2013 investor day - goodyear corporate · tire business •china consumer capacity still under...

2013 Investor Day

September 20, 2013

Forward-Looking Statements

Certain information contained in this presentation constitutes forward-looking statements for purposes of the

safe harbor provisions of The Private Securities Litigation Reform Act of 1995. There are a variety of factors,

many of which are beyond our control, that affect our operations, performance, business strategy and

results and could cause our actual results and experience to differ materially from the assumptions,

expectations and objectives expressed in any forward-looking statements. These factors include, but are not

limited to: our ability to realize anticipated savings and operational benefits from our cost reduction initiatives

or to implement successfully other strategic initiatives; increases in the prices paid for raw materials and

energy; pension plan funding obligations; actions and initiatives taken by both current and potential

competitors; deteriorating economic conditions or an inability to access capital markets; work stoppages,

financial difficulties or supply disruptions at our suppliers or customers; the adequacy of our capital

expenditures; a labor strike, work stoppage or other similar event; our failure to comply with a material

covenant in our debt obligations; potential adverse consequences of litigation involving the company; as well

as the effects of more general factors such as changes in general market, economic or political conditions or

in legislation, regulation or public policy. Additional factors are discussed in our filings with the Securities and

Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q and

current reports on Form 8-K. In addition, any forward-looking statements represent our estimates only as of

today and should not be relied upon as representing our estimates as of any subsequent date. While we

may elect to update forward-looking statements at some point in the future, we specifically disclaim any

obligation to do so, even if our estimates change.

2

Agenda

Rich Kramer Chairman and CEO

Overview

Industry MegaTrends

Strategy

Steve McClellan President – North America

Operational Update

Darren Wells Executive Vice President and CFO

Financial Outlook

Capital Allocation Plan

Question/Answer Goodyear Management

3

Meeting Highlights

4

Based on our confidence in the business…

Reconfirming 2013 outlook

• SOI of about $1.5 billion

• Positive cash flow (excluding pension pre-funding)

Targets through 2016

• Annual 10-15% SOI growth per year through 2016

• Annual positive cash flow (excluding pension pre-funding)

• Targeting 2.5x Adjusted Debt / EBITDAP by 2016

Balanced Capital Allocation Plan

• Dividend and stock buy-back plan beginning Q4/2013

5

Shareholder Return Program

Shareholder return program demonstrates strong commitment

to shareholders and confidence in strategy

Reinstating regular dividend: $55 million per year

• $0.05 per share quarterly dividend beginning in fourth quarter

• Anticipate increases over time

Establishing share repurchase program: $100 million

Q2/2013 Highlights…they are worth repeating

Record segment operating income of $428 million(a)

• All business units achieved higher year-over-year SOI

• All-time records for North America and Asia Pacific

Three business units posted higher tire unit volumes versus last year

Strong cash flow

• Cash flow positive in Q2 and continued progress managing working capital

Pension underfunded status benefitting from higher interest rates

Increasing confidence in 2013 targets

• SOI expected of about $1.5 billion, at high end of original $1.4 - $1.5 billion range

• Cash flow positive (excluding pension pre-funding)

6 (a) See Segment Operating Income reconciliation in Appendix on page 66.

Strategy Roadmap

Where We Are

Key How To’s

Our Destination

Key Strategies

#4

Industry

MegaTrends

#1

#3

#5 #2

7

8

Where We Are #1

September 2013 March 2011

• ’11 Industry Growth = ~10%

• Natural Rubber = $2.38

• Euro = $1.42, Real = 1.67

• ’13 Industry growth = ~1%

• Natural Rubber = $1.11

• Euro = $1.35, Real = 2.21

Weaker demand

Lower raws

Stronger $

• Coming off of 2010 at $917 million

of SOI with margin of 4.9%(a)

• Expect to finish 2013 at ~$1.5 billion

SOI with margin of ~7.5%

• North America at essentially

breakeven SOI • N. America approaching $600 million

SOI and creating economic value

• Pension risk over-shadowing

the “tire company” • Clear path forward on pension –

performance based on underlying

tire business

• China consumer capacity still under

construction; truck not yet begun • China consumer and truck plant fully

operational, and Asia at record SOI

• Targeting cash flow positive • Cash flow positive and dividend

paying company

Great progress….in challenging environment (a) See Segment Operating Income and margin reconciliation in Appendix on page 66.

