, guys. This is probably a little bit more for you, Mark. I think it's fair to say that Goodyear Forward did generally what it was supposed to. At least in part, an externality, you've had almost 16 quarters straight of year-over-year volume reduction. Now you have fairly significant overcapacity. Overseas, you've closed a few plants, and Fayetteville is probably a good start. I was wondering if you could give us a sense as to what moves are next that you and the team are considering. Whether that's more plant closures, more asset sales, monetization of the retail business, which seems like an opportunity, just some high-level thoughts, if you wouldn't mind.

Yeah, sure thing. Just to recap again to Fayetteville as Scott mentioned there. As we look out to really a year and a half, two years out, it's about a $270 million per year lift to the SOI specifically, in the Americas and globally for us. It really is about matching supply with demand. We continue to do all of the things that we need to do in terms of, as we shared with you before, controlling the controllables. Again, on the Goodyear Forward, we clearly see we're going to trigger past $1.5 billion of savings in the coming couple of months here, which is great. We've embedded that into our DNA, and we continue to drive, as I shared about, it really is about our operating discipline, the cost focus.

As we think about Fayetteville specifically, that's taking a capacity out that at peak was between seven and eight million units, James. It really is to balance that in terms of some of the headwinds that we saw here in the H1, and looking back over the last couple of years around that unabsorbed fixed cost. Meanwhile, the manufacturing team is not standing still. We are continuing to modernize. The modernization plans are fully being executed and continue to be, such as in Lawton, that we've shared with you, Napanee expansion, doing our digitalization of the plants to be able to be very tight in terms of our flexing of the plants, managing the inventory, as well as other expansions, such as in Americana, in South America.

We've also focused heavily in Dębica in Eastern Europe as we're now completing that second plant closure, which we announced right as I came on board, between the Fulda and Fürstenwalde and getting our SEGE or that premium capacity moved over into Eastern Europe, which is a meaningful shift as well. Feel very good about the investments that we're doing there and the restructuring activities that we're doing to make Goodyear more competitive.

Got it. Okay, that's quite helpful. I guess, Scott, welcome. This question's probably a bit more for you. Based on the walk that you gave us to the other James a few seconds ago, it sounds like probably for this year, cash flow will be neutral or even some cash burn. Understanding, of course, next year you have some expenses around the Fayetteville plant closure. Is it fair to think that next year might be another year of cash burn? You have this at least a little bit of padding on the balance sheet from the debt raise, but I just want to get your thought on when we might start to see that turnaround.

Yeah. To your point for FY 2026, we do expect it to be a burn year in the tune of about $200-$300 million. To your point, notable item in the mix being Fayetteville at about $100 million for the year. We would expect to have some continued burn into 2027 as well, but to your point, it'll definitely start to moderate. When you factor in Fayetteville's benefits of nearly $250 million in 2028, clearly benefits like that will start to flow through.

We'll take our next question from Rajat Gupta with JPMorgan. Please go ahead. Your line is now open.

Hey, thanks for taking my questions. Yash for Rajat Gupta. Just wanted to ask on the raw mats piece until 2027, just given the six-month lag effects, the raw mat spike that we're seeing right now should start hitting the P&L early next year as well. Just wanted to understand some underlying assumptions about what you're seeing on the ground today, maybe in the current spot rate and how should we think about just the year-on-year headwind into H1 next year?

Yeah. On the last call, on the Q1 call, the company talked about an expectation that raw materials were going to be headwind for the H2 to the tune of about $200 million. To your point, while we've seen some slight improvements, clearly there's a lot of uncertainty that's still out there. Accordingly, we haven't seen enough to really update or change our outlook around that $200 million. Why? Obviously, the point you raised, the lag effect dynamics, the supply chain dynamics, refinery economics, all those things are clearly a factor in that. We think that pushes us, and essentially those were already baked into the company's expectations that were conveyed in the Q1, particularly related to the Q4.

I will say to your point, as we start to look into 2027, clearly we were encouraged by the dynamics coming out of the Middle East and any stabilization there flowing quickly through to oil. We would start to see some benefit of that as we get into 2027. The other factor and consideration in all that is raw material indexes on that portion of our business where we have those, roughly about a third of the business. We would expect those to begin to reset higher as we move into 2027, and that's a benefit as well.

Helpful. Thanks. Just wanted to ask another one on just the commercial vehicle side of things. I just wanted to see what are the underlying trends you're seeing in the months of July and August now across both OE and replacement channels? We had some participants who were pointing to seeing some early signs of recovery year after hitting the trough. Wanted to understand a little more on what you were seeing on that front.

Sure. Thanks. The overall fundamentals in the commercial market are looking better. There has been some decline, obviously, specifically in the Middle East in terms of the outlook for that. The rest is relatively flat or just slightly down as we look at some of the replacement cycles. On the OE front, as we shared with you in the last call, I think things were looking 200% up year-over-year. Where we're at today, we're seeing it about 100% up year-over-year in June. Reminder, that's on a very low comp number. With the industry being the lowest it's been really kind of in the history of that marketplace when we think about Class 8 truck business. What we do see, the truck capacity tightening, freight rates are moving higher.

