Goodyear Tire & Rubber Co (GT) 2007 Q2 法說會逐字稿

Good morning. My name is Carrie and I will be your conference operator today. At this time, I would like to welcome everyone to Goodyear's second-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).

At this time, I would now like to turn the conference over to Mr. Greg Dooley, Investor Relations. Thank you. Mr. Dooley, you may begin your conference.

Thank you. Good morning, everyone, and thank you for joining us for Goodyear's second-quarter 2007 results review and strategy update. Joining me on the call are Bob Keegan, Chairman and CEO; Rich Kramer, President of North American Tire and CFO; and Darren Wells, Senior Vice President of Finance and Strategy.

The webcast of this morning's discussion and the supporting slide presentation are available now on our Web site, investor.Goodyear.com. We filed our Form 10-Q this morning. This morning's 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 risks and uncertainties that can cause actual results to differ materially. These risks and uncertainties are outlined in Goodyear's 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, thanks, Greg. Good morning, everyone.

On today's call, I will start by reviewing the highlights of the second quarter and the progress we've made relative to our focus on driving growth using our strong business platforms. Rich will then talk about the second-quarter financial results in detail, and I will then come back to update our outlook for 2007. Then, we will open up the call for questions and answers.

In the second quarter, we see reflected in our strong results the improvements that you would expect as a result of our execution against our strategies. You see these improvements in the continued strength of price mix generated by our new product engine and our overall focus on attractive market segments; you see this in the early-stage improvements in our cost structure, particularly in North American Tire; you see this in a balance sheet that continues to get stronger each quarter; and you see all these improvements despite relatively soft conditions in many of our key markets. We will have more to say about that as we go through the morning.

Sales from our tire businesses were a record $4.9 billion, up 4% compared to last year. This improvement in sales was achieved despite a 6% decline in unit volume globally, driven primarily by our strategic decision to exit certain segments of the private-label market in North America.

Revenue per tire grew 6%, incorporating significant price mix improvements which increased sales by approximately $207 million.

Sales outside North America were up 10%, more than offsetting the anticipated decline in North American Tire.

Segment operating income from continuing operations was $309 million, up 32% compared to the $234 million we reported last year.

We delivered improved operating income in every strategic business unit compared with a year ago. This significant improvement was due in large part to the increase in North American Tire's results, which reflects a strong strike recovery, a richer mix of business, and the early-stage benefits of a dramatically improved cost structure.

Now, we fully recognize that North America has been a point of concern in the past for you and frankly for me. Now, we're starting to see the positive results of the broad set of decisions we made to turn around this business. Clearly, the major impact of that set of decisions will be felt in 2008 and beyond.

The increase in segment operating income reflected substantial price mix improvements of approximately $155 million, which more than offset raw material cost increases of $55 million.

Our emerging markets businesses in Eastern Europe, Latin America and Asia Pacific continue to perform very well. In the second quarter, these businesses had total sales of $1.3 billion and grew 15% year-over-year. Each of the emerging markets businesses achieved the best quarterly sales for any quarter in their history. They had combined segment operating income of $194 million in the quarter, an increase of $24 million year-over-year. Eastern Europe and Asia Pacific's results were driven by strong price mix performance, which more than offset the impact of higher raw material costs. Latin America's results improved as a result of a 9% increase in unit sales, driven by strong OE markets and the impact of price increases and positive effects of currency translation.

I'd now like to update you on the five business platforms that position us for future growth. These platforms are a focus on speed, strong topline growth capability, a step-change improvement in our cost structure, a stronger and more competitive balance sheet, and an intense focus on our core tire businesses. I will spend a few minutes talking about each. Please recall here that these platforms derive from our focus on the seven strategic drivers. That list of seven drivers is included in the appendix.

We continue to accelerate the pace of change at Goodyear. Our focus on speed and change is a continuing effort for the team as we execute against our strategies. Our impressive list of significant actions completed year-to-date continues to grow.

On the first-quarter conference call back in April, we discussed the substantial list of actions we have taken since the beginning of this year, and here you can reference Slide 6. In Q2, we've added several significant actions to this list, which I will mention here. In May, we completed our much-anticipated equity offering, raising $833 million net of fees. This additional capital, along with the improvement it drives in our balance sheet metrics, significantly improves our risk profile and our ability to invest in growing our core businesses. This improvement is reflected in recent ratings upgrades from both Moody's and Standard & Poor's.

In June, we completed the redemption of $315 million of notes using proceeds from the equity offering. This will of course result in less interest expense in 2007 and beyond.

In the second quarter, we also launched a group of impactful new product across the globe. I will just note a couple of examples. In North America, we concluded the formal launch of our Eagle F1 all-season tire at the Daytona International Speedway, providing both journalists and dealers the opportunity to experience the dramatic performance difference of this product. The journalists responded very positively to the product performance and we are starting now to see their comments in print in major automotive publications and the mainstream media. This product is another example of a category performance leader for Goodyear. Our leadership here has recently been confirmed in independent testing that will soon be published. This style of event strengthens our links with our customers and provides journalists the opportunity to talk with the people who successfully sell our products to consumers.

In Europe, we launched our Max technology for commercial trucks in one of our most ambitious launches ever. We hosted 650 key decision-makers from truck and trailer manufacturers and major fleets from both the EU and Eastern Europe, along with about 100 specialist commercial journalists from 24 countries at our MIREVAL proving grounds in the south of France. The event was designed to showcase, collectively, Goodyear's latest technologies and their related benefits. These benefits included improvements in fuel consumption, obviously critical in today's world, shorter wet breaking distances, greater load capacity, and longer tire life. I would comment that the feedback from the event confirms our expectation that this technology will continue to build on the market momentum we've established in our commercial truck business in Europe.

Three days after the quarter end, the United Steel Workers and class counsel representing the class of hourly retirees filed a complaint -- the complaint in federal court to start the litigation to seek court approval for the agreement on the VEBA trust. As you will recall, this was a critical step towards the completion of this important agreement, so first major step taken.

Our strong topline growth capability is focused on carefully targeted, attractive market segments, and we are now in a position to invest in growing sales in these segments. We continue to see very attractive market opportunities that are available to us in both the consumer market, with our premium tires, and the growing demand for large-rim diameter tires, and in the truck market where we continue to develop advanced technologies to benefit the end-user, much as I mentioned with the Max technology in Europe.

