-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CLLVK8gCWf8PfE4L/T3cSXubw0gYYWFi4UQtXrYm2en7WVaBLPsvBhNZOs7Eimcm C5utSt0oY1MktgVkr9S3pQ== 0000950152-01-500579.txt : 20010402 0000950152-01-500579.hdr.sgml : 20010402 ACCESSION NUMBER: 0000950152-01-500579 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOODYEAR TIRE & RUBBER CO /OH/ CENTRAL INDEX KEY: 0000042582 STANDARD INDUSTRIAL CLASSIFICATION: TIRES AND INNER TUBES [3011] IRS NUMBER: 340253240 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 001-01927 FILM NUMBER: 1587061 BUSINESS ADDRESS: STREET 1: 1144 E MARKET ST CITY: AKRON STATE: OH ZIP: 44316 BUSINESS PHONE: 2167962121 MAIL ADDRESS: STREET 1: 1144 E MARKET ST CITY: AKRON STATE: OH ZIP: 44316 10-K405/A 1 l87385be10-k405a.txt GOODYEAR TIRE AND RUBBER COMPANY 10-K405/AM.#1 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A AMENDMENT NO. 1 TO FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 COMMISSION FILE NUMBER: 1-1927 THE GOODYEAR TIRE & RUBBER COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) OHIO 34-0253240 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1144 EAST MARKET STREET, AKRON, OHIO 44316-0001 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (330) 796-2121 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------ ------------------------ Common Stock, Without Par Value New York Stock Exchange Preferred Stock Purchase Rights Chicago Stock Exchange Pacific Exchange ------------------------ The Registrant hereby amends and restates in its entirety the following item of its Annual Report on Form 10-K for the fiscal year ended December 31, 2000, as set forth in the pages attached hereto: Part I, Item 1 ------------------------ 2 The Goodyear Tire & Rubber Company (the "Company"), by this Form 10-K/A, Amendment No. 1 to Form 10-K (the "Amendment"), hereby amends and restates in its entirety Item 1 of Part I of the Annual Report on Form 10-K of the Company for the year ended December 31, 2000 (the "Annual Report"). In accordance with Rule 12b-5 under the Securities Exchange Act of 1934, Item 1 of Part I of the Annual Report as amended by this Amendment is set forth in its entirety on the following pages numbered 1 through 20, inclusive. The Amendment includes: (i) the cover page and this page 2 of the Amendment; and (ii) Item 1, "Business", of Part I of the Annual Report (pages numbered 1 through 20, inclusive, which follow this page 2). SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10K/A, Amendment No. 1 to Annual Report on Form 10-K for the year ended December 31, 2000, to be signed on its behalf by the undersigned thereunto duly authorized. THE GOODYEAR TIRE & RUBBER COMPANY (Registrant) Date: March 30, 2001 By /s/ ROBERT W. TIEKEN ------------------------------------------ Robert W. Tieken, Executive Vice President and Chief Financial Officer (Signing on behalf of Registrant as a duly authorized officer of Registrant and as the Principal Financial Officer of Registrant.) 3 ITEM 1. BUSINESS. BUSINESS OF GOODYEAR The Goodyear Tire & Rubber Company is an Ohio corporation organized in 1898. Its principal offices are located at 1144 East Market Street, Akron, Ohio 44316-0001. Its telephone number is (330) 796-2121. The term "Registrant" wherever used herein refers solely to The Goodyear Tire & Rubber Company. The terms "Goodyear" and the "Company" wherever used herein refer to The Goodyear Tire & Rubber Company together with all of its consolidated domestic and foreign subsidiary companies, unless the context indicates to the contrary. Goodyear is one of the world's leading manufacturers of tires and rubber products, engaging in operations in most regions of the world. Goodyear's 2000 net sales were $14.4 billion. Goodyear's net income for 2000 was $40.3 million. Goodyear's worldwide employment averaged 106,724 during 2000. Goodyear's principal business is the development, manufacture, distribution and sale of tires for most applications. Goodyear also manufactures and markets several lines of rubber and other products for the transportation industry and various other industrial and consumer markets and numerous rubber-related chemicals for various applications, provides automotive repair and other services at retail and commercial outlets and sells various other products. FORWARD-LOOKING INFORMATION - SAFE HARBOR STATEMENT Certain information set forth herein (other than historical data and information) may constitute forward-looking statements regarding events and trends which may affect Goodyear's future operating results and financial position. The words "estimate," "expect," "intend" and "project," as well as other words or expressions of similar meaning, are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. Such statements are based on current expectations and assumptions, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including: changes in general economic and industry conditions in the various markets served by Goodyear's operations; price and product competition; increased competitive activity; demand for Goodyear's products; fluctuations in the prices paid for raw materials and energy; the ability to control costs and expenses; changes in the monetary policies of various countries where Goodyear has significant operations; changes in interest and currency exchange rates; and other unanticipated events and conditions. It is not possible to foresee or identify all such factors. Goodyear disclaims any intention, commitment or obligation to revise or update any forward-looking statement, or to disclose any facts, events or circumstances that occur after the date hereof which may affect the accuracy of any forward-looking statement. RECENT DEVELOPMENTS IN GOODYEAR'S BUSINESS SIGNIFICANT TRANSACTIONS. On October 31, 2000, Goodyear and Arkansas Best Corporation formed a joint venture company, Wingfoot Commercial Tire Systems, LLC ("Wingfoot") to engage in selling and servicing commercial truck tires, providing retread services and conducting related businesses. Goodyear transferred its commercial truck tire outlets and related assets in exchange for 81% of the equity of the joint venture and Arkansas Best Corporation's subsidiary, Treadco Inc., contributed substantially all of its assets to Wingfoot in exchange for 19% of Wingfoot. Wingfoot operates 197 commercial tire sales and servicing outlets, including 78 truck tire retreading facilities, throughout the United States. Arkansas Best Corporation has the right at any time after April 30, 2003 and before April 30, 2004 to sell its 19% interest in Wingfoot to Goodyear for approximately $74 million and Goodyear has the right at any time after April 30, 2003 and before October 31, 2004 to purchase Treadco's interest in Wingfoot for approximately $79 million. In June 2000, Goodyear and the Michelin group established a joint venture company in The Netherlands, each owning a 50% equity interest, for cooperative research and development of advanced run-flat tire technologies. Goodyear has licensed its extended mobility tire technology 1 4 and tire pressure monitoring system to Michelin. Michelin has licensed its PAX System to Goodyear. The PAX System consists of a tire with a unique bead lock and a run flat insert, a special wheel and a tire pressure warning system. Goodyear and Michelin will focus on accelerating the availability of the PAX System and the incorporation of EMT technology into the PAX System. The joint venture will also provide auto manufacturers additional sourcing opportunities by enabling Goodyear and Michelin to develop complimentary and interchangeable products. Goodyear and five other tire companies, Continental, Cooper Tire, Michelin, Pirelli and Sumitomo, have founded RubberNetwork.com LLC, an independent global electronic purchasing and procurement marketplace, which is preparing to commence commercial operations in April 2001. In addition to procurement services, RubberNetwork.com LLC plans to offer a complete set of marketplace solutions to industrial companies in the tire and rubber industry, including e-catalogs, auctions, requests for proposals and/or quotes and supply chain management. A global alliance with Sumitomo Rubber Industries, Ltd. ("Sumitomo") was established on September 1, 1999, when Goodyear acquired 75%, and Sumitomo acquired 25%, of a Netherlands holding company which purchased substantially all of Sumitomo's tire businesses in Europe (operated under the Dunlop trade style) and the major portion of Goodyear's tire businesses in Europe. Goodyear also acquired 75%, and Sumitomo 25%, of a holding company in the United States that purchased Sumitomo's tire manufacturing operations and certain tire related distribution operations in North America and 100% of the balance of Sumitomo's Dunlop tire distribution operations in North America. In Japan, Goodyear owns 25%, and Sumitomo owns 75%, of two companies, one for the sale of Goodyear-brand passenger and truck tires in the Japanese replacement market and the other for the sale of Goodyear-brand and Dunlop-brand tires to vehicle manufacturers in Japan. Goodyear also owns 80%, and