Good morning. My name is Michael and I will be your conference operator today. At this time, I would like to welcome everyone to the Goodyear First Quarter Financial Results 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 would now like to turn the call over to Mr. Patrick Stobb, Director of Investor Relations at Goodyear Tire & Rubber Company. Mr. Stobb, you may begin your conference.

Thank you, Michael. Good morning, everyone, and welcome to Goodyear's first quarter conference call. Joining me on the call are Bob Keegan, Chairman and CEO Darren Wells, Executive Vice President and CFO, and Damon Audia, Senior Vice President, Finance and Treasurer. Before we get started, there are a few items I'd like to cover. To begin, the webcast of this morning's discussion and the supporting slide presentation are available on our website at investor.goodyear.com. A replay of this call will be accessible this afternoon. Replay instructions were included in our earnings release issued this morning. The last item, we plan to file our 10-Q later today. If I can now direct your attention to the Safe Harbor statement on slide two of the presentation. Our discussion this morning may contain forward-looking statements, based on our 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 filing 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. Turning now to the agenda. On today's call, Bob will provide a strategy update, followed by a market overview. After Bob's remarks, Darren will review the financial results and discuss outlook, before opening the call to your questions. That finishes my remarks. I will now turn the call over to Bob.

Well, thanks Pat, and good morning, everyone, and thank you for joining us on the call this morning. When we announced our year-end earnings in February, we suggested that Q1 was going to be a difficult quarter, much like we saw in the fourth quarter of last year. And you will see from our results, it was. Industry volumes were down more than we expected in some markets, with commercial truck markets being hit the hardest. Our OE customers continued to struggle with their business, particularly here in the U.S. And raw material costs remained high as we worked through higher priced commodities. While we are not satisfied with the quarterly financial results, they generally reflected our expectations, given the prevailing market conditions. Darren will provide details in a few minutes. While our markets presented us with the challenges we expected and in some cases, more, we continued to take the right actions to strengthen our business, to position ourselves to rapidly take advantage of opportunities as the market recovers, which it inevitably will. Our actions are fully aligned with the strategy that has served us well over the past several years. Our strategy guided by our intense focus on the seven strategic drivers of our business. Our future direction is not a new one. We are taking a proven strategic path for the next level of business performance. Today, I'll update you on the progress we have made in our action plans in three areas, top-line growth, cost savings and cash management. Then I'd like to provide you with our view of where the tire markets are, and where we see them heading near term. Initially, let me address our actions to support the top line. These actions are absolutely critical given weak industry conditions. Our industry leading new…

Thanks Bob. I'll start this morning with a few summary comments, before moving onto address our income statement, the balance sheet, business unit results and our outlook for 2009. First quarter results reflect the continued impact of unprecedented economic challenges we currently face. As in the fourth quarter of last year, the two factors having the most significant impact on our results are weak industry demand and peak raw material costs. Otherwise, you will see our plans on track. In North America, we saw significant volume declines continue across all tire segments, despite market share gains, with the replacement industry volumes declining by levels consistent with the fourth quarter last year. But, OE volumes declining even more severely. In Europe, the story was similar. Commercial volumes, in particular, were hard hit, and have shown no signs of life at this point. As simply to choosing to cannibalize tires from idle equipment, rather than purchase new tiers. In our other regions, industry volumes were also very weak compared to the prior year. But, there were some hopeful signs, with passenger vehicle production picking up in China and India, driven by strong government incentives. The significant drop in industry volumes, when compared to the prior year, drove global unit sales lower by nearly 9.5 million units, a reduction of almost 20%. We continue to see the double hit to earnings from production costs, which reflect for us, not only lower sales, but also our aggressive management and inventory levels. So in the first quarter, we see -- we reduced production by 12 million units, equal to what we indicated on our February call. Raw material costs increased 332 million or 31% versus a year ago, the highest percentage we've seen as the high cost from the raw materials purchased in mid-2008 flow…

(Operator Instructions). Your first question from Rod Lache with Deutsche Bank.