We continue to see the purchasing manager index, that PMI above 50 for the entire year, which gives some reasons to believe in acceleration and that the manufacturing sector is starting to pick up as well. Which is absolutely key towards that overall freight activity picking up, thus helping that replacement business, retread business, et cetera. In Q2, we saw our commercial OE shipments up for the first time in two years. It's going be though, we have to remember, it's super depressed industry levels for commercial, and it's going to need more than a year for it to get back to kind of a mid-cycle level of production from the OE side. To the replacement to that point.

The improvements in fleet profitability that's been seen in the market is really about capacity rationalization across the industry, which is elevated freight rates, carrier profitability's, net-net, the freight volumes are still down year-over-year. That's why, again, as we refer back to that PMI, that purchasing index above 50, in manufacturing picking up, we think that's a really important step to us getting back on a better footing as an industry and specifically for Goodyear's part of that.

Thank you. Once again, that is star 1 if you would like to ask a question. We will take our next question from John Healy with Northcoast Research. Please go ahead. Your line is now open.

Yeah. Thanks for taking the question. Wanted to go back and talk a little bit about the retail business here in the U.S. Mark, there's been a lot of M&A kind of activity amongst retailers of late, some sizable type movements. Would love to get your thought just about how, I know it came up briefly just a few minutes ago, but just how you view the retail asset. Is it something that you feel Goodyear needs to be in for its kind of long-term success? I know you're launching this week kind of a revitalized new concept up in Detroit. Would love for you to kind of address the position you guys are in there. As you look at some of these transactions that are going on in the marketplace, does that help hurt the restocking?

Does that help hurt Goodyear's position, do you think, within the replacement category? Thanks.

Sure. Thanks, John. A couple of key points when it comes to retail. Let's start maybe with company-owned retail in the U.S. We continue to march forward with really the turnaround or the improvement in the robustness of that business. That business is performing better than it has in over two decades. Really pleased with that. Big shout out to our retail team, and the Americas team for just the improvements in that business. What I really enjoy about that business is it puts us direct consumer facing and gives us a direct flavor of what all of our customers are going through as they are working with the end consumer. For me and throughout my career, it's been an important point to have some of that so that we can stay close to customer and consumer same time.

To your point on the concept store, we're really excited about launching that next Friday, next Saturday. It's really about a destination location, if you will, of car enthusiasts. What better place to do that than in my former home of the Motor City to start that out. Where Cars and Coffee is part of the DNA of Detroit life. Let's take something that maybe not the happiest purchase for everybody. We got the enthusiasts that love it and we've got other folks that just need to buy them. We want to make it something that's special and fun. Again, it's about our Goodyear DNA. It's about performance, race to road. It really is about being consumer centric, customer centric.

We feel that this kind of puts that on stage, if you will, in terms of additional earnings for us and bringing folks back to the brand. As I joined two and a half years ago, it was one of the things I shared with you guys. We had been out of the marketing and advertising business for too long. We had talked a lot about mixing up, but we hadn't actioned that. In fact, we're back with the Polysteel commercial. We're back with Fast Is In Us. We are back in terms of winning at Tire Rack, of having the number one high performance tire in the marketplace. We are back when it comes to being much more consumer centric and doing what we say we're going to do.

That was a long-winded version of feel pretty strongly that really, really pleased with our internal retail team. To your point in the broader issue. We have a lot of channels that we participate in, between our large chains, our distribution, our smaller retail shops, our franchisees, et cetera. There continues to be a lot of consolidation and PE activity. We have a very robust program called Velocity for our smaller dealers, that strong loyalty program where we combined our Goodyear and Cooper programs, which had not been finished since the acquisition. We got that wrapped up. Great feedback. It's about us being much more easy to work with and to understand where we're at and working with our customer base. That's what's important to us.

We're working through as we have been, for my two and a half or three years and before that as well with our sales teams directly with each of the channels and what their specific needs are. Feel very good about within this consolidation, we have done well with our share of business, and getting the right portfolio screens for each of those customers based on their specific needs and where they're going in terms of the market and the market placement. While I share we are rationalizing low-end SKUs we cannot make money on that are too long in the tooth. At the same time, we're making sure we have a refreshed or vitality, as we call it, a refreshed lineup all the way across. We have a full portfolio and our power lines are fully vetted out for each of our customers.

They have a complete offering for every customer coming into their, each consumer coming into each of our customers' shops.

Great. No, that's very helpful. Just wanted to ask a kind of financial question on the rationalization line as well as some of the things you're going to be doing with Fayetteville. When you guys talk about rationalization, does that also include the dollars to reallocate and retool wherever that capacity is going? When you talk about the savings of $100 million or $270 million, does that include the startup or transition costs that go into the facility where those volumes are moving to? Thanks.

Yeah. Absolutely, John. It includes any mold CapEx. It includes movement or recertification of product, and getting the ramp-up curves, getting things to where last off, first off, same quality, same up times, and all of that is taken into account in those numbers that Scott shared with you earlier.

The P&L and the balance sheet dynamics associated with that.

