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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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, 1998
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
Chicago Stock Exchange
Pacific Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Chicago Stock Exchange
Pacific Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No __
------------------------------------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein or in the definitive proxy
statement incorporated by reference in Part III of this Form 10-K. [].
------------------------------------
The aggregate market value of Registrant's outstanding Common Stock held
by nonaffiliates of the Registrant on February 16, 1999, determined using the
per share closing price thereof on the New York Stock Exchange Composite
Transactions tape of $47.50 on that date, was approximately $7,407,866,442.50
------------------------------------
Shares of Common Stock, Without Par
Value, outstanding at February 16, 1999:
155,987,524
-----------------------------------
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of Registrant's definitive
Proxy Statement, dated February 26, 1999, for
its 1999 Annual Meeting of Shareholders are
incorporated by reference into Part III.
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THE GOODYEAR TIRE & RUBBER COMPANY
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 1998
Table of Contents
Item Page
Number Number
- ------ ------
PART I
1 Business.................................................... 1
2 Properties.................................................. 17
3 Legal Proceedings........................................... 19
4 Submission of Matters to a Vote of Security Holders......... 21
4(A) Executive Officers of Registrant............................ 22
PART II
5 Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 26
6 Selected Financial Data..................................... 28
7 Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 29
7(A) Quantitative and Qualitative Disclosures About
Market Risk............................................... 41
8 Financial Statements and Supplementary Data................. 43
9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure....................... 69
PART III
10 Directors and Executive Officers of the Registrant.......... 69
11 Executive Compensation...................................... 69
12 Security Ownership of Certain Beneficial Owners and
Management................................................ 69
13 Certain Relationships and Related Transactions.............. 69
PART IV
14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.................................................. 70
Signatures................................................ 72
Index to Financial Statement Schedules.................... FS-1
Index of Exhibits......................................... X-1
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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 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 1998
net sales were $12.626 billion and income from continuing operations was $717.0
million. Goodyear's net income for 1998 was $682.3 million. Goodyear's worldwide
employment averaged 96,950 during 1998.
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 the Company'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, 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 economic
conditions in the various markets served by the Company's operations; increased
competitive activity; fluctuations in the prices paid for raw materials and
energy; changes in the monetary policies of various countries where the Company
has significant operations; and other unanticipated events and conditions. It is
not possible to foresee or identify all such factors. The Company makes no
commitment to update any forward-looking statement, or to disclose any facts,
events or circumstances, after the date hereof that may affect the accuracy of
any forward-looking statement.
RECENT DEVELOPMENTS IN GOODYEAR'S BUSINESS
1998 DEVELOPMENTS
Goodyear introduced the Aquasteel EMT line of passenger tires using
extended mobility technology (EMT) in the North America replacement market
during 1998. EMT run-flat tires enable automobiles to travel up to 50 miles at
up to 55 mph after the tire has lost air pressure. EMT tires are expected to
eventually eliminate the need for spare tires. Goodyear also introduced the
Eagle F1-Steel, the Eagle HP Ultra and the Eagle Ultra Grip GW-2 performance
passenger tire lines and the Wrangler ST all season and Wrangler TF-A (rotation
free) light truck tire lines.
In Europe, the Company introduced twelve new lines of radial passenger
tires during 1998, led by the Eagle Ventura, ten new lines of radial medium
truck tires, led by the Marathon Long Haul Steer and Drive and the Omnitrac
Mixed Service lines and two new lines of farm tires. In Latin America, the
Company introduced the NCT2 and NCT3 lines of radial passenger tires, the
Wrangler AT/S line of radial light truck tires and the 300 Unisteel series of
radial medium truck tires. In Asia, the Company introduced the Eagle F1 high
performance radial passenger tire and the Wrangler D Mark radial light truck
tire.
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In 1998, the Company increased its interest in South Asia Tyres Limited
from a 50% equity interest to 100% equity ownership at a cost of $21 million
and, as a result, acquired $103 million of additional debt. The Company also
acquired an additional 15% of the equity of Nippon Giant Tire Company, a
manufacturer of heavy equipment tires in Japan, for approximately $7.0 million,
raising its equity interest in the firm from 50% to 65%. Brad Ragan Inc. became
a wholly-owned subsidiary of the Company in December 1998, when the Company
acquired the 25.5% of the outstanding shares of Brad Ragan Inc. it did not own
at a cost of approximately $20.75 million.
In 1997, Goodyear re-entered the South African market by acquiring a 60%
equity interest in the tire and engineered rubber products businesses of Contred
for approximately $121 million, including assumed debt. On March 2, 1998, the
Company purchased the remaining 40 percent interest in these South African
subsidiaries from Anglovaal Industries Ltd. for approximately $59 million. The
Company's South African subsidiaries own and operate tire and engineered
products manufacturing facilities and numerous retail tire outlets and truck and
earthmover tire retreading facilities located throughout South Africa.
The Company acquired, effective as of July 1, 1998, a 60% equity interest
in the tire manufacturing facilities and business of SAVA, d.d., a tire
manufacturer in Slovenia, at a total cost of $95.7 million. A new company was
formed to own and operate the tire manufacturing facilities and related assets
and businesses formerly owned by SAVA, d.d.. The new company, which is owned 60%
by Goodyear and 40% by SAVA, d.d., owns and operates a tire manufacturing plant
and certain related distribution facilities in Slovenia.
On July 30, 1998, Goodyear sold all of the capital stock of All American
Pipeline Company, Celeron Gathering Corporation and Celeron Trading &
Transportation Company (the "Celeron Companies") to a subsidiary of Plains
Resources, Inc. The Celeron Companies owned and operated the All American
Pipeline System, a 1,225 mile crude oil pipeline, and related crude oil
transportation and trading assets. The operations of the Celeron Companies
during 1998 prior to the sale were reported as discontinued operations. Goodyear
received $422.3 million cash proceeds from the sale, which included the
distribution of $25.1 million to Goodyear prior to the closing. The sale of the
Celeron Companies resulted in a loss, net of income from operations during 1998,
of $34.7 million after tax.
During 1998, the Company also sold a latex processing facility in Georgia,
six distribution facilities and certain other real estate. These transactions
resulted in gains totaling $123.8 million ($76.4 million after tax).
Goodyear continued its program to enhance production capacity and efficiency
through plant modernization and expansion projects. Expansions of the Company's
Fayetteville, North Carolina, Napanee, Ontario, Americana, Brazil and Marakina,
Philippines tire plants were completed during 1998. Significant plant
modernization and expansion projects are presently underway at the Company's
Napanee, Ontario, Danville, Virginia, Union City, Tennessee, Medicine Hat,
Alberta, Valleyfield, Quebec, Debica, Poland, Ballabgarh, India, and Bangkok,
Thailand tire plants, at the Company's Statesville, North Carolina tire mold
plant, at the Company's Kranj, Slovenia power transmission products plant, at
the Company's San Luis Potosi, Mexico hose products and air springs plant, and
at the Beaumont, Texas, synthetic rubber and rubber chemicals plant. During
1998, the Company also commenced construction of a new passenger tire
manufacturing plant in Brazil, which is expected to be completed in late 2000 at
a cost of approximately $60 million, and a new power transmission products plant
in Chihuahua, Mexico, which is expected to be completed in late 1999 at a cost
of approximately $20 million.
1999 DEVELOPMENTS
GLOBAL ALLIANCE. On February 3, 1999, the Company entered into a
Memorandum of Understanding with Sumitomo Rubber Industries, Ltd. ("Sumitomo")
regarding the formation of a strategic global alliance for the manufacture,
distribution and sale of tires. The Memorandum
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contemplates a global alliance through the creation of joint ventures in
Europe, North America and Japan and global technology and purchasing joint
ventures. The Memorandum also contemplates that the Company would purchase 10%
(after giving effect to the purchase) of the shares of the Common Stock of
Sumitomo and that Sumitomo would invest an equal amount of money in the Common
Stock of the Company. The formation of the global alliance is subject to the
negotiation of definitive agreements, which are expected to be signed by
mid-1999. The joint ventures are expected to be formed and operating by year-end
1999. The formation of the global alliance is also subject to the receipt of
various necessary regulatory approvals.
The Memorandum provides, among other things, that the Company would own
75%, and Sumitomo would own 25%, of a holding company in Europe that would own
substantially all of Sumitomo's tire businesses in Europe, which include eight
tire manufacturing plants located in England, France and Germany and sales and
distribution operations in 18 European countries, and all of the Company's tire
businesses in Europe, excluding the Company's aircraft tire business and the
Company's tire businesses in Poland (other than a sales company), Slovenia and
Turkey (as well as in Morocco and South Africa which are reported as a part of
the Company's Europe Tire Segment) and excluding the Company's textile, steel
tire cord and tire mold manufacturing plants and technical center and related
facilities located in Luxembourg. The Company would also acquire 75% of
Sumitomo's tire manufacturing operations in North America and of certain of its
related tire sales and distribution operations. The balance of Sumitomo's tire
distribution and sales operations in the United States and Canada would be 100%
owned by the Company. The Company would also acquire a 25% equity interest in
each of two tire companies in Japan, one for the distribution and sale of
Goodyear-brand passenger and truck tires in the replacement market in Japan and
the other for the distribution and sale of Goodyear-brand and Dunlop-brand tires
to original equipment manufacturers in Japan. The Company would also own 51%
(and Sumitomo would own 49%) of a company for the global development of
technology and providing certain technology services and 80% (and Sumitomo would
own 20%) of a global purchasing company. Under the terms of the Memorandum, at
closing (which is expected to occur during 1999) the Company would pay a total
of $936 million to Sumitomo, subject to certain adjustments. The cash payment is
expected to be financed in whole or substantial part by the issuance of debt
during 1999.
Assuming the global alliance with Sumitomo is completed during 1999 and
assuming the business to be included by Sumitomo in the European and North
American joint ventures generate sales in 2000 as a part of the joint ventures
equal to the sales those businesses generated in 1998, it is estimated that the
global alliance with Sumitomo will contribute approximately $2.5 billion to
Goodyear's consolidated net sales in 2000. Goodyear also expects that completing
the global alliance with Sumitomo will result in Goodyear being the largest
company in the tire industry in terms of annual unit tire sales and annual
revenues from tire sales.
