The Goodyear Tire & Rubber Company (the “Company”) is an Ohio corporation organized in 1898. Its principal offices are located at 1144 East Market Street, Akron, Ohio 44316-0001. Its telephone number is (330) 796-2121. The terms “Goodyear”, “Company” and “we”, “us” or “our” wherever used herein refer to the Company together with all of its consolidated domestic and foreign subsidiary companies, unless the context indicates to the contrary.
We are one of the world’s leading manufacturers of tires, engaging in operations in most regions of the world. Our 2009 net sales were $16.3 billion, and Goodyear’s net loss in 2009 was $375 million. Together with our U.S. and international subsidiaries and joint ventures, we develop, manufacture, market and distribute tires for most applications. We also manufacture and market rubber-related chemicals for various applications. We are one of the world’s largest operators of commercial truck service and tire retreading centers. In addition, we operate approximately 1,500 tire and auto service center outlets where we offer our products for retail sale and provide automotive repair and other services. We manufacture our products in 57 manufacturing facilities in 23 countries, including the United States, and we have marketing operations in almost every country around the world. We employ approximately 69,000 full-time and temporary associates worldwide.
RECENT DEVELOPMENTS
Venezuelan Currency Devaluation. On January 8, 2010, the Venezuelan government announced the devaluation of its currency, the bolivar fuerte, and the establishment of a two-tier exchange structure. The official exchange rate has been changed from 2.15 bolivares fuertes to each U.S. dollar to 4.30 bolivares fuertes to each U.S. dollar, except in the case of the conversion of bolivares fuertes to U.S. dollars to pay for the importation of “essential goods,” for which the rate is 2.60 bolivares fuertes to each U.S. dollar. Some of the tires and raw materials that Goodyear’s Venezuelan subsidiary, Compania Anonima Goodyear de Venezuela (“Goodyear Venezuela”), imports into Venezuela have been classified as “essential goods,” while others have not. We are continuing to evaluate the list of goods classified by the Venezuelan government as “essential” to determine which exchange rate will apply to Goodyear Venezuela’s imports.
At December 31, 2009, without giving effect to the devaluation, we had $370 million in cash denominated in bolivares fuertes, third-party U.S. dollar-denominated accounts payable of $17 million, and U.S. dollar-denominated intercompany accounts payable of $127 million. We expect to record a charge in the first quarter of 2010 in connection with the remeasurement of our balance sheet to reflect the devaluation. If calculated at the 4.30 official exchange rate, the charge is expected to be approximately $150 million, net of tax. To the extent that any goods that Goodyear Venezuela imports are classified as “essential,” this impact could be reduced. The devaluation did not affect our 2009 results of operations or financial position.
Effective January 1, 2010, Venezuela’s economy is considered a highly inflationary economy under U.S. generally accepted accounting principles. Accordingly, all gains and losses resulting from the remeasurement of our financial statements are required to be recorded directly in the statement of operations. If in the future we convert bolivares fuertes at a rate other than the official exchange rate, we may realize additional gains or losses that would be recorded in the statement of operations.
Debt Exchange Offer. On February 2, 2010, we commenced an offer to exchange any and all of our $650 million in aggregate principal amount of 7.857% Notes due 2011 (the “2011 Notes”) for up to $702 million in aggregate principal amount of a new series of 8.75% Notes due 2020. Concurrent with the exchange offer, we are soliciting consents from the holders of the 2011 Notes to amend the terms of the indenture that governs the 2011 Notes. The proposed amendments, if adopted, would delete many of the restrictive covenants and certain events of default in the indenture governing the 2011 Notes. The new notes will be our unsecured senior obligations and will be guaranteed by our U.S. and Canadian subsidiaries that also guarantee our obligations under our senior secured credit facilities. The exchange offer and consent solicitation will expire on March 2, 2010, unless extended or earlier terminated by us. The completion of the exchange offer and consent solicitation is subject to the satisfaction of certain conditions, including that we receive valid tenders, not validly withdrawn, of at least $260 million in aggregate principal of the 2011 Notes.
The Reserve Primary Fund. On January 29, 2010, we received a distribution of $24 million from The Reserve Primary Fund.
DESCRIPTION OF GOODYEAR’S BUSINESS
General Segment Information
For the year ended December 31, 2009, we operated our business through four operating segments representing our regional tire businesses: North American Tire; Europe, Middle East and Africa Tire; Latin American Tire; and Asia Pacific Tire. As a result of our sale of substantially all of our Engineered Products business on July 31, 2007, we have reported results of that segment as discontinued operations for 2007.
Financial Information About Our Segments
Financial information related to our operating segments for the three year period ended December 31, 2009 appears in the Note to the Consolidated Financial Statements No. 17, Business Segments.
