The Goodyear Tire & Rubber Company

Good morning. My name is Keith, and I'll be your conference operator today. At this time, I would like to welcome everyone to Goodyear's second 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. Please go ahead.

Thank you, Keith, and thank you, everyone, for joining us for Goodyear's second 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 Zamara, 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 could now draw your attention to the safe harbor statement on slide two, 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 can affect future results are outlined in Goodyear's filings with the SEC in their 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. Non-GAAP financial measures discussed on the call are reconciled to the U.S. GAAP equipment as part of the appendix to the slide presentation. And with that, I'll now turn the call over to Rich. Great. Thank you, Nick, and good morning, everyone.

I'd like to start today by welcoming all of the Cooper Tire Associates joining us this morning. I've had the opportunity to meet many of you in recent weeks, and I've been so impressed by your passion for Cooper and for our industry. From our initial interactions on through to our integration meetings and business reviews, it's clear that your industry knowledge and experiences will bring tremendous value to the combined organization. Sharing ideas and best practices will make us a stronger competitor and allow us to find new ways to better serve our customers and consumers. Our journey is just beginning, but I'm really excited about our future and about what we can achieve together. Let me begin my prepared remarks today by providing some comments to supplement this morning's press release. For the second quarter, we delivered $349 million of merger-adjusted segment operating income, which is over one and a half times what we earned in the second quarter of 2019. These strong results reflect continued recovery in demand, and we outperformed industry growth across many of our businesses. At the same time, we delivered the highest quarterly contribution of price mix that we've seen in our business in nine years, and we continue to have good momentum. As I look at the global consumer replacement industry during the quarter, we continue to see a sustained path toward recovery. As you would expect, this general theme is largely carried by mature markets. we continue to experience pandemic-related weakness in several of our emerging market countries. More broadly, however, economic recovery remains robust, particularly in the U.S. and China. Given these markets play to our strengths, we saw global consumer replacement market share rise nearly one point. In our OEM business, the global shortage of semiconductors resulted in weaker and more volatile demand than we expected. The auto industry produced approximately 2 million fewer vehicles than initially expected at the beginning of the quarter. Despite the weaker-than-expected backdrop, we continue to recover share globally, including the benefit of our strong position on SUVs and light trucks. We're also continuing to see the benefits of our strong cost management. On balance, our business performance is strengthening. And with this as the foundation, towards the end of the second quarter, we completed our announced combination with Cooper Tire. I believe this is truly a transformational milestone for both companies. Our collective team continues to share excitement about our prospects going forward. As we do the work to bring our companies together, I know we will be better positioned than ever before to meet our customers' evolving needs. and you can see evidence of our strengthening performance and the initial benefit of the Cooper combination in each of our SBUs. In the Americas, our U.S. consumer business took advantage of favorable conditions in the replacement market where we continued to see robust demand for our most premium products. Our large rim diameter volume performance was particularly notable with our growth exceeding the industry by nearly 10 points, The resulting mixed benefits combined with pricing actions more than offset higher raw material costs. Our U.S. commercial business is also capitalizing on strong end-user markets. With freight demand outpacing supply, keeping existing trucks road-ready is a top priority of fleets. As a result, more customers are relying on Goodyear's Fleet Central to make informed decisions regarding their tire and maintenance needs. The growing popularity of our suite of fleet management tools is helping us drive market share in targeted segments. In the quarter, our commercial shipments were nearly 15% above the second quarter of 2019. Turning to Brazil, our consumer and commercial replacement businesses are recovering faster than anticipated. Shipments in both segments were well above pre-pandemic levels during the quarter, reflecting both economic recovery and share gains. Our Brazilian OE business, however, saw more than half of the country's auto assembly facilities taking capacity offline during the quarter, keeping our OE volume considerably below pre-pandemic levels. In EMEA, markets are also recovering, albeit with less consistency than in the Americas, with industry demand softening sequentially. We sustained our relative momentum in the quarter with share gains in all of our