In connection with the aforesaid investment in the capital stock of
Sumitomo, on February 25, 1999, the Company purchased at par from Sumitomo a
1.2% Convertible Note Due August 16, 2000 in the principal amount of
Y13,073,070,934 (equivalent to approximately $108.0 million at February 25,
1999, based on an exchange rate of 121 Yen per dollar), which is
convertible, if not earlier redeemed, beginning July 16, 2000 into shares of the
Common Stock, Y50 par value per share, of Sumitomo at a conversion price of
Y539 per share, subject to certain adjustments. Upon conversion of the
Sumitomo note into Sumitomo Common Stock, the Company would own 10% of
Sumitomo's outstanding shares. On February 25, 1999, the Company issued at par
its 1.2% Convertible Note Due August 16, 2000 in the principal amount of
Y13,073,070,934 which is convertible, if not earlier redeemed, beginning
July 16, 2000 into 2,281,115 shares of the Common Stock, without par value, of
the Company at a conversion price of Y5,731 per share, subject to certain
adjustments.
GLOBAL MANUFACTURING RATIONALIZATION. Goodyear announced a global
rationalization plan on February 3, 1999 to respond to the continuing Asian
economic downturn and the recent economic slowdown in Latin America and to
retire inefficient operations in the United States. The
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principal element of the plan is the termination of tire production at the
Company's Gadsden, Alabama, tire manufacturing plant by the end of 1999. The
Gadsden plant will continue to mix rubber for the Company's other tire and its
engineered products plants in North America. The Gadsden plant is one of the
Company's largest, oldest and most inefficient plants. Tire production will be
transferred primarily to the Company's other United States tire plants. In
Europe, Latin America and Asia, Goodyear will eliminate inefficient capacity at
five of its tire plants. In addition, the Company will eliminate certain
Engineered and Chemical Products production operations. As a result of the
global rationalization plan, approximately 2,800 jobs will be permanently
eliminated. The Company expects to take a charge of approximately $150 million
($96 million after tax) in the first quarter of 1999. When completed, the
global rationalization plan is expected to result in annual cost savings of
$100 million to $150 million.
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, 1998 appears in Note 19 captioned
"Business Segments" of the Notes to Financial Statements set forth in Item 8 of
this Annual Report, at pages 64 through 66, inclusive, and is incorporated
herein by specific reference.
DESCRIPTION OF GOODYEAR'S BUSINESS
GENERAL SEGMENT INFORMATION
In accordance with Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"), adopted by Registrant effective December 31, 1998, "Segment" information
is now presented to reflect the operating business units of the Company.
Segment information for 1997 and 1996 has been restated to reflect the Company's
operating "Segments."
In prior years, the Company's "Industry Segments" were Tires and General
Products and its "Geographic Segments" were United States, Europe, Latin
America, Asia and Canada. Under SFAS 131, the Company's "Segments" are North
American Tire, Europe Tire, Latin American Tire and Asia Tire (collectively the
"Tire Segments") and 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 of the Tire Segments
exclude sales and operating income in respect of tires sold to the other Tire
Segments and include sales and operating income derived from tires exported and
sold 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 and the Engineered Products Segment.
GENERAL INFORMATION REGARDING THE 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 in most regions of the world a broad line of
rubber tires for automobiles, trucks, buses, tractors, farm implements,
earthmoving equipment, aircraft, industrial equipment and various other
applications, in each case for sale to original equipment manufacturers and in
the replacement markets. Goodyear also (1) manufactures and sells inner tubes
and flaps for truck tires and other types of tires, (2) retreads truck, aircraft
and heavy equipment tires, and (3) manufactures and sells tread rubber and other
tire retreading materials. In the United States, Canada and certain other
countries, Goodyear also offers automotive repair services and miscellaneous
other products and services.
The principal class of products of the Tire Segments is new tires for
most applications. No other class of products or services accounted for as much
as 10% of Goodyear's consolidated sales during any of the last three years. The
table below sets forth the percentage of Goodyear's consolidated net sales and
operating income attributable to the Tire Segments, and the percentage
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of Goodyear's net sales attributable to tires, for each year in the three year
period ended December 31, 1998:
Year Ended December 31,
-----------------------------
1998 1997 1996
------ ------ ------
Total sales of Tire Segments 86.3% 85.8% 85.5%
Total operating income of Tire Segments 77.7% 78.5% 78.2%
Tire sales 77.2% 77.3% 76.7%
Goodyear offers tires for most applications and to all classes of
customers. 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 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.
During 1998, approximately 95.8% of all passenger tires, 84.4% of all light
truck tires and 76.7% of all medium truck tires sold by Goodyear were radial
construction.
No customer or group of affiliated customers accounted for as much as 5.1%
of Goodyear's consolidated net sales during 1998, 1997 or 1996. Worldwide,
Goodyear's annual net sales to its ten largest customers, including their
respective affiliates, represented less than 21.9% of consolidated net sales
during each of 1998, 1997 or 1996. No customer or group of affiliated customers
accounted for as much as 4.8% of the sales of the Tire Segments during 1998,
1997 or 1996. The ten largest customers of the Tire Segments represented less
than 22.1% of the sales of the Tire Segments during each of 1998, 1997 and 1996.
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/Uniroyal Goodrich (based in
France). Other competitors include Cooper Tire, Continental/General, Pirelli,
Sumitomo/Dunlop, Toyo, Yokohama, Kumho, Hankook and various regional tire
companies.
Goodyear competes with other tire manufacturers on the basis of price,
warranty, service, consumer convenience and product design, performance and
reputation. The Company believes Goodyear-brand tires enjoy a high recognition
factor throughout the world and have a reputation for high quality and value.
Kelly-brand, Fulda-brand, Debica-brand, Sava-brand, and various other
house-brand tire lines offered by the Company, and tires manufactured and sold
by the Company to private-brand customers, compete primarily on the basis of
price and performance.
The Company does not consider its business as a whole, or the business of
the Tire Segments individually or as a group, to be seasonal to any significant
degree. Goodyear maintains a significant inventory of new tires in order to
optimize production schedules and assure prompt delivery to its customers,
especially original equipment manufacturers that require "just in time"
deliveries of tires or tire and wheel assemblies. Goodyear manages its tire
production and inventory levels to avoid unnecessary increases in unit
production costs and limit working capital requirements, ordinarily by
optimizing production schedules consistent with anticipated demand.
The following table indicates the percentage change in Goodyear's annual
unit sales of passenger, truck and farm tires worldwide:
PERCENTAGE INCREASE (DECREASE) IN GOODYEAR'S ANNUAL UNIT SALES OF
PASSENGER, TRUCK AND FARM TIRES
1998 vs 1997 1997 vs 1996
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North American Tire 2.3% 2.4%
Europe Tire 5.6% 9.8%
Latin America Tire (4.8)% 7.5%
Asia Tire (7.7)% 4.7%
Worldwide (All Tire Segments) 1.7% 5.0%
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Based on information available from various industry and other sources and
information published by the Rubber Manufacturers Association (the "RMA"), the
Company sells more tires in the United States than any other tire manufacturer
and, on the basis of annual net sales, is the third largest tire manufacturer in
the world. Based on various industry and other sources, it is estimated that the
Company's share of the worldwide auto, truck and farm tire markets was
approximately 20% in 1998, 19% in 1997, and 18% in 1996.
NORTH AMERICAN TIRE
Goodyear's largest Segment, the North American tire business, develops,
manufactures, distributes and sells tires and related products and services in
the United States and Canada (the "North American Tire Segment"). The principal
class of products of the North American Tire Segment is new tires for most
applications. No other class of products or services accounted for as much as
10% of the consolidated sales of the North American Tire Segment during any of
the past three years.
The table below sets forth the percentage of Goodyear's consolidated net
sales and operating income attributable to the North American Tire Segment, and
the percentage of the North American Tire Segment sales attributable to the sale
of new tires, for each year in the three year period ended December 31, 1998:
Year Ended December 31,
------------------------------
1998 1997 1996
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North American Tire Segment sales.............. 49.4% 47.5% 47.2%
North American Tire Segment operating income... 33.6% 31.8% 27.1%
Tire sales................................ 86.3% 86.7% 86.0%
TIRES. The North American Tire Segment manufactures and sells a broad line
of tires in North America for automobiles, trucks, buses, tractors, farm
implements, earth moving equipment, aircraft, industrial equipment and various
other applications.
Goodyear-brand radial passenger tire lines sold in North America include
the premium all season Infinitred, the Eagle performance touring tire lines, the
Eagle F1-Steel, Eagle Ultra Grip GW-2, the Eagle Gatorback and the Eagle
Aquatred high performance tire lines and run-flat extended mobility technology
tires, including the new Aquasteel EMT. Other major lines of passenger tires
include the Regatta, Aquatred and Invicta lines. The major lines of
Goodyear-brand radial light truck tires offered in the United States and Canada
are the Wrangler and Workhorse.
The North American Tire Segment manufactures and markets a full line of
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 newest truck tire line is the Unisteel G-177, which features a
high-tensile steel reinforced cording, a skid resistant tread design and a new
damage resistant tread compound.
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. The Kelly-Springfield Tire group
("Kelly"), an operating division of the North American Tire Segment,
manufactures and distributes various lines of radial and bias-ply passenger and
truck tires for sale in the United States and Canadian replacement markets.
RELATED PRODUCTS AND SERVICES OF NORTH AMERICAN TIRE SEGMENT. The North
American Tire Segment also retreads truck, aircraft and heavy equipment tires,
primarily as a service to its commercial customers, and manufactures and sells
tread rubber and other tire retreading materials for various applications.
Additional products and services of the North American Tire Segment include
(1) automotive repair services provided through Goodyear's retail outlets,
(2) the sale to dealers and consumers of automotive repair and maintenance
items, automotive equipment and accessories and other items, and
(3) miscellaneous other products and services.
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Market and Other Information
The North American Tire Segment sells Goodyear-brand tires to vehicle
manufacturers for use as original equipment on vehicles they produce and sells
Goodyear-brand, Kelly-brand, other house brand and 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 original equipment manufacturers.
During 1998, the North American Tire Segment exported and sold approximately
3.3% of its tire production to unaffiliated customers outside North America,
delivered approximately 8.7% of its tire production to the other Tire Segments,
primarily Europe Tire and Latin American Tire, and imported approximately 7.7%
of the tires it sold from the other Tire Segments.
In North America, all passenger tires (except bias-ply temporary spare
tires) and approximately 94.7% of all light and medium truck tires sold by the
Company during 1998 were radial construction. Approximately 33.8% of all
passenger tires sold in the United States and Canada during 1998 were high
performance type tires.