Key Strategy: NA Profitability

Strong business performance

Trailing 4 quarters approaching $600

million of SOI, far exceeding original

$450 million target

Despite weak-volume tire industry

Consistent business momentum

16 straight quarters of year-on-year SOI

improvement

Excellent execution of Goodyear strategy

Market-back innovation excellence

Target profitable market segments

Operational excellence & enabling

investments

USW contract recently extended into 2017

Sustainable business that is creating value

9

Record

Terms: Trailing 4 Quarters of SOI in $ millions

#2

Key Strategy: Win in China

High growth business (ex. ANZ) ... with excellent long term prospects

Winning in China

New passenger and truck plant fully

operational

Solid return on our CapEx investment

Gaining share

Record SOI in Asia

After working through natural disaster

(i.e., Thailand flood) and plant start-up

costs

Broad Asian business

Growing consumer & commercial

Solid off-the-road and farm (India)

Restructuring in Australia/New Zealand in

response to weak economic conditions

10

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

$0

$50

$100

$150

$200

$250

$300

$350

$400

Q4/10

Q1/11

Q2/11

Q3/11

Q4/11

Q1/12

Q2/12

Q3/12

Q4/12

Q1/13

Q2/13

SO

I a

s %

of

Re

ve

nu

e

SO

I in

$

m

illio

ns

SOI: AsiaTerms: Trailing 4 Quarters of SOI in $ millions

Record

Factory

start-up

#2

Key Strategy: Continued Success in LA

High margin business on the road to recovery

Team responding to market transition

Closed open markets

- Primarily local manufacturing

local and significant imports

- Monobrand multibrand

distribution

Back to the “basics” of open market

Innovation via exciting new products

Increased HVA capability (Americana)

Solid marketing programs

Working through challenges of Venezuela

and Argentina

Evidence of recovery

Experiencing volume growth

3 straight qtrs of yr-on-yr SOI growth

Renewed

11

Recovery

underway


#2

Key Strategy: Continued Success in EMEA

Developing recovery plan…full journey will take several years

Renewed

Struggling in weak economy

• Restructuring in response…

o Amiens North closure ($75 million)

o Profit Improvement Plan

1. Target Market Segments

2. Emerging Market Growth

3. Productivity ($75-$100 million

2013-2015)

Not backing off innovation

• Technology strength evidenced by

industry-leading Summer Tire labels

Our recovery plan is targeting a return

to historical margins by 2016

12

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

$0

$100

$200

$300

$400

$500

$600

$700

$800

Q4/10

Q1/11

Q2/11

Q3/11

Q4/11

Q1/12

Q2/12

Q3/12

Q4/12

Q1/13

Q2/13

SO

I a

s %

of

Re

ve

nu

e

SO

I in

$

m

illio

ns

SOI: EMEA

Recovery (early signs)


Historical

Margin (6-7%)

#2

13

Our Destination

#3

Segment Operating Income(a)

$ in millions

Our performance provides confidence in achievability of Destination

(a) See Segment Operating Income reconciliation in Appendix on page 66.

Our Destination

Strategy leads to sustainable growth

Creating Sustainable Economic

Value by being….

• First with our customers

• Leader in our targeted segments

• The innovation leader

• Competitively advantaged

14

#3

As a result, we will be…

• Profitable though economic cycles

• Cash flow positive

• Investment grade

Strategy Roadmap

Where We Are

Key How To’s

Our Destination

Key Strategies

NA Adding Economic Value

Weak Volume

Pension Remains a Challenge

Executing Plan

Innovation Leader

Strong Earnings

Creating Sustainable Value

First with Customers

Innovation Leader

Leader in Targeted Segments

Competitively Advantaged

Profitable thru Economic Cycle

Cash Flow Positive

Investment Grade

Industry

MegaTrends

#4 #5

15

1. North America: Profitability

2. Asia: Winning in China

3. EMEA/LA: Continued Success

Industry MegaTrends

Significant GDP growth in emerging markets will provide impressive tire market growth

Internet and information

technology will alter end-

user buying behaviors

Developed markets’ size, mix

and drive for innovation

provide profitable market

segments

High Value Added technology

will continue to migrate into

mid-tier cars/tires

“Green” (fuel efficiency) will

be a growing and permanent

global theme

Tire performance labeling will

become an industry standard

Unlikely to experience game-

changers…. evolutionary, not

revolutionary

Industry

MegaTrends

7

MegaTrends Define Industry Growth and Profit

Opportunities for Next Several Years

#4

16

Global Tire Industry is a growth business…led by Emerging Markets

MegaTrend #1: Significant GDP growth in emerging

markets will provide impressive tire market growth

17 (a) CAGR – Compound Annual Growth Rate

(b) Estimates based on LMC Automotive forecast and internal Goodyear analysis

Market Memo: 2012 Cumulative Industry 2018

Segment Avg. Price Industry Mix Growth 2018 vs 2012 Industry Mix

Premium ~$100 20% +19% 22%

Mid-Tier ~$80 55% +8% 54%

Economy ~$60 25% +7% 24%

Total ~$79 100% +10% 100%

18

MegaTrend #2: Developed markets’ size, mix and drive for innovation provide profitable market segments

