Goodyear profit beats estimates, shares jump

By David Bailey

DETROIT (Reuters) - Goodyear Tire & Rubber Co (GT.N: Quote, Profile, Research) posted a stronger-than-expected quarterly profit on Friday, driven by price increases, the sale of more expensive tires and favorable foreign exchange rates, sending its shares up 6.4 percent.

Goodyear, the largest U.S. tire maker, said the slowing U.S. economy remained a concern and it would likely cut production by 5 million tires in North America over the balance of 2008 to align with lower demand from vehicle manufacturers.

The company also cut its industrywide forecast sharply for North American tire demand from manufacturers of cars and light trucks such as sport utility vehicles and pickups. It also cut its forecast for consumer replacement tire demand in the region.

Goodyear sold fewer tires worldwide in the first quarter due to weak demand from vehicle manufacturers in North America and from consumers in North America and Europe.

Softening consumer demand was mainly in lower-priced tires that produce lower profits and its average revenue per tire rose 7 percent. It also said it had not seen evidence of consumers trading down to less expensive tires.

"On balance, our view of Goodyear's performance for the quarter is highly positive," Calyon Securities analyst Mark Warnsman said in a note to clients.

Warnsman said raw material cost increases "remain a valid and ongoing concern," but he pointed to Goodyear's ability to more than cover those costs so far.

Goodyear reported first-quarter net profit of $147 million, or 60 cents per share, compared with a net loss of $174 million, or 96 cents per share, a year earlier. Sales rose 9.8 percent to $4.94 billion.