No customer or group of affiliated customers of the North American Tire
Segment accounted for as much as 7.0% of its sales during 1998. The ten largest
customers of the North American Tire Segment accounted for 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. The motor vehicle manufacturers supplied by
the North American Tire Segment include DaimlerChrysler, Ford, General Motors,
BMW, Honda, Mitsubishi, Nissan, Toyota, Volvo, AAI, Freightliner, Mack Truck,
Navistar, Peterbuilt, Kenworth, Caterpillar, John Deere and J.I. Case. Aircraft
manufacturers supplied by Goodyear include Boeing and Lockhead-Martin.
Goodyear's major competitors in the North American tire market are
Bridgestone/Firestone, Michelin/Uniroyal Goodrich, Sumitomo/Dunlop,
Continental/General and Cooper, 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 tires are sold in the United States and Canadian
replacement markets through several channels of distribution. The principal
method of distribution is a large network of independent dealers. Goodyear-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 Montgomery Ward. In addition, Goodyear operates approximately 988 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 or Just Tires trade styles. Several lines of 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 approximately 915 of the retail outlets
operated by Goodyear. Automotive repair and maintenance items, automotive
equipment and accessories and other items, which are purchased by the Company
for resale, are distributed to many of the Company's tire dealers.
Goodyear from time to time offers various financing and extended payment
programs to certain of its tire customers in the North American 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 in North America.
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Based on a composite of industry sources and information published by the
RMA, it is estimated that approximately 242 million passenger tires were sold in
the United States during 1998, compared to approximately 238 million in 1997.
Based on current economic forecasts, Goodyear expects the total market for
passenger tires in the United States in 1999 to increase approximately 0.5%
compared to 1998, with 1999 passenger tire demand expected to decrease
approximately 0.8% in the original equipment market and to increase
approximately 0.9% in the replacement market.
Based on a composite of industry sources and information published by the
RMA, it is estimated that approximately 58 million light and medium highway
truck tires were sold in the United States during 1998, compared to 53 million
units sold during 1997. Goodyear estimates that demand for light and medium
highway truck tires in the United States during 1999 will increase approximately
2.5%.
Based on information available from various industry and other sources,
the Company sells more tires in the United States and Canada than any other tire
manufacturer. Based on RMA data and other available information, Goodyear
estimates that its share of the North American tire market during 1998 was
approximately 29.6%, compared to 30.2% in 1997 and 30.6% in 1996.
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. The NHTSA has the authority to order the recall of automotive
products, including tires, having defects deemed to present a significant safety
risk. NHTSA has also issued "Tire Registration" regulations which require the
registration of tires for the purpose of identification in the event of a
product recall and "Uniform Tire Quality Grading" regulations which require 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
have increased the cost of producing and marketing passenger tires in the United
States.
EUROPE TIRE
The Company's second largest Segment, the European tire business,
develops, manufactures, distributes and sells a broad line of tires for
automobiles, trucks, farm implements and construction equipment throughout
Europe and in Morocco and South Africa, distributes and sells tires to various
export markets in the Middle East, Africa and other regions, and provides
related products and services (the "Europe Tire Segment"). The principal class
of products of the Europe Tire Segment is new tires for most applications. The
Europe Tire Segment manufactures tires in plants located in England, France,
Germany, Italy, Luxembourg, Morocco, Poland, Slovenia, South Africa and Turkey.
The table below sets forth the percentage of Goodyear's consolidated net
sales and operating income attributable to the Europe Tire Segment, and the
percentage of Europe Tire Segment sales attributable to the sale of new tires,
for each year in the three year period ended December 31, 1998:
Year Ended December 31,
---------------------------
1998 1997 1996
----- ----- -----
Europe Tire Segment sales 23.1% 22.4% 22.1%
Europe Tire Segment operating income 26.8% 22.4% 25.7%
Tire sales 94.9% 95.2% 95.5%
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The Europe Tire Segment manufactures and sells several lines of radial
passenger and light truck tires, led by the Eagle and the Eagle Aquatred
passenger tire lines and the Wrangler light truck tire line. The Europe Tire
Segment also offers the Unisteel series of truck tires as well as a full line of
bias-ply medium truck tires and a broad line of tires for farm implements and
heavy equipment.
The Europe Tire Segment sells new, and manufactures and sells retreaded,
aircraft tires in Europe. The Europe Tire Segment also provides various
retreading and related services for truck and heavy equipment tires, primarily
for its commercial customers, offers automotive repair and related services
through certain retail outlets in which it owns a controlling interest, and
provides other related products and services.
Markets and Other Information
The Europe Tire Segment distributes and sells tires in most countries in
Europe and in Morocco and South Africa. Tires are sold to all classes of
customers. Goodyear's sales to customers in the various replacement markets
served by the Europe Tire Segment substantially exceed its sales to original
equipment manufacturing customers. During 1998, the Europe Tire Segment exported
and sold approximately 2% of its tire production to unaffiliated customers
located outside Europe, Morocco and South Africa, primarily in the Middle East
and Africa. Approximately 0.5% of the tires produced by the Europe Tire Segment
during 1998 were delivered to Goodyear's other Tire Segments, primarily the
North American Tire Segment, and approximately 4.5% of the tires it sold were
imported from the other Tire Segments.
In Europe, substantially all passenger and light truck tires, and
approximately 90% of all medium truck tires, sold by the Company during 1998
were radials. Approximately 30% of passenger tires sold by the Company in Europe
during 1998 were high performance type tires.
The Europe Tire Segment is a significant supplier of tires to most
manufacturers of automobiles, trucks and farm and construction equipment located
in Europe and South Africa. Manufacturers supplied by Goodyear include
DaimlerChrysler, Fiat, Volkswagen, Volvo, Ferrari, BMW, Peugeot, Alfa Romeo,
Renault, subsidiaries of Ford and General Motors, and New Holland.
Goodyear is a leading tire manufacturer in Europe and South Africa. The
Europe Tire Segment's major competitors are Michelin, Continental,
Bridgestone/Firestone, Dunlop and Pirelli. Other significant competitors include
several regional tire producers and imports by tire manufacturers from other
regions, primarily Asia.
Goodyear-brand tires in the European replacement markets are sold through
various channels of distribution. The principal method of distribution is
through independent tire dealers who sell several brands of tires. In some
countries in Europe, Goodyear-brand tires, as well as Kelly-brand, Fulda-brand,
Debica-brand and Sava-brand tires (which are brands owned or controlled by the
Company), are sold through independent dealers and regional distributors and
through approximately 181 retail outlets operated by multi-brand retail tire
chains controlled by Goodyear. In South Africa, tires are sold through a retail
chain of approximately 220 stores owned by the Company and through independent
dealers. In the Middle East and most of Africa, tires are sold to regional
distributors for resale to independent dealers.
No customer or group of affiliated customers accounted for as much as 2.8%
of the Europe Tire Segment's sales during 1998. The ten largest customers of the
Europe Tire Segment represented less than 15.1% of the Europe Tire Segment sales
for 1998. The Europe Tire Segment offers payment terms consistent with industry
practice in the region. The working capital requirements of the Europe Tire
Segment are not unusual relative to the volume of sales involved and prevailing
tire industry practices in the countries served by the Europe Tire Segment.
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LATIN AMERICAN TIRE
Another Segment, the Latin American tire business, manufactures,
distributes and sells tires in Mexico and throughout Central and South America,
sells tires to various export markets, retreads and sells commercial truck,
aircraft and heavy equipment tires, and provides other products and services
(the "Latin American Tire Segment"). The principal class of products of the
Latin American Tire Segment is new tires for automobiles, trucks and farm
equipment. The Latin American Tire Segment manufactures tires in plants located
in Argentina, Brazil, Chile, Colombia, Guatemala, Mexico, Peru and Venezuela.
The table below sets forth the percentage of Goodyear's consolidated net
sales and operating income attributable to the Latin American Tire Segment, and
the percentage of Latin American Tire Segment sales attributable to the sale of
new tires, for each year in the three year period ended December 31, 1998:
Year Ended December 31,
------------------------------------------
1998 1997 1996
-------- --------- --------
Latin American Tire Segment sales 9.9% 10.8% 10.5%
Latin American Tire Segment operating income 16.5% 19.4% 19.4%
Tire sales 90.5% 91.0% 90.9%
The Latin American Tire Segment manufactures and sells several lines of
radial and bias-ply passenger, light truck and medium truck tires in Latin
America, including the GPS2 radial passenger tire, the Wrangler radial light
truck tire and various radial and bias-ply medium truck tires. The Latin
American Tire Segment also (1) manufactures and sells tubes for truck and heavy
equipment tires, (2) retreads, and provides various materials and related
services for, truck, aircraft and heavy equipment tires, (3) manufactures other
products, including batteries for motor vehicles, (4) sells new aircraft tires,
and (5) provides miscellaneous other products and services.
Markets and Other Information
The Latin American Tire Segment distributes and sells a broad line of tires
for automobiles, trucks and farm equipment throughout Latin America and in
various export markets to original equipment manufacturers and the several
replacement markets. Goodyear's sales of tires to the replacement markets served
by the Latin American Tire Segment substantially exceed its sales to original
equipment manufacturers. In Mexico and Central and South America, approximately
82.4% of all passenger and light truck tires, and approximately 26.7% of all
medium truck tires, sold by the Company during 1998 were radials.
The Latin American Tire Segment sells its tires to vehicle manufacturers in
Argentina, Brazil, Chile, Colombia, Mexico and Venezuela and to independent
dealers and distributors in the several replacement markets in the regions. The
Latin American Tire Segment is a major supplier of tires to most manufacturers
of automobiles and trucks with facilities in the region, including Ford, General
Motors, Volkswagen, DaimlerChrysler, Fiat and Renault.
Goodyear is the leading tire producer in each of the markets served by the
Latin American Tire Segment. Goodyear's major competitors in Latin America
include Bridgestone/Firestone, Michelin and Pirelli. Other competitors include
various regional producers and imports by various other tire companies,
primarily from Asia. During 1998, the Latin American Tire Segment delivered
approximately 27.7% of its tire production to other Tire Segments, primarily
passenger and truck tires to the United States from plants in Argentina, Brazil,
Chile and Mexico, exported and sold approximately 8.6% of its tire production to
unaffiliated customers outside Latin America, and imported approximately 4.2% of
the tires it sold from the other Tire Segments.
No customer or group of affiliated customers accounted for as much as 8.2%
of the Latin American Tire Segment's sales during 1998. The ten largest
customers of the Latin American
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Tire Segment represented less than 27.5% of its sales for 1998. The working
capital requirements of the Latin American Tire Segment are limited to the
extent possible to reduce the effects of inflationary economic conditions in the
region and are consistent with prevailing tire industry practices in Latin
America. In certain countries the operations of the Latin American Tire Segment
are affected from time to time by price controls, import controls, labor
regulations, tariffs, and other restrictive governmental regulations.
