Goodyear Tire & Rubber Co (GT) 2007 Q1 法說會逐字稿

At this time, I 'd like to welcome everyone to the Goodyear first quarter 2007 earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. (OPERATOR INSTRUCTIONS)

I'll now turn the call over Mr. Craig Dooley Investor Relations. Sir, you may begin your conference.

Good morning everyone and thank you for joining us for today's Goodyear first quarter 2007 results review and strategy update. Joining me on the call are Bob Keegan, Chairman ad CEO; Rich Kramer, President North America Tire and CFO and Darren Wells Senior Vice President Finance and Strategy. The web cast of this mornings discussion and the supporting slide presentation are available now on our web site, Investor.Goodyear.com. We expect to file our Form 10-Q later today

This mornings discussion will be available for replay after 3 PM Eastern time today by dialing 706-634-4556 or on our web site at Investor.Goodyear.com. Before we get started I need to remind everyone that our discussion this morning may contain certain forward-looking statements based on current expectations and assumptions that are subject to risk and uncertainties that can cause actual results to differ material. These risk and uncertainties are outlined in Goodyear filings with the SEC and in the news release we issued this morning. The Company disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise. Thanks again for joining us today, now I will turn the discussion over to Bob Keegan.

Well, thank you Craig and good morning everyone. All begin the call today by reviewing our first quarter highlights and the progress we are making against both our seven strategic drivers and the strong set of business platforms that now position us for profitable growth in the future.

Rich will then talk about the first quarter financial results in detail and I will come back at the end to update our outlook for 2007 and then we will open up the call for Q&As. Before I get into the first quarter highlights I want to take a moment to point our a change to our financial statements. As you know on March 23, we entered into an agreement to sell substantially all our engineered products business to the Carlyle Group for almost $1.5 billion. As a result, EPD has now been reported as discontinued operations. Our historical results will be revised to reflect the change and published in a separate 8-K in the next two weeks. To illustrate the change, in the first quarter we would have reported new sales of $4.9 billion dollars including EPD. With the discontinued operation adjustment we reported sales of $4.5 billion.

You'll note other changes in the income statement balance sheet and cash flow statements and our comments today will focus on continuing operations. Our first quarter results provide a strong start to 2007. Global sales form continuing operations were up 1% compared to last year, despite the on going impact of the 12-week strike by the steel workers and despite selling 2.1 billion fewer units due to our strategic decision to exit certain segments of the private label tire business at North America. Price mix improvements more than off set raw material cost increases and drove an 8% revenue for tire increase year-over-year. Now this reflects the continued success of our new high value added products and when you take into account the varies impacts of the quarter we believe our gross margin improved. Rich will cover this in more detail later.

Segment operating income from continuing operations of $226 million was down compared to $282 million last year. Principally due to the decline in North America's results. This years first quarter results were negatively impacted by $34 million due to the strike while last Q1 results saw a couple of significant items that improved results. Taking into account these items we feel this quarters results indicate a solid progress. Our emerging market of businesses in eastern Europe, Latin America and Asia, continue to perform very well. In the first quarter these business had total sales of about $1.2 billion and grew 11%, year-over-year Two of these businesses, eastern Europe and Asia Pacific set segment operating income records in the first quarter.

Eastern Europe's strong performance was driven by a 17% increase in replacement volumes. In Asia Pacific, our perform an was driven be continued strong price mix improvements. Now, Latin America's results were impacted by lower consumer replacement volume, which increased our conversion costs. The business also experienced a difficult year-over-year comparison due to a pension plan change in Brazil last year, which resulted in one on-time benefit in 2006. As we turn to the strike recovery in northern American tire. First we need to thank our associates for their outstanding efforts, and to thank our customers for their loyalties and their patience. While the 12-week strike technically ended with the ratification of the labor agreement on December 29th, the real work of strike recovery was just beginning for us.

I am pleased with the North American team in this regard on two fronts. First, they use a very robust business continuity process to quickly recover from the strike. Second, despite the distraction of the strike and the related recovery, the team maintained momentum in the core business. While more work remains to return inventory across the breadth of our product line to the level needed to provide all of our customers with the service they deserve, our progress in the first quarter exceeded our internal expectations. And I'll be more specific. During the fourth quarter conference call in February, we provided our estimate of the financial impact of the strike during 2007. The impact on North American tire was estimated at $200 million to $230 million for the full year. Our estimate was based here on a comparison of where we felt we would have been without the strike in terms of sales and production, versus where we expected to be during the strike recovery period in 2007. As you saw in our release, we have reduced substantially the estimated 2007 impact of the strike on our results to 100 million to 120 million.

Now, while this may seem like a significant change from initial projections over a fairly short period of time, consider two key factors, if you would. First, this was an unprecedented event for our company, our first significant strike in 30 years, making recovery predictions difficult. Second, given the weak consumer OE market, we had more production capacity available to produce tires for the replacement market. This combination resulted in higher production and higher sales levels than we previously expected. As we discussed in February, accelerating the pace of change and the speed of our decision making have become critical success factors at Goodyear, and we're accelerating the pause of change in everything we do, not just reflecting in our strike recovery. Consider the significant announcements that we've already made since the beginning of the year. We announced the elimination of tire production at Valleyfield and produced our last tire before the end of March, one week earlier than planned. We closed our unprofitable operations in Morocco. We signed a new five-year supply and marketing agreement with NASCAR. We introduced five impactful and innovative new consumer products in North America and four in Europe. We introduced a new get there advertising campaign in North America which we mentioned on the last call. We brought our north American factories back up to full prestrike production levels before the end of January. We repaid almost $1 billion of borrowings under our revolving credit lines. We announced a restructuring of our U.S. salary benefit plans. We announced and closed a credit facilities refinancing, resulting in interest expense savings and additional operational flexibility, and we'll have more to say on the call in a few minutes about that.

We also announced an agreement to sell the engineered products division for $1.475 billion, and we're not finished. Our focus on speed and accelerating the pace of change at Goodyear has just begun to have a major impact on our business model. As I said on past calls, we remain focused on the 7 strategic drivers are that have been the foundation of our progress to date, and I would like to comment today on just one of the seven, but an important one, leadership.

We recently announce several key changes to our leadership team. Most significantly, Rich Kramer, our CFO for the past three years, has taken over as President of North American Tire, in addition to the CFO responsibilities he will retain until we name someone to that position. Now, rich Rich has made tremendous contributions to our team in his role as CFO. And we are very pleased to have Rich rejoin our team in North America where he previously served as the head of finance. The unique perspective and understanding of the opportunities and challenges for each of our businesses that I think Rich gained as CFO will help him take the North American business to the next level.