Revenue growth will continue to be driven by innovative and impactful new products. As I said, we are now in a position to support those new products with investments in marketing and in the expansion of our high value-added product manufacturing capacity. Our goal here is always to enrich the product mix.

We will continue to leverage our integrated consumer products marketing strategy to drive our topline, directing our marketing spend to targeted high-return segments. Goodyear's "Get There" advertising campaign in North America is gaining a tremendous amount of traction with its performance in a number of magazines. Popular Science, Sports Illustrated and Men's Journal have all rated the print execution of our ads number one in effectiveness and creative among its total advertisers in targeted issues. That's a big win for us. "Get There" is also scoring very well with prospective tire purchasers on television.

As we discussed on our first-quarter conference call, we intend to increase our global high value added production capacity by 40% to support this new product pipeline. We continue to make progress in our plans for these investments. While I have no specifics to share with you today, we expect to be in a position to provide further visibility as the year progresses.

Finally, in this area of growth, we have a supply chain goal that is very simple. We will develop a global supply chain that is competitively advantaged. As I said in the Q1 call, we learned a great deal during the strike last year about working with reduced inventories, about meeting customer service goals, and about taking costs out of the system, for example by utilizing direct shipments to customers from our factories. This is helping us understand the decisions and the investments required to create an advantaged supply chain. This new supply chain structure will help us fully leverage our outstanding dealer network.

A step-change improvement in cost structure will be driven by execution on our four-point cost savings plan. You will recall here we're targeting $1.8 billion to $2 billion of gross cost savings by the end of 2009. I will simply say we've made a great deal of progress against our cost-reduction targets and we intend to deliver on that plan.

Now, as I mentioned earlier, in Q2, we realized only the early stages of the cost improvement actions that will clearly kick in fully in 2008. Over the next five years, our low-cost production capacity will increase by one-third through investments in our existing facilities. Our strategic goal is to have approximately half our production capacity in low-cost manufacturing within five years. As a result, our global manufacturing capacity will be well aligned with expected demand. Again, we will provide further visibility to these investments as we move forward.

Now, during the quarter, we executed the final stage of the capital structure improvement plan that we began in 2003. This plan has been critical, not just in supporting the improvements we've made over the last four years but also in now providing us with a more competitive balance sheet that supports reliable access to capital throughout the economic cycle.

As I mentioned earlier, we completed a successful equity offering in May. Now, this had always been considered as a key component of our plan, and our offering elicited strong demand from investors and we're very pleased with the result.

We continue to work toward the closing of the sale of the Engineered Products business to Carlisle. We expect this transaction to close in the third quarter once an agreement between Carlisle and the Steel Workers is ratified.

In using proceeds both from equity and the EPT sale, we will be able to significantly reduce our debt, address our legacy obligations, and invest to grow in our key businesses.

In addition to the $315 million of debt that we redeemed in June, we also anticipate we will repay the 650 million of secured notes that we issued in 2004, which will become callable in March, 2008. We will look to further reduce high-cost debt and to achieve our 2.5X debt-to-EBITDA Target.

Now, relative to core tire business focus, we continue to have an intense focus on the core consumer and commercial tire businesses and will invest there with resources freed up by exiting noncore businesses. When we complete the sale of our Engineered Products business, we will have significantly divested our noncore businesses. However, I want to mention that our remaining portfolio of businesses will remain continually under review.

We remain confident that our execution against each of our business growth platforms will enable us to achieve the next-stage metrics that we established with investors in September of 2005. You will recall, these metrics are an 8% segment operating income return on sales globally, a 5% segment operating income return on sales in North America, and as I mentioned earlier, the 2.5X debt-to-EBITDA ratio.

Now, we certainly recognize that a series of significant actions has been announced since we originally presented these goals. We've made a lot of progress. We look forward now to delivering on these goals and then setting new objectives for our company.

With that review of highlights and growth platforms, I will turn the call over to Rich to review, in some detail, our second-quarter results. So, Rich?

Thanks, Bob. Before I begin my second-quarter comments here, I again want to remind everyone that, similar to our first-quarter presentation, the Engineered Products business is reflected in our financials as discontinued operations, given the pending sale of that business. So my comments today will therefore again be focused on results from continuing operations, which of course is going to exclude the Engineered Products business.

Now, during the second quarter, we continued to execute against our key strategies and remained focused on driving our core businesses going forward. We delivered strong results despite the fact that key consumer markets in North America and Western Europe continue to be weak. Our results were driven by our North American Tire and our emerging market businesses, which both delivered strong price and mix improvements.

Second-quarter sales increased $183 million to $4.9 billion, a 4% increase over 2006, despite relatively soft conditions in key markets and despite the volume impact of exiting the wholesale private-label business. The increase in sales was driven by stronger price mix and foreign exchange, which were partially offset by lower unit volume. Unit sales decreased 3.2 million units or 6% in the second quarter, which reflects our exit from the wholesale private-label business in North America, the impact of a soft summer tire market in Western Europe, and the continued weakness in the North America commercial and consumer OE markets.

Gross margin in the 2007 second quarter improved significantly compared to 2006, increasing 2.8 percentage points to 19.4%. This improvement was primarily driven by improved business mix and the benefit of cost savings and restructuring actions taken over the past year.

Selling, administrative and general costs increased $62 million versus the prior-year quarter to 14% of sales. The increase was primarily driven due to favorable currency translation which increased SG&A by approximately $22 million and higher advertising expenses of approximately $9 million, driven by advertising programs to support our new product launches. Our SG&A also increased due to higher stock compensation expense of approximately $17 million, which is the result of a higher stock price.

Segment operating income of $309 million decreased $75 million or 32% versus 2006. The increase was driven by strong results in our North American Tire business and in our emerging-market businesses. Price mix improved earnings by approximately $155 million, while raw material costs were up $55 million or 4%, with the increase again attributable to higher natural rubber costs. The impact of prior-period price increases and the improved mix of our business continued to mitigate raw material cost increases. However, volatile commodity prices remain a concern in the second half of the year.

Foreign currency translation also increased earnings by $21 million in the quarter, primarily due to the strong Brazilian Real and the strong euro. Lower volume reduced segment operating income by $17 million versus 2006, as did $19 million of higher conversion costs resulting from production inefficiencies in certain countries in Eastern Europe and Latin America.