Thank you. We'll take our next question from Itay Michaeli with TD Cowen. Please go ahead. Your line is now open.

Great. Thanks. Good morning, everybody, and welcome, Scott. Maybe, Mark, a first question on, with all the portfolio rationalization and evolution and the SKUs and, of course, the go-to-market strategy, I'm just curious how we should think about the impact to overall volume going forward. It does seem like your H2 exit rate for volume positions you maybe to grow global volume by low single digit next year. I'm just trying to make sure we're thinking about that the right way, just given some of the changes in the portfolio and SKUs and of course, to go to market as well.

Yeah, sure. Thanks, Itay. As we shared with you before, last year, we had about 40% more new SKUs and power lines into the marketplace than we've ever brought forward. Again, big shout-out to our engineering and manufacturing team for making that happen. Those are all flowing meaningfully into the market now, which, again, is part of those proof points as we think about the H2 and going into 2027 as well. As a reminder, a lot of that greater than 18 and above, and especially the new power lines, where we have built out the power lines that were not yet complete in terms of a full portfolio for our customers, as I just shared with John. At the same time, those were literally blank space products where we were not participating in the market. Those typically are tail SKUs.

Meanwhile, they're tail SKUs, much more meaningful in terms of the revenue and the margin profile of those products. Some of the ones that, as you well know and we've seen in the numbers, of rationalizing on the low end, where we were participating in areas, quite frankly, for too long that we could not compete in nor convert that into the double-digit profitability that we're still marching towards. Long story short on it, we'll continue to optimize the portfolio. We have another big year of things coming out this year as well as next year, which fully builds out the portfolio in what we laid out in terms of the 18 and above.

At the same time, there are certain things that around the world, at 18 and above or premium mix, we're really trying to moderate how we say that, because around the world, 18 and above is not necessarily it. In South America, it's more like 16 and above. It's about premium market share. It's about premium products. It means different things around the world for that, and we're doing that within each of the geographies on that, Itay.

That's very helpful, Mark. I think as a follow-up on the financials, curious at a high level how to think about costs into 2027. If we assume normal course inflation of a couple of hundred million, should we think about the $90 million Fayetteville savings as being incremental to sort of normal cost offsets you would take to offset inflation? Or do you need that $90 million to offset normal course inflation and other costs?

Maybe I'll start, and I'll turn it over to Scott on it. Yeah, absolutely. It's a meaningful part of our offsetting inflation headwinds going forward. As I said, that is very much about balancing supply and demand in the areas of the market we want and need to participate in versus trying to be everything to everyone and running these larger volume, low-end SKUs that are just running for a contribution margin, which makes no sense in the long term to run that hard for so little. That's why to balance that. Meanwhile, within manufacturing and across the zone, it is embedded in our DNA from the Goodyear Forward, which really is about offsetting inflation with productivity. That doesn't mean only a closure scenario.

It really is about continuing to invest in the future for modernization, automation, improving waste, improving those things while continuing to have top-notch quality products that people want. From that side, then let me let Scott take it over on some numbers there.

No, not numbers per se, but if you go back to my opening remarks at the beginning, one of the things certainly that I've noticed here is, you take Fayetteville, clearly that's a structural item. There was a question earlier about other kinds of things like that the company is considering. Those are being evaluated. Really across the company, that continuous improvement mindset from SG&A all the way through manufacturing, the punch list of projects that people are actively working to address those productivity dynamics are absolutely part of the mandate and the expectation that Mark and the team are driving down through the business. Clearly, that is the expectation.

I would add too, Itay, it's that same clarity and focus on that controlling the controllables that continues even though the official part of Goodyear Forward, again, we're gonna go past $1.5 billion at this point. Every function, every region, every PBU are driving that with a regular cadence that's been embedded as well of governance, where we're holding ourselves accountable, whether it is delivery of the new products from engineering, whether it is offsetting inflation headwinds and finding ways to improve the overall cost and efficiency in manufacturing to our direct and indirect material cost and so forth. Work streams in all of those areas. The teams are absolutely laser-focused on getting that done.

Thank you. At this time, we've reached the end of our time for allotted questions. I will now turn this call back over to Mark Stewart for any final or closing remarks.

Thank you, Brittany. Guys, we are laser-focused on resources of the areas of Goodyear which can compete the most effectively to create value. Value for our shareholders, value for our employees, and making sure we're doing products that are exciting. The actions that we're taking really are all meant to serve that strategy. Build the right portfolio, manufacture the products in the right footprint with the right cost structure, and win customers through our sales execution. The priorities really reinforce one another. They position Goodyear to create stronger financial performance. We're really encouraged by the evidence that strategy's taking hold, right? That higher mix of 18-and-above products all around the world. The OE market share gains across every region that are setting us up for the replacement cycle two and three years out to have a robust pipeline of premium 18-and-above products.

The wins that our teams are having in each of the marketplaces, in terms of the performance, and again, our goal of being number one in tires and service. Thank you, guys, and thanks for joining today.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Goodyear Tire & Rubber (GT) Q2 2026 Earnings Call Transcript

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