Sumitomo owns 20%, of the capital stock of a newly formed global purchasing company. In August 2000, Goodyear acquired 10% of the capital stock of Sumitomo and in August 2000 and February 2001 Sumitomo acquired 2,278,896 shares of Goodyear Common Stock. Since September 1, 1999, Goodyear has taken certain rationalization actions to reduce costs and has developed plans to realize the benefits of various synergies that are or may be available as a result of the global alliance with Sumitomo, which actions and plans are designed to result in annual cost savings of $300 million to $360 million by 2003, depending on, among other things, the demand for tires, in the relevant markets, pricing flexibility, raw material and other costs and general economic conditions. NEW PRODUCTS AND OTHER DEVELOPMENTS. Goodyear introduced several new lines of tires around the world during 2000. In North America, a number of new passenger tire lines were introduced, including the Aquatred 3, a premium all season tire, providing improved traction and durability. Also introduced were the Wrangler MT/R and Wrangler Ultra Grip lines for light truck and sport utility vehicles. Two new medium commercial truck tire lines were introduced, the G397LHS radial steer truck tire with reinforced supertensile steel and polyimide belts and the Wingfoot APR all position rib tire. MODERNIZATION AND EXPANSION PROJECTS. During 2000, Goodyear continued to increase productivity and enhance product quality through plant modernization and expansion projects. Significant tire plant projects were completed during 2000 at the Company's Napanee, Ontario, Danville, Virginia, Union City, Tennessee, Americana, Brazil, Dalian, China, Bogor, Indonesia, and Izmit, Turkey tire plants. Significant tire plant projects are presently underway at the Company's Lawton, Oklahoma, Danville, Virginia, Union City, Tennessee, Philippsburg and Wittlich, Germany, and Colmar-Berg, Luxembourg tire plants. Goodyear completed construction of its new $130 million synthetic rubber and specialty polymer plant in Beaumont, Texas, which commenced commercial operations in late 2000. FINANCIAL INFORMATION ABOUT GOODYEAR'S SEGMENTS Financial information relating to Goodyear's "Segments" for each of the three years in the period ended December 31, 2000 appears in Note 20 captioned "Business Segments" of the Notes to Financial Statements set forth in Item 8 of this Annual Report, at pages 76 through 79, inclusive, and is incorporated herein by specific reference. 2 5 DESCRIPTION OF GOODYEAR'S BUSINESS GENERAL SEGMENT INFORMATION Segment information is presented to reflect Goodyear's operating business units. Goodyear's operating "Segments" are North American Tire, European Union Tire, Eastern Europe, Africa and Middle East Tire, Latin American Tire and Asia Tire (collectively the "Tire Segments"), Engineered Products and Chemical Products. Each Tire Segment manufactures tires that are exported and sold to one or more of the other Tire Segments. The sales and operating income of each Tire Segment exclude sales and operating income in respect of tires sold to other Tire Segments and include sales and operating income derived from tires imported from other Tire Segments and tires exported to unaffiliated customers. Sales and operating income of the Chemical Products segment include sales and operating income in respect of products transferred to the Tire Segments or the Engineered Products segment. GENERAL INFORMATION REGARDING TIRE SEGMENTS Goodyear's principal business is the development, manufacture, distribution and sale of tires and related products and services worldwide. Goodyear manufactures and markets numerous lines of rubber tires for: - automobiles - farm implements - trucks - earthmoving equipment - buses - aircraft - motorcycles - industrial equipment - various other applications in each case for sale to original equipment manufacturers and in replacement markets worldwide. Goodyear also: - manufactures and sells flaps for truck tires and other types of tires. - retreads truck, aircraft and heavy equipment tires. - manufactures and sells tread rubber and other tire retreading materials. - provides automotive repair services and miscellaneous other products and services. The total sales and operating income of the Tire Segments during the periods indicated were:
(IN MILLIONS OF DOLLARS) YEAR ENDED DECEMBER 31, --------------------------------- 2000 1999 1998 --------- --------- --------- Total sales of Tire Segments .......... $12,674.9 $11,645.5 $11,304.2 Total operating income of Tire Segments $ 491.7 $ 357.8 $ 809.9
The Dunlop businesses, which were acquired on September 1, 1999, contributed sales to the Tire Segments of $2.3 billion during the year ended December 31, 2000 and $873.4 million during the four months ended December 31, 1999. Of the 223.3 million tires sold by Goodyear during 2000, 37.3 million were sold by the Dunlop businesses. In 1999, the Dunlop businesses sold 14.4 million of the 200.5 million tires sold by Goodyear. The principal class of products of the Tire Segments is new tires for most applications. The percentages of Goodyear's consolidated net sales and operating income attributable to the Tire Segments, and the percentage of Goodyear's net sales attributable to new tires, for each year in the three year period ended December 31, 2000 were: 3 6
YEAR ENDED DECEMBER 31, ----------------------- 2000 1999 1998 ---- ---- ---- Total sales of Tire Segments .......... 87.9% 87.2% 86.4% Total operating income of Tire Segments 82.1% 65.7% 76.8% Tire sales .................. 81.2% 79.5% 77.2%
Worldwide, Goodyear's sales of new tires to the numerous replacement markets it serves substantially exceed its sales of new tires to original equipment manufacturers. Goodyear's worldwide tire unit sales in the replacement markets served and to vehicle manufacturers for mounting as original equipment on vehicles ("OE") during the periods indicated were: GOODYEAR ANNUAL TIRE UNIT SALES - REPLACEMENT AND OE
(IN MILLIONS OF TIRES) YEAR ENDED DECEMBER 31, --------------------------- 2000 1999 1998 ----- ----- ----- Replacement ................. 157.8 141.3 132.9 Original Equipment .......... 65.5 59.2 54.7 ----- ----- ----- Total Goodyear Worldwide 223.3 200.5 187.6
Goodyear offers two basic constructions of tires, radial and bias ply. Various belting and reinforcing materials are used, including nylon and polyester fiber tire cord and steel belts and tire cord. Approximately 96.6% of all passenger tires, 85.3% of all light truck tires and 79.7% of all medium truck tires sold by Goodyear during 2000 were radial construction. No customer or group of affiliated customers accounted for as much as 4.7% of Goodyear's consolidated net sales during 2000, 1999 or 1998. Worldwide, Goodyear's annual net sales to its ten largest customers, including their respective affiliates, represented less than 22.0% of consolidated net sales during each of 2000, 1999 or 1998. No customer or group of affiliated customers accounted for as much as 4.8% of the sales of the Tire Segments during 2000, 1999 or 1998. Annual sales by the Tire Segments to the ten largest customers of the Tire Segments, including their respective affiliates, represented less than 22.5% of the total sales of the Tire Segments during each of 2000, 1999 or 1998. New tires are sold under highly competitive conditions throughout the world. On a worldwide basis, Goodyear has two major competitors: Bridgestone/Firestone (based in Japan) and Michelin/UniroyalGoodrich (based in France). Other significant competitors include Continental/ General, Cooper Tire, Pirelli, Sumitomo, Toyo, Yokohama, Kumho, Hankook and various regional tire manufacturers. Goodyear competes with other tire manufacturers on the basis of product design, performance, price and reputation, warranty terms, customer service and consumer convenience. Goodyear-brand tires enjoy a high recognition factor worldwide and have a reputation for performance, high quality and value. Goodyear believes Dunlop-brand tires enjoy a high recognition factor in North America and Europe and have a reputation for performance, quality and value. Kelly-brand, Fulda-brand, Debica-brand, Sava-brand and various other house brand tire lines offered by Goodyear, and tires manufactured and sold by Goodyear to private brand customers, compete primarily on the basis of value and price. Goodyear does not consider its businesses as a whole, or the businesses of the Tire Segments whether considered individually or as a group, to be seasonal to any significant degree. A significant inventory of new tires is usually maintained in order to optimize production schedules and assure prompt delivery to customers, especially original equipment manufacturers that require "just in time" deliveries of tires or tire and wheel assemblies. Tire production and inventory levels are generally managed to avoid unnecessary increases in unit production costs and limit working capital requirements by optimizing production schedules consistent with anticipated demand. 4 7 During 1999 and into the first quarter of 2000, the demand in North America for certain Goodyear-brand passenger and truck tire lines and sizes, primarily from its original equipment and mass merchandise retail chain customers, exceeded the Company's ability to supply tires when ordered, resulting in significantly lower than normal order fill rates. Order fill rates have returned to normal levels. Tire unit sales for each of the Tire Segments and for Goodyear worldwide during the periods indicated were: GOODYEAR'S ANNUAL TIRE UNIT SALES