Good morning. Can you hear me?

Yes. We can, Rod. Good morning.

I have a couple of questions. Was hoping, first of all, you can break down the volume versus the mix effects in the quarter. And within mix, just speak, if you can, to -- you mentioned that truck -- commercial truck was down, but OE was down also. And I would imagine that the OE would have a positive effect on mix. So, how did you see that affect the overall mix result?

Well, I think I mean the point that you're making are right. We've had some factors going in each direction. But, I think when you look at it, the severe drop in the commercial truck tire markets, as well as there's some drop that we see in the OTR markets, are both working strongly against the mix factor. All right, so that to as what we saw as an impact on revenue per tire that was more significant than the benefit we would've gotten from some lower OE volumes. And I think if you break it apart by region, you'll see some differences as well. And you can see the impact that Europe gets is more strong from the volume, and part of that is the fact the OE business there is better for us than the OE businesses in U.S.

What was the price affect, if you just looked to that in isolation? Was that a positive year-over-year?

Yeah. We've seen -- we've continued to focus on our strategy on pricing. And we've worked very hard to establish price positions in the market. Obviously, we're continuing to focus on that with our new product engine. We don't break pricing mix out specifically. But, I think that the focus that you would have on the mix effect is going to be on the mix among our businesses as much as there is anything else.

And would you expect that pricing to remain fairly stable over the course of the year, even as you've commented that raw material should become favorable towards the latter half of the year?

I think, maybe Rod, I'll just jump in and say, as we're looking forward this year, obviously, as raw material prices come down, we've got a weak demand environment. There'll be some pressure here. But, we don't think it will be very intense pressure. We've been able to get price mix, not only in the first quarter, but in 2008, the previous four years. So, we're pretty confident about the value propositions that we're putting out there.

Okay. And just the last two from me would be, looks like you've cut production by 12.6 million units, if I calculated it right. And you had a 9.5 million unit sales decline. How much did the inventory reduction impact your unabsorbed overhead? And then lastly, looking at prospective cost savings, it looks like the big opportunities are in the productivity and steel USW bucket, and in the capacity bucket. Could you just speak to you are coming up on a new contract. What are your expectations there, and what would the savings be from this 15 to 25 million unit capacity reduction?

Rod, I'll take the question on the production cuts first. Clearly, that is an area where we have taken a double hit. Our cutbacks in production have been more than the lost volume. And so, you're right to look at that and say, yeah, that's driving a lot of unabsorbed overhead. But, even if the unit sales continued, we wouldn't continue to see all of that. Now, having said that, we are continuing to focus on driving our inventory levels down. And that does carry with it some impact on unabsorbed overhead. And I think the production cuts that you see are in a range of 12 million units, versus 9.5 million units or so volume declined. So, I think you can figure out what portion of that is going to be from the additional production cuts. The productivity question or the productivity point you make is the right point. Going forward, we should see significant impact on cost savings from the head count reductions that we've taken. And that's both in the salaried staff, as well as in our production facilities. And if we look at what we've been able to do there, and not just in the U.S., but around the world, we have been able to take reductions that are going to pay us back over the course of the year more than they would have in the first quarter.

What would the savings be from the 15 to 25 million capacity reductions?

The -- I mean, Rod, we've taken out 25 million units of capacity over the last several years. And I don't have any better guidance for you than to suggest that the savings should be similar. The savings we've seen in capacity reductions historically.

Okay. Thank you.

Rod, maybe just one point, because you raised the question of the negotiations with the Steelworkers. Obviously, those will begin in June. Our policy will continue to be not to countdown until we're through those negotiations. I'll just say that with the progress we made in the three plants I mentioned in Danville, Topeka and Buffalo, that we got good working relationship. And frankly, a good environment here.

Thank you.

Next question.

