The Goodyear Tire & Rubber Company

Please stand by. Your program is about to begin. If you need audio assistance during your call today, please press star zero. Good morning. My name is Ashley, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Goodyear second quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise. After some opening remarks, there will be a question and answer session. You may register to ask a question at any time by pressing the star, then one on your telephone keypad. You may withdraw your question by pressing star 2. Please note that this call may be recorded. It is now my pleasure to turn the conference over to Greg Schenck, Senior Director, Investor Relations.

Thank you, Ashley. Good morning and welcome to our second quarter 2024 earnings call. Today on the call, we have Mark Stewart, our CEO and President, and Christina Zamaro, our Executive Vice President and CFO. During this call, we 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 slide 20 of the supporting presentation for today's call and our filings with the SEC. These materials can be found on our website at investor.goodyear.com. where a replay of this call will also be available. A reconciliation of non-GAAP financial measures discussed on today's call to the comparable GAAP measures is also included in the appendix of that presentation. With that, I will now turn the call over to Mark.

Thank you, Greg, and good morning, everyone. Welcome to our second quarter earnings call. Thank you for joining us, and thank you for your interest in Goodyear. I want to start this morning by saying we are clearly progressing on our goals, as part of our Goodyear Forward Plan, and that is true on multiple fronts, as well as in each of our key work streams of the Goodyear Forward Plan. In the second quarter, we achieved significant margin expansion, another strong quarter of year-over-year earnings growth. We have just recently announced the sale of our off-the-road, our OTR business, another important step as part of our overall transformation plan. Having said that, the industry environment in the first half has not been supportive, including downgrades to OEM production levels and significantly more challenging replacement markets, which has been saturated by low-end imports. We're anticipating that these industry challenges will continue through the second half. In that environment, and as a result, we will continue to focus on profitable volume segments of the market, as well as the areas that are generating the highest return for us. as well as continuing the execution of our cost reduction efforts. To be very clear, we continue to make and execute the appropriate adjustments in our cost base to ensure we meet Good Year Forward objectives and our operating plans. We are already making great progress, and these recent challenges means that we will need to continue to dig deeper. We will continue to execute to continue to achieve our goals. Moving on to the financials, our second quarter segment operating income was $339 million, and segment operating income margin was 7.4%, which is almost triple the margin we delivered in the second quarter of 2023. EPS on a reported basis increased by over $1, and on an adjusted basis, EPS grew 53 cents. Clearly, our execution has been strong. Our results show strong price mix versus raw materials and stepped up results on good year forward savings with two of our business units demonstrating and contributing strong growth and earnings. Americas saw remarkable gains with SOI up nearly $140 million from last year. In the U.S., our volume performance in the 18-inch and greater segment was in line with industry. It was a different story in the smaller rim sizes where imports have taken shelf around the Americas. Magnifying this challenge, industry sellout in the U.S. retail channel was negative during the quarter and down high single digit to low double digits at the traditional retailers. This instigated heavy promotional activities by other manufacturers at the lower end of the market. We continue to focus on complexity reduction, our platforming, well as looking at the blank spaces in the high end of the market we are continuing to work in front of us as part of our plan to boost margins we continue to execute skew rationalizations margin enhancement actions to address profitability on low margin low value products as part of our Goodyear forward plan this is important for us as we reach as we work to reduce our exposure to the increasingly competitive Tier 3 and Tier 4 segments of the market. In Latin America, we experienced some temporary volume softness in the quarter as a result of the changes we're making to distribution, as well as the flooding in Brazil that happened early in Q2. Earnings, therefore, remaining strong, but we continue to feel very good about our market position in Latin America. In EMEA, results were relatively stable, despite an OE industry that contracted 5%. Importantly, we continue to demonstrate industry-leading innovation and product technology. During the second quarter, our Goodyear Vector Gen 3 All Season was awarded the test winner by ADAC. This should help drive price and mix for us in this fast-growing segment over the next several quarters. Like in the U.S., EMEA's lower-tier brands and the product lines have been hurt by growth in imports, particularly in Eastern Europe. Over the past quarter, we were able to finalize the required consultations related to our previously announced factory closures in the region, which will help address our cost structure in EMEA. Asia Pacific continued to see significant growth in both volume and earnings and turned its third consecutive quarter of SOI margin above 10%. Volume growth was driven by fitment wins in consumer OE market and primarily in the EV electric vehicle segment. Having said that, the consumer replacement industry in China was weaker than we expected, so Asia Pacific continues to set the standard for performance. Turning to Goodyear Forward. It's clear that the speed of execution towards our Goodyear Forward plan is critical. In SAG, we've made great progress in EMEA with our transition to shared services. We've also just recently announced a plan to open a new shared services center in Costa Rica for the Americas. In manufacturing, Christina and I are continuing to meet regularly with our factory leaders, reviewing progress against our efficiency plans, and making sure any roadblocks are removed. As just one example, the team has been able to achieve record levels of OE yield over the last couple months. We are cascading our benchmark level performance by process across the world. We've also implemented tight controls and efficiency tools covering manufacturing and SAG spending, and we are seeing early returns. By June, we achieved a reduction in America's overtime hours of over 15%. At the same time, we're optimizing our real estate portfolio, and in one example, we recorded the sale of a valuable piece of property in Germany this quarter. These types of optimizations will continue going forward. In R&D, we've focused the team on industrializing premium SKUs for the market, executing on consolidating parts through using common product platforms to address our cost structure on lower tier SKUs. And finally, in our retail operations, our execution is ahead of plan as we have focused on driving incremental traffic into our bays. We're doing this by focusing our retail value proposition with both traditional customer base and through new last mile fleet customers as well. We are fully committed to Good Year Forward. We remain confident in delivering our targets of 10% SOI margins by the end of next year. Next, I'll turn it over to Christina to take you through the second quarter financials, and we'll move on to the Q&A section.