ASIA TIRE
The Company's tire business in Asia engages in the development,
manufacture, distribution and sale of tires throughout the Western Pacific,
including China, India, Indonesia, Japan, Malaysia and Thailand (the "Asia Tire
Segment"). The Asia Tire Segment manufactures and sells several lines of tires
for automobiles, light and medium trucks, farm implements and construction
equipment for both the original equipment and replacement markets. The Asia Tire
Segment manufactures tires at facilities located in China, India, Indonesia,
Japan, Malaysia, the Philippines, Taiwan and Thailand.
The table below sets forth the percentage of Goodyear consolidated net
sales and operating income attributable to the Asia Tire Segment, and the
percentage of Asia Tire Segment sales attributable to the sale of new tires, for
each year of the three year period ended December 31, 1998:
Year Ended December 31,
-----------------------
1998 1997 1996
------ ----- ------
Asia Tire Segment sales 4.0% 5.1% 5.7%
Asia Tire Segment operating income 0.7% 4.9% 6.0%
Tire sales 96.0% 96.9% 96.6%
The Asia Tire Segment manufactures and sells several lines of radial and
bias-ply passenger tires, led by the new Eagle F1 high performance line, the
GPS2 and Eagle Aquatred lines, and various lines of radial and bias-ply truck
tires, including the Wrangler D-Mark radial light truck tire line and the
Hi-Miler bias-ply medium truck tire line.
The Asia Tire Segment also (1) manufactures tubes for truck, farm and heavy
equipment tires, (2) retreads truck, heavy equipment and aircraft tires, and (3)
provides miscellaneous other products and services.
Markets and Other Information
The Asia Tire Segment distributes and sells tires in most countries in Asia
and the Western Pacific. Tires are sold to all classes of customers. Goodyear's
sales to the replacement markets served by the Asia Tire Segment substantially
exceed its sales to original equipment customers in the region. The Asia Tire
Segment also exports tires to other Tire Segments and to markets the Company had
previously served from other regions or had not previously supplied. During
1998, the Asia Tire Segment delivered approximately 30.3% of its tire production
to other Tire Segments, primarily the North American Tire Segment, exported
and sold approximately 7.8% of its tire production to unaffiliated customers
located outside the region, and imported approximately 1.8% of the tires it sold
from the other Tire Segments. Approximately 85% of all passenger and light truck
tires, and approximately 7% of all medium truck tires, sold by the Asia Tire
Segment during 1998 were radials.
Goodyear supplies tires to global automobile manufacturers with facilities
in China, Japan, the Philippines and India, including Ford, General Motors,
Volkswagen, DaimlerChrysler, Toyota, Honda, Nissan, BMW, Fiat, Volvo, Isuzu,
Daihatsu and Mitsubishi and regional manufacturers including Bandan (Indonesia),
Perodua and Protron (Malaysia), Maruti, Skoda and Telco (India) and AAT
(Thailand). In the replacement market, Goodyear sells tires through
approximately 1,600 dealers and distributors. In Japan, the Company sells
Goodyear-brand tires made by Sumitomo in the replacement market through
traditional distribution channels.
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Goodyear is a leading tire manufacturer in several of the markets served by
the Asia Tire Segment, including Indonesia, Malaysia and the Philippines.
Goodyear is not a major supplier in Thailand, India, Japan, Korea or China. In
Asia, Goodyear's principal competitors include Bridgestone, Michelin, Toyo,
Yokohama, Sumitomo, Kumho, Hankook, MRF, Ceat and numerous regional tire
companies.
No customer or group of affiliated customers accounted for as much as 10.6%
of the sales of the Asia Tire Segment during 1998. The ten largest customers of
the Asia Tire Segment accounted for less than 31.8% of its 1998 sales.
Ordinarily, the working capital requirements of the Asia Tire Segment 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.
The Asia Tire Segment information does not include the operations of South
Pacific Tyre, an Australian Partnership, and South Pacific Tyre Ltd, a New
Zealand Company (together "SPT"), which are joint ventures 50% owned by Goodyear
and 50% owned by Pacific Dunlop Corporation. SPT is the largest tire
manufacturer in Australia and New Zealand, with five tire manufacturing plants
and 17 retread plants. For additional information regarding SPT, see Note 19,
"Business Segments", of the notes to Financial Statements set forth in Item 8 of
this Annual Report, at page 64. In Australia and New Zealand, SPT sells Goodyear
brand and Dunlop brand tires through a chain of 540 retail stores and commercial
tire centers owned by SPT.
ENGINEERED PRODUCTS
Another Segment engages in the development, manufacture, distribution and
sale of numerous rubber and thermoplastic products worldwide (the "Engineered
Products Segment"). The table below sets forth the percentage of Goodyear's
consolidated net sales and operating income attributable to the Engineered
Products Segment for each year in the three year period ended December 31, 1998:
Year Ended December 31,
----------------------------------
1998 1997 1996
------ ------ -----
Engineered Products Segment sales 10.1% 10.1% 9.8%
Engineered Products Segment operating income 9.9% 10.8% 10.1%
The products and services comprising the Engineered Products Segment
include: (1) belts and hoses for motor vehicles; (2) air springs, engine mounts
and chassis parts for motor vehicles; (3) conveyor and power transmission belts;
(4) air, water, steam, hydraulic, petroleum, fuel, chemical and materials
handling hose for industrial applications; (5) tank tracks; and (6) various
other engineered rubber products and miscellaneous services. Engineered Products
are manufactured in plants located in the United States, Canada, Brazil,
Australia, China, Venezuela, Mexico, Slovenia and South Africa.
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 the sales of the Engineered Products Segment is made to various industrial
and transportation markets for replacement purposes.
The Engineered Products Segment consists of several product lines in
respect of which several manufacturers produce some, but not all, of the
products manufactured by Goodyear. There are numerous suppliers of automotive
belts and hose products, air springs, engine mounts and other rubber components
for motor vehicles. More than 50 major firms participate in the various
engineered rubber products markets. These markets are highly competitive, with
quality,
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service and price being the most significant factors to most customers.
Goodyear believes the products offered by the Engineered Products Segment are
generally considered to be high quality and competitive in price and
performance.
During 1998, the ten largest customers of the Engineered Products Segment
accounted for approximately 41.4% of Engineered Products Segment sales and no
customer accounted for more than 13.7% of Engineered Products Segment sales. The
principal customers of the Engineered Products Segment include DaimlerChrysler,
Ford, General Motors, Navistar and AutoZone. The Engineered Products Segment
business is not seasonal to any significant degree and 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 Segment engages in the development, manufacture, distribution and
sale of synthetic rubber and rubber latices and numerous resins and organic
chemicals used in rubber and plastic processing and various other chemical
products for industrial customers worldwide (the "Chemical Products Segment").
The Chemical Products Segment also owns and operates a natural rubber plantation
in Indonesia, owns and operates two natural rubber processing facilities, and
conducts natural rubber purchasing operations.
The table below sets forth the percentage of Goodyear's consolidated net
sales and operating income attributable to the Chemical Products Segment (which
includes sales and operating income in respect of products transferred to the
other Segments), and to the sales of the Chemical Products Segments to
Goodyear's other Segments, for each year in the three year period ended
December 31, 1998:
Year Ended December 31,
--------------------------------
1998 1997 1996
------ ------ ------
Chemical Products Segment sales 7.7% 8.3% 8.9%
Chemical Products Segment operating income 12.4% 10.7% 11.7%
Chemical Products Segment sales to other Segments 4.2% 4.4% 4.2%
The major portion (54.0%, 52.3% and 47.4% in 1998, 1997 and 1996,
respectively) of the revenues of the Chemical Products Segment were sales to
Goodyear's other Segments, primarily synthetic rubber and rubber processing
chemicals to the North American Tire Segment, at the lower of a formula price or
market. Substantially all production is in the United States, except for certain
rubber chemicals manufactured in France.
Markets and Other Information
The Tire Segments purchase substantially all synthetic rubber, and the
major portion of the rubber processing chemicals, produced by the Chemical
Products Segment. All products of the Chemical Products Segment sold to external
customers are sold directly to manufacturers of various rubber, plastic and
chemical products. Natural rubber produced by the Company's plantation and two
natural rubber processing facilities is used by the Company, although in the
past substantially all natural rubber produced by the Company was sold in the
world market. Several major firms are significant suppliers of one or more
chemical products similar to those manufactured by Goodyear. 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 Segment are generally considered to be high quality and competitive in
price and performance.
During 1998, the ten largest unaffiliated customers of the Chemical
Products Segment accounted for approximately 10.9% of the sales of the Chemical
Products Segment and no unaffiliated customer accounted for more than 2.0% of
its sales. The Chemical Products Segment 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.
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GENERAL BUSINESS INFORMATION
Sources and Availability of Raw Materials
The principal raw materials used in Goodyear's tires and other rubber
products are synthetic and natural rubber. Goodyear purchases substantially all
of its requirements for natural rubber in the world market. Synthetic rubber
accounted for approximately 54%, 55% and 54% of all rubber consumed by Goodyear
worldwide during 1998, 1997 and 1996, respectively. The Company's plants located
in Beaumont and Houston, Texas, supply the major portion of its synthetic rubber
requirements in the United States. The major portion 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 yarn, substantial quantities of which are processed in
Goodyear's textile mills, and wire for radial tires, a portion of which is
produced by Goodyear, are used in significant quantities 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 1998, Goodyear anticipates the
continued availability (subject to possible spot shortages) of all such
materials during 1999.
Goodyear uses substantial quantities of chemicals and fuels in the
production of tires and other rubber products, synthetic rubber and latex and
other products. Supplies of chemicals and fuels have been and are expected to
continue to be adequate for the Company's manufacturing plants.
Natural rubber and certain other raw material prices decreased during 1998.
In general, the Company does not anticipate significant changes in raw material
prices during 1999, although many materials are likely to continue to be subject
to some price volatility.
Patents and Trademarks
Goodyear owns approximately 1,895 patents issued by the United States
Patent Office and approximately 7,359 patents issued or granted in other
countries around the world, and 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 550 applications for United States Patents
pending and approximately 5,288 patent applications on file in other countries
around the world. While Goodyear considers that such patents, patent
applications and licenses as a group are of material importance, 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 its business considered as a whole or the business of any of
its Segments.