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

Hi, good morning. I wanted to talk about North America, either for Bob or for Darren. Just looking, it looks like your revenues in units were sequentially from the fourth quarter down about 20%. And your segment operating income is roughly flat. I know you don't disclose a sort of sequential bridge on profits. But, could you just give us some color there, what was it -- what were the factors that went more favorable to offset that sort of revenue pressure?

Yeah, Himanshu I think the point you're making is we dropped from 16.9 million units to 13.9 in terms of volume from as we go from Q4 to Q1. Clearly, the volume had some impact. Although, if we look at that and I think a large part of it is drop in OE volume, which in North America doesn't happen, it doesn't carry within a lot of earnings. So, the drop off there isn't as significant as it might appear to be, just given that those are pretty low margin units. I think in addition to that you'll see that North America is getting some cost savings. That's going to be helpful, as we go from Q4 to Q1. The other thing though that worked against us to some degree, and you'll see it in our disclosures is the, as the 10-Q is published that the non-tire businesses, or the tire related businesses, I should say, in North America. And you can think about the chemical business, the retail business, the rethread (ph) business. Those are businesses that have continued to get tough for us.

Darren, was the, when you say cost savings, was there a big relief sequentially from general inflation?

Well, I mean, we did see some -- if you think sequentially, not as much relief as you see here from a year-over-year perspective, because inflation wasn't nearly as much of a factor in Q1, as it was for us in Q4. A couple of things that you do see there. Number one, you see really the first quarter will get the full benefit of the Viva in North America, as it flow through inventory, given the lag that, that would have taken. So, that's the benefit. And benefit from some savings that we have taken in SAG. They're pretty insignificant.

Okay. The 11 million unit production cut guidance for the second quarter. First, just a housekeeping comment, what is that in reference to? Is that versus a year ago, or is that versus your previous internal plans?

Yeah I mean, you can think of it. I don't think it's going to be too much different. It is -- the 11 million units is going to be compared with a -- not what we would consider to be a normal production schedule. And if we look at a year ago, we were still on more or less what we would have seen as a normal production schedule. Our production cutbacks started somewhat in the second quarter, but mostly kicked-in in the third quarter of last year.

Okay. So, my question on that is, is there a chance here that the 11 million maybe too steep, just on the sunset (ph). It looks like your inventories are started to get under control. We're seeing some stabilization or improvement, whatever, in miles driven. It looks like the rate of decline on consumer replacement in Europe has also started to moderate. Are you viewing this as sort of a conservative number, or would say this number has downside risk to it? I was just trying to get some color around that.

We still think it's a realistic number. We've been aggressive cutting production schedules and drawing inventory down, since the middle of last year. I think we're still going to be aggressive in that area. There's a lot of volatility in the demand environment as you see. But, we think this is a realistic number. And I am not sure whether I'd quite go so far as to say, it's a 50% upside, 50% downside. But, it's a very realistic number at this point.

And then last question on for Darren. Maybe you could just comment on just given where the markets are, both on the equity and the credit side, what are some of the financing options that you think could be tapped opportunistically, to address the debt maturity at year-end?

Himanshu, this is Damon. As Darren alluded to, we would look to opportunistically refinance the December maturity, if presented itself for us in the high yield company, there is obviously the unsecured market that we will look at. And given our secured position, we do have the options with the secured market as well.

Okay. Any thoughts on equity-linked transaction, or is that still something that you think would -- either you're not interested in, or you think it's just hard to pull off?

The equity-linked market is another option for us to consider, Himanshu. But, as we look through the options, we look at the cost of each of these, the market's appetite for Goodyear transaction. And then, again, looking at what's in the best interest of the company in the near term and the long-term, and looking at what different options we have.

Okay, very good. Thank you.

Thank you.

Your next question comes from John Murphy with Merrill Lynch.

Good morning, guys.

Good morning, John.

You've made pretty good progress on your inventory reduction, have a little bit more to go according to your targets. So, that bodes well for you. What is your sense of the competition on their inventory reduction, and what are you hearing sort of from the channels. And I'm just trying to understand, if we get into this lower inventory level that you're heading for, can we get some pricing support particularly, in the second half of this year?