Net income from continuing operations was $29 million or $0.14 per share in the second quarter. Our reported net income included after-tax charges of $15 million or $0.06 per share related to the previously announced restructuring plans, including accelerated depreciation, and debt-retirement fees of $47 million or $0.20 per share resulting from refinancing our credit facilities and debt repayments, both consistent with our capital structure improvement plan.

In the second quarter of 2006, our operating results were also impacted by restructuring and accelerated depreciation charges. Several items that impacted our results in the second quarter of this year and last year are listed on the last page of our earnings press release, and in the appendix to the slide presentation.

Now, turning to the balance sheet, during the quarter, we completed a successful equity offering, refinanced our domestic and European credit facilities, and began the process of repaying portions of our high-cost debt. These actions were executed in line with our capital structure improvement plan and have a real result in reduced leverage, lower financing costs and most importantly, increased flexibility. Additionally, these actions favorably position us to further reduce our high-cost debt to address legacy obligations and to invest in growth initiatives in our core consumer and commercial tire businesses.

I should point out that execution against our business strategies in the capital structure improvement plan favorably impacted the recent debt ratings upgrades by Moody's and Standard & Poor's, our first upgrades in many years.

Now, our cash balance increased, compared to the first quarter, primarily as a result of the proceeds from the equity offering. While we saw an increase in working capital, relative to both year-end and first-quarter levels, driven by seasonally higher sales and inventory levels, we continue to operate at working capital levels below plan as we catch up following the strike in North America.

Now, looking into the second half of the year, we will be evaluating opportunities to repay more high-cost debt. Once the court approval process is complete, we expect to make our planned, $1 billion VEBA contribution in cash.

Turning to cash flow for the first six months of the year, our cash flow used in continuing operations was approximately $255 million lower than last year, primarily driven by lower net income and higher working capital. We used more cash, as anticipated, to support working capital increases as we continue to recover from the strike. We see a further use of cash as we recover from the strike during the second half.

Regarding pension contributions, so far this year, we've contributed $245 million. We now expect to contribute $525 million to $550 million to our funded domestic plans this year. This is $25 million lower than our previous estimate and reflects updated actuarial data for year-end, 2006.

I would also point out our capital expenditures remain below the prior year despite higher expected investment levels for the full year. All SBUs spent less than planned in the first half, and this was especially true in North America, due to the delays caused by the strike.

Now, let me tell you how that happened in North America. We were certainly not cash-constrained in our ability to purchase new capital equipment. However, as a result of the strike, our key engineering and operational resources were focused on strike recovery, which constrained our ability to install the new capital investment. We were forced to make trade-offs among three choices on how to use our key resources. The choices or trade-offs were ensuring that we maximize production of our current products to meet high customer demand following the strike, ensuring that we stayed on track of the launch of our key new Goodyear-branded products, such as the successful launch of the Eagle F1 all-season tire, and investing capital for line extensions and new sizes of our existing products, particularly Dunlop, Kelly and other associated brands.

Now, that said, we focused our resources on meeting immediate customer needs and rolling out key new products at the expense of investing capital for line extensions and new sizes. We're comfortable with the tough choice we made, as those choices were made based upon what we felt was best for our customers and for our business.

Now, turning to the individual segments, North American Tire segment operating income for the second quarter was $53 million, up $47 million from the 2006 second quarter despite decreases in units and sales. Revenue per tire was up 6% versus the prior-year period, driven by continued Goodyear brand market share gains. The significantly improved operating income is reflective of the Company's strategic focus on improving our brand, product and channel mix, and on reducing our structural costs, consistent with our articulated plans. Additionally, the improved results were delivered despite very weak industry conditions. While the key consumer replacement market showed reasonable growth versus 2006 of plus 2%, 2007 market levels remain below 2005 levels for the replacement in OE in both the consumer and commercial markets.

For the quarter, units and sales were down 11% and 2.7%, respectively. The $2.5 million decrease was due to the Company's 2006 exit from the wholesale private-label business, which comprised $1.9 million of the unit's shortfall, a continued weak consumer OE industry, down 5% in the quarter, which primarily drove $600,000 of the unit shortfall, and a weak truck industry with replacement down 4% and OE down 35%, which drove $500,000 of the unit shortfall.

Now, excluding the impact of the exited wholesale private-label units, the remaining consumer replacement business was up approximately 500,000 units or nearly 4%, or two times the-second-quarter industry growth. Goodyear brand signature technology products grew at three times the industry growth and helped drive an overall Goodyear brand share gain of more than 0.5 point in the quarter. This increase more than offset volume decreases in Dunlop and Kelly products, which were down in the quarter, reflective of the backorders resulting from the strike.

The increase in segment operating income of $47 million was driven by a price mix of $69 million. Improved price mix reflected the impact of both previous price increases and the impact of significantly improved product mix as a result of branded products comprising a larger portion of our business versus the prior-year second quarter. The raw material increase in the quarter was $25 million, while conversion costs were slightly favorable despite production being down from the year-ago period. Cost reductions came from continuous improvement initiatives, the early impacts resulting from ceasing tire production at the Valley Field plant, lower labor costs resulting from hiring $13-an-hour employees in accordance with our USW contract, and salary/benefit changes impacting our non-USW plants. While in the early stages, we are beginning to see the impacts of the structural cost initiatives undertaken over the past year.

Selling, general and administrative expenses remained relatively flat despite an increase of approximately $5 million in advertising spend related to the "Get There" campaign, which independent survey results show is breaking through to consumers well above the norms. Certainly, we are pleased with the way the campaign is progressing.

Now, the second quarter was also impacted by the strike due to lost sales as a consequence of operating on lower-than-normal inventory levels. While our customer service has improved significantly since the first quarter, it is still not at the level that our customers expect and deserve. By assessing backorders in comparison to historical levels, we estimate the earnings impact of lost sales to be approximately $5 million, bringing the strike impact to $39 million year-to-date. We continue to expect lost sales due to customer service in the second half of 2007, although at a much lower rate than the first half.

Now, the larger impact in the second half will be the adverse effect on our growth rate from the impact of delays in first-half capital spending that I discussed earlier. We will still grow in our targeted markets, just not at the overall rate we would have without the strike delay. We estimate the second half of the year earnings impact of this lost growth opportunity to be approximately $40 million to $45 million. We do not see this second-half impact reversing immediately, and looking to 2008, we will continue to grow our volume and mix in targeted markets as planned, and we will increase the pace of our aggressive capital spending programs.

