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  • The Goodyear Tire & Rubber Company 2003 Annual Report

  • G o o d y e a r 2 0 0 3

    Goodyear is the worlds largest tire company.Together with its U.S. and international subsidiaries and joint ventures, Goodyear manufactures and markets tires for most applications. It also manufactures and sells several lines of power transmission belts, hoseand other rubber products for the transportationindustry and various industrial and consumermarkets, as well as rubber-related chemicals forvarious applications. Goodyear is the worldslargest operator of commercial truck service andtire retreading centers. In addition, it operatesmore than 1,600 tire and auto service center outlets. Goodyear manufactures its products inmore than 80 facilities in 28 countries. It hasmarketing operations in almost every countryaround the world.

    The Goodyear Tire & Rubber Company1144 East Market StreetAkron, Ohio 44316-0001www.goodyear.com

    Trademarks owned by or licensed to TheGoodyear Tire & Rubber Company or its subsidiaries mentioned in this report include:Assurance, ComforTred Technology, Dunlop,Eagle, Eagle F1, Fortera, Fulda, ,Goodyear, HydraGrip, Kelly, Kristall Supremo,Sport Maxx, TripleTred Technology and Wrangler.

    Cover tire: Goodyear Assurance featuringTripleTred Technology

  • Financial Overview

    Table of Contents

    Year ended December 31

    (dollars in millions, except per share) 20022003 as restated

    Net Sales $ 15,119.0 $ 13,856.2

    Net Loss (802.1) (1,227.0)

    Per diluted share (4.58) (7.35)

    Total Assets $ 15,005.5 $ 13,038.7

    Consolidated Debt 5,077.4 3,643.0

    Total Shareholders Equity (13.1) 255.4

    Debt to Debt and Equity 100.3% 93.4%

    Cash Dividends per Share $ $ 0.48

    Common Shares Outstanding 175,326,429 175,307,433

    Average Number of Associates 89,293 94,122

    G o o d y e a r 2 0 0 3 1

    2 To our Shareholders

    7 Managements Discussion and Analysis

    of Financial Condition and

    Results of Operations

    37 Forward-Looking Information

    39 Consolidated Financial Statements

    43 Notes to Financial Statements

    102 Report of PricewaterhouseCoopers LLP,

    Independent Accountants

    103 Supplementary Data (unaudited)

    107 Comparison with Prior Years

    109 Board of Directors and Officers

    110 Facilities

    inside back cover Shareholder Information

  • To Our Shareholders

    ur energy, drive and determinedefforts are concentrated on the continued transformationof The Goodyear Tire & RubberCompany into a market-focused, cost-competitive company that provides superiorproducts and services, alongwith superior returns for ourshareholders.

    We are confident that wehave a winning strategy in place, and we areaggressively executing against that strategy. There remains much work to do, but the tide isbeginning to turn.

    The year 2003 was one of many accomplish-ments at Goodyear, with much of our focus direct-ed toward the North American Tire business, thenearly $7 billion operation that represents almosthalf of our sales. Other initiatives addressed ouroverall financial condition and sought to build on our global brand, product and distributionstrengths. We adopted very aggressive market-place and cost strategies to achieve our goals. Wemade fact-based decisions with passion, withspeed, and with the courage that is necessarywhen taking bold action.

    2003 Actions We completed a restatement of our previously

    reported financial results, which unfortunatelydelayed the release of our 2003 financial state-ments. As disappointing as it was for us to bein this situation, it was a positive factor thatour people identified the accounting issues inour overseas operations. We have taken stepsto address the issues identified during therestatement process, and we are implementingstrengthened and improved controls to ensurethat these problems do not reoccur. The entirecompany is committed to full and accuratepublic reporting.

    Six of our seven business units distinguishedthemselves with continued strong financial performance, resulting in an accelerated busi-ness momentum that has provided both finan-cial results and insights that are being appliedto our North American operational turnaround.

    We needed to rebuild relationships and credi-bility with our large network of independentdealers in North American Tire, and we accomplished that huge task.

    We launched a successful debt refinancingearly in the year to extend our obligations andposition our balance sheet to the point wherewe had the capability to progress our turn-around plan, and we succeeded with the completion of a $3.3 billion refinancing. This was a crucial first step in our refinancingprogram.

