The Goodyear Tire & Rubber Company (NASDAQ:GT) Q2 2020 Earnings Conference Call - Final Transcript
Jul 31, 2020 • 09:00 am ET
[Operator Instructions] We'll go first to Rod Lache with Wolfe Research. Please go ahead.
Good morning, everyone.
I had a couple of questions. Just first, can you just talk a little bit more about what's embedded in your Q3 negative 20% expectation? Just seems steep. I think auto production, generally, the consensus is like negative 10% to 15%. So are you expecting replacement to be worse than that?
Yes. So Rod, the second half volume recovery expectation here, we're trying to think through this on a global level. And you've recognized completely that we had some numbers in June that looked pretty good and some numbers in July, particularly for U.S. OE, that look even better. So I think we're taking some of those trends, including the good U.S. OE, the strength that we're seeing in China and even some of the pent-up demand and lower channel inventories that should be supportive of sales. But I think we're balancing those against some uncertainty in European OE, where registrations are still down. Some uncertainty in Europe for the winter season, for sure, where inventories are still generally higher than they should be, given the level of sales last year. A lot of uncertainty in emerging markets, including India, which Rich mentioned in his remarks. And then just your overall concern about what's going to happen with consumer attitudes, given the rising number of COVID-19 cases. So I think we're balancing it out. Not challenging the point that you're making about the strength in the U.S. OE build at all. But taking into account, I think we're what we're seeing globally and not taking for granted that the trends continue, given the risk of further government actions on higher levels of cases.
Okay. Two other things I was hoping you could just talk about. One is what is the impact of everything that's happening right now on some of the savings actions that you're taking? You had originally targeted $65 million to $130 million of savings from aligning distribution in Europe. Are things like that on track? Or are they falling behind? And any kind of high-level comments on this ITC decision at the end of August? It sounds like there's a potential for some duties or tariffs on maybe 25% of the U.S. replacement supply, if this actually happened. And if it did, would the impact be similar to what we saw back in the, I guess, it was 2010. I can't remember exactly when, but there was a period of time with pretty strong industry pricing for a while as a result of tariffs on China, which was similar.
Richard J. Kramer
Yes. Rod, I'll start. And I'll start with aligned distribution in Europe. And I would say that that we're actually very pleased with the progress. So the question that we're on track, absolutely. And I think it's important to say again that COVID did not at all change our plans or our commitment to it. We've reached agreement with now