Now, despite a weak industry where three of four markets decrease significantly in the quarter, and given the impact of the strike, North American Tire's earnings trends supports prior decisions to refocus our business on markets where, by capitalizing on our strengths, we can win. This is reflected in the second-quarter 2007 segment operating earnings being at one of their highest levels in the past five years on unit volume well below and a product mix well above the comparative prior periods. This, combined with our cost initiatives around plant closures, benefit changes and productivity initiatives, all of which remain in the early stages of implementation, gives us confidence that our strategy is progressing as intended. Our plans to invest in low cost production, to continue to introduce innovative and impactful new products and to continue to build management and execution capability within our team reinforces our ability to meet the 5% segment income target, particularly as industry volumes rebound.

Our European Union business grew sales and segment operating income year-over-year as strength in the commercial truck business was offset partially by continued challenges in our consumer replacement business. The commercial truck business benefited from price increases, new products and strong market conditions with the industry growing over 15% in the quarter.

In addition to soft markets, our consumer business continued to be impacted by a tough competitive price environment and by supply constraints in key targeted market segments where demand will remain strong even in an environment of overall market weakness. Our portfolio of new products continued to position us well in these market segments, where we continue to drive price mix over volume, as evident in our continuing price mix improvements despite an overall volume decrease in the quarter. Now, these constraints are driven partly by strong OE demand, which reduced available production for the replacement market, and partly by market trends in our successful new product engine. We are addressing these constraints in the consumer business both by balancing our replacement and OE focus and by driving an investment program focused on premium tire capacity. This will provide upside opportunity for our European business going forward.

In the second quarter, sales increased $73 million or 6% versus 2006, with favorable currency translation positively impacting sales by $80 million. Price mix improvements drove a 5% increase in revenue per tire. Sales volume declined by approximately 5% versus 2006, driven by weak summer tire market conditions and our stance of choosing price over volume, given our capacity constraints.

The European Union segment operating income increased $4 million versus 2006, driven by price mix improvements of $34 million which more than offset raw material inflation of $6 million. The strong euro resulted in favorable currency translation of $4 million. Despite lower volumes, cost reduction actions taken over the past 12 months, including the closing of a plant in the UK, led to a $5 million conversion cost reduction. Segment operating income was negatively impacted by lower volume of $11 million, and higher as unit costs of $17 million, which was partially driven by timing of our second-quarter ad spend versus the first quarter.

Now, turning to our emerging market businesses in Eastern Europe, Latin America and Asia Pacific, these businesses turned in another strong quarter. Now, in aggregate, they reported double-digit sales in segment operating income growth. We expect continued strong performance from these businesses with new product launches and continued aggressive cost management.

Eastern Europe reported solid results driven by strong markets, improved pricing and product mix, and outstanding cost management. Sales increased $52 million or 14% versus 2006. Strong price mix improvements, driven by a shift towards more premium products, led to a 14% increase in revenue per tire versus 2006. Favorable currency translation and improved retail sales also helped push sales higher compared to 2006. Unit volume declined 5%, which reduced sales by $15 million.

Eastern Europe segment operating income was a second-quarter record and increased $4 million versus 2006, driven by price mix improvements of $27 million, which more than offset $2 million of raw material cost increases. Negatively impacting segment operating income was a $50 million increase in conversion cost driven by temporary disruptions in two of our manufacturing facilities, the impact of lower sales volume, and higher SG&A costs due to increased marketing spend to support new product launches.

Latin America's results reflect a strong and a profitable OE business, share growth in the consumer replacement business, and continued strength in the commercial truck business, all of which has helped offset a difficult pricing environment. The consumer business grew units more than 9% year-over-year. Latin America's sales increased $71 million or 18% versus 2006, driven by a 9% increase in total unit sales. Favorable currency translation, primarily due to the Brazilian Real, increased sales by $23 million. Excluding translation, sales increased 12% and price mix improvements drove revenue per tire up 2%.

Latin America segment operating income was also a second-quarter record and increased $7 million versus 2006. The increase was driven by improved sales volume, which positively impacted segment operating income by $11 million, and by favorable currency translation of $17 million. Price mix improvements of $6 million were constrained partly by the ongoing strength of the Real and only partially offset an $18 million increase in raw material costs. Conversion costs increased approximately $11 million year-over-year, due to an unfavorable production mix.

Asia Pacific's overall performance was excellent in the second quarter as the business reported record sales and segment operating income despite lower unit sales. We continue to experience unit and profit growth in key fast-growing countries in the region, and we are also seeing the immediate benefits from our enhanced marketing efforts in China. Asia's sales increased $51 million or 14% versus 2006. Favorable currency translation increased sales by $37 million. Sales were up 4%, excluding translation. Price mix improvements drove an 8% increase in revenue per tire. Lower volume reduced sales by $10 million as units decreased 3% versus 2006 due to the supply constraints related to the fire in our Thailand factory and also due to weak sales at South Pacific Tire, our Australian subsidiary. We expect our factory in Thailand to be back up and running during the third quarter.

Segment operating income increased $13 million or 46% versus 2006, driven by strong price mix improvements of $19 million, which more than offset raw material cost inflation of $4 million. Weak volume and higher freight costs in the quarter negatively impacted income by about $5 million.

Now, I want to make a final point on the impact of the first-quarter fire in Thailand, which shut down production during the second quarter. While this event reduced or unit volume, it did not reduce segment operating income earnings in the region. The volume reduction resulting from the fire primarily impacted our unprofitable OE business, consequently improving mix for the quarter, while incremental operating costs in Thailand resulting from the fire were covered by insurance.

Now, overall, we are pleased with our second-quarter results, the second-quarter operating income exceeding $300 million with market share gains in Goodyear brand coming off the strike in North America, and with our foreign businesses continuing to deliver solid results. Additionally, we continue to execute against our long-term business plan, relative to improving our financial position, thus paving the way for new investments to drive our business forward. We also remain realists and appreciate both the impacts of variable market conditions as well as competition in the marketplace. We feel that actions taken today and those still to come position us favorably to win in our targeted markets and segments.

Now, I will turn the call back over to Bob.

Well, thanks, Rich. I thought, before I discuss our updated outlook for 2007, I would mention that our search for a new CFO continues. We are pleased with the progress of our search and expect to announce a new chief financial Officer in the not-to-distant future. Of course, until that time, much as you've seen this morning, Rich will continue to serve both as CFO and as President of North American Tire.

