The Goodyear Tire & Rubber Company · NASDAQ:GT
The Goodyear Tire & Rubber — Goodyear Tire & Rubber — Investor Presentation (August 2007)
39 slides from The Goodyear Tire & Rubber's investor presentation, Aug 15, 2007
Slide 1: Investor Meeting August 15, 2007
Investor Meeting August 15, 2007
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain information contained in this presentation may constitute forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. There are a variety of factors, many of which are beyond the company's control,
Slide 3: Agenda
Agenda 5 Overview Growth Platforms Investment Plans North American Tire Progress Cost Savings Balance Sheet Q&A
Slide 4: Overview Investment Highlights
Overview Investment Highlights Proven management team with a proven track record / innovative solutions Market leader with strong momentum and attractive growth opportunities attractive market trends well-recognized brand portfolio established dealer network Intense focus on growing core consumer an
Slide 5: Business Platforms
Business Platforms Strong top-line growth capability Step change improvement in cost structure Stronger balance sheet Focus on core businesses Focus on speed 9
Slide 6: Financial Overview Revenue and Operating Income
Revenue Total Segment Operating Income(a)(b) Segment operating income reconciliations in Appendix on pages 37 & 38. FY 2006 and 1H07 exclude estimated strike impact of $313 million and $39 million, respectively. Note: FY 2003 total segment operating income, as presented, is derived by adding the seg
Slide 7: Segment Results - Segment Operating Income
Financial Overview Segment Results - Segment Operating Income Note: FY 2006 for North American Tire excludes estimated strike impact of $313 million. Segment operating income reconciliations in Appendix on page 37 13 North American Tire European Union Tire Eastern Europe, Middle East & Africa Tire L
Slide 8: Growth Platforms Investment Plans
Growth Platforms Investment Plans Increase HVA capacity Increase by 40% by 2012 Remaining high-cost plants to be converted to HVA North America: Fayetteville and Gadsden Western Europe and Eastern Europe Latin America and Asia Pacific Expand low-cost capacity in existing plants Increase by 33% (abou
Slide 9: Marketing Investments to Drive Profitable Brand Growth
Marketing Investments to Drive Profitable Brand Growth
Slide 10: Goodyear Brand #1 in US
*Modern Tire Dealer 2006 Brand Share Report Goodyear Brand #1 in US by almost 2x* Growth will be driven by: Impactful new products Marketing effectiveness Leveraging our assets to surround target consumers and drive them to retailers 19
Slide 11: Growth through Product Innovation
Growth through Product Innovation 4x vs. 2004 Signature Products 21 Collectible Sales
Slide 12: Growth through Effective Marketing
Growth through Effective Marketing New campaign provides significant branded breakout from industry clutter Highest recall of 61 ads (80%)** 100% correct brand recall** 68% planned to take action** Print Record-breaking scores* 3x average awareness* spot Index Testing Average 100 Ad 1 280 Ad 2 320 A
Slide 13: Leverage Assets To Surround the Consumer
Leverage Assets To Surround the Consumer 681 PR Placements 14 Minutes of In-Race Air Time Strong Media Payout In-Race Ads Retail Promotions At-Track Presence PR Track Print 25
Slide 14: Leverage Assets To Surround the Consumer
Dick Vitale Show Stories/Ads in Print Blimp Coverage in 80% of Games Online TV Ads PR Leverage Assets To Surround the Consumer $1.1mm in PR Value #2 Recalled Brand* 2x Recall of #2 Tire Company* * Proprietary Goodyear Post-Tournament Research 27
Slide 15: Goodyear Brand Market Share Momentum
2003 2004 2005 2006 1H 2007 Share 10.17 10.8 10.83 11.16 11.57 114 index vs. 2003 *North America RMA Data Market Share Momentum 29 Goodyear Brand Market Share
Slide 16: North American Tire Update on Progress
1H 2006 1H 2007 NAT 49 33 39 North American Tire Update on Progress Segment Operating Income Factors Impacting Results Price/mix exceeded raws (+$14M) Branded share growth New product success Pricing actions Lower volume (-$21M) and unabsorbed factory overhead (-$73M), of which: Strike impact of -$3
Slide 17: North American Tire Update on Cost Savings
North American Tire Update on Cost Savings Reflected in 1H 2007 2H 2007 / 2008 Full $40M run-rate savings related to Valleyfield plant closure Tyler closure savings of $50M begins in 2008 Full $80-$90M run-rate savings related to salaried benefit plan changes USW productivity run-rate savings of $11
Slide 18: North American Tire Focus Going Forward
North American Tire Focus Going Forward Continue to drive products / brand success Rebuild inventory to improve service levels (esp. Kelly and Dunlop) Work to regain lost sales opportunity from strike $40 - $45 million lost operating income in 2H 2007 Drive cost savings Drive supply chain improvemen
Slide 19: Target $1.8 - $2.0 billion in gross cost savings by end of 2009
Target $1.8 - $2.0 billion in gross cost savings by the end of 2009 Cost Savings Savings on Track USW Contract Savings ($250 million by 2009) Business Process Improvements (Productivity, Six Sigma, Lean Manufacturing) Product Reformulation Safety Global high cost footprint strategy Target more than