~ 2x

Premium expected to grow at ~2X overall industry growth rate

Note: Price of Premium tire ~25% more than average tire

North America Total Consumer Industry Segmentation

Expected Cumulative Industry Growth: 2018 versus 2012

(a) Source: Internal Goodyear analysis and industry data sources

19

MegaTrend #3: High Value Added technology will

continue to migrate into mid-tier cars/tires

• Consumer HVA tires incorporating one or more of the following features:

– Rim diameter 17” or greater

– Reduced sidewall height

– Speed-rated H or higher

• Commercial tires with specific performance characteristics (e.g., Fuel Max, DuraSeal)

and retreadability

– Segmented mold

– Advanced tread compounds

– Extra load constructions

LVA Tire

(Low-Value-Added)

Incremental

$10 - $20

Margin Per Tire

HVA Tire

(High-Value-Added)

Silica

Tread

Additional

Components

For Handling Carbon Fiber

Dual Reinforced

Sidewalls

Dual Tread

Zones with

TredLock

Technology

Goodyear Capturing Higher Margins Through Improved Value

Proposition for New Products

MegaTrend #3: High Value Added technology will continue to migrate into mid-tier cars/tires

Industry continues to evolve towards HVA tires 20

Latin America Example: OE Requirements for Mid-Tier Vehicle Platforms (a)

Mid-Tier Vehicle Examples

GM – Onix

Hyundai - HB20

Fiat - UNO Sporting

Ford - New Fiesta

VW - GOL/ UP

(a) Source: Internal Goodyear analysis and industry data sources

MegaTrend #4: “Green” (fuel efficiency) will be a

growing and permanent global theme

• Oil prices

• Sustainability

- Recycle/Reuse

- Climate Change

Global trends • CAFE Standards

• Advanced powertrains

• Total Cost of Ownership

• Increased electronic

content (constrained for

weight)

Vehicle OEMs

• Fuel Economy

Mandates

• Safety Standards

Governments

Demand for Fuel Efficiency Growing Rapidly Across all Regions and Accelerating HVA Growth

21

2010 2013

~6M

~14M

Goodyear Consumer

Fuel Efficient Tire Sales

In millions of

tires

Growth

Rate

~30%

CAGR

Includes FuelMax, EfficentGrip, TripleMax, BlueResponse

22

MegaTrend #5: Tire performance labeling will become

an industry standard

Already

implemented

Europe

(mandatory)

Japan

(voluntary)

Korea

(mandatory)

To be

implemented

Brazil

(2015)

US

(2016)

Under

consideration

Argentina

Australia

Chile

China

Mexico

Tire Labeling is a reality in several countries

Testing protocols and implementation continue to be defined

Global Tire Labeling Rollout European Label

Fuel

Efficiency

Wet

Grip

Noise

MegaTrend #5: Tire performance labeling will become

an industry standard

23

40% 60%

EU Summer Replacement Market(a)

% of Unit Volume

Summer HP Market Rest of Summer Replacement Market

(a) Passenger market based on Europool 2012 Total Europe (excl. Turkey and Ukraine). All grades based upon publicly available information on tires

available for sale as at August 2013. HP segment covers H and V speed indexes.

(b) B grade in Rolling Resistance Index / A grade in Wet Grip Index.

(c) Competitors include Premium brands and best available reported grades by size.

And when Tire Labeling comes…Goodyear has shown ability to lead

MegaTrend #6: Internet and information technology

will alter end-user buying behaviors

24

Consumer Behavior

Drive Sales & Mix

Marketing

% Consumers using internet

research prior to purchase(a)

2010 Now

• US 55% 70%

• Germany 20% 38%

• Brazil 51% 77%

• China 4% 10%

Drive consumers to our website

2012: 11.4M unique visits (+28% vs 2011)

Web Traffic

Goodyear.com in US (b)

#1 in the US

Customer Website

Taking advantage of the trend to drive higher sales and richer mix (a) Source: Industry data sources

(b) Source: Compete.com; Goodyear is #1 among North America tire manufacturer sites

1 2

3

MegaTrend #7: Unlikely to experience game-changers

….evolutionary, not revolutionary

1845 Robert Thomson

invents the pneumatic tire

1846 Tomas Hancock

produces the first

solid rubber tire

1904 Carbon black

discovered

as rubber

reinforcement

1909 First winter tire

1913 Radial ply tire

patented by

Christian Hamilton

1937 First low

profile tire

1947 Tubeless tires

1948 The steel belted tire

1966 First low profile for

high performance tires

1986 Goodyear introduces

the first HP All

season tire

1992 Goodyear

introduces

the Run-on-Flat

1979 Mini-spare

2007 Run-on-Flat

Standard

Equipment

at BMW

1839 Charles Goodyear

discovers vulcanization

1903 Bias-ply tires

1926 Drop-center, one

piece rim adopted

as standard equipment

for automobiles

Evolutionary Pace of Technology Change Makes Investment Returns More Predictable 25