Now, on to the outlook for the full year, we have updated our full-year 2007 North American and European Union industry outlook to reflect our current forecast. In North America for the full year, our forecast for the consumer replacement and the consumer OE markets are unchanged from what we had said at the Q1 call. We continue to expect the consumer replacement market to be up 1% to 2%, and that's following a very weak 2006 environment. We expect the consumer OE market to be down approximately 3%, reflecting ongoing production cuts at our customers in Detroit. We have adjusted our forecast for the North American commercial replacement and OE markets. Our updated forecast for the commercial OE market is down 30% versus down 20% guidance in Q1. As you will recall, this market is down versus a rather robust 2006, driven by the new truck emissions legislation. We now expect the North American commercial replacement market to be down approximately 4% for the year as demand for freight continues to be weaker than expected. Our Q1 guidance was down 2%.

In the European Union for the full year, we expect no change to our forecast for the consumer replacement market of a 1% to 2% decline. As Rich indicated, that's about the weakness that we've seen during the first half.

We are revising our forecasts up for all the other segments in the EU. The consumer OE market is now expected to be flat to up slightly for the year versus flat to down 1% in our prior forecast. The commercial replacement market is now expected to be up 2% to 3% for the year, versus up 1.5% to 2.5%. The commercial OE market is now expected to be up 20% for the year, versus up 7% to 8% previously. Needless to say, the truck markets continue to perform very well in Europe.

With regard to raw materials, we continue to see quite a bit of uncertainty, primarily driven by the ongoing volatility in the price of natural rubber. Due to this volatility, of course it's difficult to project 2007 raw material costs. I just mentioned here that, while natural rubber prices are down slightly compared with where they were at the time of our Q1 call, basically just under $0.96 a pound versus about $0.97 a pound, we continue to expect raw material costs to be up 4% to 6% in 2007. This estimate could change and could change significantly based on changes in the cost of natural rubber or other key raw materials.

I would like to point out that we continue to have success developing the technology to increase our flexibility to substitute synthetic rubber for natural rubber in tire compounds. In the past, we were able to substitute synthetic rubber for up to 15% of the natural rubber called for in a compound. I am pleased to update this number this morning. We are now able to achieve a 20% substitution rate, and we are continuing to push this important initiative as part of our cost savings plan. This is certainly an important step forward for Goodyear.

We are reducing our full-year interest expense forecast from $510 million to $525 million to $490 million to $510 million. Our revised forecast reflects additional interest expense savings of about $13 million this year from the notes that we paid down in June. This debt reduction will result in annual interest expense savings of over $25 million beginning in 2008.

Our capital expenditures 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 global manufacturing facilities.

For modeling purposes, our tax rate guidance is unchanged at approximately 30% of international segment operating income.

Now, before we open the call for questions, I'd like to briefly summarize the key points you've heard from us today, and there have been many. We continue to execute successfully against our strategies. Second, our second-quarter earnings results were strong despite relatively soft conditions in many of our key markets. This reflects the substantial impact of price mix, driven by our strategy of exiting low-end businesses, the impact of strong new products, and frankly our pricing discipline and the early-stage benefits of our improved cost structure. Number three, our emerging markets businesses continue to perform very well. Fourth, we continue the industry-leading pace of introducing impactful new products, both in passenger tires and in truck tires. Fifth, our balance-sheet improvement initiatives are moving forward as planned. Sixth, we have revised our industry outlook for the North American and the European markets, and I know you will take note of that. Seven, with actions we've taken over the past few years, we've created strong platforms for growth going forward. We intend to fully capitalize and leverage those platforms. Eight, we remain intensely focused on delivering our next-stage metrics.

With that said, we will now open things up to your questions.

(OPERATOR INSTRUCTIONS). Himanshu Patel, J.P. Morgan.

Good morning, guys. A couple of questions for you -- when you look at Slide 4 in the appendix where you've got the relationship between price mix and raw materials for the first half, it seems like, you know, if you decomposed Q1 and Q2, the pricing mix benefit was still strong but it seems like what really changed is that the year-on-year hit from raw materials declined significantly. I think you said $55 million for this quarter. It looks like it was maybe $116 million for Q1. I'm just wondering. I mean that spread between price mix and raw materials, it's quite powerful this quarter. Is that something we should think should sustain, or is the decline in the raw materials hit you're seeing this quarter really just a reflection of maybe the sort of the lag effect when natural rubber declined in the second half of last year?

This is Bob. I think I will kick it off by saying, you know, when we concluded last year, if you look at annual number that's located on that Slide 4, that gives you some information. If you recall, in the fourth quarter itself, we also had a -- third and fourth quarters, we had a potential issue. So to some degree, I think what we are seeing in the first half is the result of initiatives we put in place during Q3 and Q4 last year. Now you're seeing that kind of roll out here into the second quarter as well as the first quarter.

Look, we are going to continue to be very aggressive on price mix. Rich mentioned that, in Western Europe particularly, you know, we've had a -- I will say a good, strong competitive pricing situation over the first half of this yea. We've continued to focus on price mix. We think that's in the best interests of the performance and our shareholders, so we will continue to do that.

I won't speculate as to whether we're going to continue to see the price mix at levels this far above raw materials. Rich, you may have some comments here.

I think the only thing that I would add, Himanshu, is that we, as you know because you've asked in the past, as have others, to break out price and mix separately, we don't do that. What I will maybe directionally tell you is that, versus prior periods, if we go back since this significant escalation in raw material prices, you're seeing more of a mix improvement than a pure price improvement, looking through there as well. So clearly price inevitably will have some relation to where raw materials are in the marketplace, but I would also tell you that the mix piece that we've improved on, really as Bob spoke of, from new product and other things, that certainly -- our intention there would be to continue to drive that.

Okay. Then on Asia, we've heard about the Chinese tax I guess for Chinese-produced tires go up. Have you seen a benefit from that in the sense that -- are some of the low-end Chinese tires that are being imported into the U.S. -- have you seen a noticeable increase in their pricing?

Well, Himanshu, I will mention that there's a lot of activity and media comment about Chinese tires in the last month or so. Relative to this VAC net of rebates increasing from 5% to 13%, that's a fact of life. I think it's too early to tell what impact this would have. I know there's been a lot of speculation that prices may have increased, but I said to say too early to tell. Probably on the next call, we will have a better view of how that's playing out in the market. But one would have to expect it to have some impact.

