By Karen Padley
NEW YORK, April 29 (Reuters) - Four months into the top job at Goodyear Tire & Rubber Co. , Robert Keegan is headed to Wall Street this week with pressure mounting to deliver on years of unkept management promises to reverse chronic troubles at the world's No. 3 tire maker.
Keegan, a one-time Eastman Kodak Co. executive who became Goodyear chief executive on Jan. 1, is expected to reveal plans to cut staff further and perhaps close plants to shore up its weak North American tire business, analysts say.
Analysts generally agree that Keegan inherited many of the "self-inflicted" problems from previous management, but say he nevertheless must act boldly to assure investors that a turn-around is underway or just around the corner.
"If it's not a sweeping and convincing restructuring plan, it will not mitigate our concern about the company's financial conditions," said John Casesa, a Merrill Lynch analyst.
It has been a long, hard ride down for Goodyear investors. The stock has plunged from a high of more than $75 five years ago to less than $6 today and has underperformed all of its major rivals. Goodyear's bonds are all rated as junk, and its most actively traded notes are selling at 77.5 cents on the dollar.
LOOKING TO DAM STREAMS OF RED INK
Goodyear, based in Akron, Ohio, has not had an annual profit in two years and has posted losses in five of the past nine quarters. It is expected to report yet another loss on Wednesday when Keegan meets with investors and analysts in New York and reviews Goodyear's first-quarter results.
The company is hardly alone in struggling through a market that suffers from waning consumer demand for replacement tires. But the litany of problems at Goodyear stretches well beyond a string of losses in a harsh market.
Goodyear's balance sheet is in tough shape. Even though its banks recently agreed to refinance a major portion of its debt, giving it about two years to regain its footing, the company carries some $5 billion in total debt. Credit ratings agencies have all cut its bond ratings to junk in the past year.
Operationally, it has been criticized for a series of missteps, including a failure to capitalize on what many saw as a golden opportunity when arch-rival Bridgestone Corp.'s Firestone unit was forced to recall millions of tires.
Goodyear alienated many of its dealers by eliminating some discounts and announcing price increases that have not always been matched by competitors.
Its cost-cutting efforts have hit employees, who have been stung by a recent move to stop matching 401(k) contributions, as well as investors. Aside from suffering a 92 percent drop in the stock price over the past five years, they took a hit when Goodyear eliminated its dividend for the first time since the Great Depression.
COST STRUCTURE IS JOB ONE, ANALYSTS SAY
Cost pressures remain and Goodyear must address them soon, analysts say.
"Like the airlines, you can do it with wage reductions. You can do it with fewer facilities. You can do it with advertising adjustments," said Saul Ludwig, an analyst with McDonald Investments.
Only one thing is certain, Ludwig said: "They will have to do something to lower their cost structure."
The loan refinancing, for instance, will raise Goodyear's interest-rate costs in the first quarter and beyond. Raw material prices also are higher.
Goodyear has reined in capital spending in the past few years to save money, but that has raised concerns about whether it will be able to keep up with rivals' new products.
Even with the cutback in 401(k) contributions, it still faces higher pension expenses in the next two years because of recent stock market declines. A lot is riding on what Goodyear can win from its largest union, the United Steelworkers of America, in current contract negotiations.
Whatever Keegan unveils on Wednesday, Wall Street is not ready to grade the plan without seeing results. Analysts note that Goodyear has restructured several times in recent years, but generally has not produced promised cost-savings.
"Even if they announce something major, people are going to want to see the results of it," said Rod Lache, an analyst with Deutsche Bank Securities. "The company does not have such a great track record in terms of execution."