NEW YORK (AP) -- Shares of Goodyear Tire & Rubber Co. fell Tuesday on worries about a drop in North American production and higher costs.
In afternoon trading, Goodyear shares dropped $1.75, or 8.6 percent, to $18.66 after tumbling all the way to $18.15 earlier in the session. Over the past 52 weeks, the tire maker's shares have traded between $15.56 and $31.36.
Saul Ludwig of KeyBanc Capital Markets cut his rating for the Akron, Ohio, company to "Hold" from "Buy," and lowered his 2008 earnings estimate for Goodyear by 30 cents to $1.90 per share.
Analysts, on average, expect a profit of $2.16 per share for the year, according to a poll by Thomson Reuters.
"Strategically Goodyear is doing several right things (cutting high cost capacity, VEBA, enriching its mix and investing in automation)," Ludwig wrote in a note to investors. "But external forces and competitive dynamics make it difficult to achieve full earnings potential until at least 2010, in our opinion."
The VEBA funds will shift huge retiree health care expenses to union-administered trusts, allowing the companies to move billions in liabilities off their books.
Ludwig said tire production has been cut significantly in both North America and Europe, while at the same time the company has substantial overhead costs that it has been unable to absorb.
The analyst said that with oil and gasoline prices falling, raw material costs may come down and tire demand should eventually rebound.
"Those are certainly positives for 2009 but unless tire demand (for both the industry and for Goodyear) improves substantially, Goodyear will have too much capacity and unabsorbed costs that could linger into 2009," Ludwig said.