YEAR ENDED DECEMBER 31, ---------------------------- (IN MILLIONS OF TIRES) 2000 1999 1998 ------ ------ ------ North American Tire ......................... 115.9 109.1 105.0 European Union Tire ......................... 60.3 45.7 35.4 Eastern Europe, Africa and Middle East Tire . 15.6 15.8 15.5 Latin American Tire ......................... 19.7 17.8 20.8 Asia Tire ................................... 11.8 12.1 10.9 ------ ------ ------ Goodyear worldwide .................. 223.3 200.5 187.6
The following table indicates the percentage change in Goodyear's annual unit sales of passenger, truck and farm tires by Tire Segment and worldwide: PERCENTAGE INCREASE (DECREASE) IN GOODYEAR'S ANNUAL TIRE UNIT SALES
2000 VS 1999 1999 VS 1998 ------------ ------------ North American Tire ........................ 6.3% 3.8% European Union Tire ........................ 31.8% 29.1% Eastern Europe, Africa and Middle East Tire (1.5)% 2.2% Latin American Tire ........................ 11.0% (14.7)% Asia Tire .................................. (2.1)% 11.3% Tire Segments worldwide ............ 11.4% 6.9%
Based on information available from various industry and other sources, Goodyear estimates that, worldwide, passenger and truck tire shipments by the industry during the periods indicated were: ESTIMATED ANNUAL WORLDWIDE INDUSTRY TIRE SHIPMENTS
YEAR ENDED DECEMBER 31, ------------------------- (IN MILLIONS OF TIRES) 2000 1999 1998 ----- ----- ----- Worldwide industry tire shipments 892.4 870.0 822.5
On the basis of annual net tire sales, Goodyear was the largest tire manufacturer in the world during 2000. Based on information published by the Rubber Manufacturers Association (the "RMA") and various other sources, it is estimated that Goodyear's share of the worldwide auto, truck and farm tire markets was approximately: GOODYEAR SHARE OF GLOBAL TIRE MARKET (AUTO, TRUCK AND FARM TIRES)
YEAR ENDED DECEMBER 31, ------------------------ 2000 1999 1998 ---- ---- ---- Goodyear share of global tire market 23.0% 20.1% 19.1%
5 8 NORTH AMERICAN TIRE Goodyear's largest segment, the North American tire business ("North American Tire"), develops, manufactures, distributes and sells tires and related products and services in the United States and Canada. The principal class of products of North American Tire is new tires for most applications. North American Tire manufactures tires in 14 plants in the United States and Canada. The sales and operating income of North American Tire during the periods indicated were: NORTH AMERICAN TIRE SALES AND OPERATING INCOME
YEAR ENDED DECEMBER 31, ---------------------------------- (IN MILLIONS OF DOLLARS) 2000 1999 1998 -------- -------- -------- North American Tire sales .......... $7,111.3 $6,648.6 $6,507.9 North American Tire operating income $ 260.7 $ 26.3 $ 314.2
The Dunlop businesses in North America contributed sales of $755.0 million during 2000, and $252.3 million during the four months ended December 31, 1999. North American Tire sold approximately 115.9 million tires during 2000, including 12.3 million tires sold by the Dunlop businesses. North American Tire sold 109.1 million tires during 1999, including 4.1 million units sold by the Dunlop businesses, and 105.0 million tires during 1998. The percentages of Goodyear's consolidated net sales and operating income attributable to North American Tire, and the percentages of the North American Tire's sales attributable to new tires, for the periods indicated were:
YEAR ENDED DECEMBER 31, ---------------------------- 2000 1999 1998 ---- ---- ---- North American Tire sales .......... 49.3% 49.8% 49.7% North American Tire operating income 43.5% 4.8% 29.8% Tire sales ............... 89.9% 88.1% 86.3%
TIRES. North American Tire manufactures and sells a broad line of tires in North America for automobiles, trucks, motorcycles, buses, farm implements, earthmoving equipment, aircraft and industrial equipment and for various other applications. Goodyear-brand radial passenger tire lines sold in North America include the Aquatred line of tires, Eagle high performance and touring tires, Eagle Aquatred high performance tires, and run-flat extended mobility technology (EMT) tires. The major lines of Goodyear-brand radial tires offered in the United States and Canada for sport utility vehicles and light truck are the Wrangler and Workhorse. North American Tire also manufactures and sells Dunlop-brand, Kelly-brand, other house brand and several private-brand radial passenger tires in the United States and Canada. North American Tire manufactures and markets a full line of Goodyear-brand all-steel cord and belt construction radial medium truck tires, the Unisteel series, for various applications, including line haul highway use and off-road service. The current truck tire line includes the Unisteel G-177, which features a high-tensile steel reinforced cording, a skid resistant tread design and a new damage resistant tread compound, and the Unisteel G-397 line haul steer tire, which features reinforced belting of super-tensile steel with a polyimide top belt for resistance to damage and rust propagation and increased retreadability. North American Tire also manufactures and distributes various lines of Dunlop-brand and Kelly-brand radial and bias-ply truck tires for sale in the United States and Canadian replacement markets. 6 9 Several lines of tires for other applications are manufactured by Goodyear in North America, including radial and bias-ply tires for farm machinery and heavy equipment. Goodyear also manufactures aircraft tires for commercial and military aircraft in the United States. RELATED PRODUCTS AND SERVICES. North American Tire also: - retreads truck, aircraft and heavy equipment tires, primarily as a service to its commercial customers. - manufactures tread rubber and other tire retreading materials for various applications. - provides automotive maintenance and repair services at 1,091 retail outlets. - sells automotive repair and maintenance items, automotive equipment and accessories and other items to dealers and consumers. - provides miscellaneous other products and services. MARKET AND OTHER INFORMATION North American Tire sells Goodyear-brand and Dunlop-brand tires to OE customers for use as original equipment on vehicles they produce and sells Goodyear-brand, Dunlop-brand, Kelly-brand, other house brand and several lines of private brand tires through various channels of distribution for sale to vehicle owners for replacement purposes. Goodyear's sales of tires in the North American replacement markets substantially exceed its sales of tires to OE customers. Tire unit sales to OE customers and in the replacement markets in the United States and Canada during the periods indicated were: NORTH AMERICAN TIRE UNIT SALES - REPLACEMENT AND OE
YEAR ENDED DECEMBER 31, --------------------------- (IN MILLIONS OF TIRES) 2000 1999 1998 ----- ----- ----- Replacement tire unit sales ...... 79.5 71.8 70.1 Original Equipment tire unit sales 36.4 37.3 34.9 Total .................. 115.9 109.1 105.0
During 2000, North American Tire exported and sold approximately 2.7% (2.6% in 1999) of its tire production to unaffiliated customers outside North America, delivered approximately 1.9% (1.9% in 1999) of its tire production to the other Tire Segments, primarily European Union Tire and Latin American Tire, and imported approximately 8.0% (8.0% in 1999) of the tires it sold from the other Tire Segments, primarily Latin American Tire and Asia Tire. All passenger tires (except bias-ply temporary spare tires) and approximately 96.0% of all light and medium truck tires sold by Goodyear in the United States and Canada during 2000 were radial construction. Approximately 39.9% (39.0% in 1999 and 36.7% in 1998) of all passenger tires sold by the Company in the United States and Canada during 2000 were high performance type tires. No customer or group of affiliated customers of North American Tire accounted for as much as 6.1% of its sales during 2000, 7.3% of its sales during 1999 or 7.0% during 1998. The ten largest customers of North American Tire accounted for less than 36.0% of its sales during 2000, less than 35.5% of its sales during 1999 and less than 34.7% of its sales during 1998. Goodyear is a major supplier of tires to most manufacturers of automobiles, trucks, farm and construction equipment and aircraft that have facilities located in North America. North 7 10 American Tire supplies tires to most motor vehicle manufacturers with plants in North America, including: - DaimlerChrysler - AAI - Ford - Freightliner - General Motors - International Truck and Engine - BMW - Kenworth - Honda - Mack Truck - Mitsubishi - Peterbuilt - Nissan - Caterpillar - Toyota - John Deere - Volvo - J.I. Case Aircraft manufacturers supplied by Goodyear include Boeing and Lockheed-Martin. Goodyear's major competitors in the North American tire market are Bridgestone/Firestone, Michelin/UniroyalGoodrich, Continental/General and Cooper Tire, each with manufacturing facilities and other operations in North America. Other significant competitors in North America are Pirelli, Toyo, Yokohama, Kumho, Hankook, who are primarily importers of tires, and various regional tire manufacturers that export tires to North America. Goodyear-brand, Dunlop-brand and Kelly-brand tires are sold in the United States and Canadian replacement markets through several channels of distribution. The principal method of distribution for Goodyear-brand tires is a large network of independent dealers. Goodyear-brand, Dunlop-brand and Kelly-brand tires are also sold to numerous national and regional retail marketing firms in the United States, including Sears Roebuck & Co., Wal-Mart, Penske Auto Centers and numerous other firms. In addition, Goodyear operates approximately 1,091 retail outlets (including auto service centers, commercial tire and service centers and leased space in department stores) under the Goodyear name or under the Brad Ragan, Carolina Tire, Allied or Just Tires trade styles. Several lines of Dunlop-brand and Kelly-brand and various other house brand passenger and truck tires are marketed through independent dealers. Private brand and associate brand tires are sold to independent dealers, to national and regional wholesale marketing organizations, including TBCCorporation, retail chain marketers, including Wal-Mart, Discount Tire, Sears Roebuck & Co. and Big-O, and to various other retail marketers. Automotive parts, automotive maintenance and repair services and associated merchandise are sold under highly competitive conditions in the United States and Canada through retail outlets operated by Goodyear. Automotive repair and maintenance items, and associated merchandise are purchased by Goodyear for distribution to many of Goodyear's tire dealers. North American Tire from time to time offers various financing and extended payment programs to certain of its tire customers in the replacement market. Goodyear does not believe these programs, when considered in the aggregate, require an unusual amount of working capital relative to the volume of sales involved and prevailing tire industry practices. Tire inventories are maintained at levels designed to optimize production schedules, assure prompt delivery to customers and minimize working capital requirements, subject to adjustments to reflect unanticipated changes in demand. Based on data published by the RMA and information obtained from other industry sources, industry shipments of passenger and light and medium highway truck tires in the United States during the periods indicated were: INDUSTRY ANNUAL UNIT SALES IN THE UNITED STATES
YEAR ENDED DECEMBER 31, ---------------------- (IN MILLIONS OF TIRES) 2000 1999 1998 ---- ---- ---- U.S. Passenger Tire shipments .................... 259 253 242 U.S. Light and Medium Truck Tire shipments ....... 63 64 58 ---- ---- ---- Total Industry Passenger and Truck Tire shipments 322 317 300
8 11 Based on current economic forecasts, Goodyear expects the total market for passenger tires in the United States in 2001 to be 258 million tires, a decrease of over one million units compared to 2000. Passenger tire demand in 2001 is expected to be 1.7% lower than in 2000 in the original equipment market and .4% lower than in 2000 in the replacement market. Goodyear estimates that demand for light and medium highway truck tires in the United States during 2001 will be 64 million units, a 1% increase compared to 2000. Goodyear sold more tires in the United States and Canada than any other tire manufacturer during the three years ended December 31, 2000. Based on information published by industry and other sources, Goodyear estimates that its share of the North American (United States and Canada) tire market in each of the periods indicated was approximately: GOODYEAR'S SHARE OF TIRE MARKET - U.S. AND NORTH AMERICA
YEAR ENDED DECEMBER 31, UNITED STATES NORTH AMERICA ----------------------- ------------- ------------- 2000 ................. 30.8% 31.1% 1999 ................. 28.9% 29.6% 1998 ................. 28.8% 29.6%
The National Highway Traffic Safety Administration ("NHTSA"), under authority granted to it by the National Traffic and Motor Vehicle Safety Act of 1966, as amended, has established various standards and regulations relating to motor vehicle safety, some of which apply to tires sold in the United States for highway use. NHTSA has the authority to order the recall of automotive products, including tires, having defects deemed to present a significant safety risk. NHTSA requires the registration of tires for identification in the event of a product recall, the grading of passenger tires for treadwear, traction and temperature resistance pursuant to prescribed testing procedures and the molding of such grades into the sidewall of each tire. Passenger and highway truck tires are required to be identified by ten-digit manufacturing identification codes molded on the sidewall of each tire. The effect of compliance with these regulations on Goodyear's sales and profits cannot be determined. However, these regulations increase the cost of producing and marketing passenger tires in the United States. EUROPEAN UNION TIRE Goodyear's second largest Tire Segment ("European Union Tire ") develops, manufactures, distributes and sells tires for automobiles, motorcycles, trucks, farm implements and construction equipment in the member states of the European Union and in Norway and Switzerland, exports tires to other regions of the world, and provides related products and services. European Union Tire manufactures tires in 13 plants located in England, France, Germany and Luxembourg. Substantially all of the operations and assets of European Union Tire, including the Dunlop businesses acquired on September 1, 1999, are owned and operated by Goodyear Dunlop Tires Europe B.V., a 75% owned subsidiary of Goodyear. The sales and operating income of European Union Tire during the periods indicated were: EUROPEAN UNION TIRE SALES AND OPERATING INCOME
YEAR ENDED DECEMBER 31, ------------------------------ (IN MILLIONS OF DOLLARS) 2000 1999 1998 -------- -------- -------- European Union Tire sales .......... $3,198.1 $2,642.7 $2,139.8 European Union Tire operating income $ 88.7 $ 188.0 $ 199.7
The Dunlop businesses in Europe contributed sales of approximately $1.5 billion during 2000 and $621.1 million during the four months ended December 31, 1999 to European Union Tire. European Union Tire sold approximately 60.3 million tires in 2000, including 25.0 million tires contributed by the Dunlop businesses, compared to 45.7 million tires in 1999, including 10.3 million tires contributed by the Dunlop businesses, and 35.4 million tires in 1998. 9 12 The percentages of Goodyear's consolidated net sales and operating income attributable to European Union Tire, and the percentages of European Union Tire's sales attributable to new tires, for the periods indicated were:
YEAR ENDED DECEMBER 31, ---------------------------- 2000 1999 1998 ---- ---- ---- European Union Tire sales .......... 22.2% 19.8% 16.4% European Union Tire operating income 14.8% 34.5% 18.9% Tire sales ............... 96.8% 98.2% 93.0%
European Union Tire: - manufactures and sells Goodyear-brand, Dunlop-brand (since September 1, 1999), Fulda-brand and Kelly-brand passenger, truck, motorcycle, farm and heavy equipment tires. - sells Debica-brand and Sava-brand passenger, truck and farm tires manufactured by the Eastern Europe, Africa and Middle East Tire segment. - sells new, and manufactures and sells retreaded, aircraft tires. - provides various retreading and related services for truck and heavy equipment tires, primarily for its commercial truck tire customers. - offers automotive repair services at retail outlets in which it owns a controlling interest. - provides miscellaneous related products and services. MARKETS AND OTHER INFORMATION European Union Tire distributes and sells tires throughout the European Union and in Norway and Switzerland. During 2000, European Union Tire sold approximately 17.9 million (12.7 million during 1999 and 10.1 million during 1998) tires to OE customers and 42.4 million (33.0 million during 1999 and 25.3 million during 1998) tires in the replacement markets it serves. During 2000, European Union Tire exported approximately 4.5% (less than 1% in 1999) of its tire production to unaffiliated customers and approximately 5.3% (7% during 1999) of its tire production to other Tire Segments, primarily North American Tire. Approximately 20% (6.3% in 1999) of the tires sold by European Union Tire were imported from other Tire Segments, primarily Eastern Europe, Africa and Middle East Tire. Substantially