Goodyear owns and uses approximately 1,100 different trademarks, including
several using the word "Goodyear". These trademarks are protected by
approximately 7,000 registrations worldwide. Goodyear also has approximately 950
trademark applications pending in the United States and other jurisdictions.
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.
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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 total amount of Goodyear's business during 1998 under contracts or
subcontracts which were subject to termination at the election of the United
States Government amounted to approximately 0.6% of Goodyear's consolidated net
sales for 1998. The amount of business under such contracts or subcontracts
during 1997 was 0.6% of Goodyear's consolidated net sales for 1997. The amount
of business under such contracts or subcontracts during 1996 was 1.1% of
consolidated net sales for 1996.
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; tire technical centers in Cumberland, Maryland, and Tsukuba, Japan;
and tire proving grounds in Akron, Ohio, 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.
During the years ended December 31, 1998, 1997, 1996, 1995 and 1994
Goodyear expended, directly or indirectly, $420.7 million, $384.1 million,
$374.5 million, $369.3 million and $341.3 million, respectively, 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 manufacturing processes and
equipment and improvements to existing processes and equipment. Goodyear
estimates that it will expend approximately $440 million for research and
development activities during 1999.
Employees
At December 31, 1998, Goodyear employed approximately 97,104 people
throughout the world. Of the approximately 40,798 persons employed in the United
States at December 31, 1998, approximately 11,521 were covered by a master
collective bargaining agreement, dated May 9, 1997, 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 (subject to a reopener on April 19, 2000), and approximately
9,967 were covered by other contracts with the USWA and various other 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 waters and the generation, handling,
storage, transportation and disposal of waste materials and hazardous
substances. Goodyear has a continuing program to ensure its compliance with
Federal, state and local environmental and occupational safety and health laws
and regulations. During 1998, 1997, 1996, 1995 and 1994, Goodyear made capital
expenditures aggregating approximately $17.5 million, $16.6 million, $12.5
million, $17.4 million, and $11.7 million, respectively, for environmental
improvement and occupational safety and health compliance projects in respect of
its facilities worldwide. Goodyear presently estimates that it will make capital
expenditures for pollution control facilities and occupational safety and health
projects of approximately $17.8 million during 1999 and approximately $16.8
million during 2000. In addition, Goodyear expended approximately $64.8 million
during 1998, and Goodyear estimates that it will expend approximately $83.8
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million during 1999 and approximately $78.6 million during 2000, 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, which amounts are expected to be sufficient to comply with
applicable existing environmental and occupational safety and health laws and
regulations and are not expected to have a material adverse effect on Goodyear's
competitive position in the industries in which it participates. At December 31,
1998, Goodyear had reserved $71.7 million for anticipated costs 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 and increasingly stringent environmental laws, such as the Clean
Air Act, 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 the Company's capital expenditures
and may have a material adverse effect on the Company's earnings and competitive
position.
INFORMATION ABOUT INTERNATIONAL OPERATIONS
The Company, through its foreign subsidiaries, engages in manufacturing or
sales operations in most countries in the world, including manufacturing
operations in 28 foreign countries. Goodyear's international manufacturing
operations consist primarily of the production of tires. Engineered rubber and
certain other products are also manufactured in certain of the Company's plants
located outside the United States.
Goodyear's consolidated net sales and long-lived assets are split between
the United States and all foreign countries as follows:
Net Sales Long-Lived Assets
----------------------------------------------------- -----------------------------------------------------
United States International United States International
Year -------------------------- ------------------------- ------------------------- --------------------------
Ended In Millions Percent of In Millions Percent of In Millions Percent of In Millions Percent of
12/31 of Dollars Consolidated of Dollars Consolidated of Dollars Consolidated of Dollars Consolidated
- ------- ----------- ------------- ----------- ------------- ----------- ------------- ----------- ------------
1998 $6,806.4 54% $5,819.9 46% $2,750.6 51% $2,649.5 49%
1997 $6,831.0 52% $6,234.3 48% $2,966.6 59% $2,074.1 41%
1996 $6,882.8 53% $6,102.9 47% $2,940.5 60% $1,936.7 40%
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 1998, there was no foreign country
in which Goodyear's operations contributed more than 5.5% of Goodyear's
consolidated net sales or employed more than 6.8% of Goodyear's long-lived
assets. Goodyear's operations in Brazil, Canada, England and Germany, Goodyear's
four largest foreign operations, contributed approximately 18% of its
consolidated net sales.
Goodyear also participates in joint ventures with Pacific Dunlop Limited.
Goodyear and Pacific Dunlop Limited each have a 50% equity interest in South
Pacific Tyres, an Australian partnership, and South Pacific Tyres N.Z. Limited,
a New Zealand company (together, "SPT"). SPT operates five tire manufacturing
plants, 17 retread plants and a chain of approximately 540 retail outlets in
Australia, New Zealand and Papua - New Guinea. The net sales of SPT during 1998,
1997 and 1996 were $636.3 million, $744.2 million and $814.1 million,
respectively. The operating income of SPT during 1998, 1997 and 1996 was $47.2
million, $63.5 million and $75.8 million, respectively.
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 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.
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ITEM 2. PROPERTIES.
Goodyear manufactures its products in 83 manufacturing facilities located
around the world. There are 31 plants in the United States and 52 plants in 28
other countries.
NORTH AMERICAN TIRE SEGMENT MANUFACTURING FACILITIES. The Company owns (or
leases with the right to purchase at a nominal price) and operates the following
manufacturing facilities used by the North American Tire Segment having an
aggregate of approximately 20.9 million square feet of floor space located at:
(A) in the United States (1) tire plants at Akron, Ohio; Danville, Virginia;
Fayetteville, North Carolina; Freeport, Illinois; Gadsden, Alabama; Lawton,
Oklahoma; Topeka, Kansas; Tyler, Texas; and Union City, Tennessee; (2) steel
tire wire cord plant at Asheboro, North Carolina; (3) textile mills at
Cartersville, Georgia; and Decatur, Alabama; (4) tread rubber plants at Radford,
Virginia; Social Circle, Georgia; and Spartanburg, South Carolina; and (5) tire
mold plants at Statesville, North Carolina; and Stow, Ohio; and (B) in Canada,
tire plants located at Medicine Hat, Alberta; Napanee, Ontario; and Valleyfield,
Quebec.
EUROPE TIRE SEGMENT MANUFACTURING FACILITIES. The Company owns and operates
the following manufacturing facilities used by the Europe Tire Segment having an
aggregate of approximately 13.6 million square feet of floor space located at:
(1) tire plants at Amiens, France; Casablanca, Morocco; Cisterna di Latina,
Italy; Colmar-Berg, Luxembourg; Fulda and Phillippsburg, Germany; Adapazari and
Ismit, Turkey; Debica, Poland; Kranj, Slovenia; Wolverhampton, England; and
Uitenhage, South Africa; and (2) plants at Colmar-Berg, Luxembourg, for the
manufacture of tire fabric, steel wire tire cord, tire molds and tire
manufacturing machines.
LATIN AMERICAN TIRE SEGMENT MANUFACTURING FACILITIES. The Company owns and
operates tire plants used by the Latin American Tire Segment having an aggregate
of approximately 7.9 million square feet of floor space located at: Hurlingham,
Argentina; Americana and Sao Paulo, Brazil (also tubes, tire molds, tire fabric
and fabric dipping); Santiago, Chile (also tubes and batteries); Cali, Colombia;
Guatemala City, Guatemala; Mexico City, Mexico; Lima, Peru; and Valencia,
Venezuela.
ASIA TIRE SEGMENT MANUFACTURING FACILITIES. The Company owns (or has long
term land use rights) and operates tire plants used by the Asia Tire Segment
having an aggregate of approximately 5.4 million square feet of floor space
located at: Dalian, China; Aurangabad and Ballabgarh, India; Bogor, Indonesia;
Tansuno, Japan; Kuala Lumpur, Malaysia; Las Pinas and Marikina, Philippines;
Taipei, Taiwan; and Bangkok, Thailand.
ENGINEERED PRODUCTS SEGMENT MANUFACTURING FACILITIES. The Company owns (or
leases with the right to purchase at a nominal price) and operates the following
manufacturing facilities used by the Engineered Product Segment having an
aggregate of approximately 5.6 million square feet of floor space located at:
(A) in the United States, (1) hose products plants at Hannibal, Missouri,
Lincoln, Nebraska (also power transmission products), Mt Pleasant, Iowa,
Norfolk, Nebraska, and Sun Prairie, Wisconsin; (2) conveyor belting plants at
Marysville, Ohio, and Spring Hope, North Carolina; (3) air springs plant at
Green, Ohio; (4) molded rubber products plant at St. Marys, Ohio; and
(5) automotive parts plant at Logan, Ohio; (B) in Canada, (1) hose products
plants at Collingwood, Ontario, and St. Alphonse de Granby, Quebec; (2) conveyor
belting plant at Bowmanville, Ontario; (3) power transmission products plant at
Owen Sound, Ontario; and (4) molded rubber products plant at Quebec City,
Quebec; (C) in Europe and Africa, an air springs and power transmission products
plant at Kranj, Slovenia, and conveyor belting and power transmission and hose
products plant at Uitenhage, South Africa; (D) in Latin America, (1) conveyor
belting and power transmission and hose products plants at Sao Paulo, Brazil,
and Tinaquillo, Venezuela; (2) air springs plant at Maua, Brazil; (3) hose
products plant at Santiago, Chile; (4) conveyor belting plant at Valencia,
Venezuela; and (5) hose products and air springs plant at San Luis Potosi,
Mexico; and (E) in Asia, (1) conveyor belting plant at Bayswater, Australia; and
(2) hose products plant at Qingdao, China.
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CHEMICAL PRODUCTS SEGMENT MANUFACTURING FACILITIES. The Company owns and
operates manufacturing facilities used by the Chemical Products Segment having
an aggregate of approximately 2.6 million square feet of floor space located at:
(1) synthetic rubber and rubber chemicals at Bayport, Beaumont and Houston,
Texas; (2) specialty resins plant at Akron, Ohio; and (3) rubber chemicals
plants at Niagara Falls, New York, and LeHavre, France.
The manufacturing facilities of Goodyear are, when considered in the
aggregate, modern and adequately maintained. Goodyear's capital expenditures for
new plant and equipment and for expansion, modernization and replacement of
existing plants and equipment and related assets aggregated $838.4 million in
1998, $699.0 million in 1997 and $617.5 million in 1996. Of said amounts, $447.7
million in 1998, $343.2 million in 1997 and $301.4 million in 1996 were expended
on facilities located in the United States. The Company estimates that its
capital expenditures during 1999 (other than the cost of completing the global
alliance with Sumitomo and the cost of any acquisitions of new businesses) will
total approximately $750 million to $900 million.
