Goodyear Tire & Rubber Company (NASDAQ:GT) turned lower in early trading on Friday after the company announced cost savings actions in response to what it says is a challenging industry environment.
The planned rationalization and workforce reorganization will result in an approximately 5% reduction in salaried staff globally or about 500 positions.
Despite raw material and certain other input costs having declined recently, Goodyear (GT) said it is looking to drive efficiencies to help offset inflation in other areas like wages and benefits. The rationalization and reorganization are expected to be completed during Q1 and Q2 with a portion in international businesses subject to required consultation with relevant stakeholders. The actions are noted to be in addition to cost synergies related to the integration of Cooper Tire.
Goodyear (GT) expects to record pre-tax charges associated with these actions of approximately $55M, primarily relating to cash severance payments that are expected to be substantially paid during the first half of 2023. The rationalization and reorganization are estimated to lead to a quarterly run-rate benefit of approximately $15M beginning in Q2. Savings in Q1 are expected to be $5M.
“Our fourth quarter results fell short of our expectations given a significantly weaker industry backdrop, particularly in Europe,” warned Goodyear CEO Richard Kramer. “While our businesses have performed at a high level through the volatility of the past several years, the uncertain near-term macroeconomic outlook and continuing impacts of inflation make these difficult actions necessary to position our business for future success,” he added.
Shares of Goodyear Tire (GT) fell 3.58% in premarket action on Friday.
Goodyear (GT) is lined up to report Q4 earnings on February 8. See the recent track record of earnings beats and misses.