Okay, and then two last questions, one on the cash flow. You know, the 2.5 debt-to-EBITDA target, it sounds like you're going to be there pretty quick, if not by the end of this year then maybe early next year. What do you guys sort of think of uses of cash going forward? I know you've identified increases in CapEx, but even factoring that in, it just sounds like you're going to have a lot of excess liquidity available in the '08/'09 timeframe. Should we think about acquisitions, or is it still too early to think about that?

Well, maybe I will just kick-off. I think you should see, from a broad standpoint -- yes, you will see us investing in, as we've said, a host of activities to grow our business. That includes CapEx investment in more high-value added (inaudible) premium production capacity. We will also be investing to improve our productivity overall. We will be investing in more low-cost capacity in our existing plants. You will see that. We are also going to be investing in reducing debt and investing in reducing our legacy obligations just as importantly here over these coming months. We will be providing the marketing support that we need to drive forward if we're going to continue to launch new products at an even greater pace than we are today.

So I think, from an overall standpoint, that gives you kind of the portfolio of investments that we're going to make. Rich, I know you (multiple speakers).

The only thing I would add -- I agree with Bob, with your comments. The only thing I would add is that, Himanshu, just going back to my remarks, I think, as we move forward and as we drive our business, the word that we like to focus around is enhanced flexibility to do some other things as we look to the future, whether that's acquisitions or continued investment back in our business. We are certainly not going to comment on anything specific at this point, but the key is allowing us to have more of that flexibility to drive our business forward. That's certainly something we haven't had as we've looked over the past few years.

Okay, and one last one if I could sneak it in? Bob, you've talked about supply chain improvement for the past six months or so. Are you at a stage now where you could help quantify a little bit for us how long this process will take, how much investment you need to make into that and what are the sort of potential savings that could come out of that effort?

Himanshu, I'm not in a position where I'm going to quantify that. I will simply say that, look, we are in the process. We've been working at this for the past four years and working aggressively the past four years. We now, certainly, given your previous question and the comments Rich and I both made, we've got some money to invest in this area. Don't think here in terms of bricks and mortar; think more in terms of IT and people and process capability in terms of driving an advantaged supply chain.

We think we've got the resources pretty much in-place today to get at this. Certainly, every one of the SBU presidents like Rich are identifying a host of initiatives that they're going to put into place. I think it's there for the taking, frankly, as I've said before. This is not an industry with great supply chains overall because the SKU proliferation over the past 10 to 15 years has really strained the current systems. So we're thinking pretty strategically and pretty broadly about this.

Rod Lache, Deutsche Bank.

Good morning. I've got a few questions. Maybe you can help us, first of all, with -- I'm just looking at the restated second quarter '06 cost of goods sold and SG&A against second quarter of '07. I understand that there's the depreciation (inaudible) depreciation charge of $15 million in the cost of goods sold this year. But nonetheless, the numbers for both cost of goods sold and SG&A are higher on a year-over-year basis. Part of that is explained by the raw materials, but your volumes are down. So can you just maybe walk through where the cost savings are on a year-over-year basis on both of those? Just you mentioned some of the SG&A anomalies, I think stock comp and things like that. Can you just review that?

Okay, Rod, that's a broad question. I know you may need to follow-up on that, but I will start by saying, number one, remember. When you're looking at our cost of goods sold, we are producing a richer mix. So as we look at cost of goods sold, we are very interested in that, but we are extremely interested in gross margin and up (inaudible) 2.8 percentage points in gross margin is critical to us. So as you're looking up at cost of goods sold, it's going to be higher because we've got a richer mix going forward.

I think, from a cost standpoint overall, in NAT and in Europe, Western Europe, we had good cost performance. In the SAG area, you certainly saw some numbers that were inflated by two things that I think are relatively non-occurring. One is we have a lot of advertising in the second quarter in Western Europe. We've kind of put that in the second quarter; we delayed it from the first quarter, put all our emphasis behind the significant new products that they were launching, so that's a Q2. It's not an anomaly; it's a very strategic decision that we made.

We've also, given the run-up in stock price, we've got some stock compensation that's higher here. Of course, you always have to overlay foreign exchange and currency translation on these results.

So those were I see as positive. In emerging markets, I would mention we did have a couple of, I would call them isolated manufacturing issues which are going to be short-term, that we [felt] with during the quarter. So that would be at least my kickoff to this. Rich, Darren, you guys may have other comments.

Yes. I don't think I would add much more to that, but Rod, I think, if you dissect -- and I know you've done this in the aggregate, but if you were to dissect each of the business units, adjusting for some of the one-timers like accelerated depreciation and the like -- but if you would go back, you'd see that there is, particularly in North America, let's just start there, there is a cost of goods sold or gross margin, I should say, improvement year-over-year, both in terms of the percent or the percentage improvement and the absolute dollars. So, I think there is cost savings coming through there, particularly as we are running plants full in North America coming out of the strike. So there are some of those cost savings through. Valley Field just came out, so you are seeing part of that in there. You're seeing inflation like (inaudible) non-union plants where we are getting some of the changes in our salary benefits coming through. In SAG, again, Bob highlighted items. When you take FX in the salary/compensation, you cover about two-thirds of the impact. A good bit of the rest is really the add spend, so I think there are the cost savings that are in there but there are some of these other items that we're trying to make transparent as well.

Can you review those numbers again for the ad spend increase, the SG&A and the stock comp?

Sure. If you look at it, in SG&A, right off the income statement, we are up about $62 million, and of that, about $22 million is FX; call it $17 million is the increase in complex fence. Again, that is driven by some of the stock performance comp plans we have that are mark-to-market, if you will, given where the stock price goes. That accounted for about $17 million. So you've got roundabout two-thirds of it. Then call it just rounding $10 million relates to the increased ad spend across the globe. That's really, A, related to new products and, B, some of that you see lower ad spend in Q1 that kind of came through in the second quarter. The difference is certainly some other -- some other -- call it normalized items, workers' comp changes, things like that.

Okay. Then can you just -- maybe approaching this a little bit differently, if we look at the segment operating income improvement, the 234 to the 309, you gave us some of those SG&A components. We know price and mix was 155 positive, raw materials was 55 negative. What was, for the overall company, the volume impact and the conversion costs?