Goodyear's radial passenger and truck tire plants in North America and
Europe were operated at approximately 92% of capacity during 1998, 92% of
capacity during 1997 (excluding the 19 day period plants were closed due to the
strike by the United Steel Workers at five tire plants in the United States) and
91% of capacity during 1996. Goodyear's worldwide tire capacity utilization was
approximately 91% of capacity during 1998, 90% during 1997 (excluding the period
of said strike) and 89% during 1996. In order to maintain its competitive
position, respond to changing market conditions and optimize production
efficiencies, Goodyear has a continuing program for rationalizing production,
eliminating inefficient capacity and modernizing and increasing the capacity of
its radial passenger and truck tire facilities. Goodyear has expansion projects
planned or underway at several of its existing tire plants and certain other
tire manufacturers are building, or have announced plans to install, additional
capacity for passenger tires and light and medium truck tires over the next few
years. Since 1996, Goodyear has also acquired, or is in the process of
installing, acquiring or obtaining access to, additional tire manufacturing
capacity in various markets, including China, India, the Philippines, Poland,
Slovenia and South Africa, and, in the planned global alliance with Sumitomo, in
the United States, England, France and Germany. Continued high levels of
capacity utilization by the tire industry during 1999 will be dependent on
continued high production levels by the original equipment manufacturers in the
United States and Europe and growth in the original equipment markets in Asia
and Latin America, coupled with continued high levels of demand in the
replacement markets throughout the world.
During 1998, the manufacturing facilities used by the Engineered Products
Segment were operated at approximately 76% of rated capacity, compared to
approximately 77% and 69% in 1997 and 1996, respectively. The manufacturing
facilities used by the Chemical Products Segment were operated at approximately
90% of rated capacity during 1998, compared to 89% and 94% in 1997 and 1996,
respectively.
Giving effect to plant expansions and modernizations recently completed or
presently underway or planned, the Company's manufacturing facilities are
generally expected to have production capacity sufficient to satisfy presently
anticipated demand for the Company's tires and other products.
The Company also owns and operates a rubber plantation in Indonesia,
natural rubber processing facilities in Indonesia and the Philippines, and
research and development facilities and technical centers in Akron, Ohio,
Colmar-Berg, Luxembourg, Lincoln, Nebraska, Green, Ohio, Marysville, Ohio, and
Orsay, France and tire proving grounds in Akron, Ohio (82 acres), Mireval,
France (450 acres), and San Angelo, Texas (7,243 acres). The Company also
operates tire technical centers in Cumberland, Maryland, and Tsukuba, Japan, and
a tire proving ground in Colmar-Berg, Luxembourg.
The Company operates approximately 988 retail outlets for the sale of its
tires to consumers in the United States and Canada and approximately 401 retail
outlets in other countries.
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Worldwide, the Company also operates approximately 120 tire retreading
facilities and approximately 230 warehouse and distribution facilities.
Substantially all of these facilities are leased. The Company does not consider
any one of these leased properties to be material to its operations. For
additional information regarding leased properties, see Note 8, "Properties and
Plants," and Note 10, "Leased Assets," of the Notes to Financial Statements set
forth in Item 8 of this Annual Report at pages 54 and 58, respectively.
ITEM 3. LEGAL PROCEEDINGS.
At March 15, 1999, Goodyear was a party to the following material legal
proceedings, as defined in the Instructions to Item 103 of Regulation S-K:
(A) Since January 19, 1990, a series of 66 civil actions have been filed
against Registrant in the United States District Court for the District of
Maryland relating to the development of lung disease, cancer and other diseases
by former employees of The Kelly-Springfield Tire Company ("Kelly"), formerly a
wholly-owned subsidiary (and now a part) of Registrant, alleged to be the result
of exposure to allegedly toxic substances, including asbestos and certain
chemicals, while working at the Cumberland, Maryland tire plant of Kelly, which
was closed in 1987. The plaintiffs allege, among other things, that Registrant,
as the manufacturer or seller of certain materials, negligently failed to warn
Kelly employees of the health risks associated with their employment at the
Cumberland plant and failed to implement procedures to preserve their health and
safety. The plaintiffs in these civil actions are seeking an aggregate of $650
million in compensatory damages and $6.46 billion in punitive damages. On March
5, 1997, the court granted Registrant's motion for summary judgment and issued
an Order and Judgment dismissing all of these civil actions with prejudice. On
April 7, 1997, the plaintiffs appealed the Order and Judgment of the Court to
the United States Court of Appeals for the Fourth Circuit. On May 11, 1998, the
United States Court of Appeals for the Fourth Circuit vacated the judgment of
the District Court and remanded the cases for further proceedings. On January
28, 1999, the court granted Registrant's motion for summary judgment on
causation and issued a Final Judgment Order with respect to all of these cases,
dismissing each case with prejudice and assessing costs to the plaintiffs. On
February 24, 1999, the plaintiffs appealed the Final Judgment Order of the Court
to the United States Court of Appeals for the Fourth Circuit.
(B) On June 7, 1990, a civil action, Teresa Boggs, et al. v. Divested
Atomic Corporation, et al., was filed in United States District Court for the
Southern District of Ohio by Teresa Boggs and certain other named Plaintiffs on
behalf of themselves and a putative class comprised of certain other persons who
resided near the Portsmouth Uranium Enrichment Complex, a facility owned by the
United States Government as a part of the United States Department of Energy
("DOE") located in Pike County, Ohio (the "Portsmouth DOE Plant"), against
Divested Atomic Corporation ("DAC"), the successor by merger of Goodyear Atomic
Corporation ("GAC"), Registrant and Martin Marietta Energy Systems, Inc.,
presently known as Lockheed Martin Energy Systems ("LMES"). GAC had operated the
Portsmouth DOE Plant pursuant to a series of contracts with the DOE for several
years until November 16, 1986, when LMES assumed operation of the Portsmouth DOE
Plant. The Plaintiffs allege that the past and present operators of the
Portsmouth DOE Plant, GAC (then a wholly-owned subsidiary of Registrant) and
LMES, contaminated certain areas near the Portsmouth DOE Plant with radioactive
or other hazardous materials, or both, causing property damage and emotional
distress. Plaintiffs are claiming $300 million in compensatory damages, $300
million in punitive damages and unspecified amounts for medical monitoring and
cleanup costs. This civil action is no longer a class action as a result of
rulings of the District Court decertifying the class. On June 8, 1998, a new
civil action, Adkins, et al. v. Divested Atomic Corporation, et al.
(Case No. C2 98-595), was filed in the United States District Court for the
Southern District of Ohio, Eastern Division, on behalf of approximately 276
persons who currently reside, or in the past resided, near the Portsmouth
DOE Plant against DAC, the Registrant and LMES. The plaintiffs allege, on behalf
of themselves and a putative class of all persons who were residents, property
owners or lessees of property subject to windborne particulates and water run
off from the Portsmouth DOE Plant, that DAC (and, therefore, Registrant) and
LMES in their operation of the
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Portsmouth DOE Plant (i) negligently contaminated, and are strictly liable
for contaminating, the plaintiffs and their property with allegedly toxic
substances, (ii) have in the past maintained, and are continuing to maintain, a
private nuisance, (iii) have committed, and continue to commit, trespass, and
(iv) violated the Comprehensive Environmental Response, Compensation and
Liability Act of 1980. The plaintiffs are seeking $30 million in actual damages,
$300 million of punitive damages, costs, expenses, attorney's fees and other
unspecified legal and equitable remedies.
(C) On January 13, 1995, a civil action, Gregory Tire, et al. v. Goodyear,
et al. (Cause No. 95-00409), was filed in the 192nd Judicial District Court,
Dallas County, Texas, against Registrant (and two employees of Registrant) by
22 tire dealers located in Texas who are or were customers of Registrant, either
as independent dealers or franchisees. The complaint alleges, among other
things, that in the course of Registrant's commercial relationships and dealings
with the plaintiffs, Registrant violated the Texas Business Opportunities Act
and the Texas Deceptive Trade Practices Act, breached its fiduciary duty to the
plaintiffs, breached its covenants of good faith and fair dealings with the
plaintiffs, violated the Texas Free Enterprise Act, violated the Texas Antitrust
Act, breached certain contracts with the plaintiffs and committed common law
fraud. In 1998, plaintiffs voluntarily dismissed the claim that Registrant
violated the Texas Antitrust Act. On February 23, 1999, on Registrant's motion,
the Court issued an order dismissing with prejudice the plaintiffs' claim that
Registrant breached its fiduciary duty to the plaintiffs. Also in February 1999,
the claims of two of the plaintiffs were dismissed with prejudice. The twenty
plaintiffs are seeking unspecified compensatory damages, exemplary damages equal
to the greater of $230 million or 10% of Registrant's net worth, and injunctive
and other relief.
(D) On March 15, 1995, a civil action, Orion Tire Corporation, et al. vs.
Goodyear, et al. (Cause No. SA CV 95-221), was filed in the United States
District Court for the Central District of California, against Registrant,
Goodyear International Corporation, a wholly-owned subsidiary of Registrant
("GIC"), and five individuals, including Samir G. Gibara, Chairman of the Board,
Chief Executive Officer and President of Registrant, by Orion Tire Corporation,
a California corporation ("Orion"), China Tire Holdings Limited, a Bermuda
corporation ("China Tire"), and China Strategic Holdings Limited, a Hong Kong
corporation ("China Strategic"). The plaintiffs alleged, among other things,
that, in connection with Registrant's acquisition of a 75% interest in a tire
manufacturing facility (the "Dalian Facility") in Dalian, People's Republic of
China, in 1994, Registrant and GIC engaged in tortious interference with certain
alleged contractual relationships of plaintiffs involving the Dalian Facility,
committed tortious interference with certain prospective economic advantages of
the plaintiffs, violated the California Cartwright Act by engaging in an
unlawful combination and conspiracy in restraint of trade and committed trade
libel and defamation by making oral defamatory and written libelous statements
concerning the plaintiffs to various parties. In addition, all defendants were
alleged to have engaged in a civil conspiracy to induce the entities which owned
the Dalian Facility to breach their contracts with the plaintiffs and to have
engaged in civil racketeering. On motion made by Registrant, the court dismissed
all individual defendants from the proceeding for lack of jurisdiction,
dismissed all claims made by China Strategic and most of the claims made by
Orion and China Tire. The remaining claims of Orion and China Tire are that
Registrant and GIC allegedly (i) engaged in conduct which constituted tortious
interference with the prospective economic advantage of Orion by allegedly
wrongfully obstructing and interfering with Orion's alleged prospective business
ventures involving the Dalian Facility and (ii) committed trade libel and
defamation in respect of Orion and China Tire by knowingly publishing untrue
statements regarding Orion and China Tire to various officials of the Dalian
Facility and various governmental bodies in the People's Republic of China. The
plaintiffs are seeking more than $1.0 billion in actual damages and $3.0 billion
in exemplary damages from Registrant and GIC and such further relief as the
court may deem appropriate.