Strategy Roadmap

Where We Are

Key How To’s

Our Destination

Key Strategies

NA Adding Economic Value

Weak Volume

Pension Remains a Challenge

Executing Plan

Innovation Leader

Strong Earnings

Creating Sustainable Value

First with Customers

Innovation Leader

Leader in Targeted Segments

Competitively Advantaged

Profitable thru Economic Cycle

Cash Flow Positive

Investment Grade

Industry

MegaTrends

1. North America: Profitability

2. Asia: Winning in China

3. EMEA/LA: Continued Success

1. Market-Back Innovation Excellence

2. Target Profitable Segments

3. Operational Excellence

4. Enabling Investments

5. Top Talent/Top Teams

26

#5

Five Key How To’s

#5

27

1. Innovation Excellence -- Market Back Product Innovation • Aligning new product roadmap to our targeted market segments

• Driving performance evidenced by labeling scores

EMEA Asia Pacific North America

2013 Tire of the Year

- China

Tested by German magazine AUTOBILD June

2013 very recommended ranking; Tire

dimension: 205/55R16 91V Test track:

Goodyear Mireval, France

Tested by Motor Trend Magazine China

against other global brands

Tested at Bob Bondurant School of High

Performance Driving, Phoenix, Ariz., May

30, 2013, by independent journalists. Tire

dimension: 245/40R18

Dunlop Sport

BlueResponse

Goodyear Efficient Grip

Product launch test drive

high marks

Latin America

G686 MSS Plus &

G677 MSD Plus

Launched September 2013

G686 MSS Plus G677 MSD Plus

Five Key How To’s

#5

28

2. Target Profitable Segments • Focus on segments/geographies that offer highest long-term profit potential

• Make smart choices that best utilize our advantages in brands, technology, etc

…while being cognizant of the capability of our existing footprint

Examples of Success

Focus in Target Market Segments drives profitable growth

China SUV

Completed market-back

analysis to understand

consumer needs

Developed technology to

deliver features and benefits

relevant to consumers

Launched marketing

programs to create “word of

mouth” endorsements from

key opinion leaders

Won numerous product

awards from print media

Russia Truck

Identified segment as large

volume and profitability driver

Redefined Go-to-Market

strategy and strengthened

commercial capabilities

Significantly increased dealer

network to expand

distribution

Doubled sales force and

introduced dedicated training

program

Improved planning processes

to ensure consistent supply

Large Mining

Business model definition based

on market-back analysis

Defined and targeted strategic

customers

Developing integrated solutions

to become leader in Customer

Value

Made to Order, Customized

Product driven by customer’s

needs

Investment in R&D and CapEx to

support growth

Five Key How To’s

#5

29

Source Deliver Make Customers Serve Suppliers

3. Operational Excellence • Utilizing best-in-class approaches to deliver continuous and sustainable

results across end-to-end supply chain

• Total productive

maintenance

• Equipment reliability

• Lean run strategies

• Globally leverage asset

base

• Customer service levels

• Reduce working capital

(ours and customers’)

• Reduce cost to serve

• Contingency planning

• Increased level of supplier

collaboration

• Leverage full scale of our

global operations

• Continue creating

flexibility to substitute with

lower cost materials

• Continue innovation of

new materials

• Total productive

maintenance

• Equipment reliability

• Lean run strategies

• Globally leverage asset

base

• Customer service levels

• Reduce working capital

(ours and customers’)

• Reduce cost to serve

• Contingency planning

• Increased level of supplier

collaboration

• Leverage full scale of our

global operations

• Continue creating

flexibility to substitute with

lower cost materials

• Continue innovation of

new materials

30

Five Key How To’s

#5

4. Enabling Investments

Segment Operating Income trajectory enabled by Growth Capex (a) See Segment Operating Income reconciliation in Appendix on page 66.

5. Top Talent / Top Teams • Leadership traits: Builders, problem solvers, courageous, deliver results (right way!)

Five Key How To’s

#5

31

27%

19%

54%

A balanced team of...

…home grown talent

and external hires

>10

years

0-5

years

6-10

years

We attract talent from…

…many world class companies

Goodyear’s Leadership Team Experience Profile – Top 130 Executives

People make the difference … and we have strong leadership …

that continues to get stronger

Terms: years of

Goodyear

service

Key How To’s

Lead in innovation

Target highly profitable market segments

Supply reliability and leverage global scale

High ROI to support targeted product market segments

Best team

32

WINNING FORMULA

Value of the Goodyear Brand

Integrity

Innovation

Reliability

“Supplier of the Year”