Slide 20: Cost Savings First Half Cost of Goods Sold
Cost Savings First Half Cost of Goods Sold 39 **Estimated inflation includes inflation on wages, benefits and indirect materials. Product mix increases cost, but also increases margin *Other includes 2006 Gains/Settlements, 2007 Curtailment charge and accelerated depreciation ($ in millions)
Slide 21: Cost Savings First Half SAG Expense
Cost Savings First Half Selling, Administrative & General Expense 41 ($ in millions)
Slide 22: Cost Savings Plan Impact on COGS Going Forward
4 Point Cost Savings Plan Impact on COGS Going Forward 43 * Assumes completion by year-end 2007
Slide 23: Balance Sheet Debt Repayment Plan
Balance Sheet Debt Repayment Plan $175 million of 8.625% notes Completed $140 million of 9.00% notes Completed Repay $300 million 3rd Lien Term Loan 8/16/07 Call $650 million secured notes Q108 $100 million 6 3/8% notes mature Q108 Further de-levering being evaluated $315 million "claw-back" 45
Slide 24: Balance Sheet VEBA Update
Balance Sheet VEBA Update Goodyear, USW, and retiree class counsel finalized documentation for class-action suit Retiree class counsel filed suit on July 3rd Necessary first step Goodyear response filed with court Settlement agreement to follow Delay impacts near-term cost savings 47
Slide 25: Next Stage Metrics
Next Stage Metrics 2005 Next Stage Metrics North American Segment Operating Margin 1.8% 5% Total Segment Operating Margin(a) 5.9% 8% Debt(a)(b) 3.2x EBITDA 2.5x EBITDA FY 2005 total segment operating margin and debt reconciliations in Appendix on pages 39 & 40 EBITDA is calculated in accordance with
Slide 26: Summary
Summary Proven management team with a proven track record / innovative solutions Market leader with strong momentum and attractive growth opportunities Intense focus on growing core consumer and commercial tire businesses Strengthening balance sheet to capitalize on growth, improve competitive posit
Slide 27: Goodyear
GOOD;Y YEAR ” Get there’
Slide 28: Appendix
Appendix
Slide 29: 7 Strategic Drivers
Leadership Lower Cost Structure Cash is King Leveraged Distribution Build Brand Strength Product Leadership Advantaged Supply Chain Overview 7 Strategic Drivers 57
Slide 30: Differentiated Business Model
Differentiated Business Model Typical Auto Supplier Valuable brand Not applicable World-renowned brand Aftermarket exposure <10% of sales >80% of sales Pricing ability Limited due to dependency on OEMs 10 price increases 2004 to present in U.S. consumer replacement market Time to market Multiple yea
Slide 31: Outlook Full Year 2007
63 Outlook Full Year 2007 Raw material costs expected to increase 4 - 6% Interest expense of $480 - $500 million Capital expenditures of $750 - $800 million Tax expense about 30% of international segment operating income
Slide 32: Significant Reduction in Legacy Obligations
2004 2005 2006 2007E Unfunded Pension Obligations 3124 3001 2438 1800 Unfunded OPEB Obligations 3201 2610 2452 800 Significant Reduction in Legacy Obligations Stronger Balance Sheet Legacy Obligations Addressed < $2,600 $4,890 $5,611 $6,325 < ($ in millions) < < a b Assumes VEBA approval process is
Slide 33: Second Quarter 2007 Revenue Per Tire Increase
Second Quarter 2007 Revenue Per Tire Increase North America 0.06 European Union 0.05 Eastern Europe, Middle East & Africa 0.14 Latin America 0.02 Asia Pacific 0.08 Total Company 0.06 (Y-o-Y, excluding impact of exchange) North America European Union EEMEA Latin America Asia Pacific Total Company 67
Slide 34: Price/Mix versus Raw Materials
Price/Mix versus Raw Materials Note: Reflects tire businesses only. ($ in millions) Price/Mix Raw Materials 2004 587 268 2005 596 526 2006 746 829 1H 07 295 171 69
Slide 35: Raw Material Cost
Raw Material Cost Raw material cost breakdown Raw materials make up about 35% of COGS Note: As of FY 2006. (a) Dependent upon oil. Natural Rubber 25 Synthetic Rubber(a) 24 Carbon Black(a) 12 Fabrics(a) 12 Steel Cord 9 Other(a) 18 Slice 12 Slice 13 Slice 14 Slice 15 Slice 16 Synthetic Rubber(a) 24% N
Slide 36: Reconciliation for Segment Operating Income / Margin
Reconciliation for Segment Operating Income / Margin Note: FY 2003 total segment operating income, as presented, is derived by adding the segment operating income of Goodyear's five tire businesses, as reported. Includes professional service fees related to labor negotiations, capital structure, acq
Slide 37: Reconciliation for Segment Operating Income / Margin
Reconciliation for Segment Operating Income / Margin 75
Slide 38: Reconciliation for Segment Operating Income / Margin
Reconciliation for Segment Operating Income / Margin Note: As stated, does not reflect Engineered Products Division as discontinued operations. (a) Includes professional service fees related to labor negotiations, capital structure, acquisitions and divestitures in 2005. Total Segment Operating Inco
Slide 39: Reconciliation for Debt / Consolidated EBITDA
Reconciliation for Debt / Consolidated EBITDA Note: Amounts include Engineered Products Division. ($ in millions) Twelve Months Ended December 31, 2005 Net Income (Loss) Consolidated Interest Expense U.S. and Foreign Taxes on Income Depreciation and Amortization Expense Cumulative Effect of Accounti
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