General Information Regarding Our Segments
Our principal business is the development, manufacture, distribution and sale of tires and related products and services worldwide. We manufacture and market numerous lines of rubber tires for:
• automobiles
• trucks
• buses
• aviation
• motorcycles
• farm implements
• earthmoving and mining equipment
• industrial equipment, and
• various other applications.
In each case, our tires are offered for sale to vehicle manufacturers for mounting as original equipment (“OE”) and for replacement worldwide. We manufacture and sell tires under the Goodyear, Dunlop, Kelly, Fulda, Debica and Sava brands and various other Goodyear owned “house” brands, and the private-label brands of certain customers. In certain geographic areas we also:
• retread truck, aviation and off-the-road, or OTR, tires,
• manufacture and sell tread rubber and other tire retreading materials,
• provide automotive repair services and miscellaneous other products and services, and
• manufacture and sell flaps for truck tires and other types of tires.
Global Alliance
We have a global alliance with Sumitomo Rubber Industries, Ltd. (“SRI”). Under the global alliance, we own 75% and SRI owns 25% of two companies, Goodyear Dunlop Tires Europe B.V. (“GDTE”) and Goodyear Dunlop Tires North America, Ltd. (“GDTNA”). GDTE owns and operates substantially all of our tire businesses in Western Europe. GDTNA owns the Dunlop brand and operates certain related businesses in North America. In Japan, we own 25%, and SRI owns 75%, of two companies, one for the sale of Goodyear brand passenger and truck tires for replacement in Japan and the other for the sale of Goodyear brand and Dunlop brand tires to vehicle manufacturers in Japan. We also own 51%, and SRI owns 49%, of a company that coordinates and disseminates both commercialized tire technology and non-commercialized technology among Goodyear and SRI, the joint ventures and their respective affiliates, and we own 80%, and SRI owns 20%, of a global purchasing company. The global alliance also provided for the investment by Goodyear and SRI in the common stock of the other.
North American Tire
North American Tire, our largest segment in terms of revenue, develops, manufactures, distributes and sells tires and related products and services in the United States and Canada. North American Tire manufactures tires in eight plants in the United States and two plants in Canada.
North American Tire manufactures and sells tires for automobiles, trucks, motorcycles, buses, earthmoving and mining equipment, commercial and military aviation and industrial equipment, and for various other applications.
Goodyear brand radial passenger tire lines sold in the United States and Canada include Assurance, Assurance Fuel Max, Assurance featuring TripleTred Technology and Assurance featuring ComforTred Technology for the premium market; Eagle, for the high performance market, and RunOnFlat extended mobility technology (“ROF” or “EMT”) tires. The major lines of Goodyear brand radial tires offered in the United States and Canada for sport utility vehicles and light trucks are Wrangler featuring technologies including MT/R with Kevlar, and DuraTrac; and Fortera featuring TripleTred Technology. Goodyear also offers Dunlop brand radial passenger tire lines including Signature and SP Sport performance tires, and Dunlop brand radials for light trucks such as the Rover and Grandtrek lines. Additionally, North American Tire also manufactures and sells several lines of Kelly and Fierce brands, as well as house and private brand radial passenger and light truck tires in the United States and Canada.
Latin American Tire
Our Latin American Tire segment manufactures and sells automobile, truck and farm tires throughout Central and South America and in Mexico, sells tires to various export markets, retreads and sells commercial truck, aviation and OTR tires, and provides other products and services. Latin American Tire manufactures tires in six facilities in Brazil, Chile, Colombia, Peru and Venezuela.
Asia Pacific Tire
Our Asia Pacific Tire segment manufactures and sells tires for automobiles, light and medium trucks, farm, construction and mining equipment and the aviation industry throughout the Asia Pacific region. Asia Pacific Tire manufactures tires in eight plants in China, India, Indonesia, Japan, Malaysia, Taiwan and Thailand. Asia Pacific Tire also:
• retreads truck tires and aviation tires,
• manufactures tread rubber and other tire retreading materials for truck and aviation tires,
• provides automotive maintenance and repair services at retail outlets, and
• provides miscellaneous other products and services.
Employees
At December 31, 2009, we employed approximately 69,000 full-time and temporary people throughout the world, including approximately 39,000 people covered under collective bargaining agreements. At December 31, 2008, we employed approximately 75,000 full-time and temporary people throughout the world, including approximately 42,000 people covered under collective bargaining agreements. Approximately 10,000 of our employees in the United States are covered by a master collective bargaining agreement with the United Steelworkers (“USW”), which expires in July 2013. Approximately 17,000 of our employees outside of the United States are covered by union contracts which currently have expired or that will expire in 2010, primarily in Brazil, Germany, Turkey and South Africa. In addition, approximately 1,000 of our employees in the United States are covered by other contracts with the USW and various other unions. Unions represent the major portion of our employees in Europe, Latin America and Asia.