John, I won't comment where the competition is. But, I'll go back to the comment I made in my remarks that if we look at the overall trade distribution channels, people are running clearly, with fairly low inventories at this point. As I said, cash is certainly king for them. Most of them have run their businesses for many years on a cash basis, and still do so. So, we think inventories that are out there are, what you might call, a normal level or below in virtually all the markets. And the only place where that might be a little different is on the commercial truck, where people have gotten caught by surprise with the fall in demand. But, in the passenger area and I am making a global statement here, inventories are relatively normal to low.

Okay. And you alluded to moving to an environment where you might see more of a pull model as opposed to a push model on inventory. Are there any signs that that pull model is beginning to develop as far as the demand and supply balance.

Well, for us, we've been working intensely on this for the past three years. And for us, we're certainly moving towards a pull environment very rapidly. And again, I won't comment on the competition in that regard. But, for us, that's a step that we have now taken. And we've got the capability in place to do it.

Bob, you mentioned that you were able to gain market share a lot of which something came from is mid-tier tires that you have included in the very good product. What is the profitability of those tires? Is that sort of along the corporate average, or is that slightly above or below?

They're pretty good margins, John. Because remember, when we say, I talked about branded mid-tier. And it's important to have all those words. So, there are mid-tier products that the not branded, where margins might be a little less. But for branded mid-tier, a significant portion of that is what we've called in the past HVA or high value-added product. So, these are good margins in the area particularly, if you bring new product to the category like the Assurance Fuel Max.

Okay. And then just lastly, just one question on slide 17. The available credit line looks like it dropped pretty significantly from 1.7 billion at the end of last year to 1.0 billion at the end of the first quarter. Was there something that changed in the borrowing base, or what's going on there?

Damon, you want to take that?

Yeah. John, this is Damon. The delta, the drop in the available credit lines is really due to the seasonal borrowings in Europe. So, when you see the Q, you will see that we've drawn our credit line in Europe, which is fairly traditional.

Great. Thank you very much.

Thanks, John.

Your next question comes from Saul Ludwig with KeyBanc.

Hi. Good morning, guys.

Good morning, Saul.

Good morning.

With all the inventory cuts that have taken place. And the fact that there is seven other tire plants that have already been announced for closing. Do you still feel taking out another 15 to 25 million units is necessary, given that there have been additional plant closings subsequent to your originally announcing the need to take out that additional capacity?

No, I'd just comment to some degree, we've got the range in there. And the range was positioned for the reasons that you mentioned. We're continually monitoring demand. We're continually rethinking where demand will be in the future. But, yeah, we've got to take some capacity out. We feel strongly about that. And we have some high cost capacity that needs to come out. And some regions that are more stressed from a demand standpoint that others. So, we feel pretty good about that range.

Right. Next question. What's the timing when you have to move out of the Dalian plant? And where do you stand with the construction of the new plant?

Yeah. I won't give you a precise timing, because it moves a little bit. I'll simply say that we are on plan, in terms of government interaction. So, we have joint plans, and the preparation of the site. So, no, things are right on plan with Dalian.

Is there any time when you have to out of your existing plant, because of the neighborhood in which it's in Bob?

It's a function of, remember, this is all well coordinated. It's a function of when the new plant is ready to roll. So, that's the pacing item, Saul.

And are we in the two to three year timeframe or one to two year timeframe, or -- not nearly if you answer a specific month?

(inaudible). But, I'd simply say that we're in the two year plus timeframe to be completely ready to ship product.

Okay. And then finally, Damon, why with the $64 million of interest expense in the first quarter, what's going to cause that interest expense level to be so much higher to achieve the 315 to 325 expense for the full year?

