CHICAGO - Goodyear Tire & Rubber Co. eliminated its quarterly dividend on Tuesday, a move that is expected to boost cash flow at the financially struggling company by $84 million annually.
The Akron, Ohio, company has paid a dividend every year since 1937. It had reduced the quarterly payout to 12 cents a share in October 2001 from 30 cents.
Goodyear, one of the world's largest tire producers, lost $203.6 million in 2001 and is expected to report near break-even results for 2002. It has shed thousands of jobs in recent years as it struggles with worldwide industry overcapacity and North American sales that have lagged the industry.
Trading in shares of Goodyear was halted briefly on the New York Stock Exchange for the news.
Goodyear already has taken several steps to improve its financial results. It cut about 3,000 jobs, or 3 percent of its work force, last year after reducing its head count by 10,000 workers the year before that.
"The elimination of the dividend is an important step in a series of actions the company is taking to improve its financial flexibility in light of recent disappointing results and challenging economic conditions," said Robert J. Keegan, who took over as chief executive officer on Jan. 1, in a press release.
Keegan is expected to announce details of his turnaround plan for Goodyear's North American tire unit when the company reports its fourth-quarter results. The company hasn't set a date yet.
Analysts said Goodyear's decision to eliminate the dividend isn't surprising given its problems.
The company's sales have lagged those of the industry as consumers moved from concentrating on quality following a major Firestone tire recall to focusing more on price.
"They pushed through some pretty aggressive price increases in selected segments last year that weren't all matched by competitors," said David Bradley, a J.P. Morgan analyst.
The company last week said it might cut some North American tire production capacity by as much as 15 percent, but added it has no plans to shut any plant in the near future.
Bradley said the company may trim capacity in its unprofitable product lines. Such areas in the past have included business with original equipment manufacturers, private labels and its distributor business.
"That's probably what we're going to see next," Bradley said.
Goodyear also faces other problems, such as increased raw material prices and higher pension costs, that have some analysts worried about the company's liquidity.
In a 10-page report issued Tuesday morning, UBS Warburg analyst Saul Rubin said Goodyear has considerable debt coming due the next three years and will have a serious "liquidity crunch" as a result.
"In the absence of a stunning recovery, free cash from operations will not be sufficient in our view," he wrote. "Net income could be nonexistent for a sustained period and an extra squeeze in working capital and capital spending could be limited."
He predicted the elimination of Goodyear's dividend and asset sales.
Goodyear denied that it has any liquidity problems.
"With our cash on hand, available cash flow and available credit lines, we expect to be able to meet our obligations," said spokesman Keith Price.