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Goodyear swings to profit in third quarter helped by sale of unit

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Goodyear Tire & Rubber Co., helped by the sale of its engineered products unit, swung to a big profit in the third quarter from a loss a year ago.

But strong results in Goodyear's international tire markets and an emphasis on high-margin premium tires in North America helped drive up Goodyear's operating income in the quarter and send the company's stock up 7.6 per cent.

Goodyear, the world's third-largest tire maker, said Tuesday that it earned US$668 million, or $2.75 per share, for the quarter ended Sept. 30, compared with a loss of $48 million, or 27 cents a share, a year ago. Sales were $5.06 billion for the quarter, up from $4.9 billion in the year-ago period.

On Aug. 1, Goodyear completed its sale of nearly all of its engineered products business for $1.48 billion to EPD Inc., part of Washington-based private equity firm The Carlyle Group. Goodyear said it expects to use the money to reduce debt, cover obligations for employee benefits and buyouts, and invest in its core tire businesses.

Goodyear recorded an after-tax gain in the quarter of $517 million, $2.12 per share, on the engineered products sale.

Discounting the gain and one-time charges, Goodyear earned 70 cents per share.

Analysts surveyed by Thomson Financial survey expected earnings of 53 cents a share for quarter.

Goodyear recorded a restructuring charge of $107 million, or 60 cents a share, in the year ago quarter that included the planned closing a plant in Tyler, Texas.

Through nine months of 2007, Goodyear made $550 million, or $2.44 per share, on sales of $14.9 billion, compared with year-ago earnings over the same period of $28 million, or 16 cents per share, on sales of $14.1 billion.

Taking out the engineered products unit, the nine-month period shows a gain of 39 cents per share from continuing operations in 2007 and a loss on that basis of 36 cents per share in 2006.

Goodyear's North American tire sales in the third quarter were down six per cent from a year ago, primarily because the company left some private label tire markets. But Goodyear also gained market share with its more profitable Goodyear brand tires.

Operating income of $66 million for that key segment was the highest since the third quarter of 2001 and up substantially from $19 million in the same 2006 quarter.

``Despite market challenges, our results are among the best ever achieved by Goodyear,'' said Robert Keegan, chairman and chief executive. ``We continue to improve, we have momentum in our markets, we continue to meet or exceed our goals and we continue to become a tougher competitor.''

Keegan told analysts on a conference call that demand for some of Goodyear's premium products has been so strong that the company now is experiencing supply constraints. Keegan said Goodyear is accelerating planned investments to boost capacity of high value-added tires.

Goodyear is also making the most of international growth.

``We had significant growth in our operations outside the U.S., where we enjoyed higher margins,'' Keegan said.

The four segments other than North America _ Asia Pacific Tire; Latin American Tire; European Union Tire; and Eastern Europe, Middle East and Africa Tire _ each achieved record sales.

Deutsche bank analyst Rod Lache noted in a report Tuesday Goodyear's higher margins for North American tires and improvement in Goodyear's Latin American and Asian markets.

``We continue to believe that Goodyear is on track with our expectations for significant earnings improvement driven by price/mix and cost savings,'' Lache said in his report.

Goodyear shares rose $2.05 to $29.16 in trading Tuesday. The shares have traded between $14.62 and $36.90 the past year.

Goodyear, based in Akron, has about 70,000 employees and makes tires and chemicals in 26 countries, including Canada.


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Goodyear swings to profit in third quarter helped by sale of unit
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