Trust

The Goodyear brand is a differentiator in a competitive market 33

Summary

34

Our view of industry MegaTrends is unchanged and offers

significant profit opportunities for Goodyear and the Industry

Our strategy works…and is delivering record results

We are staying the course on our strategy and focusing our

attention on execution

We remain vigilant in a competitive, cyclical industry, but

confidence in our brand, our strategy and our team allows us

to…

• Announce significant SOI growth targets

• Announce a balanced capital allocation plan that includes dividends and

stock buy back

Goodyear has a tremendous legacy…but the best is yet to come

North America

Operational Update

Steve McClellan President – North America

-$305

$18

$276

$514 $577

Takeaway Message

2009 2011 2010 2012

North America

Path to Profitability

Exceeded $450M SOI goal one year early, despite weak industry volumes

Q2 2013 TTM

Margin

6.4% Margin

5.3%

Margin

2.8%

240M Units 239M Units Flat Consumer Replacement Industry

March 2011

Investor Day Target

$450M in 2013

36

$ In millions

Takeaway Message

North America

Path to Profitability

Fundamental change drove North America turn around

$514

-$305

Capture

Brand Value

Lower

Cost 2009 2012

Market Back Innovation

Award Winning Products

Transition to HVA

Targeted Market Segments

Close Union City

Reduce Supply Chain cost

Addressed Legacy costs

USW Contract

Today’s

Focus

37

$ In millions

North America

Sustainable Profitability

Our business is fundamentally different:

Consumer Replacement business

Consumer OE business

Commercial Truck business

Shift from LVA to HVA driving sustained profitability

38

Volume driven to fill the

factories, primarily LVA

Multiple brands including

private label

Reliant on industry volume

All things to all customers and

consumers

Where We Were

Market back strategy, majority

HVA and Goodyear brand

Approaching 100% Branded

portfolio

Profitable through all economic

cycles

Strategically focused in

targeted market segments

Where We Are

Fundamental changes have created a sustainable business

North America

Consumer Replacement

39

Significant HVA growth in targeted segments

Industry 2013 – 2018*

Commuter

Touring

Perfor-

mance

All-

Terrain Winter

-

Premium

Mid-Tier

Economy

+14%

Overall industry flat 2009-2012

Targeted segments growing faster than

industry, and those segments are HVA

Goodyear brand is well positioned in

these targeted segments

Invested in increased HVA capacity

North America


The Driving Force in the Industry

* Source: Internal Modeling 40

Retailer’s Needs Response

Attract more customers

Grow volumes in fastest growing HVA

segments

Increased sales, margins and

profitability

Innovative branded products to meet HVA

market demand

Goodyear brand generates demand for

retailer

Value of Goodyear brand realized through

improved margins for both customer and

Goodyear

Historically focused primarily on the sales of private label tires

“Large Regional Retailer”

Capturing value through HVA branded products

North America


41

Business not profitable

Focused on driving volume to

fill factories

Long term fixed price contracts

OE managed as “standalone”

business

Where We Were

Profitable business

Market back strategy, focused

on HVA targeted market

segments

Contracts reflect HVA products

and raw material indexes

Integrated approach; aligned

with the replacement business

Where We Are


North America

Consumer OE

42

Automotive Trends

Fuel Efficiency

Integrated Technology (navigation,

Bluetooth, satellite radio, etc.)

Larger Rim Diameter/Low Profile

Improved Handling & Styling

HVA impacting all classes of vehicles

Takeaway Message

Essentially all new vehicles will be equipped with HVA tires

North America


2013 2018

263M +97M -86M 252M

Retired New

Vehicles

Registered vehicles(a)

(a) Source: Global Insight May 2013


HVA

43

OEM’s Needs Response

Reduced tire weight

Aggressive wet and dry grip

Lower rolling resistance, less noise

Extended mobility – no spare tire

Meet government regulations

Next generation HVA tire with…

Fuel economy

Enhanced traction

New tread compound

Run on Flat technology

Seeking to respond to consumers’ needs for high-performance vehicle

“Original Equipment Manufacturer”

Takeaway Message

Capturing value through HVA branded products

North America


44

Where We Were

Where We Are


LVA products

Incomplete service network

Focused on volume to fill

factories

Not realizing value for our

products and services

Industry leading HVA products

Complete service network –

largest in the U.S.

Market back product portfolio

aimed at targeted market

segments

Realizing value for our

products and solutions

North America


45

We’ve created value, and customers are benefiting from it

North America


Takeaway Message Need for HVA products and solutions to improve fleet profitability

Slow growth industry

Fragmented service and product

providers

Government regulations impacting

emissions, fuel efficiency, and drivers

Economic uncertainty impacting

investments

Truck Industry Class 4-8 Ton Miles(a)


2008 2018

720M 665M

Retired

2012

(a) Source: FTR & Associates and internal models

660M

CAGR

~ +1%

CAGR

~ 0%

Quarterly Average

46

Fleet Needs Response

Premium fuel efficient tires

Product durability

Consistent billing & pricing

Nationwide product & service availability

Tire performance tracking

Seeking to improve profitability through lower cost/mile and increased uptime

“Large Fleet”

Takeaway Message Capturing value through HVA branded products and solutions

North America


Integrated solution with tires &

services…..