Darren Wells, our treasurer for the past 4.5 years has also assumed a new roll. He was appointed Senior V.P. of Finance and Strategy. Darren has also made tremendous contributions to our team as you look at the problem over the last four years of our capital structure improvement plan. In his new roll, Darren will work closely with me to continue developing our corporate strategy, while maintaining his oversight of our business development and treasury activities, and finally Damon (Audia) assistant treasurer under Darren was named Vice President and treasurer providing treasury organization with yet another strong is talented leader. We continue to focus on leadership at all levels of our company. We strive here for a blend of talents and ideas that will move us toward achieving our strategic goals. As I said, we're actively recruiting a CFO, and will announce that individual once a decision has been made. Our focus on the 7 strategic drivers has resulted in a financial and a cultural transformation with in our company, and they will remain a key area of focus for us.

As we discussed at our last call, one of our key accomplishments in 2006 was the creation of a set of strong business platforms that position us for profitable future growth. And those platforms include, first, strength in top line growth capability. Second, a step change improvement in our cost structure. Third, a stronger balance sheet. Fourth, a tight focus on our core businesses. And, 5th, all of the above become collectively even more effective when you overlay the focus on speed and the accelerated pace of change I spoke to earlier. I would like to take a few minutes and elaborate on each of the platforms. Strong topline growth will be generated by price volume increases, a continually richer product brand and customer mix. New product introductions, innovative marketing in an outstanding dealer network. We are now positioned to focus more resources on growing our consumer and commercial core tire businesses. And just to mention a few examples of where we're investing, we're investing in more innovative new products like those that have already helped drive our top line success. We have a future product road map that captures market trends and consumer desires and matches those with relevant technology and leading edge performance. I mentioned that already in 2007 we have introduced five new consumer products in North America and four in Europe with more to come.

We are investing in increasing our high value added or high-end tire capacity. We intend to increase that capacity by about 40% over the next five years, to support our new product pipeline and capitalize on the attractive market trends toward high performance tires. We're investing in improving our supply chain. An advantage supply chain has been one of our key areas of focus and one of our seven key drivers for some time. I believe be started to truly understand the benefits of an advantage supply chain during the strike during the fourth quarter. We learned a lot about what had to be done to manage the difficult situations that result from a work stoppage, and those learnings extended into the post strike recovery plan era. We learned a great deal about working with reduced inventories, about meeting customer service goals, and about taking costs out of the system, utilizing direct shipments to our customers from our factories. We intend to be innovative in this area. Having seen how much more progress is possible, we are now bringing in two new supply chain leaders for North America and for Europe, from companies with leading supply chain capabilities, to add to our expertise and take us to a clearly advantage position. This area offers a significant opportunity for growth going forward. We're also investing in reducing our cost structure, which will enable us to be a strong competitor going forward. Over the next five years, our low cost capacity will increase by one third through investments in our existing facilities.

Our strategy is to have approximately half of our production capacity in low cost manufacturing within five years. As a result, our global manufacturing capacity will be well aligned, that is well aligned with demand. We intend to focus our marketing spend on our best opportunities and key market segments to continue growth if our branded tire businesses, and help our customers build their businesses. (Inaudible) Now, you'll get there is an excellent example of how we can put those dollars to work efficiently. At this years NCAA basketball tournament, the get there advertising campaign, aligned with our integrated marketing and PR efforts around get there, resulted in a consumer perception that we were the second biggest advertiser on the road to the final four. Despite what I would call a modest but focused spend. So there's tremendous, tremendous power here in what we're about to do. Give the expected improvement in our capital structure, we are now in a position to commit to these investments which I've just mentioned, and which are critical to further improving our cost structure and driving growth. In September of 2005, we presented a four-point cost savings plan to you, indicating that we planned to eliminate 750 million to 1 billion in costs by the end of 2008. In mid-2006, we raised that goal more than a $ 1billion. In February, we said that we were revisiting our target in the near future with a view of raising our goal. Today we are confirming that we believe we will exceed our $ 1 billion target by 2008, and, in addition, we are adding aggressive targets for 2009, which align our cost savings targets here with our planning cycle. That's the reason for the addition of 2009.

We are now targeting 1.8 to $2 billion of gross cost savings by the end of 2009. The new target incorporates the 2006 savings, captures savings from the steelworker's contract, and increases savings in each of four cost point areas. And may require additional cash restructuring charges beyond the $250 million that we previously envisioned. And I want you to be aware of that. We've made a great deal of progress against our cost reduction plan in key areas, and I am confident in my team's ability to reach this new savings target.

And I would like now to discuss even of the four areas of cost savings. Continuous improvement. Of the total savings of $1.8 billion to 2 billion, we expect the majority, or $1.25 to $1.4 billion to come from continuous improvement initiatives. Continuous improvement savings include, by way of definition, first steelworker contract savings, excluding the footprint savings like we'll be receiving from Tyler. Also continuous improvement includes manufacturing efficiency action driven by Lean and Six Sigma processes where our execution is improving daily. Third, product reformulation initiatives to reduce material cost and fourth improve safety initiatives to reduce injuries.

The prior goal here had been 350 million to 450 million over three years, of which we achieved nearly 300 million in 2006 alone. So you can see that we've established momentum and have now significantly raised the performance bar in this area. In the the area of footprint, we've increased our targets again to reflect the reduction in global high cost capacity of more than 25 million units, compared to 21 million of announced capacity reductions to date. And savings of more than $150 million by 2009. This indicates our intention to continue to address our high cost footprint beyond the significant actions announced already. The savings associated with these footprint actions is a result of the fixed cost savings at these plants. Additional savings are possible to the extent that production from the closed plants are transferred to existing facilities, and or our move to low cost countries. In the area of Asian sourcing, we are targeting $200 million to $300 million of savings by the end of 2009. Our sourcing office in Shanghai continues to create an exciting platform for future savings. I'll remind you our prior target in this area had been $150 million to $200 million by 2008. We're on track to meet our revised goal.

