Goodyear Tire (GT) to Close Philippsburg, Germany, Manufacturing Plant; Sees Pretax Charges

October 24, 2016 4:48 PM EDT
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Goodyear Tire (Nasdaq: GT) disclosed the following in a U.S. SEC filing on Monday:

Item 2.05 Costs Associated with Exit or Disposal Activities.

On October 20, 2016, The Goodyear Tire & Rubber Company (the "Company") approved a plan that proposes to close Goodyear Dunlop Tires Germany GmbH’s tire manufacturing facility in Philippsburg, Germany that produces passenger car and light truck tires. The proposed plan is in furtherance of the Company’s announced strategy to capture the growing demand for premium, large-rim diameter tires in part by reducing excess capacity in declining, less profitable segments of the tire market. The proposed plan would result in approximately 890 job reductions at the Philippsburg plant. The plan remains subject to consultation with relevant employee representative bodies.

The Company expects to be substantially complete with this rationalization plan by the end of 2017 and estimates total pre-tax charges associated with this action to be between $240 million and $280 million, of which $165 million to $190 million is expected to be cash charges primarily for associate-related and other exit costs and $75 million to $90 million is expected to be non-cash charges related to accelerated depreciation and other asset-related charges. The Company expects to record $116 million of pre-tax charges in the third quarter of 2016 and approximately $20 million of pre-tax charges in the fourth quarter of 2016 associated with this plan. The majority of the remaining charges will be recorded in 2017.

Once completed, this action is expected to improve Europe, Middle East and Africa’s segment operating income by approximately $20 million in 2018 and $30 million on an annualized basis thereafter.

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