all passenger and light and medium truck tires sold during 2000 were radials and 47% (30% in 1999) of all passenger tires sold were high performance type tires. European Union Tire is a significant supplier of tires to most manufacturers of automobiles, trucks and farm and construction equipment located in Western Europe. Manufacturers supplied by Goodyear include DaimlerChrysler, BMW, Fiat, Renault, Volkswagen-Audi, Volvo, Ferrari, Peugeot, Alfa Romeo, subsidiaries of Ford and General Motors, and New Holland. Goodyear is a leading tire manufacturer in Western Europe. Based on data published by industry and other sources, Goodyear estimates that its share of the Western European tire market was approximately 22% in 2000 (18% in 1999 and 15% in 1998), second in the region to Michelin's 30% (30% in 1999 and 30% in 1998) market share. Principal competitors are Michelin, Continental, Bridgestone/Firestone and Pirelli. Other significant competitors include several regional tire producers and imports from other regions, primarily Asia. Goodyear-brand and Dunlop-brand tires are sold in the replacement markets served by European Union Tire through various channels of distribution, principally independent tire dealers who sell several brands of tires. In some markets, Goodyear-brand tires, as well as Dunlop-brand, Kelly-brand, Fulda-brand, Debica-brand, Sava-brand, Falken-brand and Pneumant-brand tires, are distributed through independent dealers, regional distributors and approximately 543 retail outlets operated by multi-brand retail tire chains controlled by Goodyear. No customer or group of affiliated customers accounted for as much as 5.0% of the sales of European Union Tire during 2000, 3.1% of its sales during 1999 or 2.7% of its sales during 1998. 10 13 The ten largest customers of European Union Tire represented less than 20.1% of its sales for 2000, less than 19.3% of its sales during 1999 and less than 17.0% of its sales during 1998. European Union Tire offers payment terms consistent with industry practice in the region. The payment terms offered to customers in each market served are consistent with industry practice. The inventory levels and working capital requirements of European Union Tire are not unusual relative to the volume of sales involved and prevailing tire industry practices in the markets it serves. EASTERN EUROPE, AFRICA AND MIDDLE EAST TIRE Another Tire Segment, the Eastern Europe, Africa and Middle East tire business ("EEAME Tire"), develops, manufactures, distributes and sells passenger, truck, farm and construction equipment tires in Eastern Europe, Africa and the Middle East. EEAME Tire manufactures tires at plants located in Morocco, Poland, Slovenia, South Africa and Turkey. EEAME Tire maintains sales operations in most countries in Eastern Europe, including Russia, Africa and the Middle East, exports tires for sale in North America, Western Europe and other regions of the world, and provides related products and services in certain markets it serves. The sales and operating income of EEAME Tire during the periods indicated were: EEAME SALES AND OPERATING INCOME
YEAR ENDED DECEMBER 31, ------------------------------ (IN MILLIONS OF DOLLARS) 2000 1999 1998 ------ ------ ------ EEAME Tire sales .......... $793.0 $812.9 $867.4 EEAME Tire operating income $ 54.6 $ 49.8 $102.4
EEAME Tire sold approximately 15.6 million tires in 2000, compared to 15.8 million tires in 1999 and 15.5 million tires in 1998. The percentages of Goodyear's consolidated net sales and operating income attributable to EEAME Tire, and the percentages of EEAME Tire's sales attributable to new tires, for the periods indicated are:
YEAR ENDED DECEMBER 31, ---------------------------- 2000 1999 1998 ---- ---- ---- EEAME Tire sales .......... 5.5% 6.1% 6.6% EEAME Tire operating income 9.1% 9.1% 9.7% Tire sales ...... 93.4% 92.7% 95.0%
EEAME Tire manufactures and sells Goodyear-brand, Kelly-brand, Debica-brand and Sava-brand tires and sells Dunlop-brand (since September 1, 1999) and Fulda-brand tires manufactured by European Union Tire. EEAME Tire also sells new and retreaded aircraft tires, provides various retreading and related services for truck and heavy equipment tires, sells automotive parts and accessories and provides automotive repair services. MARKETS AND OTHER INFORMATION EEAME Tire distributes and sells tires in most countries in Eastern Europe, Africa and the Middle East. Tires are sold to all classes of customers. During 2000, approximately 98% (98% in 1999) of the passenger and light truck tires, and approximately 82% (77% in 1999) of all medium truck tires, sold by EEAME Tire were radials. Approximately 16% of all passenger tires sold by EEAME Tire during 2000 (12% during 1999) were high performance type tires. During 2000, EEAME Tire sold approximately 3.5 million (3.2 million in 1999 and 3.2 million in 1998) tires to OE customers and 12.1 million (12.6 million in 1999 and 12.3 million in 1998) tires in the several replacement markets it serves. EEAME Tire exported and sold approximately 3% of its 2000 tire production (5% in 1999) to unaffiliated customers located outside 11 14 Eastern Europe, Morocco, South Africa and Turkey, which customers were located primarily in the Middle East and Africa. Approximately 54% of the tires produced by EEAME Tire during 2000 (51% in 1999) were delivered to other Tire Segments, primarily European Union Tire. Approximately 23% of the tires sold by EEAME Tire during 2000 (11% in 1999) were imported from other Tire Segments. EEAME Tire is a significant supplier of tires to manufacturers of automobiles, trucks, and farm and construction equipment in Poland, South Africa and Turkey. Manufacturers supplied by EEAME Tire include Fiat Auto Poland, Daewoo Poland, VW South Africa, Fiat Turkey and Renault Turkey. EEAME Tire has a significant share of each of the markets it serves. Its major competitors are Michelin, Bridgestone/Firestone, Continental and Pirelli. Other competition includes regional and local tire producers and imports from other regions, primarily Asia. Goodyear-brand tires in the various replacement markets served by EEAME Tire are sold primarily through independent tire dealers and wholesalers who sell several brands of tires. In some countries, Goodyear-brand, as well as Dunlop-brand, Kelly-brand, Fulda-brand, Debica-brand and Sava-brand tires are sold through regional distributors and multi-brand dealers. In South Africa, tires are also sold through a retail chain of approximately 220 retail stores owned by Goodyear. In the Middle East and most of Africa, tires are sold primarily through regional distributors for resale to independent dealers. No customer or group of affiliated customers accounted for as much as 2.8% of the sales of EEAME Tire during 2000 or as much as 3.0% in 1999 or 4.1% in 1998. Sales to the ten largest customers of EEAME Tire represented less than 11.8% of its 2000 sales and less than 13.0% of its 1999 sales and less than 15.2% of its 1998 sales. The payment terms offered customers of EEAME in each market it serves are consistent with industry practices. The inventory levels and working capital requirements of EEAME Tire are not unusual relative to the volume of sales involved and prevailing tire industry practices in the region. LATIN AMERICAN TIRE Another Tire Segment, the Latin American tire business ("Latin American Tire"), manufactures, distributes and sells automobile, truck and farm tires in Mexico and throughout Central and South America ("Latin America"), sells tires to various export markets, retreads and sells commercial truck, aircraft and heavy equipment tires, and provides other products and services. Latin American Tire manufactures tires in plants located in Brazil, Chile, Colombia, Guatemala, Mexico, Peru and Venezuela. The sales and operating income of Latin American Tire during the periods indicated were: LATIN AMERICAN TIRE SALES AND OPERATING INCOME
YEAR ENDED DECEMBER 31, ------------------------------ (IN MILLIONS OF DOLLARS) 2000 1999 1998 -------- -------- -------- Latin American Tire sales .......... $1,047.9 $ 948.1 $1,269.8 Latin American Tire operating income $ 69.8 $ 67.7 $ 186.1
Latin American Tire sold approximately 19.7 million tires in 2000, compared to 17.8 million tires in 1999 and 20.8 million tires in 1998. The percentages of Goodyear's consolidated net sales and operating income attributable to Latin American Tire, and the percentages of Latin American Tire's sales attributable to new tires, for the periods indicated were:
YEAR ENDED DECEMBER 31, ---------------------------- 2000 1999 1998 ---- ---- ---- Latin American Tire sales .......... 7.3% 7.1% 9.7% Latin American Tire operating income 11.7% 12.4% 17.7% Tire sales ............... 91.6% 89.0% 90.5%