Finally, we expect to reduce our selling and administrative and general expenses by $200 million to $250 million. This target builds on our strong performance if 2006, but also recognizes a need to increase our investment in marketing initiatives this year, in 2007, compared to a strike affected 2006. The new goal also reflects a need to reduce about $25 million per year of stranded overhead costs previously absorbed by the engineered products business. Now, overall, these increased cost savings targets demonstrate our commitment to improve our competitive position, and to deliver at our next stage performance metrics. We have already made significant inroads into improving our capital structure, and you're well familiar with those. We are now positioned to make further progress. Proceeds from the sale of E PD, as well as a potential equity offering, will accelerate our progress toward our target of 2.5X debt to EBITDA, while also providing capital for growth. Just as importantly, we also will see a significant reduction in our legacy obligation. These obligations have already declined from almost 6 billion in 2004, to about 5 billion last year, and will drop about half of that by the end of this year. Will drop to half of that by the end of this year.

As I remarked earlier, we recently announced the sale of our engineered products division. This announcement follows divestitures for the North American Farm Tire business, our Tire Fabric business, our Rubber Plantation, and our Adhesive Resins business over the last three years. Exiting these noncore businesses, enables my leadership team to intensively focus on growing our core consumer and commercial tire businesses, and to focus our resourcing on available profitable growth opportunities. I'm sure it's now obvious to you that we are committed to accelerating the pace of change at our company. I quickly reviewed for you earlier 10 major actions that we implemented since the first of the year. The changes that we have been driving now supported by expected improvements in our capital structure allow us to increase our rate of investment and enable us to move at a pace previously unheard of in our company. We are confident our pace of change represents a competitive advantage for our company. Although we are fully of the future challenges we face, we are confident that our execution against each of these five business platforms will enable us to deliver on our next age metrics.

And as you recall, these metrics are an 8% segment operating income return on sales globally, and a 5% segment operating income return in North America, along with the 2.5X debt to EBITDA target I already mentioned. I would now like to turn the call over to Rich to discuss first quarter results in more detail. So Rich.

Thanks, Bob, and good morning everybody. Before I begin my comments then quarter, I just again want to mention that the engineered products business is being reflected in our financial statements as discontinued operations, giving us pending disposition. So my comments today will be focused on our results from continuing operations of course excluding the impact of engineered products.

As we assess our financial performance in the first quarter, we see a strong start to 2007 despite challenging market conditions and increasingly competitive and rapidly changing tire industry. 2007 is a transitional year for our business as we move beyond many of the turn around actions we have taken the past several years, and move into a situation where we can focus on increasing investments in the future of our business. As Bob mentioned earlier, we have acted with significant speed in implementing many key structural and operational changes to our business in the first quarter. And despite all of these actions requiring our team's attention, we remain focussed on driving our core business and delivering solid operating performance.

I'll turn now to our first quarter financial performance. First quarter sales increased to over 4.5 billion, a 1% increase over 2006, despite relatively weak market conditions in some of our key markets, despite the impact of the strike, despite exiting the whole sale private label business. Unit sales decreased by 4.8 million units in the first quarter, again reflective of the impact of the strike and the exit from the whole sale private label business in North America. Also helping push units down year-over-year was weakness in the consumer OE market in North America, competitive market conditions in Western Europe, and significant weakness in the North America commercial markets. Overall, lower volume impacted our sales by 300 million in the first quarter. Also impacting sales were year-over-year improvements in price mix of $225 million, and favorite foreign currency translation of 125 million, which helped to offset the impact of lower volume. Price increasing implemented in the face of rising raw material costs and a richer product mix drove an 8% increase in revenue per tire year-over-year. In terms of mix, I want to point out that we continue to see significant benefits from our innovative new products and our focus on high value added segments of the market. Gross margin in the first quarter 2007 was 16.9%, compared to 19.1% in the first quarter of 2006. Year-over-year decrease was negatively impacted by certain significant items such as the streak and the 2006 raw materials settlement to name a few, which impacted both the 2007 and 2006 periods. When considering these items, and understanding that our first quarter 2007 results do not include the benefits of any North America plan closures, again, despite having exited the whole sale private label business, we are pleased with our year-over-year margin progress. Our modest top line growth, when combined with the cost reduction actions we have implemented over the past year, resulted in solid segment operating performance for the quarter, after considering significant items impacting both periods.

First quarter 2007 total segment operating income of $226 million, included an estimate $34 million strike impact while the 2006 segment operating income of $282 million, included benefits totaling $47 million from raw material settlements and a pension plan change in Latin America. For the quarter, price mix improved earnings by is $165 million, more than offsetting the impact of raw material inflation of 120 million, which was a 9% year-over-year increase, driven largely by natural rubber costs. Lower volume in the quarter negatively impacted segment operating income by 35 million, and was also the primary driver of higher conversion costs of approximately $40 million. S&G expense decrease nearly $10 million in the quarter on lower wage and benefit cost. Now, looking at our overall earning witness we recorded a net loss from continuing operations of $0.61 per share in the first quarter, compared to $0.23 per share in the first quarter of 2006. Both this year's and last year's quarters included several significant items. Our 2007 first quarter included after tax charges for restructuring and accelerated depreciation of 31 million, a strike impact estimated at 34 million, and a $64 million curtailment charge related to salary benefit changes announced during the quarter. The first quarter of 2006 included after tax restructuring charges of 29 million, a favorable raw material settlement and I should say favorable raw material settlement of 26 million.

Now, there were several other significant items that impacted our results in the first quarter this year, and last year, which are listed on the last page of our earnings press release. Now, as I mentioned at the beginning of my remarks, 2007 is a transitional year, reflective of numerous actions undertaken as part of our turn around. When assessing our first quarter earnings performance, and giving consideration to the financial impacts of those numerous actions, we are pleased with both our first quarter results and our progress toward our next stage metrics. Now, turning to the balance sheet, you'll see that we used a significant amount of cash in the first quarter to repay outstanding debt, including the $ 1billion we borrowed up a revolving credit facility during the strike. Compared to our year-end balance sheet, we also see an increase in working capital during the first quarter, primarily driven by higher accounts receivable, as sales returned to more normal levels following the conclusion of the strike. Now, typically we would see a larger inventory build during the first quarter, as we prepare for the spring and summer selling season. However, inventories increased only modestly in the first quarter this year, due to a combination of somewhat lower January production in North America, as we recovered from the strike, and due to stronger North America sales reflective of strong customer demand for good year brand products. Now, as we continue to recover from the strike, working capital levels -- working capital will increase as inventory rises to a level, we can best serve ore customers; however, I'll point out that we'll do this in a manner consistent with our supply chain initiatives. So looking forward, the sale of engineered products will have a significant and positive impact on our balance sheet. A significant about of the net proceeds from the transaction which we estimate at about 1.4 billion will be used to repay high cost debt, including the secure notes issued during the first quarter of 2004, which become callable in early 2008. In addition, we are now in a position to fund our entire $1 million VIVA contribution using all cash. And the remaining proceeds from the engineered products sale will be used to invest in growing our core tire businesses, some of the areas of which Bob referred to earlier.

