3rd UPDATE: Goodyear 3Q Profit Overshadowed By 4Q Outlook; Shares Fall

Goodyear Tire & Rubber Co. (GT) reported its first profit in the past nine months but saw shares fall after saying it expects its North America earnings to drop by as much as $125 million in the fourth quarter.

The fourth quarter will be affected by growing overhead costs as the company struggles with a drop in demand for commercial truck tires. The company is currently running its commercial truck production at 41% of its capacity.

"In North America we expect Q4 segment operating income to be down approximately $75 [million] to $125 million compared with Q3 reflecting the impact with seasonal trends on unit sales and reduced activity from our other tire related businesses," said Chief Financial Officer Darren Wells. "Again Q4 is essentially inline with our plans in 2009."

Still, the news didn't sit well with investors as Goodyear's shares fell as much as 22% before recovering. The shares were trading at $13.74, down $2.99 or 17% in earlier trading Wednesday.

For the third quarter, earnings were $72 million, or 30 cents a share, compared to a profit of $31 million, or 13 cents a share, for the same period a year earlier, the Akron, Ohio, company said in a statement Wednesday. Sales fell 15% to $4.39 billion from $5.17 billion for the same period a year earlier.

Excluding items, Goodyear reported a profit of 45 cents a share, exceeding the average analyst estimate of 40 cents a share, according to a survey by Thomson Reuters.

The largest North American tire maker has wrestled with the downturn in demand as consumers slow their purchases of new vehicles and delay tire replacement.

The company received a boost from falling oil prices, which reduced the cost of synthetic rubber and other tire building products such as carbon black. Goodyear said it saved $207 million on raw material expenses compared to the same period a year earlier.

Goodyear has moved aggressively to slash jobs in higher cost plants. It cut 300 positions during the third quarter, which is in addition to the approximately 5,500 jobs cut in the first half of the year. The company's full-year target was a reduction of 5,000 jobs.

The company also achieved $195 million in new savings during the third quarter, for a total of $540 million in the first nine months of 2009.

Goodyear plans to trim another $215 million in expenses over the life of its new four-year union contract reached with the United Steelworkers late last month.

The union deal relaxes work rules, ends the defined pension benefit plan and leaves the Union City, Tenn., plant in an "unprotected status," meaning Goodyear could shut the facility.

Lack of auto maker demand for products hurt Goodyear across all of its segments.

In North America, Goodyear sold 1 million fewer tires as auto maker sales fell 21% compared to the same period a year earlier. The company shipped 17.1 million tires as auto makers and commercial truck makers cut production during the economic slowdown.

The number of tires shipped in the company's Europe, Middle East and Africa unit fell to 17.8 million from 19.7 million as auto maker and commercial truck sales dropped 20%.

Latin America's tire volume fell slightly to 5 million from 5.3 million. Auto maker and commercial truck sales dropped 8%.

China's tire volume was unchanged at 5.1 million units.

-By Jeff Bennett, Dow Jones Newswires; [e-mail]; 248-204-5542