The Goodyear Tire & Rubber Company

Good morning. My name is Nikki and I will be your conference operator today. At this time, I would like to welcome everyone to Goodyear first quarter 2021 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. I will now hand the program over to Nick Mitchell, Senior Director, Investor Relations.

Thank you, Nikki, and thank you, everyone, for joining us for Goodyear's first quarter 2021 earnings call. I'm joined here today by Rich Kramer, Chairman and Chief Executive Officer, Darren Wells, Executive Vice President and Chief Financial Officer, and Christina Zamaro, Vice President, Finance, and Treasurer. The supporting slide presentation for today's call can be found on our website at investor.goodyear.com, and a replay of this call will be available later today. Replay instructions were included in our earnings release issued earlier this morning. If I can now draw your attention to the Safe Harbor Statement on slide 2, I would like to remind participants on today's call that our presentation includes some forward-looking statements about Goodyear's future performance. Actual results could differ materially from those suggested by our comments today. The most significant factors that could affect future results are outlined in Goodyear's filings with the SEC and in our earnings release. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Our financial results are presented on a GAAP basis and, in some cases, a non-GAAP basis. The non-GAAP financial measures discussed on the call are reconciled to the U.S. GAAP equivalent as part of the appendix to the slide presentation. And with that, I will now turn the call over to Rich.