Turning to our cash flow in the quarter. Cash flow from operations was approximately $100 million lower than last year, driven by the decrease in net income. Our capital expenditures of 97 million in the first quarter were lower than last year, due to timing as we focused on getting plant operations back up to speed the first quarter. CapEx spending will accelerate as we move through the year, supporting the businesses's need for more high value added tire capacity globally, and of course to support our cost reduction efforts. Now, I'll take a few minutes to look at our business segments. Turning first to North America, our strike recovery progress in the first quarter exceeded our expectations, and that's particularly so related to Goodyear brand product. Our progress attributable to the efforts of our associates, the loyalty and support of our customers, and the demand that our signature technology products have created. Now, as we said, we estimate the strike impact on segment operating income in the first quarter to be $34 million. In order to calculate the impact of the strike on our results, we made a comparison of where our financial results should have been had we not experienced a strike, versus our actual results.

For example. In the first quarter, our North America business sold 19.3 million tires. We estimate that had the strike not occurred, we would have been able to sell an estimated 20.5 million units, or 1.4 million more units than we actually sold. We used this same calculation methodology in determine this financial impact of the lost production in the quarter. Now given our strong first quarter recovery versus our plan, we are now estimating the full year strike impact will be 100 million to $120 million. With the impact for the remainder of the year being driven by lower sales than we estimate we could have achieved had the strike not occurred. Now, keep in mind that while we are catching up on many product lines, it will take longer to catch up on other product lines given the low level of our inventories at the end of the strike. We continue to belive that the strength of our brand and our innovative products will allow us to return to prestrike and supply and share levels.

Now, overall, pleased with the strike recovery efforts in our first quarter momentum. In particular, Goodyear brand share in the quarter was significantly up versus the fourth quarter and it was essentially equal to the prior year quarter despite a slow start in January coming out of the strike, and a relatively week consumer replacement industry. The slow consumer OE market aided our recovery as we were able to redirect capacity to supply increased product to the more profitable replacement market. Now, clearly our dealers were restocking their inventory with Goodyear product in the first quarter, which is certainly a positive. However, it is yet still unclear as to whether consumer demand will be equally as robust over the coming quarters, given rising gas prices and other economic indicators. We do, however, remain confident that the demand for our signature technology products will remain robust. relative to the truck markets, we say industry declines in both the replacement and the OE markets. While the OE market decline was fully expected and in line with our forecast, the replacement market was weaker than anticipated. Nonetheless, we are able to make significant progress in this weak market against our prior year and prestrike market share position, and did so ahead of our internal expectations. Sales in North America declined $222 million in the quarter, driven by a 4.4 million unit decline. The volume decrease resulted from a $1 million unit decline in consumer OE, a 2.1 million unit decline from the exit of the whole sale private label business, and the balance primarily driven because of the strike. North America's segment operating income was a loss of 20 million, down from 43 million profit last year.

The year-over-year decrease was essentially driven by three elements. First, the estimated $34 million strike impact, due to lost sales and production. Second, the impact of exiting the whole sale private label business in advance of the upcoming capacity closures of Valleyfield and Tyler, which we estimated to be about $15 million in the quarter and third, the first quarter of 2006 inclusion of a $21 million benefit due to a favorable raw material settlement.

Now, when considering the impact of these three elements on North America tires results, they account for more than the $63 million reduction in operating earnings indicating that the underlying operation showed progress, largely driven by good cost control, and this was despite higher ad spend and higher raw material costs in the quarter. Now this performance comes during a time when the industry was weak and in a time before we start to reap the benefits of our announced structural cost actions, such as plant closures, U. S. W savings, and salary benefit changes, and during a time when we were clearly focused on recovering from the strike. We are not satisfied with our results, but we are pleased, given the context in which they were delivered.

Now, one item worth mention being moving on to Europe is an update any the VIVA. As I explained during our fourth quarter call, the first step of the process is for a class action law suite and related settlement to be filed in the Federal Court by the United Steel Workers and certain retirees representing the class. Once the class action suit and related settlement is filed, our study of other companies implementing Viva indicates that it will take several months to be completed. We continue to work in concert with the steel workers on this process, but the initial steps have taken longer than originally expected. While this reduces much of the earnings impact we anticipated for 2007, it does not change our view of the benefits in 2008 and beyond, and we remain confident in our collective ability to complete this transaction.

Now, moving on to Europe. Despite weak consumer markets and continued competitive pricing pressures, the European union business delivered good performance in the quarter by executing against their operating plants. Sales increased 140 million or 12% versus 2006 with favorable currency translation positively impacting sales by $113 million. Price mix improvement drove an 8% increase in revenue for tire. While the consumer markets were generally weak in the quarter the commercial markets showed robust year-over-year growth and our performance in these markets continues to be strong. Partially offsetting these positive impacts was a 4% volume decline driven by a weak consumer market and our strong stance on pricing at the expense of volume. The European union segment operating income increased by 3 million in the quarter with the benefit of price mix improvements of approximately $50 million, more than offsetting $30 million of raw material increases and the negative $10 million impact of lower consumer replacement volumes in the quarter.

Our European union management team continues to execute their strategy of winning in targeted markets and channels. The European union introduced four innovative new products already this year, which continues to distinguish Goodyear from its competition. This reinforces our premium project strategy in the region where competitive pricing continues, and where our cycle time around new product introductions remains a distinct competitive advantage. Now, emerging market businesses in eastern Europe, Latin America and Asia delivered another strong quarter. In the aggregate, these businesses grew segment operating income by $4 million, versus the 2006 first quarter, which includes a $17 million benefit from a pension plan change in Brazil. We expect continued strong performance from our emerging market businesses with new product launches scheduled for later this year, and continued aggressive cost management. Now, taking a look first at eastern Europe, the business had an outstanding results, driven by strong markets, improved pricing and product mix, and aggressive cost management. The following are some first quarter highlights as compared to the prior year. Unit volume increased 12% over all, where replacement volume increased over 17%. Sales increased by 22%. Revenue per tire increased 13%. Price mix improvements offset raw material cost increases by nearly $20 million, and segment operating income of $64 million increased by 49%. Our new products, our leading market position in this growing region, along with our low cost production, positions us favorably for future growth.