HVA fuel efficient tires

Complete product & service

network

Nationwide coverage with more

than 2,000 Locations

24/7 service including roadside

47

North America Summary

• North America aligned to the Goodyear Strategy

Roadmap

• Path to profitability driven by execution against key

strategies

• North America creating economic value

• Fundamental changes enabling sustainability

48

Financial Summary

Darren Wells Executive VP and CFO

2010-2013

Record

Results

2013 SOI Outlook

~$1.5B

• Price/mix

• Selective

approach on

volume

• Cost savings

• Invest for

growth

Our Financial Journey

50

Our Journey

2004-2007

Turnaround

2008-2009

Great

Recession

Avg SOI(a)

$960M

• Asset sales

• 4-point cost

savings plan

• New product

engine

• Exit wholesale

private label

Avg SOI

$590M

• New products

• Increase cost

savings

• Constrain

CapEx

• Reduce

inventory

2001-2003

Survival

Avg SOI(a)

$350M

• Financial

restructuring

• Leadership

changes

Multi-stage Journey Positions the Business for Value Creation

2014-2016

Consistent

SOI Growth

SOI

Grow 10-15%/yr

• Growth & cost

• Investment

grade Balance

Sheet

• Balanced

Capital

Allocation

(a) Segment Operating Income for 2001 – 2006 utilized in the averages represents the sum of the individual tire business unit SOI amounts.

51

~$1,500

2013 2016

Balanced plan to grow SOI at 10% to 15% per year based on growth and cost

Segment Operating Income Target

Part Growth

• Sales margin and

overhead absorption on

sales growth (3-5 million

units / year)

Part Cost

• Structural cost savings

(focus in EMEA)

• Cost savings > inflation

o Offset by added

investments in R&D and

advertising / marketing

$ In millions

2014 - 2016 SOI Target $5.5 - $5.8

Corporate Other ~ (400)

EBIT ~ 5.1 - 5.4

Depreciation ~ 2.1

EBITDA ~ 7.2 - 7.5

Pension Expense ~ 0.6 - 0.7

2014 - 2016 EBITDAP ~ $7.8 - $8.2

52

• Interest Expense ~$1.2 - $1.4

• Taxes Paid ~ $0.8 - $1.0

• Sustaining CapEx ~ $2.0 - $2.2

• Working Capital ~ $0.0

• ~$4.0 - $4.6

Capital Allocation Plan - Cumulative 2014-2016

Sources / Uses of Cash Flow

Note: All estimates based on current assumptions and available data

Cash Available for

Deployment

• Dividends / Share

Repurchase

• Growth CapEx

• Debt Reductions

(incl. Pension)

• Restructurings

~$3.6 - $3.8

Significant cash available for deployment to further enhance shareholder value

Maintaining the Business Driving Value

~ (0.4)

$ In billions

53

Cumulative Cash Available for Deployment $3.6 - $3.8B

Capital Allocation Plan – Driving Value 2014 - 2016

Capital allocation plan provides immediate returns to investors while

strengthening the balance sheet and continuing investment for future growth

Growth Capex

Debt Repayment /

Pensions

Restructurings

$1.1 - $1.3B

$1.4 - $1.7B

$0.5 - $0.7B

Shareholder

Return Program $0.3 - $0.4B

$ In billions

Capital Expenditures

• Continue to get strong returns from past “growth capex” investments

• Ongoing projects discussed at 2011 investor day on track – helping drive

2014-2016 earnings growth

• 2013 capex for “sustaining” (excluding growth projects) consistent with /

slightly below assumption of ~$700 million

• Several large projects complete / nearly complete in 2013

– Growth capex likely down in 2014

• Continued growth capex required (especially 2015 & beyond) as added

capacity is required for growth in HVA (excluding Western Europe)

54

Continued growth capex required albeit at lower levels for 2014

55

Enabling Investments • Investments focused on supporting, driving and sustaining profitable growth

North America Asia

EMEA Latin America

Lawton Modernization

CapEx (2010-2013): ~$150 million

Benefit: Convert 5 mil LVA consumer tires to HVA

Fayetteville Modernization

CapEx (2008-2013): ~$175 million

Benefit: Convert 4 mil LVA consumer tires to HVA

Pulandian (China) Plant

CapEx (2008-2014): ~$775 million (net of incentives)

Benefit: 5 mil tires/year consumer HVA & 0.6 mil truck

Japan OTR Plant Expansion

CapEx (2011-2014): ~$250 million (funded by customers)

Benefit: Add large Earthmover tire capacity

Equipment Upgrades (multi-plant)