Great. Thank you, Nick. And good morning, everyone. Thanks for joining us today. The results we reported earlier today show that we're building on the momentum we established in the second half of last year. We delivered segment operating income of $226 million for the quarter, up $273 million from the previous year. While we expected to surpass last year's results given the level of disruption from the pandemic, our segment operating income was nearly 20% higher than first quarter 2019, even though industry demand has not yet fully recovered. Our consumer replacement business delivered strong results despite the ongoing impact of the pandemic. By leveraging improved distribution in new products, we significantly outperformed the industry in the U.S., Europe, and China. In the OE segment, we continued benefiting from our OE pipeline, which again resulted in share gains. We generated these share gains while capturing more value for our products, allowing us to continue recovering raw material cost inflation. And finally, we continued to see improved manufacturing efficiency and reduced structural costs in the U.S. and Europe. These results reflect the commitment of our associates to position the company in the best possible way for recovery. As we look across our markets, we see healthy demand trends. We're encouraged by the momentum that we're seeing in consumer placement, where demand has nearly returned to pre-pandemic levels and done so much faster than we anticipated. Conditions are particularly strong in the U.S., where sell-out demand exceeded 2019 March levels. Vehicle miles traveled are improving, and manufacturers and dealers need to replenish inventories, which were cautiously managed to low levels during the pandemic. These signals, coupled with data from other industries and a robust second-half global GDP forecast, indicate an emerging consumer-led recovery and strong market conditions ahead. These dynamics are also favorable for new vehicle sales. As you know, OE production has been affected by part shortages in the first quarter, particularly the tight supply of semiconductors. This is a situation we expect to persist. For Goodyear, to the extent OE production remains constrained, we have the opportunity to redirect our capacity to much-needed premium replacement tires. Equally so, as OE production improves alongside sustained replacement demand, the industry's supply-demand dynamic will likely remain constructive. While perhaps at different stages, these market trends are evident in each of our SBUs. In the Americas, our volume increased 7%, driven by strong growth in replacement, particularly in the U.S., U.S. consumer replacement volume grew 17%, far outpacing the industry. I'm especially pleased with the performance in the premium high-margin segments, where we grew significantly more than the market, which itself was up double digits. Making it easier for customers and consumers to choose Goodyear is also resonating. And nowhere is this more evident than our e-commerce and mobile installation businesses, both of which contributed to this strong volume performance. Higher traffic and improved conversion rates at Goodyear.com are fueling strong unit growth, with our e-commerce volume up more than 25% in the first quarter. The popularity of our mobile installation business continues to benefit from excellent customer satisfaction scores and greater market coverage. These dynamics contributed to triple digit volume growth during the quarter and impressive performance even for a business that's in the early growth phase. With strong momentum in these new customer facing challenges, with traffic to Walmart's auto care centers improving and with our other distribution channels performing well, we expect to continue recovering share in the coming quarters. Our U.S. commercial replacement business also continued to set the standard. Volume growth once again exceeded the industry rate, with units increasing 13% during the quarter on top of solid growth last year. On a two-year basis, our volume is up nearly 20%, a remarkable performance. In a rising cost environment, fleets continue to find great value in our mobility tools and fuel-efficient products, such as the FuelMax LHD2, a product that demonstrates our commitment to helping our customers achieve their sustainability goals. In Brazil, demand for replacement tires is recovering faster than anticipated. During the quarter, our combined replacement volume in the country was up slightly despite a recent resurgence of COVID-19. Our consumer OE volume decreased 6%, reflecting lower industry demand with vehicle production adversely impacted by supply chain challenges. Despite the decline in shipments, our relative performance remains strong as we outperform the industry for the fifth consecutive quarter. We're laying the foundation for growth beyond this year. With the U.S. government developing strategies to accelerate the adoption of EVs, we have additional opportunities to differentiate ourselves as a technology leader. Last year, we secured several high-volume EV fitments, including the Tesla Model Y and GM's new all-electric Hummer, strengthening our position as a tire maker of choice for EV manufacturers. In 2021, OEMs continue to turn to Goodyear for tires that can handle the added stress of increased vehicle weight, regenerative braking, and higher torque while helping extend vehicle range through reduced rolling resistance. We must deliver on these requirements while also addressing the level of road noise in the cabin through noise reduction technology. Nearly one-third of the fitments we were awarded during the quarter were for EVs, The momentum we have established will strengthen our leading OE position in the Americas as the automotive landscape evolves. In EMEA, our volume increased 10% driven by EMEA's replacement business despite ongoing mobility restrictions. Our consumer replacement business continues to benefit from the strategic changes we made last year to restructure our distribution in Europe. With the transitional volume impact behind us, we outperformed the industry, growing our total consumer replacement volume 11%. During the first quarter, we performed exceptionally well in the all-season and summer segments. The Vector 4 Seasons Gen 3, the Eagle F1 Asymmetric 5, and the Efficient Grip 2 SUV contributed to our solid share gains. Each tire was recently recognized by trade publications for its superior performance in its respective category, further validating our industry-leading technical capabilities. EMEA's consumer OE volume increased 4% during the quarter, also outpacing the industry. In addition to the solid OE volume growth, we also continued adding to our leading position in the EV segment in EMEA. Notable fitments one included Audi's high-performance RS e-tron GT. That's a great fitment for us. Turning to EMEA's commercial business, we continued adding to share gains we achieved over the past two years. Total commercial unit volume increased nearly 20%, driven by growth and replacement. This outperformance continued to be driven by our rapidly expanding fleet business. On our last call, I mentioned that Rider had recently selected Goodyear as its sole mobility partner in Europe. With a strong start, the team is on pace to set a new customer conquest record in 2021, indicating Fleet C tremendous value in our total mobility solutions and our customer-centric approach to product design. In Asia Pacific, consumer replacement volume increased 30% to more than 4 million units, far surpassing the previous volume record for our first quarter. We benefited from strong growth in China and India, where we more than doubled our replacement units on a combined basis versus last year. Turning to our consumer OE business, our volume increased 26%, reflecting a strong rebound in industry fundamentals in China, where demand is approaching 2019 levels. Now, before I move on, I would like to congratulate our consumer OE team in Asia Pacific for earning FAW Volkswagen's Best Supplier Award at a recent supplier conference. This designation recognizes the supplier's commitment to excellent product performance, quality, reliable supply, and outstanding collaboration. Goodyear was the only tire supplier to receive this honor, a testament to our industry-leading technical capabilities, our market-backed approach to product design, and our commitment to working with customers to help them solve their toughest challenges. These same attributes also helped us secure the fitment on the recently launched Volkswagen ID.6 Cross, the latest modular electric battery platform vehicle in VW Group's lineup. Goodyear is proud to be the sole supplier on this EV platform since its inception. Now even as markets recover and our business momentum gains strength, we continue to focus on our longer-term competitive advantage with both the Cooper Tire acquisition and new mobility. Our enthusiasm around the Cooper Tire transaction continues to build as we develop our integration plans and prepare to welcome Cooper Tire to the Goodyear family. The acquisition will allow us to increase our business in markets and segments that play to our strengths and offer a more comprehensive portfolio of products and services to our customers and consumers. We're particularly excited about the potential of stronger combined portfolio of SUV and light truck fitments given the importance and growth in these vehicle segments. At the same time, we expect the combination will deliver significant financial benefits to shareholders through cost synergies as well as incremental growth and margin opportunities in the years ahead. We're excited for this next chapter to begin. Now, beyond the EV wins and general trends you've heard us revert to, the inflection point of future mobility is certainly well underway. A world of connected, electric, shared, and autonomous vehicles is fast approaching, and our progress continues. With Anvil, our digital platform focused on vehicle readiness, we have expanded our platform vehicle service by six-fold since launching in early 2020, and we expect to continue to grow as shared mobility rebounds post-pandemic. The emerging need to service these fleets is clear today and will only increase as the migration to EVs accelerates. Our work on the intelligent and integrated tire has expanded by adding new partners to advance our real-time tire monitoring and integration with vehicle systems. That work and the continued experience we gain with our partner fleets equipped with intelligent tires only increases our perspective that the tire itself is the ultimate sensor to improve the driving experience through anticipating and adjusting safety and performance in autonomous vehicles. And finally, our focus on sustainable materials in our products remains paramount to our future mobility vision with a goal of having a tire constructed entirely of sustainable materials by 2030. Creating new revenue streams in and around our core tire business reflects our commitment to not only be a part of, but driving the future of mobility with safety, performance, and reliability at its core. It's remarkable just how much has changed over the past year. During the first quarter of 2020, we faced an emerging crisis of historic proportions as COVID-19 brought the global economy and the auto industry to a near standstill. While COVID remains a very real personal and economic challenge in some parts of the world, today, on balance, we see a much brighter picture. In many of our key markets, Vaccinations are increasing, vehicle miles traveled are improving, auto production is recovering, and employers are hiring. As we look ahead, we expect to sustain our underlying momentum to capitalize on opportunities in this new era, fully recognizing that we will continue to see pockets of disruption and challenges in the months and quarters ahead. And as the markets recover, We're feeling a level of momentum we haven't felt in some time. We have a strong lineup of products. Following actions to further improve our distribution, our ability to reach customers has never been better. Our fleet solutions offerings is unmatched in the market, and the planned acquisition of Cooper Tire will further strengthen our position, creating increased opportunities to generate value in the years ahead. Personally, I continue to be very excited about our prospects moving forward. Now I'm going to turn the call over to Darren.