The Goodyear Tire & Rubber Company (NASDAQ:GT) Q3 2016 Earnings Conference Call - Final Transcript

Oct 28, 2016 • 09:00 am ET


The Goodyear Tire & Rubber Company (NASDAQ:GT) Q3 2016 Earnings Conference Call - Final Transcript


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Good morning everyone and welcome to The Goodyear Tire & Rubber Company Third Quarter 2016 Earnings Conference Call. At this time all participants are in a listen-only mode. (Operator Instructions) It is now my pleasure to turn today's program over to Christina Zamarro, Goodyear's Vice President of Investor Relations. Please go ahead.

Christina Zamarro

Thank you, Tony, and thank you everyone for joining us for Goodyear's third quarter 2016 earnings call. Joining me today are Rich Kramer, Chairman and Chief Executive Officer; and Laura Thompson, Executive Vice President and Chief Financial Officer.

(Forward-Looking Statements)

With that, I'll now turn the call over to Rich.

Rich Kramer

Thank you, Christina, and good morning, everyone. This morning, I'll cover updates to our industry and our 2016 plan since we last spoke at our Investor Day meeting in Boston. Then I'll briefly discuss each of our regional businesses. As always, Laura will follow with a detailed financial report before opening the call for your questions.

Our third quarter results were highlighted by continued growth in segment operating margin. All three of our global businesses achieved operating margins above 12% led by our Asia-Pacific business, which delivered 18.3% operating margin. In addition, our year-to-date core segment operating income grew to a record nine-month level.

We delivered global segment operating margin of 14.5% for the quarter in a more challenging overall industry environment, particularly in our U.S. commercial truck tire business. This performance demonstrates the strength of our value proposition and our sustainability of margin growth in our business.

As we discussed at our September Investor Day, our strategy is built to take advantage of the trends shaping our industry. Global demand for a high value-added large rim diameter tires is increasing and we believe that our portfolio of these products plus our connected business model position us on the path to sustained growth and competitive advantage.

I'm also very pleased with the decisions we are making in our business units to drive and stay on our strategy. We continue to have opportunities to pursue short-term volume in increases that recognize that these opportunities are in unprofitable parts of the market that are not growing. In other words, any potential near-term gains would fall outside our long term strategy.

The value of a strategy is in its consistent execution regardless of industry and internal conditions. At Goodyear, we are committed to consistent execution of our strategy. Now during the third quarter and particularly late in the quarter, we experienced some headwinds to our plan. In addition to generally weaker overall industry conditions, three specific items affected our third quarter results and our expectations for the fourth quarter. I'll comment on each this morning. First, as a result of the challenging market conditions and lower volumes in our U.S. commercial truck tire business, we experienced higher conversion costs in the quarter.

Second, we saw increased competition in deterioration in the pricing environment in EMEA, specifically in the smaller than 17-inch rim diameter consumer tire segment of the market. And third, there