CapEx (2011-2016): ~$400 million

Benefit: Lead performance in tire labeling

Furstenwalde (Germany) Expansion

CapEx (2011-2016): ~$150 million

Benefit: Add 1 mil tires/year consumer HVA

Chile Expansion

CapEx (2008-2013): ~$475 million


Brazil Expansion/Modernization

CapEx (2011-2014): ~$250 million


Driving successful completion of growth projects we announced at 2011 Investor Day

Ongoing Growth Capex Projects

Capital Expenditures

56

Investing consistent with our business plans

$ In millions

2013E 2014 2015-2016Current Growth Projects

Lawton Modernization 5

Fayetteville Modernization 15

EMEA Modernization (multi-plant) 65

Furstenwalde Expansion 45

Chile Expansion 45

Brazil Modernization 105

Pulandian (China) Plant 25

OTR (Japan) Expansion 150

Total Current Projects 455

Future Growth Projects n/a

Total Growth CapEx 455 200 to 300/yr 400 to 500/yr

Sustaining CapEx 645 ~700/yr ~700/yr

memo: Depreciation ~700 ~700 ~700

Total CapEx ~$1,100 $900 to $1,000/yr $1,100 to $1,200/yr

Complete or Nearly Completed in 2013

Replace worn outequipment, support of

owned Retail stores, IT, environmental, safety,

molds, etc

Balance Sheet Management

3 Focus Areas:

1. Target leverage of 2.5x Adjusted Debt / EBITDAP by 2016

2. Continue to pursue long-term pension strategy

– Will consider pre-funding beginning in 2014

3. Continue to reduce need for balance sheet cash

57

Addressing balance sheet to get to investment grade is a key priority

58

• Leverage target of ~2.5x Adjusted Debt / EBITDAP consistent with commitment to

achieving investment grade metrics

o Reduces cost of capital

o Improves global access to credit

Pension / debt drives improvements to earnings and cash flow

while strengthening the balance sheet

Adjusted Debt (a) / EBITDAP (b) Adjusted Debt (a)

a) Adjusted Debt is Total Debt plus Global Pension Liability.

b) EBITDAP is EBITDA plus Global Pension Expense.

Note: See reconciliations in Appendix on page 67.

Balance Sheet Management – Leverage Targets

$ In millions

4.3x 3.9x

4.1x

3.6x

2010 2011 2012 2013E 2016T

2.3x – 2.5x

$7,294

$8,298 $8,608 $8,300

2010 2011 2012 2013E 2016T

$6,600 - $6,900

o Greater ability to move debt overseas

o Ability to reduce cash balances

• In February announced intention to freeze / fund / de-risk our remaining

U.S. defined benefit pension plans

• In Q1 – Q2, completed funding / de-risking of previously frozen U.S. plans

• In Q3, announced agreement with USW that gives us ability to freeze the

remaining plans within the life of the contract

– Requires plans to be fully funded

• Will evaluate appropriate timing to pre-fund / freeze USW plans beginning

in 2014

– Interest rate increase has reduced unfunded obligation during 2013

– Additional interest rate increases have modest impact on required

contributions over next 5 years

– Asset returns versus plan assumptions remain a risk

59

Balance Sheet Management – U.S. Pension Strategy

Goodyear U.S. Hourly Pension Plans: Discount Rate Scenarios

60

Pre-funding provides stability / avoids discount rate and asset return risk;

rising rates provide limited benefit to required contributions (a) Assumes 8.5% asset returns, decreasing over time as assets shift toward a greater mix of fixed income as the U.S. hourly plans become more fully funded

(b) Discount rate as of June 30, 2013

$ in millions

Current Discount Rate Scenario:

4.5% Discount Rate (b) $1,030 ~$1,100

Increasing Discount Rate Scenario:

6.0% Discount Rate $815

Impact of Rising Rates ($215)

Estimated

5-Year Cash

Contributions

Estimated

Pre-Funding

Amount (a) Assumes target asset

return achieved

61

Regular Dividend

$55 million per year

Shareholder Return Program

$0.05 per share quarterly dividend

beginning in the fourth quarter

• First dividend has been declared for

shareholders of record on November 1

to be paid December 1

Anticipate increases over time as cash

flow and leverage improves

Shareholder return program demonstrates strong commitment

to shareholders and confidence in strategy

Share Repurchase

$100 million

Repurchases to offset new shares

issued under equity compensation

programs

Meeting Recap

62

Based on our confidence in the business…

Reconfirming 2013 outlook

• SOI of about ~$1.5 billion

• Positive cash flow (excluding pension pre-funding)

New Targets through 2016

• Annual 10-15% SOI growth per year through 2016

• Annual positive cash flow (excluding pension pre-funding)

• Targeting 2.5x Adjusted Debt / EBITDAP

Balanced Capital Allocation Plan

• Dividend and stock buy-back plan beginning Q4/2013

Goodyear committed to creating sustainable value for shareholders

Question and Answer

Session

APPENDIX

64

Use of Historical and Forward-Looking Non-GAAP Financial Measures

This presentation contains our historical total segment operating income for certain periods, our total

segment operating income outlook for 2013, our targeted total segment operating income growth rate for 2014-

16, our historical ratio of Adjusted Debt to EBITDAP for certain periods, and our targeted ratio of Adjusted

Debt to EBITDAP for 2016. Total segment operating income and the ratio of Adjusted Debt to EBITDAP are

important financial measures for the company but are not financial measures defined by U.S. GAAP, and

should not be construed as an alternative to corresponding financial measures presented in accordance with

U.S. GAAP.