Latin America turned in a solid top line performance despite weak markets and political instability in parts of the region. Sales increase $13 million, or 3% year-over-year, pricing pressure also remains in the regions due to the strong Brazilian (rayal) and the consequent influx of low cost imports. Segment operating income for Latin America was down 24 million versus the first quarter of 2006, but remember that first quarter of '06 included a benefit of 17 million from a pension plan change in Brazil. And when taking that into consideration, the decrease in the region was due to lower production volumes compared to last year. However, our Latin America segment operating income as a percent of to sale remain strong at 19%. Finally, in the Asia region, sales increased 9%, includes translation, while segment operating earnings increase by 7 million or 32%. primarily driving the improved results is better price mix, which drove an is 11% revenue per tire increase and which allowed the region to exceed raw material cost increases by nearly $15 million.

Our Asia region management continues to drive its strategies of pricing discipline and product mix improvement by increasing the speed and number of new product introductions. Additionally, the off-the-road business continues to record strong results in the region. And our Australian based South Pacific tire business experienced year-over- year declines primarily due to lower sales volume and unfavorable conversion variances from high cost production capacity. One more point regarding Asia, we did experience from damage from a fire in our plant in Thailand in the month March, which will temporary affect production there. Most of this production has been redistributed to other sources, and repair costs are expected to be largely covered by insurance.

You'll see the expense related to the repairs in our income statement under other income and expense, and not here in the segment operating numbers. While we continue to face many challenges in our business, particularly weakness in some of our key markets, continued raw material cost increases, and highly competitive markets, we delivered solid financial results in the first quarter. As we look ahead, we will be better positioned to deal with these market cost and competitive issues after we complete the structural changes we have or are in the process of implementing. While structural cost production will always, a prerequisite to our success, our focus can increasing now be turned to intensifying the pace of growth for our company. Now, I would like to turn the call back over to Bob to discuss your outlook for the year.

Thanks, Rich. We've updated our full year 2007 North American and European union industry outlook to reflect our current forecast, and I'll go through that with you. In North America for the full year, our forecast for the consumer replacement and commercial OE markets are unchanged. The consumer replacement market in North America is still expected to be up approximately 1% to 2% following a very weak 2006 industry environment. The commercial OE market in North America is still expected to be down as much as 20%, reflecting the spike in commercial truck sales that we had last year ahead of this year's new EPA regulations. We have revised our full year forecast for the consumer OE and the commercial replacement markets in North America. Given ongoing production cuts at our OE customers in Detroit, our current forecast for the consumer OE market in North America is down approximately 3%, while the commercial replacement market is expected to be down 2% for the year. As demand for freight has been weaker than expected so far this year. However, we are expecting stronger second half results here in the commercial replacement market. In Europe, for the full year, our forecast for the consumer OE market is unchanged at flat to down 1%. And our outlook for the commercial OE market has been revised up ward- up ward, to 7 to 8%, as the truck markets continue to perform very well in Europe. Our outlook for the consumer replacement market in Europe has been revised downward to a 1% to 2% decline for the year, as the summer sell in season is off to a relatively slow start.

Our outlook for the commercial replacement market in Europe has been revised up ward to a 1.5 to 2.5% increase, again driven by stronger truck markets. For raw materials, as we anticipated on our year-end conference call, we continue to see quite a bit of uncertainty, primarily driven by significant volatility in the cost of natural rubber, and due to this volatility, it's difficult to project 2007 raw material costs. While we expected the increases we experienced here in the first quarter, which was about 9%, our outlook for the balance of the year has changed. Based on our current projections, we now expect raw material costs to be up 4% to 6% in 2007, compared to our previous forecast of flat year-over-year. This estimate could of course change significantly based on changes in the cost of natural rubber or other key raw materials, so we expect volatility going forward. We are reducing our full year interest expense forecast from 520 to $540 million, down to 510 to $525 million, and our revised forecast reflecting interest expense savings of 10 to 15 million this year from our recent credit facilities refinancing action, and the refinancing action that we have taken will result in annual interest expense savings of 15 to 20 million begins in 2008.

For capital expenditures, our forecast is unchanged. We are forecasting investments of 750 million to $800 million for the year, as we accelerate our conversion of capacity to high value-added product, and increase the productivity and efficiency of our manufacturing facilities throughout the world. Also, for modeling purposes, our tax rate guidance is unchanged at approximately 30% of international segment operating income.

Now, before we take your questions, I would like to briefly summarize the key points you've heard from us today, and there are several. First, our strike recovery in North America is going much better than we planned, which means our results in NAT are exceeding our internal expectations. Second, with regard to the steelworker contract savings, we are making better than expected progress on productivity. Our contract with ongoing savings of $300 million a year beginning in 2009 is a milestone for our company. Third, the Viva process is beginning a little later than anticipated. However, we would still expect to complete the process in 2007. And the Viva has been scene as a significant positive action not only by Goodyear and the steelworker's, but other unions and companies that are facing similar legacy cost challenges. Fourth, we intend to use the proceeds from the sale of engineered products to reduce high cost debt, to contribute to the Viva, and to invest back in growing our business, which will allow us to continue to progress toward achieving our leverage target of 2.5 times debt to EBITDA. We've made significant progress to our capital structure improvement plan overall. Fifth, we've lowered our interest expense forecast as a result of the recent refinancing action. Six, we continue to announce impactful new products in North America and Europe and throughout the world with speed. Seven, our emerging market businesses continue to progress. Eight, we are now intensively focused on growing our business, and have plans to increase high value-added or premium tire capacity to meet global demand, as well as low cost capacity for emerging markets. Ninth, while we have revised downward our forecast for the North American consumer OE, and the North American commercial replacement markets, we have raised our forecast for the European commercial replacement market. Tenth., we have revised our raw material outlook to a 4% to 6% increase for 2007, and finally we have revised our cost savings target, and we are now targeting gross cost savings of between $1.8 and $2 billion by the end of 2009. As I said at the outset of the call, this was an overall solid quarter for us as we worked to minimize the impact of the Q4 strike in North America. And we've gotten offer to a good start in '07, but I'll remind you that we certainly recognize the ongoing challenges of the global tire industry. I think we'll now open the call to your questions. And Greg, I suggest that we extend the call here a little bit beyond the 11:00, as Rich and I have a lot of material to go through. So we will take your questions.