(E) In January 1997, Registrant filed a civil action, Goodyear v. Chiles
Power Supply Inc., d/b/a Heatway Systems (Case No. 5:97CV0335), against Chiles
Power Supply Inc. ("Heatway"), which is pending in the United States District
Court for the Northern District of Ohio, Eastern Division, seeking (i) to
collect $2.3 million due for Entran 3 hose sold and delivered to Heatway
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and (ii) to obtain a declaratory judgment to the effect that Registrant's
obligations in respect of Entran 2 hose sold to Heatway in the past are limited
by Registrant's standard written terms and conditions of sale. Heatway
counterclaimed, alleging that, among other things, all Entran 2 hose sold to
Heatway was defective, that Registrant misrepresented the properties and
capabilities of Entran 2 hose, and that Heatway has been damaged as a result.
In June 1998, the District Court granted Registrant's motion for summary
judgment against Heatway as to its claim for $2.3 million due for hose
purchased from Registrant and found, among other things, that Heatway may not
assert any fraud claim against Registrant in respect of substantially all of
the hose sold by Goodyear to Heatway. A trial is scheduled for January of 2000
to adjudicate the remaining claims. Heatway is seeking an unspecified amount of
actual and punitive damages. Heatway has asserted that its actual damages may
be as much as $2.5 billion. In addition, a class action complaint, Anderson, et
al. v. Goodyear, et al., (Case Number 98CV439), was filed in November 1998 in
the District Court of Eagle County, Colorado, against Registrant and Heatway on
behalf of a putative class consisting of all persons who have or had an
ownership interest in real property located in Colorado on which heating
systems using Entran 2 hose have been installed and who have suffered or may
suffer damages to their property due to the alleged defective nature of the
Heatway systems and/or Entran 2 hose. The plaintiffs claim breach of express
warranty, breach of implied warranty of merchantability and fitness for a
particular purpose, negligence and strict liability for defective product
against both Heatway and Registrant. In addition, fifteen other cases involving
twenty-four sites have been filed against Heatway and Registrant by plaintiffs
who purchased Heatway heating systems alleging damages resulting from system
failures based on all or some of the claims made in the Anderson Case. The
plaintiffs in these cases are claiming damages in unspecified amounts, plus
interest from the date damages were incurred, attorney's fees, costs and such
other relief as the court may deem proper.
(F) Since April 1, 1995, Goodyear has received two subpoenas issued in
connection with an industry-wide investigation being conducted by the Cleveland,
Ohio, office of the Antitrust Division of the United States Department of
Justice into possible violations of Section 1 of the Sherman Act by tire
manufacturers. The subpoenas call for the production of documents to a Federal
grand jury sitting in Cleveland. Goodyear has completed its response to the
subpoenas and is cooperating fully with the Department of Justice in the
investigation.
(G) In addition to the legal proceedings described above, various other
legal actions, claims and governmental investigations and proceedings covering a
wide range of matters were pending against Registrant and its subsidiaries at
March 15, 1999, including claims and proceedings relating to several waste
disposal sites that have been identified by the USEPA and similar agencies of
various States for remedial investigation and cleanup, which sites were
allegedly used by Goodyear in the past for the disposal of industrial waste
materials. Registrant, based on available information, does not consider any
such action, claim, investigation or proceeding to be material, within the
meaning of that term as used in Item 103 of Regulation S-K and the instructions
thereto.
Registrant, based on available information, has determined with respect to
each legal proceeding pending against Registrant and its subsidiaries at March
15, 1999, either that it is not reasonably possible that Goodyear has incurred
liability in respect thereof or that any liability ultimately incurred will not
exceed the amount, if any, recorded in respect of such proceeding at
December 31, 1998, by an amount which would be material relative to the
consolidated financial position, results of operations or liquidity of Goodyear,
although, in the event of an unanticipated adverse final determination in
respect of certain proceedings, Goodyear's consolidated net income for the
period during which such determination occurs could be materially affected.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of the security holders of the Registrant
during the quarter ended December 31, 1998.
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ITEM 4(A). EXECUTIVE OFFICERS OF REGISTRANT.
Set forth below, in accordance with Instruction 3 to Item 401(b) of
Regulation S-K, are: (1) the names and ages of all executive officers (including
executive officers who are also directors) of the Registrant at March 15, 1999,
(2) all positions with the Registrant presently held by each such person and
(3) the positions held by, and principal areas of responsibility of, each such
person during the last five years.
Name Position(s) Held Age
---- ---------------- ---
SAMIR G. GIBARA Chairman of the Board, Chief Executive Officer 59
and President and Director
Mr. Gibara served in various managerial capacities after joining
Goodyear in 1966. Mr. Gibara was elected a Vice President of Registrant on
October 6, 1992, serving in that capacity as the executive officer responsible
for strategic planning and business development and as the acting Vice
President of Finance and principal financial officer of Registrant. On May 3,
1994, Mr. Gibara was elected an Executive Vice President of Registrant
and, in such capacity, was the executive officer responsible for the North
American Tire Operations of Registrant. Effective April 15, 1995, Mr. Gibara
was elected President and Chief Operating Officer of Registrant. Mr. Gibara was
elected President and Chief Executive Officer of Registrant effective January 1,
1996, and Chairman of the Board, Chief Executive Officer and President
effective July 1, 1996. Mr. Gibara is the principal executive officer of
Registrant. Mr. Gibara has been a director of Registrant since April 15, 1995.
WILLIAM J. SHARP President, Global Support Operations 57
Mr. Sharp served in various tire production posts until elected, effective
April 1, 1991, an Executive Vice President of Registrant, serving in that
capacity, as the executive officer of Registrant responsible for Goodyear's tire
manufacturing and distribution operations and research, development and
engineering activities until October 1, 1992, when he became the executive
officer of Registrant responsible for the operations of Registrant's
subsidiaries in Europe. Effective January 1, 1996, Mr. Sharp was elected
Registrant's President, Global Support Operations of Registrant, and, as such,
he is the executive officer having corporate responsibility for Goodyear's
research and development, manufacturing, purchasing, materials management,
quality assurance, and environmental and health and safety improvement
activities worldwide. Mr. Sharp has been an employee of Goodyear since 1964.
ROBERT W. TIEKEN Executive Vice President 59
and Chief Financial Officer
Mr. Tieken joined Goodyear on May 3, 1994, when he was elected an Executive
Vice President and the Chief Financial Officer of Registrant. From April of
1993 through April of 1994, Mr. Tieken was the Vice President of Finance of
Martin Marietta Corporation. Mr. Tieken was Vice President, Finance and
Information Technology, of General Electric Aerospace from 1988 until it
was acquired by Martin Marietta Corporation in April 1993. Mr. Tieken is the
principal financial officer of Registrant.
EUGENE R. CULLER, JR. Executive Vice President 60
Mr. Culler served in various capacities until August 2, 1988, when he was
elected an Executive Vice President of Registrant, serving in that capacity as
the executive officer of Registrant responsible for Goodyear's North American
Tire operations until September 30, 1991. Mr. Culler was the President of
Goodyear Canada Inc., a wholly-owned subsidiary of Registrant, from October 1,
1991 to April 15, 1995. Mr. Culler was again elected an Executive Vice President
of Registrant effective April 15, 1995, and, as such, he is the executive
officer responsible for Goodyear's North American Tire Operations. Mr. Culler
has been an employee of Goodyear since 1961.
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Name Position(s) Held Age
---- ---------------- ---
JAMES BOYAZIS Vice President and Secretary 62
Mr. Boyazis joined Goodyear in 1963, serving in various posts until June 2,
1987, when he was elected a Vice President and the Secretary of Registrant. He
is also the Associate General Counsel of Registrant.
JOHN P. PERDUYN Vice President 59
Mr. Perduyn served in various public relations posts until he was elected
a Vice President of Registrant effective June 1, 1989. He is the executive
officer of Registrant responsible for Goodyear's public affairs activities.
Mr. Perduyn has been an employee of Goodyear since 1970.
RICHARD P. ADANTE Vice President 52
Mr. Adante served in various engineering and management posts until
April 1, 1991, when he was elected a Vice President of Registrant. He is the
executive officer of Registrant responsible for materials management. Mr. Adante
has been an employee of Goodyear since 1966.
GARY A. MILLER Vice President 52
Mr. Miller served in various management and research and development posts
until he was elected a Vice President of Registrant effective November 1,
1992. He is the executive officer of Registrant responsible for Goodyear's
purchasing operations. Mr. Miller has been an employee of Goodyear since 1967.
MIKE L. BURNS Vice President 57
Mr. Burns served in various human resources posts until he was elected a
Vice President of Registrant effective March 1, 1993. He is the executive
officer of Registrant responsible for Goodyear's human resources and total
quality systems. Mr. Burns has been an employee of Goodyear since 1965.
GEORGE E. STRICKLER Vice President 51
Mr. Strickler served in various accounting, treasury and financial
management posts until he was elected a Vice President and the Comptroller of
Registrant effective September 1, 1993. Since June 1, 1996, Mr. Strickler has
served as a Vice President of Registrant and is the executive officer of
Registrant responsible for the financial functions of Goodyear's North American
Tires operations. Mr. Strickler has been an employee of Goodyear since 1969.
RICHARD J. STEICHEN Vice President 55
Dr. Steichen served in various research and development posts until
November 1, 1992, when he was appointed the General Manager of Technology and
Quality Assurance of South Pacific Tyres, a joint venture company 50% owned by
Goodyear, serving in that capacity until November 30, 1994. Dr. Steichen was
elected a Vice President of Registrant effective December 1, 1994, responsible
for Goodyear's worldwide tire technology activities. Since May 1, 1998,
Dr. Steichen has been the executive officer of Registrant responsible for
Goodyear's research activities. Dr. Steichen has been an employee of Goodyear
since 1973.