12 15 Latin American Tire manufactures and sells several lines of radial and bias-ply passenger, light and medium truck and farm tires. Latin American Tire also: - manufactures and sells pre-cured treads for truck and heavy equipment tires. - retreads, and provides various materials and related services for retreading, truck, aircraft and heavy equipment tires. - manufactures other products, including batteries for motor vehicles. - sells new aircraft tires. - provides miscellaneous other products and services. MARKETS AND OTHER INFORMATION Latin American Tire distributes and sells several lines of tires for automobiles, trucks and farm equipment throughout Latin America to original equipment manufacturers, in the several replacement markets in the region and to various export markets. During 2000, Latin American Tire sold approximately 4.8 million tires to OE customers (3.6 million in 1999 and 5.2 million in 1998) and 14.9 million tires in the replacement markets it serves (14.2 million in 1999 and 15.6 million in 1998). In Latin America, approximately 86% of all passenger and light truck tires, and approximately 34% of all medium truck tires, sold by Goodyear during 2000 were radials. Latin American Tire is a major supplier of tires to most manufacturers of automobiles and trucks with facilities in Latin America, including DaimlerChrysler, Ford, General Motors, Volkswagen, Fiat and Renault. Latin American Tire sells tires to independent dealers and distributors in the various replacement markets in Latin America. Goodyear is a leading participant in each of the markets served by Latin American Tire. Major competitors in Latin America include Bridgestone/Firestone, Michelin and Pirelli. Other competition includes various regional producers and imports, primarily from Asia. During 2000, Latin American Tire delivered approximately 32% (26.3% in 1999) of its tire production to other Tire Segments, primarily passenger and truck tires to the United States, exported and sold approximately 7% (9.1% in 1999) of its tire production to unaffiliated customers outside Latin America, and imported approximately 9% (8.3% in 1999) of the tires it sold from other Tire Segments. No customer or group of affiliated customers accounted for as much as 5.2% of Latin American Tire sales during 2000, as much as 6.5% of its sales during 1999 or as much as 8.2% of its sales during 1998. The ten largest customers of Latin American Tire represented less than 24.6% of its sales for 2000, 24.9% of its sales during 1999, and 27.5% of its sales during 1998. The working capital employed by Latin American Tire is limited to the extent possible to reduce the effects of inflationary economic conditions in the region. The inventories maintained by Latin American Tire are ordinarily at levels designed to optimize production schedules consistent with anticipated demand. The payment terms offered to customers in each Latin American country are consistent with industry practices. The working capital requirements of Latin American Tire are consistent with its sales volume and industry practices in the region. The operations of Latin American Tire in certain countries are affected from time to time by price controls, import controls, labor regulations, tariffs, and other restrictive governmental regulations. ASIA TIRE Goodyear's tire business in Asia ("Asia Tire") engages in the development, manufacture, distribution and sale of tires throughout east, southeast and south Asia and the western Pacific. Asia Tire manufactures and sells radial and bias-ply tires for automobiles, light and medium trucks, farm implements and construction equipment for both the original equipment and replacement markets. Asia Tire manufactures tires at facilities located in China, India, Indonesia, Japan, 13 16 Malaysia, the Philippines, Taiwan and Thailand. Asia Tire also sells aircraft tires and retreads truck, heavy equipment and aircraft tires and provides miscellaneous other products and services. The sales and operating income of Asia Tire during the periods indicated were: ASIA TIRE SALES AND OPERATING INCOME
YEAR ENDED DECEMBER 31, ------------------------------ (IN MILLIONS OF DOLLARS) 2000 1999 1998 ------ ------ ------ Asia Tire sales .......... $524.6 $593.2 $519.3 Asia Tire operating income $ 17.9 $ 26.0 $ 7.5
Asia Tire sold approximately 11.8 million tires during 2000, compared to 12.0 million units during 1999. The percentages of Goodyear's consolidated net sales and operating income attributable to Asia Tire, and the percentages of Asia Tire's sales attributable to new tires, for the periods indicated were:
YEAR ENDED DECEMBER 31, ---------------------------- 2000 1999 1998 ---- ---- ---- Asia Tire sales .......... 3.6% 4.4% 4.0% Asia Tire operating income 3.0% 4.8% 0.7% Tire sales ..... 97.3% 96.7% 96.0%
MARKETS AND OTHER INFORMATION Asia Tire distributes and sells tires in most countries in Asia and the western Pacific. During 2000, Asia Tire sold approximately 3.0 million tires (2.4 million during 1999 and 1.4 million during 1998) to OE customers and 8.8 million tires (9.6 million during 1999 and 9.5 million during 1998) in the replacement markets it serves. During 2000, Asia Tire delivered approximately 7% (10% during 1999) of its tire production to other Tire Segments, primarily North American Tire, exported and sold approximately 1% (4% during 1999) of its tire production to unaffiliated customers located outside the region, and imported approximately 1% (2% during 1999) of the tires it sold from the other Tire Segments. Approximately 86% of all passenger and light truck tires, and approximately 3% of all medium truck tires, sold by Asia Tire during 2000 were radials. Asia Tire supplies tires to global automobile manufacturers with facilities in China, India, Indonesia, Malaysia and the Philippines, including BMW, Citroen, Daihatsu, DaimlerChrysler, Ford, General Motors, Honda, Hyundai, Isuzu, Mitsubishi, Nissan, Toyota, Volkswagen and Volvo, and to regional manufacturers, including Perodua and Proton (Malaysia), Maruti, Skoda and Telco (India) and AAT (Thailand). In the replacement market, Asia Tire sells tires through approximately 7,400 distributors and dealers. Goodyear is a leading tire manufacturer in Indonesia, Malaysia and the Philippines and a significant supplier in Thailand, India, Japan, Korea and China. In Asia, Goodyear's principal competitors include Bridgestone, Michelin, Yokohama, Kumho, Hankook, MRF, Ceat and several regional and local tire companies. No customer or group of affiliated customers accounted for as much as 3.7% of the sales of Asia Tire during 2000, 7.2% of its sales during 1999, or 10.6% of its sales during 1998. The ten largest customers of Asia Tire accounted for less than 15.2% of its 2000 sales, less than 22.8% of its 1999 sales and less than 31.8% of its 1998 sales. Ordinarily, the working capital requirements of Asia Tire are low relative to the volume of sales involved and are consistent with prevailing tire industry practices in each market it serves. During the past two years working capital requirements have increased somewhat due to the economic downturn in most of the region. Asia Tire information does not include the operations of South Pacific Tyre, an Australian Partnership, and South Pacific Tyres N.Z. Limited, a New Zealand Company (together, "SPT"), which are joint ventures 50% owned by Goodyear and 50% owned by Pacific Dunlop Limited. 14 17 SPT is the largest tire manufacturer in Australia and New Zealand, with four tire manufacturing plants and 12 retread plants. In Australia and New Zealand, SPT sells Goodyear-brand and Dunlop-brand tires through a chain of 414 retail stores and commercial tire centers owned by SPT. For additional information regarding SPT, see Note 20, "Business Segments", of the notes to Financial Statements set forth in Item 8 of this Annual Report, at page 76. Asia Tire information includes the activities of two joint venture companies in Japan, each 25% owned by Goodyear and 75% owned by Sumitomo. One company distributes Goodyear-brand passenger and truck tires manufactured by Sumitomo in Japan, or by Goodyear in other countries, in the replacement market in Japan. The other company sells Goodyear-brand and Dunlop-brand tires to original equipment manufacturers in Japan. Goodyear's 25% share of the net income or loss of these companies is reported as an increase or decrease to the operating income of Asia Tire using the equity method of accounting. ENGINEERED PRODUCTS Another Goodyear business is the development, manufacture, distribution and sale of numerous rubber and thermoplastic products worldwide ("Engineered Products"). The products and services offered by Engineered Products include: - belts and hose for motor vehicles - air springs, engine mounts and chassis parts for motor vehicles - conveyor and power transmission belts - air, water, steam, hydraulic, petroleum, fuel, chemical and materials handling hose for industrial applications - tank tracks - various other products and miscellaneous services Engineered Products manufactures products at 9 plants located in the United States and 15 plants located in Australia, Brazil, Canada, Chile, China, Mexico, Slovenia, South Africa and Venezuela. The sales and operating income of Engineered Products for the periods indicated were: ENGINEERED PRODUCTS SALES AND OPERATING INCOME