(OPERATOR INSTRUCTIONS) We'll pause for just a moment to compile the Q&A roster. Your first question comes from James with Merrill Lynch.

Good morning.

Good morning, James.

Just wanted to ask you a quick question. You had mentioned earlier that there was the potential for the senior secured notes to be called, and was just curious to see if there's the potential for any other notes to be taken out. I'm thinking in particular about the floaters of '09, and also thinking about th, not that this will be taken out, but the (inaudible) refinancing, it wasn't clear what happened to that teller loan.

Okay. James. I'll just suggest Darren is in the best position to respond to that. Darren, if you would.

Hi, James. First let me answer your last question there first. With regards to the third lien term loan, that was left in place, so that was not involved in the refinancing that we've just completed.

Okay.

Which affected our European -- most of our European and U.S. credit facilities, but the third lien was left where it was. With regards to your question on other notes, you quite rightly point out we have 500 million of notes that we issued last November that are callable, at par at any time, and that was part of the notes that were issued during the companies are of the strike. That and the third lien are both, prepayable at any time with no penalty. So, you can see say that those are things that we would continue to look at, but at this ., I think it's clear that we're going to -- once the secured notes become called -- the 650 of secured notes become call be in the first quarter, those are our highest cost debt and clearly we're going to want to take those identity.

And it's safer to assume in the renegotiated credit facilities that the covenants allow for notes beyond 2008, that mature beyond 2008 to be taken out early?

That's absolutely a good point, and this is flexibility that we have under the new credit facilities that we haven't had previously. So when Bob mentioned the additional flexibility we gained, this one of the points.

One last question. Is there still the potential to do some refinancing in Europe with being a bigger tax payer in Europe, that makes sense, to gain the benefit of the tax shield? Just curious if you have anything so say on that point.

James, as we've said before, it's clearly our strategy to try to align more of our debt liabilities with the -- where we generate cash flow. So increasing the amount of debt that we have overseas is in direct alignment with that objective, and Europe obviously has been a good earner for us. So we believe that -- we look out our Eastern and Western European operations, those are clearly operations that could tolerate more leverage.

Yes.

And any thought about rating agencies and when they might be able to move the ratings up? And I'll let you go. Thank you.

Yes, with regard to the ratings agencies, with the announcement of the engineered product sale, both rating agencies have moved us to a positive outlook. And I'll generalize, but generally means that there's a possibility that ratings could be moved up over a year-plus time frame. I can speak directly, beyond what the ratings agencies themselves have said. I can't speak to exactly what their time frame might be.

Okay. Thank you very much.

Thanks, James.

Your next question comes from Himanshu Patel with J.P. Morgan.

Good morning, guys. A couple of housekeeping questions first for Rich or Darren. When you look at the appendix with the details on the cash flow, it looks like for the quarter inventory drain was about $126 million , Do you have a number we should think about for the full

Himanshu, I done think we have a number for you to think about, but I would say, as we've managed our way out of the strike, particularly in North America, one of the things that we're actually very pleased with is really managing our inventory. We've -- got our production up faster and thought we would be building a little bit more inventory, and in effect we sold a lot of that stuff. So, as we move forward, it's very hard for me to make a prediction as to what inventory, or how much cash we're going to use for inventory. I think directionally, I would have you think about two things. One is that they will get higher than where they are today, and, two, I wouldn't necessarily say that we want to -- internally that we're targeting on managing our business at the inventory levels on a unit basis that we've been in the past, and that's directly related to Bob's comments about really sort of jump starting and energize our supply chain initiatives. The interesting thing,, we you look at inventory, you're looking at it in term of dollars, and you're seeing -- you're seeing the movement being a little bit smaller. When we look at our inventory on a unit basis, and granted we don't go through our units with you, but certainly we're down year-over-year on units a lot more than you see the change in dollars.

I'll just elaborate on Richard's comments, and say we mean what we say on supply chain, and we expect that we're going to be able to manage better customer service with lower inventory in the future, but we've got some work to do over the next few months, and Rich and his team have to work to do to get us back up to the service levels that our customers deserve and want.

Ask that's not just North America, that's on a global basis.

And, Bob, just following up on that. , we you look at your slide 8 with the four-point cost plan, the increase in continuous improvement, the sort of top left quadrant that was quite meaningful, even after adjusting for the USW savings. Is the bulk of that sort of supply chain management initiatives? Well, that sort of supply chain management

Well, the way I work look at that, the bulk of that, if you define supply chain very broadly to mean manufacturing, and logistics, transportation, et cetera, then the bulk of it is in that area. And the way we're defining supply chain internally for strategic purposes is that broadly. Because the way we're going to make our progress and way we are going innovate in this area is to integrate everything from the sales forecast right through to the delivery of the product and even on to billing.

And we should see most of that in the '09 time frame?

Well, think bout it this way, in '06 we delivered 300 million. We're now starting to execute against the plans that we had. So I think you'll see that in a pretty continuous basis '06, 07, '08, and '09, and we have to do that to hit the rather significant number that we've put in there for continuous improvement.

And before I live this slide, the top right quadrant reduced footprint. You've announced 135 million of savings, you want to go to 150 or more. I mean, that feels like one more medium sized plant, or maybe two, sort of coming out and I presume those are overseas. Can you just, give us a sense of what are the constraints on being able to give us more visibility on that right now? Are you dealing with with union issues, or are you trying to ramp up capacity in other areas before you can take such actions? What are the things we would should think about in term of time frame for that?

Himanshu, I would say there are no -- there are no gating hiding in terms of external constraints that are on us in terms of doing this. Think as we put this page together, back in September of '05, we weren't specific on the plants then, but we indicated we had a strategy of taking them out, and I think this is just an extension for that. We didn't put time frames on there in particular because, this is really a part of managing our business, a part of managing the factories, a part of managing resupply of anything that we might intend to do. So I wouldn't have you think of this as anything that's a gating item for once other than Goodyear managing its business internally in a way that we think is really the most efficient for us to move forward.

Okay. And then on the growth initiative. You talked about a planned 40% increase in high-end tire capacity, and a one third increase in low cost country tire capacity, two questions on that, first where does your high end tire capacity stand right now and, number two, how much money is kind of needed in terms of capital expenditures to sort of make this change on both the high end side, as well as the low cost country side?