Sure. Good question, Saul. One of the big variables Saul, is the debt that we reported at the end of the first quarter, as I alluded to earlier, part of that was the to draw of our line in Europe. That wasn't outstanding for the full quarter. So, you can't really extrapolate the interest expense for the first quarter for the remaining three quarters. So that's one variable. The other one is the when we look at our guidance, we look at forward-looking LIBOR curve. So, given LIBOR today, it's currently low, the forward rates are little bit higher. So, those are probably the two biggest items. And then the third one I'd point out is the European securitization program, which is not currently fully utilized. As those receivables increase in Europe, that would translate into incremental interest expense for us as well.

Great. Thanks for your good explanation. Thank you, guys.

Thanks Saul.

Your next question comes from Itay Michaeli with Citi.

Thanks guys. This is Will Randa (ph) for Itay Michaeli. I was hoping you could discuss your outlook on particularly, working capital, on capital expenditures and cash flow seasonally, as we look through the rest of the year. Just give us a sense where that would fall out?

I am going to take that. The -- I mean, what we generally experienced from a working capital and a cash flow perspective in our business is a cash out flow during the be it the first, second, even the third quarter. And then cash inflows during Q4. And that's our traditional seasonal pattern. Now, if we take that and we overlay the inventory reduction targets we have. And obviously, we're trying to work inventory down over time. We made progress on that in the first quarter. We're going continue to be focused on that. So, you have not seen inventory build the way it traditionally would build. And clearly, what happens in the marketplace in the second half of the year is going to have some influence on what level of working capital is going to be needed to support the business there. So, there is a big uncertainty. We're not in a position to have complete clarity over what the third and fourth quarter volumes are going to look like. But clearly, that's going to have some effect on poor inventory where receivables have to be. From a CapEx perspective, we are inline with our plans on CapEx. We've got plan to spend 7 to 800 million of CapEx during the year, which, while it's down about 300 million or so from last year, is a reflection of the fact that we don't need the capacity that we once thought we were going to need. And that's -- the market has reset. It's reset to a lower level. So, we don't need the high value-added capacity, and the upgrades and the expansions that we once felt we were going to need. So, we thought CapEx levels back down, we feel that we are inline with our expectations there. The cash flow is going to have all those variables involved in it. And with a big part it revolving around where the levels of business activity in the second half of the year.

Is it possible in Q2 to have a decent size benefit given your inventory reduction actions as typically in Q2, it's a relatively neutral working capital period?

Yeah I think the real question is going to be where -- typically sales in Q2 and working capital in Q2 were build? Now what happens in the marketplace is going to be a driver there. But, we continue to drive our inventory levels down. So, inventory is something we look to get a benefit from. Other elements of working capital are going to driven by business activity levels.

Thank you.

Thank you.

Next question, Michael.

Your next question comes from Patrick Archambault with Goldman Sachs.

Hi, good morning.

Good morning, Pat.

I guess, I just wanted to dig into pricing a little bit more. One of the things that has been brought up is that some of your competitors may see the benefits of lower raw material costs a little sooner from a P&L perspective, simply because I guess, they are on a different inventory accounting system with less of a lag versus FIFO. And I was wondering whether you thought that might lead to potentially accelerated pricing or discounting within the next quarter, what you're seeing, what you're hearing about that. And if you would agree with that, that would be my first question.

Okay. And maybe just to address that as I said earlier, that we feel pretty good about what we've been able to accomplish in terms of price and mix and feel pretty good going here into the second quarter in that regard as well. With regard to the FIFO versus what I think from most of our major competitors' kind of an averaging type of methodology, we haven't seen empirically over the past few years a lot of impact from that directly in pricing. So, I don't know that there'd be a delta there in terms of the timing. We certainly, we monitor the market all the time. But, I wouldn't anticipate that.

Okay.

Darren, I don't know, any other comment on that's...

No.

And just a follow-up on mix. We've spoken a lot about the impact of trucks. But specifically within passenger car, how is the move to what you described as mid-tier on a go forward basis? How is that going to impact mix as the tailwind, as we get into sort of the back half of this year. How should we think about modeling that?

