CHICAGO -- Goodyear Tire & Rubber Co., which has been battered by weak industry demand and other problems, said on Thursday its lenders have agreed to changes in one major credit line and a temporary waiver in another.
The moves failed to reassure investors. Goodyear shares, which have already fallen by 30 percent this week, fell as much as 6 percent on Thursday to their lowest level in decades. Shares closed down 10 cents to $3.57 on the New York Stock Exchange on Thursday
Like all tiremakers, Akron, Ohio-based Goodyear has been battling higher raw material prices and weak demand due to the slow U.S. economy.
Goodyear's sales have lagged the industry as it instituted price increases and its pension costs have risen dramatically. And although the company has cut thousands of jobs in the past several years, the restructuring has failed to help the bottom line.
Analysts said that while the credit line changes indicate some progress, Goodyear still has a lot to work to do before it's out of the woods.
"It's a long-term issue, not something that's settled by pushing off compliance with covenants," said Efraim Levy, an equity analyst with Standard & Poor's Ratings Services, who does not own the stock and whose firm doesn't do any investment banking for Goodyear.
"Not only do you have to report earnings but you have to generate cash to fund obligations," Levy said. "That's what's weighing on the stock."
Goodyear, one of the world's largest tire makers, said it remains in talks with banks and will not report results for 2002's fourth quarter until negotiations are complete. The company reiterated that it expects to meet its financial obligations.
Goodyear lost $203.6 million in 2001 and is expected to report near break-even results for 2002 before a charge to cut an additional 700 jobs.
The company said its banks have given it a waiver until March 7 on a clause that would have required the payment of $500 million more than required by federal law to its pension fund.
Goodyear also said its lenders agreed in December to amend a credit line for accounts receivable.
As part of that agreement, the expiration was extended to December 2003 from February. The amount of money available dropped to $700 million from $825 million as the number of banks involved went to four from five. In addition, the minimum credit rating required was lowered one notch to BB-/Ba3 from BB/Ba2.
Goodyear said it had more than $600 million in cash on hand at the end of January. It also has $300 million in other committed lines of credit and $400 million in uncommitted lines of credit available as of Dec. 31.
In addition, the company has about $400 million available for international accounts receivable. That's up from $150 million at the end of 2001 due to changes made during the fourth quarter of 2002, according to Goodyear spokesman Keith Price.