C. THOMAS HARVIE Vice President and General Counsel 56
Mr. Harvie joined Goodyear on July 1, 1995, when he was elected a Vice
President and the General Counsel of Registrant. Prior to joining Goodyear,
Mr. Harvie was a Vice President and the Associate General Counsel of TRW Inc.
from 1989 through June 1995.
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Name Position(s) Held Age
---- ---------------- ---
SYLVAIN G. VALENSI Vice President 56
Mr. Valensi served in various finance, sales and marketing positions until
November 1993, when he was named President and Chief Executive Officer of
Goodyear France S.A., a wholly-owned subsidiary of Registrant. On February 1,
1996, Mr. Valensi was appointed Vice President, European Region. On November 5,
1996, Mr. Valensi was elected a Vice President of Registrant and in that
capacity serves as the executive officer of Registrant responsible for
Goodyear's tire operations in Europe, Africa and the Middle East. Mr. Valensi
has been an employee of Goodyear since 1965.
JOSEPH M. GINGO Vice President 54
Mr. Gingo served in various research and development and managerial posts
until elected a Vice President of Registrant effective November 1, 1992, serving
in that capacity as the executive officer of Registrant responsible for
Goodyear's worldwide tire technology activities until January 1, 1995, when he
was appointed Vice President, Asia Region. On November 5, 1996, Mr. Gingo was
elected a Vice President of Registrant and, in that capacity, was responsible
for Goodyear's operations in Asia until September 1, 1998, when he was placed on
special assignment to the Chairman of the Board. Since December 1, 1998,
Mr. Gingo has served as the Vice President of Registrant responsible for
Goodyear's worldwide Engineered Products operations. Mr. Gingo has been an
employee of Goodyear since 1966.
JOHN C. POLHEMUS Vice President 54
Mr. Polhemus served in various managerial positions in Goodyear's
international operations until June 1, 1991, when he was appointed Managing
Director and President of Goodyear do Brazil Produtos de Borracha Ltda, a
wholly-owned subsidiary of Registrant. On April 10, 1995, Mr. Polhemus was
appointed Vice President for the Latin America region. On November 5, 1996,
Mr. Polhemus was elected a Vice President of Registrant and, in that capacity,
is the executive officer of Registrant responsible for Goodyear's Latin American
tire operations. Mr. Polhemus has been an employee of Goodyear since 1969.
TERRY L. PERSINGER Vice President 54
Mr. Persinger joined Goodyear in 1966, serving in various research and
development and managerial positions until May 16, 1989, when he was appointed
Vice President and General Manager of the Polyester Division. He served in that
capacity until December 1992, when the Polyester Division was sold to Shell Oil
Company and Mr. Persinger left Goodyear and joined Shell. He rejoined Goodyear
effective January 1, 1995, when he was appointed Vice President and General
Manager of Engineered Products. On November 5, 1996, Mr. Persinger was elected a
Vice President of Registrant and, in that capacity, was the executive officer of
Registrant responsible for Goodyear's worldwide Engineered Products operations
until December 1, 1998, when he was placed on special assignment to the Chairman
of the Board.
DENNIS E. DICK Vice President 59
Mr. Dick served in various research and development and production posts
until elected a Vice President of Registrant on April 9, 1984, serving as the
executive officer of Registrant responsible for Goodyear's general products
technology management activities worldwide until October 1991, when he was
appointed Vice President and General Manager of Goodyear's Chemical Division. On
November 5, 1996, Mr. Dick was elected a Vice President of Registrant and is the
executive officer of Registrant responsible for Goodyear's worldwide Chemical
Products operations. Mr. Dick has been an employee of Goodyear since 1964.
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Name Position(s) Held Age
---- ---------------- ---
JOHN W. RICHARDSON Vice President 54
Mr. Richardson served in various financial and general management posts
until he was appointed General Auditor of Goodyear on February 1, 1993, serving
in that post until appointed Vice President and Comptroller on June 1, 1996. He
was elected Vice President - Corporate Finance of Registrant on November 5, 1996
and in that capacity is the principal accounting officer of Registrant.
Mr. Richardson has been an employee of Goodyear since 1967.
CLARK E. SPRANG Vice President 56
Mr. Sprang served in various financial posts until appointed Vice President
Business Development effective September 1, 1993. Mr. Sprang was elected a
Vice President of Registrant on November 5, 1996 and is the executive officer
of Registrant responsible for Goodyear's worldwide business development
activities. Mr. Sprang has been an employee of Goodyear since 1966.
WILLIAM M. HOPKINS Vice President 54
Mr. Hopkins served in various tire technology and managerial posts until
appointed General Manager of Multipurpose Vehicle and Specialty Tires in
January of 1993. Mr. Hopkins was appointed Director of Tire Technology for
North American Tires effective June 1, 1996. He was elected a Vice President of
Registrant effective May 19, 1998 and is the executive officer of Registrant
responsible for Goodyear's worldwide tire technology activities. Mr. Hopkins
has been an employee of Goodyear since 1967.
KENNETH B. KLECKNER Vice President 51
Mr. Kleckner served in various engineering and manufacturing management
posts until he was appointed Manager of Registrant's Lawton, Oklahoma Tire Plant
effective July 1, 1993. He served as the Vice President of Manufacturing and
Operations of Kelly-Springfield Tire Company, a division of Registrant, from May
of 1994 until June of 1996, when he was appointed Director - Tire Manufacturing
for the Company's Latin American Region. He was appointed Vice President -
Engineering effective June 16, 1997. Mr. Kleckner was elected a Vice President
of Registrant effective May 19, 1998 and is the executive officer of Registrant
responsible for Goodyear's worldwide process engineering activities.
Mr. Kleckner has been an employee of Goodyear since 1971.
DEBRA M. WALKER Vice President 42
Ms. Walker served in various marketing and information services posts until
she was appointed Manager of Dealer Sales for North American Tires effective
January 1, 1994. She was appointed Director - Retail Systems effective
February 16, 1995, Vice President - Retail Systems effective April 16, 1996, and
Vice President and Chief Information Officer of Registrant effective April 16,
1997. Ms. Walker was elected a Vice President of Registrant effective May 19,
1998 and is the Chief Information Officer of Registrant. She is responsible for
Goodyear's global information technology strategy and architecture. Ms. Walker
has been an employee of Goodyear since 1979.
HUGH D. PACE Vice President 47
Mr. Pace served in various international sales and marketing posts until
1992, when he became President and Managing Director of Compania Hulera
Goodyear - Oxo, S.A. de C.V., a wholly-owned subsidiary of Registrant.
Mr. Pace was elected a Vice President of Registrant effective December 1, 1998
and is the executive officer responsible for Goodyear's tire operations in Asia,
Australia and the Western Pacific. Mr. Pace has been an employee of Goodyear
since 1975.
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Name Position(s) Held Age
---- ---------------- ---
DONALD D. HARPER Vice President 52
Mr. Harper served in various industrial engineering and human resources
posts until December 1, 1993, when he was appointed Director of Salaried Human
Resources and Employment Practices. He was appointed Director of Human
Resources for North American Tires effective December 1, 1994. In June 1996,
Mr. Harper was appointed Vice President of Human Resources Planning,
Development and Change. Mr. Harper was elected a Vice President effective
December 1, 1998 and is the executive officer responsible for Goodyear's human
resources planning, development and change. Mr. Harper has been an employee
of Goodyear since 1968.
STEPHANIE W. BERGERON Vice President and Treasurer 45
Ms. Bergeron joined Goodyear on December 29, 1998 and was elected Vice
President and Treasurer of Registrant effective January 1, 1999. Ms. Bergeron is
the executive officer responsible for Goodyear's worldwide treasury operations,
risk management activities and pension assets management. Prior to joining
Goodyear, Ms. Bergeron was Vice President and Assistant Treasurer - Corporate
Finance of DaimlerChrysler Corporation, serving in that position beginning
November of 1994. She was Finance Director, Corporate Financial Activities, of
Chrysler Corporation from 1993 to November 1994.
No family relationship exists between any of the above named executive
officers or between said executive officers and any director or nominee for
director of Registrant.
Each executive officer is elected by the Board of Directors of Registrant
at its annual meeting to a term of one year or until his or her successor is
duly elected, except in those instances where the person is elected at other
than an annual meeting of the Board of Directors in which event such person's
tenure will expire at the next annual meeting of the Board of Directors unless
such person is reelected. The next annual meeting of the Board of Directors is
scheduled to be held on April 12, 1999.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The principal market for Registrant's Common Stock is the New York Stock
Exchange (Stock Exchange Symbol GT). Registrant's Common Stock is also listed on
the Chicago Stock Exchange and The Pacific Exchange. Overseas listings include
the Amsterdam, Paris and the Swiss Stock Exchanges.
Information relating to the high and low sale prices of Registrant's Common
Stock and the dividends paid on such shares during 1998 and 1997 appears under
the caption "Quarterly Data and Market Price Information" in Item 8 of this
Annual Report, at page 68 and is incorporated herein by specific reference. The
first quarter 1999 cash dividend, paid on March 15, 1999 to shareholders of
record at February 16, 1999, was $.30 per share.
At February 16, 1999, there were 28,377 record holders of the 155,987,524
shares of the Common Stock of Registrant then outstanding. Approximately
8,467,922 shares of the Common
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Stock of Registrant were beneficially owned by approximately 34,090 participants
in four Employee Savings Plans sponsored by Registrant and certain of its
subsidiaries. The Northern Trust Company is the Trustee for said Employee
Savings Plans.
* * * * * *
On February 25, 1999, Registrant issued its 1.2% Convertible Note Due
August 16, 2000 in the principal amount of Y13,073,070,934 (the "Note")
which is convertible into 2,281,115 shares of the Common Stock of Registrant at
a conversion price of Y5,731 per share, subject to certain adjustments. The
Note was purchased by Sumitomo Rubber Industries, Ltd. and is not transferable.
Registrant may redeem the Note prior to the period during which it is
convertible. If the Note is not redeemed, during the period beginning July 16,
2000 and ending August 15, 2000 Sumitomo may convert the entire principal amount
of the Note into said 2,281,115 shares (subject to certain adjustments) of the
Common Stock of Registrant. The Note was sold directly to Sumitomo at par. No
commission or underwriter's discount was paid in connection with the issuance
and sale of the Note and no commission or fee will be paid upon any conversion
of the Note into shares of Registrant's Common Stock. The proceeds were used to
purchase a similar convertible note from Sumitomo. The Registrant determined
that the sale of the Note was, and any issuance of Registrant's Common Stock to