Goodyear Tyres Shares Plummet
The reason for the steepest drop in 22 years was the news that much lower income is expected for the rest of the year.
Executives announced that they anticipate that Goodyear’s largest division will have between $75 million and $125 million less income in the current quarter compared to the third quarter.
Goodyear’s stock closed down $3.28, or 19.6 percent, to $13.46, making it the worst performer Wednesday in the Standard & Poor’s 500 Index.
Share prices fell by $4.74 at one point, which sent the price briefly to $12. Shares are up 125.5 percent since Jan. 1 — well up from the year low of $3.51 on March 6 — and are up 56.5 percent from a year ago.
The drop wiped $794 million off the value of the company to $3.25 billion.
But executives told industry analysts in a conference call that they expect the Akron tyre maker will have a stronger financial performance in 2010 because of ongoing efforts to improve profitability combined with an expected global economic recovery.
Including the North American Tyre projections, fourth-quarter results are expected to be in line with the company’s plans and ‘’significantly improve” from a year ago, Chief Financial Officer Darren Wells said.
Industry analyst Saul Ludwig with Cleveland-based KeyBanc Capital Markets asked executives about the projected $75 million to $125 million income drop in the North American Tyre division.
”That’s enormous,” Ludwig said. ”That probably explains why the stock is getting mangled.”
Goodyear executives said the drop in North American income will stem from complex reasons, including expected slow sales, higher raw-material costs and what they called ”adverse unabsorbed overhead.”
Oliver Hall, Operations Team