businesses. Our European consumer replacement business more than recovered higher raw material costs supported by the impact of our distribution changes. At the same time, our market share in Europe has recovered by more than a quarter of a percent year to date. Our consumer OE business also continued outperforming but with less impact as part shortages limited recovery and auto production. Our continued improvement in the consumer OE segment is supported by our ability to meet the demands of electrification. Today, Goodyear has a presence on nearly half of the EV platforms produced in Europe. Having this leadership position is critical as electric mobility begins a period of dramatic growth. And as tires on most EVs wear faster than on a comparably sized internal combustion-powered vehicle, these benefits will extend well beyond the initial fitment. So what we're seeing are dynamics that should position our consumer business for long-term profitable growth. Turning to commercial, volume was more than 10% above 2019 levels, despite lower freight volumes. We benefited from exceptionally strong results in the on-road segment driven by our growth portfolio fleet customers. During the quarter, for example, we added Tesco's fleet of 6,800 trucks and trailers to our customer portfolio. Tires alone are no longer enough to win over fleet customers. Today's fleets demand innovative solutions that will help them maximize uptime and reduce costs. We recently unveiled Goodyear DrivePoint, the latest productivity tool in our total mobility offering. DrivePoint combines on-valve sensors, battery-powered receivers, and mobile apps to deliver fleets a cost-effective way to monitor tire performance. These technology solutions strengthen our position as a preferred provider of monitoring and predictive maintenance, making Goodyear more valuable to our customers and preference over other mobility solution providers. Turning to Asia Pacific, industry demand varied significantly by country. Challenging conditions persisted in India, Malaysia, and other countries with low vaccination rates affecting demand and our production in the region. In China, the story was encouraging with demand fairly consistent with pre-COVID levels. In a stable market, we leveraged an expanded retail network to grow our consumer replacement volume by more than 20% compared to the second quarter of 2019. Turning to our consumer OE business, we grew our volume more than 40% compared to the prior year in an expanding market. Our team did an excellent job in this environment helping us capture nearly one point of market share. In addition to delivering solid second quarter results, we continued advancing our mobility solution strategy. In June, we launched Goodyear Sightline, the first tire intelligence solution for cargo van fleets, a timely launch considering the impact the pandemic had on e-commerce volumes. Goodyear Sightline combines sensors and cloud-based algorithms to provide fleet operators with real-time tire health information. This rollout lays further groundwork for a connected tire future. We're also taking steps to make our mobility solutions more accessible. Last month, we announced a strategic partnership with ZF to jointly offer our Goodyear connected tires with ZF's telematic solution. By using a common telematics unit, we can simplify fleet interactions, make it easier for customers to get the tire and trailer performance data needed to optimize vehicle use and reduce fuel consumption and emissions. As I've said before, Goodyear is committed to shaping the mobility revolution. Initiatives like ANGO, Goodyear Sightline, and partnerships like the one we have with ZF, along with our focus on the intersection of new mobility, sustainability, and technology, are demonstrative of new business models and solutions that will define Goodyear's position and relevance for the next 120 years. We view our job as requiring the operational excellence to deliver results today while simultaneously building the capability to lead our industry tomorrow when the tire's relevance will not just continue but evolve to a more prominent role to enable mobility. It remains a great time to be a technology leader in the tire industry. We're entering the second half of the year focused on the opportunities ahead. Markets are more stable than at the beginning of the year, particularly in the aftermarket. Fundamentals are robust in U.S. consumer replacement, with dealer restocking and increased driving underpinning demand. In Europe, the demand picture continues to improve, led by recovery in vehicle miles traveled as more employees return to the office. And the need to keep goods flowing through supply chains is driving the demand for commercial tires around the world. And while supply chain constraints continue to limit auto production, the outlook for our consumer OE business remains favorable given our ongoing share recovery, the long-term need for OEs to restock dealer inventory, and the accelerating shift to electric powertrains, which favors Goodyear's strengths in product design and materials. Against this backdrop, we're focused on sustaining our momentum while working to integrate Cooper. The trajectory of our markets makes us feel good about the timing of the combination. We look forward to achieving our full potential in the years ahead. Now, I'll turn the call over to Darren.