Research Update: Goodyear Tire&Rubber Co. Outlook Revised To Negative On Margin Contraction, Weaker Cash Flows; 'BB-' Rating Affirmed

The Goodyear Tire&Rubber Co.'s (Goodyear) fourth-quarter margins were weaker, principally due to a decline in volumes and margins in Europe. We believe the lower volumes also led to higher-than-expected working capital usage, which further reduced free operating cash flow (FOCF). Although we expect cash flow generation will improve in 2023, the level of margin and cash flow recovery will depend on the recovery in Europe and the enduring strength of the U.S. consumer, which we expect to weaken this year as the economy goes into an expected recession. Consequently, we revised our outlook to negative from stable. We also affirmed our 'BB-' issuer credit rating on the company. In addition, we affirmed the 'BB-' issue-level ratings on its

...- The Goodyear Tire & Rubber Co.'s (Goodyear) fourth-quarter margins were weaker, principally due to a decline in volumes and margins in Europe. We believe the lower volumes also led to higher-than-expected working capital usage, which further reduced free operating cash flow (FOCF). - Although we expect cash flow generation will improve in 2023, the level of margin and cash flow recovery will depend on the recovery in Europe and the enduring strength of the U.S. consumer, which we expect to weaken this year as the economy goes into an expected recession. - Consequently, we revised our outlook to negative from stable. We also affirmed our '##-' issuer credit rating on the company. In addition, we affirmed the '##-' issue-level ratings on its unsecured debt. - The negative outlook indicates that we could lower the rating if Goodyear did not sustainably improve its FOCF to debt above 5% while maintaining debt to EBITDA below 5x....

Research Update