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's second quarter 2023 earnings call. Call lines have been placed on mute to prevent any background noise. Today on the call, we have Rich Kramer, Goodyear's chairman and chief executive officer, and Christina Samaro, chief financial officer. During this call, Goodyear will refer to forward-looking statements and non-GAAP financial measures. Forward-looking statements involve risks, assumptions, and uncertainties that could cause actual results to differ materially from those forward-looking statements. For more information on the most significant factors that could affect future results, please refer to the Important Disclosures section of Goodyear's Second Quarter 2023 Investor Letter and their filings with the SEC, which can be found on their website at investor.goodyear.com, where a replay of this call will also be available. A reconciliation of the non-GAAP financial measures that may be discussed on today's call to the comparable GAAP measures is also included in the investor letter. This call will focus on questions and answers. And at this time, if you would like to ask a question, please press the star and 1 on your touch-tone phone. You may withdraw your question by pressing star 2. Once again, for your questions, please press the star and 1 on your touch-tone phone. And we will take our first question from James Piccariello with BNP Paritas. Please go ahead.

Hey, guys. It's Jake for James. First thing I just want to talk about is the third quarter bridge items. So if I work through those, we get to about 300 million SOI in 3Q. I just want to make sure that I'm thinking about that right. And then looking at the fourth quarter, or looking at the full year, it looks like the implied guide is about 900, 950 million. So can you just talk about some of the puts and takes for the fourth quarter?

Yeah, sure. Hi, Jake. This is Christina. So I'll start on SOI. And I would say, you know, if you look at our outlook, obviously we are layering in the trends in the industry that we're seeing as we look into the third and fourth quarters. And as we think about how this has played out, obviously impacts in our earnings in Q2 due to transitory factors like destocking. more in consumer, but also more recently in commercial. And so what that means is volume weakness still yet in Q3, and a lot of that is due to our plan for some additional destocking, particularly in Europe, with volume approximately flat to up in the fourth quarter. When I think about the drivers of our SOI walk, I mean, we've laid out the industry assumptions for you. Unabsorbed overhead wins. I mean, we'll have lower Q2 production of about 4 million units, excluding Tupelo. That obviously will impact the fourth quarter. We've given you those values as well. Price mix versus raw materials should more than offset other cost inflation. In the second half, I'd say that that's true on a four-year basis as well. If I think about commercial truck, and maybe this gets to the heart of your question, what we said is big impact, $60 million in mix in the second quarter. That declines pretty significantly in Q3, and it's pretty much not an impact at all in our fourth quarter. When I look at fourth quarter price mix versus raw materials, what I would say is obviously really strong impact benefits and lower raw material costs, we do have RMI indexes beginning to take effect. But I would say that they're still relatively small here in the fourth quarter, something like 10% of that raw material benefit. So hopefully that's a help.