Goodyear Tire's Challenges Amid Rising Tariffs, Declining Sales and Weak Relative Performance

Goodyear Tire & Rubber Company (GT) faces significant headwinds, including rising tariff costs, declining sales, and relative price weakness. The company estimates that tariffs will result in an annual cost of around $350 million, and costs are rising due to retooling and technology changes. Sales volumes are expected to decline year-over-year worldwide, and the stock has been a long-term underperformer, down 10% over the past 5 years.

Goodyear Tire & Rubber Company (GT) is one of the world's largest tire manufacturers, employing nearly 70,000 people and deriving approximately 60% of its revenue from North America. However, the company is facing significant headwinds, including rising tariff costs, declining sales, and relative price weakness.

Tariffs, implemented by the Trump administration, are estimated to result in an annual cost of around $350 million for Goodyear. These tariffs impact consumer tires, imported raw materials, and commercial tariffs. The company expects raw material costs to rise by approximately $50 million in the third quarter, ballooning to a $180 million headwind in the fourth quarter [1].

In addition to tariffs, Goodyear is investing heavily in retooling and technology changes, which are expected to result in 2025 CAPEX spending of around $900 million. This increased spending, driven by more complex tire designs, is leading to decreasing cash flows.

Sales volumes are expected to decline year-over-year worldwide due to sufficient tire stock in North American wholesalers and stagnant demand overseas, particularly in the Asia-Pacific region. Goodyear produced fewer tires in the second quarter, making it more difficult to spread fixed costs and leading to an additional $50 million in costs.

Goodyear shares have been long-term underperformers, down 10% over the past five years, while the S&P 500 Index has nearly doubled. Analysts have revised their ratings and target prices, with HSBC cutting the target price to $9.5 from $15.5 and changing the recommendation to hold from buy [2].

In conclusion, while Goodyear remains a global leader in tire manufacturing, it faces significant challenges, including rising tariff costs, declining sales, and relative price weakness. Investors should closely monitor these developments as they may impact the company's financial performance.

References:
[1] https://www.nasdaq.com/articles/bear-day-goodyear-tire-gt
[2] https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3UC0HK:0-home-depot-news-premier/