CHICAGO -- Goodyear Tire & Rubber Co. said Wednesday it may build tire factories in Eastern Europe and Asia in addition to planned investments in existing plants for an expansion in production.
Goodyear, the largest U.S. tire maker, also said it would buy back nearly $1 billion of debt and its multiyear restructuring remains on track for $1.8 billion to $2 billion of annualized gross cost savings by the end of 2009.
The company previously said it intended to invest in existing factories to increase capacity for higher-profit tires by 40 percent globally and to raise production capacity by 33 percent in existing low-cost plants.
Goodyear said the investments in existing plants, and the added plants in Eastern Europe and Asia, would drive its plan to have half of its global tire production in low-cost countries by 2012.
J.P. Morgan analyst Himanshu Patel said the firm's current estimates on Goodyear remained largely intact with the announcements. It has an "overweight" rating on Goodyear.
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"It is uncertain what Goodyear's new investment plans, while beneficial for long-term growth, could mean for near-term (capital spending) requirements," Patel said in a note, adding that they could have a fairly rapid payback.
Details such as the timing of plant construction and cost will be announced after final decisions are made. Goodyear is considering production of both high-profit and low-cost tires at the plants aimed at the consumer and commercial markets.
The tire maker also said it would invest in plants in Fayetteville, North Carolina, and Gadsden, Alabama, to increase their capacity for producing higher-profit tires.
Goodyear has closed or plans to close plants or cut tire production at facilities in New Zealand, the United Kingdom, Morocco, the United States and Canada in recent years for the restructuring.
The company wrapped up its major planned asset sales for the restructuring a few weeks ago with the divestment of its engineered products unit. It plans to use proceeds from the sale to pay down debt, fund a health-care trust for union retirees, and expand its business.
Goodyear also said it would repay $950 million of debt, including a $300 million third-lien term loan, on Thursday, and $650 million of secured notes in the first quarter of 2008. It is considering other debt buybacks as well, it said.
Those early payments, and an earlier redemption of $315 million of senior notes in June, will save Goodyear more than $125 million per year in interest expenses, it said.
Goodyear has raised its cost-savings targets and extended the restructuring previously, most recently in April. Through June, it had reached nearly $750 million of the savings.
The tire maker has focused on selling more expensive tires and raising prices over the past three years to more than offset the rising cost of raw materials such as natural and synthetic rubber, steel cord, fabric and carbon black.
In 2006, about 71 percent of Goodyear tires sold were for the replacement market, which generates better margins than sales to manufacturers. About 91 percent of tires were produced for the consumer passenger market.
Goodyear shares were off 64 cents, or 2.34 percent, at $26.71 Wednesday afternoon on the New York Stock Exchange
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