DETROIT - Goodyear Tire & Rubber Co posted a narrower-than-expected quarterly loss on Wednesday as it accelerated cost cuts and reduced inventory in response to a deep economic downturn, sending its shares up nearly 12 percent.
The largest U.S. tire maker cut 3,800 jobs in the first quarter as part of its plan to eliminate 5,000 jobs worldwide in 2009 -- or 6.7 percent of its staff. It also reduced inventory by more than $300 million.
Goodyear, like other auto parts suppliers, has come under intense pressure from U.S. auto sales at nearly three-decade lows and a steep downturn in consumer demand that has prompted major automakers to slash output.
Goodyear posted a net loss of $333 million, or $1.38 per share, in the first quarter, compared with a profit of $147 million, or 60 cents per share, a year earlier.
Excluding one-time items, Goodyear losted a loss of $1.19 per share, while analysts on average expected a loss of $1.38 per share, according to Reuters Estimates.
Revenue fell to $3.5 billion in the quarter from $4.9 billion a year earlier as total tire production fell 20 percent worldwide. Vehicle production declines pressured sales to manufacturers, while less miles driven hurt replacement tire unit sales across the regions.
Tire sales to vehicle manufacturers typically make up about 30 percent of Goodyear's overall production and 20 percent of its revenue. In past auto production downturns, the replacement tire market has picked up as demand from manufacturers fell.
That has not been the case in this downturn. Tire sales to vehicle manufacturers fell 49 percent in North America in the first quarter and replacement tire sales fell 10 percent.
In Europe, sales to vehicle manufacturers fell 47 percent in the first quarter and demand from the replacement market fell 9 percent, Goodyear said.
The rising cost of raw materials also pressured Goodyear results. Due to the method for accounting for inventory of raw materials, tires sold today are based on raw materials costs that were peaking a half year ago.
The Akron, Ohio-based tire maker cut nearly 4,000 jobs in the second half of 2008 and had 75,000 employees worldwide at the end of last year.
Shares of Goodyear were up $1.23 at $11.70 on the New York Stock Exchange. (Editing by Derek Caney, Dave Zimmerman)