Total segment operating income is the sum of the individual strategic business units’ segment operating

income as determined in accordance with U.S. GAAP. The most directly comparable GAAP financial measure

is Income before Income Taxes. Management believes that total segment operating income is useful because it

represents the aggregate value of income created by the company’s SBUs and excludes items not directly

related to the SBUs for performance evaluation purposes.

Adjusted Debt is the sum of our total debt and our global pension liability, each as determined in accordance

with U.S. GAAP, and EBITDAP, as adjusted, represents net income (the most directly comparable GAAP

financial measure) before interest expense, income tax expense, depreciation and amortization expense, net

periodic pension cost, rationalization charges and other (income) and expense. We present the ratio of

Adjusted Debt to EBITDAP because we believe it is widely used by investors as a means of evaluating a

company’s leverage. It should be noted that companies may calculate the components of this ratio differently;

as a result, the ratio of Adjusted Debt to EBITDAP as presented herein may not be comparable to similarly-

titled measures reported by other companies.

We are unable to present a quantitative reconciliation of our forward-looking non-GAAP financial measures to

the most directly comparable GAAP financial measures, because management cannot reliably predict all of the

necessary components of those GAAP financial measures without unreasonable effort. These components

could be significant to the calculation of those GAAP financial measures in the future.

65

Reconciliation for Segment Operating Income / Margin

$ In millions

66

2013 2012 2012 2011 2010 2009 2008 2007

Total Segment Operating Income 428$ 336$ 1,248$ 1,368$ 917$ 372$ 804$ 1,230$

Rationalizations (13) (26) (175) (103) (240) (227) (184) (49)

Interest expense (102) (83) (357) (330) (316) (311) (320) (468)

Other income / (expense) 14 (37) (139) (73) (186) (40) (59) (9)

Asset write-offs & accelerated depreciation (5) (4) (20) (50) (15) (43) (28) (37)

Corporate incentive compensation plans (35) (15) (69) (70) (71) (41) 4 (77)

Corporate pension curtailments/settlements - - (1) (15) - - (9) (64)

Intercompany profit elimination 3 9 1 (5) (14) (13) 23 (11)

Retained expenses of divested operations (6) (5) (14) (29) (20) (17) - (17)

Other (28) (9) (34) (75) (47) (37) (45) (53)

Income before Income Taxes 256$ 166$ 440$ 618$ 8$ (357)$ 186$ 445$

United States and Foreign Taxes 63 63 203 201 172 7 209 255

Less: Minority Shareholders Net Income 5 11 25 74 52 11 54 70

Goodyear Net Income (Loss) 188$ 92$ 212$ 343$ (216)$ (375)$ (77)$ 120$

Sales $4,894 $5,150 $20,992 $22,767 $18,832 $16,301 $19,488 $19,644

Return on Sales 3.8% 1.8% 1.0% 1.5% (1.1)% (2.3)% (0.4)% 0.6%

Total Segment Operating Margin 8.7% 6.5% 5.9% 6.0% 4.9% 2.3% 4.1% 6.3%

June 30,

Twelve Months Ended

December 31,

Three Months Ended

EBITDAP, Adjusted Debt & Leverage Ratio Reconciliations

67

$ In millions

2012 2011 2010

Net Income (Loss) $237 $417 ($164)

Interest Expense 357 330 316

Income Tax Expense 203 201 172

Depreciation and Amortization 687 715 652

Net Periodic Pension Cost(a)

307 266 300

Other(b)

314 176 426

EBITDAP, as adjusted $2,105 $2,105 $1,702

2012 2011 2010

Notes Payable and Overdrafts 102 256 238

Long Term Debt / Capital Leases due Within a Year 96 156 188

Long Term Debt and Capital Leases 4,888 4,789 4,319

Total Debt $5,086 $5,201 $4,745

Unfunded Pension Liability $3,522 $3,097 $2,549

Adjusted Debt $8,608 $8,298 $7,294

Adjusted Debt/EBITDAP 4.09x 3.94x 4.29x

(a) Net periodic pension cost excludes curtailments/settlements and termination benefits.

(b) Other includes rationalization charges and other (income) and expense.

Year Ended December 31,

December 31,

2013 investor day - goodyear corporate · tire business •china consumer capacity still under...

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