Okay. Let me just -- let me make a couple of comments there that we did want to make. Our high value added capacity today is at about 50% of our total. So that's -- you can see that as a starting point. Obviously we'll move up ward. Those attractive market trends there are for us. Ask we've said that for 2007, our planned outlook to spend about 750 to 800 million of CapEx. And I think you can anticipate that as we go forward into '08, '09 and that spend in '07 is about $100 over the spend in '06 roughly speaking and I think you can expect roughly that same type of increments from us in '08 and '09, moving up from the 750 to 800 million base level that we'll set here in 2007.

Okay. So maybe sort of in the 850 to 900 range in '08, and another hundred maybe beyond that?

We'll be in that range in '08, and I don't want to give any specificity going forward into '09.

One item on the capital. I think -- and I know Bob will join me on this. As we plan on increasing sort of dimension as you did there, I think an important point to mention that our focus will continue to remain on really being very judices in how those dollars are spent, so if you think about looking to the out years on a runrate basis to say we're going to continue to ramp up a hundred million dollars every year, that's not the intent. There are things we may choose to spend money on, but at the end of the day, I think the discipline you've see with our CapEx is one you would see even at incremental high her level.

Yes, good ad, Rich.

You announced E P.D., the white collar benefit cuts have been announced. Just think about the old question of timing on the equity offering, are there other internal events you would like us to know about before proceeding with this, or we're kind of done with that story?

I think, Himanshu, we would simply say that we're not going to comment today on more significant events that will take place here in the near-term.

All right. Thank you.

Thank you.

Your next question comes from Kirk Ludtke with CRT capital.

Good morning, guys.

Hi, Kurt.

I noticed that the margins for North America and the overall company didn't change for the next stage metrics, and I'm curious, given the dramatic increase in the cost saving target why those margins wouldn't have changed, and are there offsets to the cost saves that we should talk about?

Well, I think, Kirk, we have been very, I think, consistent with our attitude here over the past four and a half years. We set targets, we keep those targets till we hit those targets, and then we talk about progress from those targets. So from our standpoint, we've retained the three financial targets, if you will, because we haven't hit those targets yet, and we anticipate that we're going to have to work very hard in a challenging tire industry to hit those targets. So that's been our attitude and our philosophy about it, and that has not changed. I think relative to -- I'm going to read into your comment a little on the cost. Remember, those are gross cost savings, and the -- depending on the inflationary environment that we find ourselves in on raw material and other costs, that will determine what the net impact is that, can carry to the earnings line. So, that's how we approach it, that's how we think about it, and it has served us well. We have no desire to change the overall philosophy.

So you're not implying that there's offsets, you're just until you get to those targets, you're going leave them there?

I think at the appropriate accurate, yes.

Is there a rule of thumb for the cash costs of achieves the cost saves that we can use?

Kirk, you mean referring back to sort of our four-point cost savings plan?

The 1.208 the 2 billion. Is there any -- suspect that you have to spend some money to realize those savings, and I'm just curious.

We did mention, in the only point I made was remember we had said before that restructuring involved in the cost, where we took it to a billion, and slightly over a billion was in this range of 150 to 250 million, and I did make a comment, but I want to maybe it even more directly, that, we're anticipating that we may go higher than the $250 million as we start to execute against this plan.

I think that's right.

And those were cash -- it was 150 million of 250 of cash, so we may well exceed the 250 million again.

And, Kirk, a simple way to think about it is we're looking at taking out more capacity as we take out capacity, as you all know from the past, it takes money to do that, so there will some more cash flow.

Yes, good point.

I know advertise the unfunded OPED liability decreased by your target for '07, decreased by, like, $500 million from the last call?

Right.

Which, if you value the company using all of these -- your off balance sheet liabilities makes a big difference, so I suspect that that's the salary, that's the benefit of the salary plan reduction?

It is essentially, but Darren, do you want to -- Kirk, if you've finished your question, we'll just have Darren comment.

Yes, I guess the only -- the only add on question to that would be, do you have other revisions to to the remaining plans planned, and if and so can you quantify them for us?

Kirk, this is on slide 25 for people who have the deck in front of them, but we've got a projected projection that our OPED liability will be -- will go from 2.5 billion at the end of last year, to less than 800 million by the end of this year. And that's really two factors. One is, as we talked about in the past, the Viva, so transferring the liability to an independent trust fund reducing that liability by 1.2 billion and then there's another 500 million reduction that relates to the restructioing of our salary benefit plans. The -- in terms of the remaining, less than 800 million of liability, that's something that we'll -- is expected to decline further over time. But that's more a matter of seeing the existing liability we have to existing salary retirees play out. And over time, that will be paid out, and liability will decline, because we're no longer offering the same type of benefits to the active work force.

It's probably just as important to mention, that decrease, is just represents in our minds, and I think yours, just outstanding performance. Frankly, guys, that's outstanding performance by our team here, and we'll continue to be vigilant in looking at other opportunities, but I don't want to dismiss the fact that what's been done to do it is just outstanding performance.

I just want to reiterate the point Darren made, because he made a key point that once the Viva is done and as we've made the salary change, that residual amount is not reflective of existing benefits anymore, that is just sort of draining out the obligation that exist so we are effectively out and done of that part of the benefit structure. That's a key point as you think about our business going forward.

I just had one last one, this will be quick. I thought I heard you say that mix was positive in the first quarter year-over-year, and I just wanted to confirm that its positive on an apples-to-apples basis.

We said -- we said our -- I think our comment wars that price mix was positive, and we combine the two because there's so many puts and takes within those, and we also set our revenue per tire was up 8%. Those were our two key comments here.

Okay. Did you -- would you be willing to comment on just what mix did?

We never -- we don't submit out price and mix. We haven't done that, Kirk, we're not going to change that here today.

Okay. I appreciate it. Thank you.

Thank you.

Your final question comes from Jonathan Steinmetz with Morgan Stanley.

Thanks. Good morning, everyone.

Hi Jonathan.

Hi. Just to follow up on a couple. On the inventory related question, I know you couldn't give a number on the increase as we go through sequentially, but could you talk a little bit more about where fill rates stand today, and maybe which tire lines you would issues where you would have to build some inventory, and where you are kind of appropriately positioned?

I think it's most appropriate that Rich and his role in now President of North America tire talk about the fill rates in the sense that we can.

I think Jonathan thence tore in the question in a generic sway difficult, because as you can imagine, we've been appropriately sequencing how we're supplying product out in the marketplace. So when you look at some of the higher end product, the Goodyear end product, I think the fill rates have improved dramatically, and I think on some of they are of the other products, we continue to get better at doing that. And we got a quicker start on that coming out of the strike, and I think as we move forward, we'll get better at it. So I think if you look in absolute terms, as I said, our Goodyear brand share, we're about where we were last year. That says we're doing pretty good job, but there are other products that we still have to get better on. So I would say still an area that we need to -- we need to work on.