The volume was negative, as I think we said, and translation was positive, again rounding about $20 million. Conversion cost was negative by about $19 million but most of that came from what I might call more isolated manufacturing issues, particularly in certain countries in Eastern Europe and in Latin America. Remember, we had a small labor disruption in Turkey during the quarter. I wouldn't belabor that point but those are the type of things that drove the $19 million.

Wait, so you said FX was a positive 20?

It was about positive 20, that's right. I'm rounding, Rod, but you'll (multiple speakers) up in the Q as well.

Right. So where's the benefit of the benefit changes in Morocco and Valley Field? I mean do you lump that into the conversion costs? So net, it was a -19, or is there like other cost savings? Because it just seems like the year-over-year changes is more than accounted for by the price.

You see conversion cost benefits or decreases in North America and in Western Europe that really reflect against some of those changes we have. The Morocco piece, frankly, would be offset by some of the manufacturing issues we had in Eastern Europe in the quarter. Europe was down. Conversion was down about 5 million and North America was relatively flat. It was actually down a little bit in the quarter (inaudible).

Would the ongoing level of SG&A beyond this quarter be kind of more close to what we saw in the first quarter?

I think it's fair to assume that. Rod, we always go back and look at ad spend depending on what's happening in the marketplace. Obviously, what happens to FX is a little bit out of our control but could (inaudible) that number (multiple speakers) understand. But no, if, broader speaking, if the question is do we anticipate some sort of increase or for you to anticipate some sort of increase in SAG, the answer is certainly no.

Yes. If you refer back, Rod, to our four-point cost savings plan, at a gross level, we're still committed to what we said in there in SAG.

One of the other quadrants in that four-point plan was the Asian sourcing. What's the timing of that?

Well, that's over the same period of time. Remember, last year, last year, we calculated our savings at about $35 million on $200 million spend. The forecast that we've got built into that chart is between now and 2009. It's actually between '05 and 2009, some of which we've already captured.

Right, so there's no really big lumps that kick in? It's more of a gradual thing?

It may be a little bit lumpy, but it's hard to forecast that way, so we are forecasting it over that period of time.

Okay. My last one is did you say what the timing is of the VEBA deal? What's the updated timing of that?

Yes, Darren, you might want to comment?

Sure. Rob, we had the -- you know, (inaudible) on July 3 that the initial lawsuit had been filed. I think what we've said historically is that, in other situations, we've seen the legal process for similar structures take five or six months. So what you saw was essentially the beginning of that process.

Now, we've obviously done a lot of work on future steps there as well. We will push them along as quickly as we can, but the legal process does take some time.

Okay. I just want to follow-up on one more thing. You said that the volume was a negative year-over-year in the quarter. Do you have a number associated with that?

Yes, all-in, it's about, call it $25 million, Rod.

Saul Ludwig, KeyBanc.

I want to focus on North America. Your pension expense was down by $28 million. Your post-retiree costs were down by $25 million. You had the favorable -- I guess you would call it $44 million price versus raw material help. So if you add the 44 and the 25 and 28, that would have given you a $97 million positive swing in North America just from those items alone. You were up $47 million. So the question is what happened to the other $50 million?

I think, Saul, some of those items clearly are ongoing operational items that impact our earnings. To isolate them out -- certainly I understand what you're saying, but it's hard to do a walk and say what happened to the complete difference. Clearly, if you look at it, you've got impacts of raw materials in there and that's (multiple speakers).

You talked about that. That's in there.

(multiple speakers) the biggest item. Also, you've got -- as I mentioned we are off about 2.5 million units in volume in the quarter, taking out the combination of the wholesale private-label business, plus [LE] and plus the weak truck markets.

That would have cost you how much volume in North America?

It's probably a little over 10 million.

That's all?! $10 million of profit on 2.5 million tires?

One of those is the private-label units, Saul.

Okay. If we look forward, would you expect that, as more of these savings kick in, that the direction of North American segment profit should move in a positive direction from this point forward?

Yes. Saul, I would just mentioned here, you know, we don't give guidance forward, but clearly, clearly, if we take our next-stage metric, you know, we feel we are on the path to get the 5% segment operating income in North American Tire. I mean, everything starts from that, and that's an achievable goal, we feel.

As part of the new labor agreement, I think, at the time, you said you felt that you would have about 7% turnover a year in the workforce, so I think about 10,000 workers. That would be kind 700 a year. Do you get about 350 in the first half of the year, meaning that you have 350 now on the payroll that are getting paid the $13 an hour?

Maybe I will just start, Saul, by saying that obviously we had a forecast for this year, and we're running ahead of that forecast, year-to-date. That obviously has an impact so far but it really has an impact now going into '08.

Can you tell us how many workers you now have at the new, lower rate?

That one we're not going to give guidance on, Saul.

We won't do it today, and we won't do it going forward. We will just say we are above our plan, and you'll see it come through in a significant way, as you know, because this is, frankly, $13 an hour labor that's coming in. (multiple speakers)

Final question I had -- Bob, you've repeatedly said that if it's not consumer and not truck, it's not strategic. Could you talk a little bit about the international farm tire business that you still have and the global off-the-road business? I don't know, it's probably pushing 750, $1 billion in sales in those products. Where are you thinking about those businesses from a strategic go-forward standpoint?

Yes, it's a good question. Relative to both those businesses, you know, we like those businesses and we like the returns for us today, certainly, but they are not strategic core for us, so we are continually in a mode of reviewing all possible options relative to both of those businesses. Certainly, as we look at things as I said, the OTR business, the non-North American farm businesses are good businesses for us today and we will continue to look at options. But I have nothing to announce today on those.

Then the final question I had is, relative to unit sales in North America, it looked that, from your balance sheet, that you had a $440 million increase in finished goods inventories. Given you had that type of increase in finished goods inventories, was the market not there to out more of those products in sales as opposed to having them build-up in the inventory bins?

Rich, you might (multiple speakers).

Saul, when you look at our overall inventory -- and we don't specifically talk to units -- but year-over-year, I can tell you we are significantly down in units year-over-year, so what you're seeing in there is the cost of higher raw materials and certainly mix, right, as Bob said, in terms of making a more complex, high-performance or higher-end tire which is more costly than the others. But in terms of units sitting around in inventory, I think it's quite the opposite. Unfortunately, we are actually down significantly in units year-over-year, thus some of the backorders that I spoke to.