YEAR ENDED DECEMBER 31, ------------------------------ (IN MILLIONS OF DOLLARS) 2000 1999 1998 -------- -------- -------- Engineered Products sales .......... $1,174.2 $1,234.8 $1,301.8 Engineered Products operating income $ 43.1 $ 70.4 $ 111.7
The percentages of Goodyear's consolidated net sales and operating income attributable to Engineered Products for periods indicated are:
YEAR ENDED DECEMBER 31, -------------------------- 2000 1999 1998 ---- ---- ---- Engineered Products sales .......... 8.1% 9.2% 10.0% Engineered Products operating income 7.2% 12.9% 10.6%
MARKETS AND OTHER INFORMATION Most products of the Engineered Products segment are sold directly to manufacturers or through independent wholesale distributors. The major portion of Engineered Products sales is made to various industrial and transportation markets for replacement purposes. Engineered Products has several competitors which produce some, but not all, of the products manufactured by Engineered Products. There are several suppliers of automotive belts and hose products, air springs, engine mounts and other rubber components for motor vehicles. 15 18 Goodyear is a significant supplier of these products. Goodyear also is a leading supplier of conveyor and power transmission belts and industrial hose products. More than 50 major firms participate in the various markets served by Engineered Products. The principal competitors of Engineered Products include Dana, Mark IV, Gates, Dayco, Bridgestone/Firestone, Conti-Tech, Trellberg, Tokai/DTR, Unipoly and Habasit. These markets are highly competitive, with quality, service and price being the most significant factors to most customers. Goodyear believes the products offered by Engineered Products are generally considered to be high quality and competitive in price and performance. During 2000, the ten largest customers of Engineered Products accounted for approximately 32.2% (41.3% in 1999 and 41.4% in 1998) of its sales and no customer, or group of affiliated customers, accounted for more than 6.7% (11.7% in 1999 and 13.7% in 1998) of its sales. The principal customers of Engineered Products include DaimlerChrysler, Ford, General Motors, International Truck and Engine, AutoZone, the Federal Government and Applied Industrial. The business of Engineered Products is not seasonal to any significant degree. Engineered Products does not maintain a significant inventory or require an unusual amount of working capital when considered in relation to the volume of business transacted. CHEMICAL PRODUCTS Another Goodyear business is the development, manufacture, distribution and sale of synthetic rubber and rubber latices, various resins and organic chemicals used in rubber and plastic processing, and other chemical products for industrial customers worldwide ("Chemical Products"). Chemical Products owns and operates six manufacturing facilities, a natural rubber plantation and processing facility in Indonesia and conducts natural rubber purchasing operations. The sales and operating income of Chemical Products during the periods indicated were: CHEMICAL PRODUCTS SALES AND OPERATING INCOME
YEAR ENDED DECEMBER 31, ---------------------------- (IN MILLIONS OF DOLLARS) 2000 1999 1998 -------- ------- ------- Chemical Products sales .......... $1,129.7 $ 949.8 $ 993.0 Chemical Products operating income $ 64.2 $ 116.4 $ 132.7
The percentages of Goodyear's consolidated net sales and operating income attributable to Chemical Products (which includes sales and operating income in respect of products transferred to Goodyear's other segments), and to the sales of Chemical Products to Goodyear's other segments, for the periods indicated were:
YEAR ENDED DECEMBER 31, ------------------------ 2000 1999 1998 ---- ---- ---- Chemical Products sales ......................... 7.8% 7.1% 7.6% Chemical Products operating income .............. 10.7% 21.4% 12.6% Chemical Products Segment sales to other Segments 3.9% 3.6% 4.0%
The major portion (50.0%, 52.0% and 54.0% in 2000, 1999 and 1998, respectively) of the revenues of Chemical Products were sales to Goodyear's other Segments, primarily synthetic rubber and rubber processing chemicals to North American Tire, on a formula price basis. Substantially all production is in the United States, except for certain rubber chemicals manufactured in France. MARKETS AND OTHER INFORMATION The Tire Segments purchase approximately 70% of the synthetic rubber, and a significant portion of the rubber processing chemicals, produced by Chemical Products. All of the natural rubber produced by Goodyear's plantation and processing facility is used by Goodyear. All external sales of rubber processing and other chemical products are made directly to manufacturers 16 19 of various products. Several major firms are significant suppliers of one or more chemical products similar to those manufactured by Goodyear. The principal competitors of Chemical Products include Bayer, Dow and Ameripol Synpol. The markets are highly competitive, with product quality and price being the most significant factors to most customers. Goodyear believes the products offered by Chemical Products are generally considered to be high quality and competitive in price and performance. During 2000, the ten largest unaffiliated customers of Chemical Products accounted for approximately 14.9% (12.1% in 1999 and 10.9% in 1998) of its sales and no unaffiliated customer accounted for more than 4.1% (2.2% in 1999 and 2.0% in 1998) of its sales. The Chemical Products business is not seasonal to any significant degree and does not require an unusual amount of inventory or working capital relative to the volume of business transacted. GENERAL BUSINESS INFORMATION SOURCES AND AVAILABILITY OF RAW MATERIALS The principal raw materials used by Goodyear are synthetic and natural rubber. Goodyear purchases substantially all of its requirements for natural rubber in the world market. Synthetic rubber accounted for approximately 53%, 54% and 54% of all rubber consumed by Goodyear worldwide during 2000, 1999 and 1998, respectively. The Company's plants located in Beaumont and Houston, Texas, supply the major portion of its synthetic rubber requirements in the United States. Substantially all of the synthetic rubber used by Goodyear outside the United States is supplied by third parties. The principal raw materials used in the production of synthetic rubber are butadiene and styrene purchased from independent suppliers and isoprene purchased from independent suppliers or produced by Goodyear from purchased materials. Nylon and polyester yarns are used by Goodyear, substantial quantities of which are processed in Goodyear's textile mills. Significant quantities of steel wire are used for radial tires, a portion of which is produced by Goodyear. Other important raw materials used by Goodyear are carbon black, pigments, chemicals and bead wire. Substantially all of these raw materials are purchased from independent suppliers, except for certain chemicals which Goodyear manufactures. Goodyear purchases most of the materials and supplies it uses in significant quantities from several suppliers, except in those instances where only one or a few qualified sources are available. As in 2000, Goodyear anticipates the continued availability (subject to possible spot shortages) of all raw materials it will require during 2001. Substantial quantities of hydrocarbon based chemicals and fuels are used in the production of tires and other rubber products, synthetic rubber, latex and other products. Supplies of chemicals and fuels have been and are expected to continue to be available to Goodyear in quantities sufficient to satisfy the anticipated requirements of its manufacturing plants, subject to possible spot shortages. In the aggregate, the costs of natural rubber and other raw materials during 2000 increased approximately 8% from 1999 levels. Although natural rubber and crude oil prices decreased slightly in the world market beginning in late 2000, the Company anticipates that the cost of energy and most raw materials, especially materials and fuels derived from hydrocarbons, will remain at year-end 2000 levels or increase during 2001. Prices for raw materials and fuels are also likely to fluctuate significantly during 2001. PATENTS AND TRADEMARKS Goodyear owns approximately 2,029 patents issued by the United States Patent Office and approximately 5,915 patents issued or granted in other countries around the world. Goodyear also has licenses under numerous patents of others, covering various improvements in the design and manufacture of its products and in processes and equipment for the manufacture of its products. Goodyear also has approximately 738 applications for United States Patents pending and 17 20 approximately 4,754 patent applications on file in other countries around the world. While such patents, patent applications and licenses as a group are of material importance to Goodyear, it does not consider any one patent, patent application or license, or any related group of them, to be of such importance that the loss or expiration thereof would materially affect any Segment or the Company considered as a whole. Goodyear owns or controls and uses approximately 1,535 different trademarks, including several using the word "Goodyear" or the word "Dunlop." These trademarks are protected by approximately 8,780 registrations and 1,120 pending applications worldwide. While Goodyear believes such trademarks as a group are of importance, the only trademarks Goodyear considers material to its business considered as a whole or to the business of any of its Segments are those using the word "Goodyear". Goodyear believes all of its significant trademarks are valid and will have unlimited duration as long as they are adequately protected and appropriately used. BACKLOG Goodyear does not consider its backlog of orders to be material to, or a significant factor in, evaluating and understanding any of its Segments or its business considered as a whole. GOVERNMENT BUSINESS The percentages of Goodyear's net sales under contracts or subcontracts subject to termination at the election of the United States Government in the years indicated were:
YEAR ENDED DECEMBER 31, ------------------------ 2000 1999 1998 ---- ---- ---- 0.9% 0.5% 0.6%
RESEARCH AND DEVELOPMENT Goodyear expends significant amounts each year on research for the development of new, and the improvement of existing, products and manufacturing processes and equipment. Goodyear maintains substantial research and development centers for tires and related products in Akron, Ohio, and Colmar-Berg, Luxembourg; and tire proving grounds in Akron, Ohio, Huntsville, Alabama, San Angelo, Texas, Mireval, France, and Colmar-Berg, Luxembourg. Goodyear operates significant research and development facilities for other products in Akron, Ohio, Green, Ohio, Lincoln, Nebraska, Marysville, Ohio, and Orsay, France. Direct and indirect expenditures by Goodyear on research, development and certain engineering activities relating to the design, development, improvement and modification of new and existing products and services and the formulation and design of new, and improvements to existing, manufacturing processes and equipment during the periods indicated were:
(IN MILLIONS OF DOLLARS) YEAR ENDED DECEMBER 31, -------------------------------------------------- 2000 1999 1998 1997 1996 ------ ------ ------ ------ ------ Research and Development Expenditures $423.1 $438.0 $420.7 $384.1 $374.5
Goodyear estimates that it will expend approximately $400.0 million for research and development activities during 2001. EMPLOYEES At December 31, 2000, Goodyear employed approximately 105,128 people throughout the world. Of the approximately 41,502 persons employed in the United States at December 31, 2000, approximately 12,548 were covered by a master collective bargaining agreement, dated May 9, 1997 (as supplemented in 2000), with the United Steel Workers of America, A.F.L.-C.I.O. - C.L.C. ("USWA"), which agreement will expire on April 19, 2003 and approximately 10,424 were cov- 18 21 ered by other contracts with the USWA and various other unions. The major portion of employees in Europe and Latin America are represented by unions. COMPLIANCE WITH ENVIRONMENTAL REGULATIONS Goodyear is subject to extensive regulation under environmental and occupational health and safety laws and regulations concerning, among other things, air emissions, discharges to surface and underground waters and the generation, handling, storage, transportation and disposal of waste materials and hazardous substances. Goodyear has several continuing programs designed to ensure its compliance with Federal, state and local environmental and occupational safety and health laws and regulations. Goodyear's expenditures relating to environmental improvement and occupational safety and health compliance projects in respect of its facilities worldwide during the periods indicated were:
(IN MILLIONS OF DOLLARS) YEAR ENDED DECEMBER 31, --------------------------------------------- 2000 1999 1998 1997 1996 ----- ----- ----- ----- ----- Environmental and Occupational Safety and Health Expenditures ........... $ 6.5 $10.4 $17.5 $16.6 $12.5
Goodyear presently estimates that it will make capital expenditures for pollution control facilities and occupational safety and health projects of approximately $17 million during 2001 and approximately $13 million during 2002. In addition, Goodyear expended approximately $79 million during 2000, and Goodyear estimates that it will expend approximately $101 million during 2001 and approximately $83 million during 2002, to maintain and operate its pollution control facilities and conduct its other environmental and occupational safety and health activities, including the control and disposal of hazardous substances. The Company expects that these expenditures will be sufficient to comply with applicable existing environmental and occupational safety and health laws and regulations and will not have a material adverse effect on Goodyear's competitive position in the industries in which it participates. At December 31, 2000, Goodyear had reserved $78.3 million for anticipated costs, including site studies, the design and implementation of remediation plans, post-remediation monitoring and legal and consulting fees, associated with the remediation of numerous waste disposal sites and certain other properties and related environmental activities. In the future Goodyear may incur increased costs and additional charges associated with environmental compliance and cleanup projects necessitated by the identification of new waste sites, the impact of new environmental laws and regulatory standards and the availability of new technologies. Compliance with Federal, State and local environmental laws and regulations in the future may require a material increase in Goodyear's capital expenditures and may adversely affect Goodyear's earnings and competitive position. INFORMATION ABOUT INTERNATIONAL OPERATIONS Through subsidiaries, Goodyear engages in manufacturing or sales operations in most countries in the world, including manufacturing operations in the United States and 27 other countries. Most of Goodyear's international manufacturing operations relate to the production of tires. Several engineered rubber and chemical products, as well as certain other products, are also manufactured in certain of Goodyear's plants located outside the United States. 19 22 Goodyear's consolidated net sales and long-lived assets were split between the United States and all other countries as follows:
NET SALES LONG-LIVED ASSETS --------------------------------------------------- ----------------------------------------------------- UNITED STATES INTERNATIONAL UNITED STATES INTERNATIONAL YEAR ------------------------ ------------------------- ------------------------- -------------------------- ENDED IN MILLIONS PERCENT OF IN MILLIONS PERCENT OF AT IN MILLIONS PERCENT OF IN MILLIONS PERCENT OF 12/31 OF DOLLARS CONSOLIDATED OF DOLLARS CONSOLIDATED 12/31 OF DOLLARS CONSOLIDATED OF DOLLARS CONSOLIDATED ----- ---------- ------------ ---------- ------------ ----- ---------- ------------ ---------- ------------ 2000 $ 7,611.1 53% $ 6,806.0 47% 2000 $ 4,188.5 57% $ 3,166.3 43% 1999 $ 7,136.6 53% $ 6,218.8 47% 1999 $ 4,080.1 55% $ 3,290.2 45% 1998 $ 7,093.5 54% $ 5,988.1 46% 1998 $ 2,750.6 51% $ 2,649.5 49%
Net sales to unaffiliated customers are attributed to the country where the sale is made, without regard to where the product was manufactured or where the product or service sold was delivered. During 2000, there was no foreign country in which Goodyear's operations contributed more than 6.3% of Goodyear's consolidated net sales. At December 31, 2000, there was no foreign country in which Goodyear's operations employed more than 5.5% of Goodyear's long-lived assets. Goodyear's operations in Brazil, Canada, England, Germany and France, Goodyear's five largest foreign operations, contributed approximately 22.7% of its consolidated net sales during 2000 and employed approximately 19.7% of Goodyear long-lived assets at December 31, 2000. SPT, a joint venture in which Goodyear has a 50% interest, operates four tire manufacturing plants, 12 retread plants and a chain of approximately 414 retail outlets in Australia, New Zealand and Papua - New Guinea. The net sales and operating income of SPT during the periods indicated were:
YEAR ENDED DECEMBER 31, ----------------------------------------------------- 2000 1999 1998 ------- ------- ------- SPT net sales $ 563.6 $ 674.5 $ 654.0 SPT operating income $ (11.1) $ 31.2 $ 47.2
In addition to the ordinary risks of the marketplace, the Company's foreign operations and the results thereof in some countries are affected by price controls, import controls, labor regulations, tariffs, extreme inflation and/or fluctuations in currency values. Furthermore, in certain countries where Goodyear operates (primarily countries located in Central and South America), transfers of funds from foreign operations are generally or periodically subject to various restrictive governmental regulations. 20 -----END PRIVACY-ENHANCED MESSAGE-----