    O

    Robert J. Keegan

    Chairman, Chief Executive Officer & President

    2 G o o d y e a r 2 0 0 3

  • G o o d y e a r 2 0 0 3 3

    We completed very painful, but critically neces-sary job cuts to reduce our cost base. We didwhat was necessary.

    We concluded intense negotiations with theUnited Steelworkers of America in which weneeded significant cost savings to provide theCompany the financial flexibility to support our turnaround plans. Again, we met the challenge.We were able to meet our 2003 challenges

    one-by-one. Today we are continuing to driveimproved results and accelerate the businessprogress that we have established.

    Business MomentumOver the past three years, weve made significantstrides in terms of financial performance and market position in six of our seven businesses.Engineered Products, Chemical, European Union,Eastern Europe, Africa and the Middle East, Asiaand Latin America have experienced both marketand financial success for the second year in a row.We achieved this by focusing on the key featuresof the Companys turnaround strategy leader-ship, cash, cost and revenue growth. Our SixSigma initiatives continue to deliver for us as weimprove both our cost structure and our marketsensing.

    While our seventh business North AmericanTire is still in the early stages of recovery, we aredriving improvement in its key strategic areas.

    AssuranceThe exciting launch of the Assurance family oftires is just one of the many positive actions thathelps illustrate the new direction of Goodyear.

    This product family is a direct response to ourcustomers needs. At the 2003 North AmericanTire dealer conference, we promised to help ourcustomers jump-start their businesses with newproducts targeted at key consumer benefits. Fromthe very beginning, Assurance was a fully integrat-ed endeavor between our technical, manufactur-ing and marketing teams. The tire was developedwith unprecedented speed, utilizing our very best

    technology and extremely talented associates. Wefulfilled our promise.

    The new tires are distinctive. They offer industry-leading performance. Assurance featuringComforTred Technology offers a smooth and quiet ride and provides the ultimate luxury drivingexperience. Assurance featuring TripleTredTechnology is a premium all-season tire designedto provide peace of mind in any driving conditions.When we unveiled these tires to our NorthAmerican dealers in February, they immediatelyrealized they would be selling the best broad-market passenger tires on the market. Theyresponded with excitement, enthusiasm and support.

    Consumers are contacting us to rave about the Assurance ride; they tell us the ride fromAssurance with ComforTred feels like theyre driving a new car. Assurance featuring TripleTredTechnology became available to consumers in lateApril, and promptly was accorded prestigious status as one of 20 hot new technology productsfrom Popular Science magazine. To quote thispopular magazine, With three zones one fordry roads, one for rain and one for icy conditions the Goodyear Assurance tire with TripleTred technology is the most complete approach to all-season tires weve seen. The new kid in this tire is the Ice Zone, whose embedded volcanic sandsupplies extra grip when plain old rubber justwont do. The Assurance with TripleTredTechnology was one of just two products singledout among the 20 as truly innovative.

    Actual demand for the Assurance family isthree times our initial estimates and we haveexpanded our production from Lawton, Oklahomato include our tire plants in Napanee, Ontario;Gadsden, Alabama; and Tyler, Texas.

    It is clear that Assurance is a brand that will bea success, and it joins our existing strong portfoliofeaturing Eagle, Wrangler and Fortera tires.

    We couldnt be more delighted. The same is true with our dealers. However, the real benefi-ciaries will be the car owners who purchaseAssurance tires.

  • Dollars in millions

    EUROPEANUNION

    EEAME LATINAMERICA

    ASIA EPD CHEMICAL

    *Restated

    200

    150

    100

    50

    0

    2001*2002*2003

    Segment Operating Income

    4410

    013

    4

    1493

    147

    8510

    714

    8

    2044

    50

    1541

    48

    4289

    119

    Seven Reasons to BelieveOur positive business momentum is a direct resultof a plan based on seven strategic drivers of ourbusiness what we refer to as the Seven Reasonsto Believe in Goodyear. These seven strategies areat the heart of all of our Companys activities moving forward, and we are fully focused on their successful execution.

    LEADERSHIP

    These seven initiatives are not in rank order ofimportance, with the single exception being leadership. The rationale is simple: without theright leadership, the other strategies could not besuccessfully executed. We have taken major stepsglobally. We have made both broad and deepchanges to our leadership teams and our organi-zational structure. Particular attenti

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