Okay. And on that sort of four quadrant cost save slide, when you talk about Asian sourcing, that may be a way to defer some CapEx. As you get into the out years, but can you just talk about how easily available product is here, or how much excess capacity you're see seeing there I mean is this a viable option? Because we have a lot of overcapacity in some of these countries or do you need to get some plants up either yourself or somebody else?

Let me kick off, just to make the comment there. When we talk about Asian sourcing, we're talking about multiple categories. We're talking about sourcing of raw materials, we're talking about sourcing of components for the manufacturing process. We're talking about sourcing of finished tires at the low end. And we're talking about capital equipment. So just to set the stage there, we're talking about all four of those -- of those categories in terms of the savings that we're talking about, the initiatives that we're driving through the Shanghai office. I know, Rich, you had a comment you know wanted to make in addition?

I think and I apologize for interrupting you there I was going to make the same point. This box often gets -- this initiative on gets sort of pigeon holed as being only tires, and its really not. There are a really of other things we can do and do quite well there, and Jonathan to answer the question more specifically on tires, I think we've mentioned in the past that we have a quality technical team over there that is qualifying a lot of manufacturers, local manufacturers, to make product that meeting our quality standards, and that is a point that we will continue to be very rough on. So sourcing those tires is not at all an impossibility. We continue to do that within the Asia region, from China to some of our businesses within Asia, so it is very doable, and I don't think there's no any item stopping us from that.

If there are any other callers, I think we'll

Let me just make sure. Were you done with the question?

I was done with that question. Yes.

Okay. I just want to -- if you've got another one.

Yes, just very quickly been on slide 20 on the commercial OE market. North America, you have down 20%. Can you just talk about, what is your imbedded class A number in that, and maybe talk about some offsets, because seems to me there could be a down side risk to that number, but just wanted to get your level of comfort with that, and what makes it at the 20 level versus worst?

On. Rich?

Yes, Jonathan, I think we forecasted about 20% in my comments, in my remarks, said that we were pretty comfortable with where we are and so Idon't think I would have much to add there and there is a impending risk that it's going to be be tremendously --

By the way-- We just reviewed that at a meeting last week with Rich's -- the truck general management, and we didn't -- although it was debated and discussed, we chose not to change the number.

All right. Thank you.

Thank you, Jonathan. I know we may have one more call.

Yes, we do have question from Rod Lache with Deutsche Banc.

Good morning, Rod.

Good morning. A lot of my questions have been answered, but I have a few things. The 750 to 800 million of CapEx, does that include the engineered products?

Yes, I -- Rod, this is Darren. That number was published at a time when engineered products was not a discontinued operation. We have chosen not to change that at this point. I think you'll see in the past that engineered products has had CapEx in the 30 million range. So relatively modest for that business

And when are you expecting to close that sale?

We've got a couple of key items to get past there, but most notably an agreement, we the Carlyle Group and the United Steelworkers, so, I don't, those discussions are ongoing.

So this is like an end of year kind of thing?

Well, our expectation, record, would be really before that, but this is the not a unilateral set of decisions, it's bilateral, and we remain confident as I'm sure the other parties do.

Okay. And the cost of the strike, you said 34 million in the further, up to 120. Does that imply that the remaining 70 to 90 is in Q2, or does some out that extend into the back half.

By the way, it's 34 in the first quarter, and then 100 to 120 for the full year.

At the beginning over the year, we didn't quarter, and I think we'll stick that, but I will say it will not be particular to Q2, it will be over the balance of the year.

Okay. And then the -- this quarter, basically the Valleyfield closure occurred at the end of the quarter, and I'm not sure whether there's any benefit from the steelworkers deal already, or whether that's some of the savings are included in these reserves that you're taking. Was that significant at all in the quarter, or is that still in the future.

I believe we made the last tire there a week before the end of the quarter.

March 26th.

So --

So all of these savings the 300 million from in the steelworkers contract basically insignificant in this quarter?

Yes, Rod, we've been executing against a lot of the initiatives in the my the contract particularly around hiring labor to full in some of the attrition that we're experiencing. So I would tell you that we're very active at implementing the pieces of the contract, but would also agree with your assessment that the first quarter results were not greatly impacted by any of the savings.

Same thing goes for in the salary, to OPED and pension change?

Yes.

And just to clarify in your stage metrics and the higher cost savings, on the next stage metrics, you did come off as a little bit cautious on those, despite the higher numbers. Is the next stage metric basically your metric for 2008, and then, the incremental cost savings basically that's coming into 2009? Is that correct, or am I misinterpreting it?

Yes, Rod, when we stated those metrics, we were never definite in terms of specific time frame. We just said over the next period of years, this is what we're trying to hit. And when we first quoted those, I've got to -- my recollection is the reaction was, boy, those are pretty significant targets. Well, now they look maybe a little more achievable, and we feel the same way. I don't categorize them as cautious. I categorize them as, hey, that's what we're trying to hit, and with a little bit of good luck and a lot of execution here, we'll hit those which & move on to other targets.

Can you provided any color on the cadence of that 1.8 billion, or the incremental. You did 425 last year, so the remaining 1.4, so how does that come in sort of this year, next year, and '09?

Darren might just comment here.

Sure. I think the key thing here is that we said, we confirmed that by '08, we're going to still exceed the original billion. We had 240 of the 340 million of union savings that we achieve by '08, so I think you can clearly go above a billion, plus the 240 for the 2008 time frame. Beyond that, I don't think I could be as specific, you can take from that that there is a pretty substantial goal for 2009, but we are still looking for upside by 2008 as well.

Great, thank you very much, and congratulations on the quarter.

Rod, thank you.

Thanks, Rod. And I think -- I think operator, that's the last question.

Yes, sir.

Maybe I'll just -- this is Bob, maybe I'll just make a final comment. I think our overall first quarter progress, particularly in the rapid recovery from the strike in North America, as positioned us here to accelerate our growth initiatives and our cost savings, but we're -- essentially we're tracking to our plan, and there are going to be some puts and takes because it's an aggressive plan, but we're on an aggressive improvement plan, and I think that's our core message here this morning. So thanks, everybody, for being on the call with us, and appreciate the questions. Really focused questions. Thank you.

Thank you for participating in today's conference call. You may now disconnect.