Goodyear Financial Analysis
Writing Assignment: Financial Analysis
Assume you are a savvy financial analyst researching companies in which to invest.
Select a U.S. publically-traded company you think might be a good investment and perform a financial analysis.
FIN 534: Financial Management - Quarter (Winter 2013)
March 12, 2013
Goodyear Financial Analysis
The Goodyear Tire & Rubber Company a leading manufacturer of tires is one of the best in the world and one of the most recognizable brand names in the world (Edgar). Goodyear has operations in most regions of the world with 52 manufacturing facilities in 22 ...view middle of the document...
Excluding the impact of foreign currency translation, in 2012 compared to 2011, Price and product mix drove an 8% improvement in revenue per tire,
reflecting Goodyear's continued focus on innovative product offerings in targeted market segments (Edgar). Also In 2012, Goodyear exceeded its $1.0 billion cost savings goal. In 2012 Goodyear realized approximately $346 million of cost savings, bringing the total cost savings for 2010 to 2012 to approximately $1.1 billion (Edgar). Another positive in 2012 Goodyear completed the transition to its new manufacturing facility in Pulandian, China adding to continued improvements in working capital efficiency, measured as a percent of sales (Edgar).
In order to address the uncertain economic environment and the challenges described above, Goodyear remains focused on the following key strategies:
• Consumer-driven product development focus(Edgar);
• Identify and select the most profitable markets, taking advantage segments where Goodyear has competitive advantages(Edgar);
• further improving customer service, improving manufacturing efficiency and creating an advantaged supply chain focused on optimizing inventory levels(Edgar);
• To investment in future growth by Focusing on cash flow to provide funding(Edgar);
• Build top talent and teams (Edgar).
A profit improvement plan is underway and actions are planned to address continued economic weakness in Europe and the significant challenges that Goodyear faces in EMEA (Edgar). Goodyear has announced the exit of the farm tire business in EMEA and the closure of one of Goodyear's Amiens, France manufacturing facilities, as well as a profit improvement plan over the next three years aimed at restoring the margins in EMEA to historical levels (Edgar). The profit improvement plan aims to:
• Target profitable segments where Goodyear has competitive advantages (Edgar);
• Accelerate Goodyear's growth in emerging markets in the region (Edgar); and
• Achieve $75 million to $100 million of productivity improvements through back-office consolidation, improved manufacturing efficiency and supply chain improvements (Edgar).
In addition, in order to address Goodyear's significant unfunded pension obligations, Goodyear has announced plans to fund Goodyear's U.S. pension plans once frozen (Edgar). See “Pension and Benefit Plans” for additional information (Edgar).
For the year ended December 31, 2012, Goodyear's net income was $212 million, compared to Goodyear net income of $343 million in 2011, and Goodyear's net income available to common shareholders was $183 million, compared to Goodyear's net income available to common shareholders of $321 million in 2011 (Edgar). Goodyear total segment operating income for 2012 was $1,248 million, compared to $1,368 million in 2011 (Edgar). The decrease in segment operating income was due primarily to lower tire volume, including the effects of under-absorbed overhead...