Yes, if you took any of the ratios that our guys use, any of those metrics, relative to days supply, etc., we're doing well.

Finally, in truck tires, with the units being so weak in the industry as you've articulated, are you able to hold onto the price increases in truck or is there some mushiness in the truck tire pricing world?

Well, Saul, I guess, I mean, there's always anomalies, but I would say the truck business, certainly where we are weak is here in North America. Remember, we're very strong in Europe.

I meant in North America pricing.

Yes, we are weak here in North America. I just think pricing has moved according to our plan, and it's to be expected because natural rubber is such a huge component of truck tires versus passenger tires. So with natural rubber at $0.96, $0.97, there's a lot of pressure. But I would say, I would say basically according to our plan.

I would just add, Saul, selling more Goodyear, Dunlop and Kelly products versus some of the associated brands in truck -- and obviously that has a favorable impact on both price and mix.

Yes, and we are pleased with the truck business in North America today from a return standpoint despite the softness in the market.

Thank you very much.

Kirk Luedtke, CRT Capital.

My impression is that maybe the VEBA deal has been pushed back a little bit. Do we need to update our numbers for OPEB expense, the '07 guidance for OPEB expense in funding?

Maybe Darren can comment here. I just mentioned that yes, we've slid a little bit from a timing standpoint. That doesn't affect where we think we're going. You might also, Darren, update what we said at the end of the first quarter and maybe start there.

Yes, I think, Kirk, what we said at the end of the first quarter is that, yes, we still believe the VEBA process was progressing as expected even if on a little bit of a delayed timetable. We didn't have concerns there. There were steps we were going to have to go through and we expected to go through them. That has not changed.

What has changed, compared to the original guidance that we gave in January on union contact savings, is where we said that we expected to get about half a year's benefit of the VEBA, which was about $55 million. What has changed now is that I think we have effectively gotten to the point where very little if any of that savings is going to happen this year. I think we're still looking to get the VEBA completed and in place and the accounting in place by year-end, which would protect, then, the savings for 2008. Obviously, if that changes, we will make statements to that effect.

But I think that, if you originally had looked at union savings in 2007 as 55 of VEBA plus 15 of other, or 70 million in total, what you'd now be looking at is union contracts savings of, say, $15 million and the upside for us comes from the increase in $13-an-hour labor.

Okay, I appreciate that. If I missed that, I'm sorry.

I'm looking at out across what's happening in the credit markets, and I'm trying to get a sense for how this repricing that's underway may be impacting your outlook. One item that comes to mind is the sale of engineered products. Is that subject to financing?

Yes, Kirk, I will take that one. Clearly, I can't make a lot of comments about the financing package that the buyer or Carlisle had lined up for the purchase of the Engineered Products or that business. What I will say is echo what Bob said. That is we expect that business to close in the third quarter, and we're moving and progressing toward a closing.

But I understand the question, because I know there have been headlines related to other merger transactions and difficulty getting get debt placed. But we still view ourselves as moving toward a closing there. That, I think, where we have to leave it.

Okay, great. You mentioned that it was subject to a deal between Carlisle and the steelworkers. Could you refresh us as to how many workers there are there, how many steelworkers there are at the EPD?

I was going to say, let me see if I can come up with a number that we've published on that. You know, there are effectively four master contract plans that are included, but I will see if we've got a number of employees.

Yes, we don't want to state the number unless it's accurate.

I understand. Then lastly, and I'm sorry if I missed this one, but did you mention the strike in South Africa and what kind of impact it might have in the (multiple speakers)?

No, we didn't. I would simply say here we've had a strike in South Africa. I think they went out July 20. It's an industry, by the way, strike; it's not a Goodyear-specific strike. It's a strike in the tire industry. I will just say there is broad industrial action in South Africa right now. For us, we don't think the results of this will be material to the Company. Our guys over there are working with their industry colleagues to try to resolve, but we're going to resolve it in reasonable terms. It's primarily around wages. This is -- I mean the conflict, at this point, is a wage-oriented conflict.

Okay, thank you very much.

Operator, I think we will take one more question.

John Murphy, Merrill Lynch.

I promise to keep it brief here. Two quick ones -- on VEBA, when we get through the core process and get the funding in place, can we sort of put this on a life raft and ship it out to sea or as I recall, there is some small funding tail that remains, if you could just sort of run through the details on that funding (multiple speakers).

I would just say I think that, to use your imagery here, John, you can put on a life raft. Rich?

Yes, John, you may recall there is a tail or a balance-sheet obligation that would remain, a little over $500 million, but that's really related not to the steelworker hourly plan; that's related to some of the salary/benefits that stayed intact that will just work its way out over time. The hourly piece will be ceased at that point.

Yes.

So there's no potential contingent funding that would be out there in the future.

(multiple speakers). No, and that means that we're -- that obligation has shifted away from Goodyear for retirees, current steelworker employees, and future employees.

Correct.

So that's why that makes sense as a funding stream.

Okay. Then, when we think about the capital that you're talking about this year, $750 million to $800 million, you know, that's a little bit of a ramp-up. Should we expect anything else in the coming years as you ramp-up this or add this high value-added capacity going forward?

Yes, that's a good question, John. Maybe Darren, do you want to (multiple speakers)?

Sure. As we -- and we are obviously spending a lot of time looking at the investments that are going to go along with the added, high value-added capacity and the added low-cost capacity that are part of our plans. I think what we would say is that we are seeing CapEx this year up about $100 million compared to a year ago. I think we would look for a similar increase going into next year. I think that we would see levels above and beyond even where we are this year, which is up quite a bit from where we've been in the last few. So the answer is yes, there is a higher level there. So I think you can think something like $100 million above where we are this year as we get into next year and beyond.

Great. Thanks a lot, guys.

I think we will turn the call back over to Bob for some closing comments.

Well, I hope that your take-away from today's call captures the confidence that we have in our team and our ability here to continue the positive momentum of our business performance, and it has been very positive momentum. We feel good about the progress that we've made, but we feel we are now positioned to come out of 2007 -- and remember, we've called and you've called 2007 a transition year. We will come out of 2007 a much stronger competitor.

We just thank you for being with us this morning and for your interest in the Company. Thank you.

This concludes today's Goodyear second-quarter 2007 earnings release conference call. You may know disconnect.