Well, just to be clear here. I want to make sure, you're looking at I think what we'll see. The reason for going to the mid-tier, the branded mid-tier, is because there's a lot of volume there, and a lot of industry volume. And there is a lot of potential there for us, to take on more consumers and more volume at very attractive margins and attractive price levels. So, to me, it's not as simple a question when we look at the mid-tier. It's just looking at price mix. It's an absolute dollar gross margin type of question. And that's really what we're going after there.

Sure. No, absolutely. But I guess, if we were kind of to model it out, like you have represented on slide 14, your success in doing that would help diminish volume headwinds, and unabsorbed overhead and all those aspects. But, the mix part of it might actually shrink a little bit.

Well, I think, it might not. Because, the mid-tier pricing, although, below the premium pricing. As I've said, it's still high value-added. It is still each substantially HVA product. I mean, pricing on our new fuel backs is a good value proposition. But, the pricing is attractive from our standpoint too. It's a good fit, attractive to us, and attractive to the ultimate consumer. So, there may be a little play down. But, there is also play up, in terms of creating a stronger mix for us. Because remember, we've exited a lot of lower price business, consciously done in over the past few years. So, I wouldn't naturally assume that mix will be down, because of that play in the mid-tier. I think there will be solid pricing.

Okay. So, sort of set at a very high level year-on-year just given some of the private label stuff you've been exiting, you still expect mix to be a tailwind even if...

It will still be a positive.

Yeah, okay. Okay.

And that will be a positive. And certainly -- and I would say in all four of our geographic markets. I mean, unless market demand changes considerably, and we haven't seen that to-date. But, the reason for going after the mid-tier is obviously, we see that as a relatively strong market segment. We saw that 18 months ago. And because of our ability to launch new products quickly, we've got products in that segment that we're shipping here early in 2009. That's the reason for speed and the new product stream being so critical.

Okay, great. And last one, the -- I might have missed this. But, can you give us a sense of what the unabsorbed overhead cost associated with the second quarter production cut will be? I mean, I think I maybe remembering this one, but I think it was between 10 and $20 a tire or something like that, depending on what region you were in? Is that the guideline you would use for just assuming that for Q -- estimating that for Q2?

Yeah. There is a -- if we look at the last three quarters, I think we've gotten you'll be able to see as much data that would help you estimate the second quarter as I can provide. It will be dependent on where -- which factories take the production cuts? In which region of the world those factories are in, and what the level of fixed costs are? And obviously, we've done some things overtime that are reducing the fixed costs. As we take people out, as we take costs out of factory, we're working to get that unabsorbed fixed costs burden down overtime. But, for the second quarter you'll look at it and say, The situation isn't going to be that much different than it was in the first quarter.

Okay, great. Thanks a lot guys.

Thanks, Pat.

And due to time restraints, your final question will come from Kirk Ludtke, with CRT Capital Group.

Good morning, guys.

Good morning, Kirk.

Good morning.

I just had a couple of follow-up questions. One was regarding the liquidity slide 17. And I think you mentioned that the decrease on the availability was due to draw to the European facilities. And I just wanted to clarify, the definition of availability. The Pan European securitization I guess, you have another 200 million of capacity. But, you don't have the borrowing base to actually draw. Is that a fair?

This is Damon. That's the way to look at it. We have a committed facility there. But, given the seasonal nature of the receivables, and given the drop-off you saw in the first quarter, we didn't have full access to that currently. Historically, you'll see the receivables in Europe grow in the second and third quarter. So, at those two compound lines in revenue, you would see us be able to borrow against that.

And is there any part of the billion dollars that similarly situated, committed, but constrained by the borrowing base?

No.

Okay, great. And then, how is it going rolling these facilities, these -- the facilities that matured in the first quarter. Did they all roll over at the same levels?

Yeah, Kirk, we see, and we 're rolling small facilities, nothing meaningful in size. And we continue to renew these facilities without any nature of problems. Again, every country, every region has different minds (ph) but nothing significant.

And Himanshu asked about the capital market options. And I was curious. Are you sharing the amount of secured debt that you could layer in to your capital structure?

We haven't given a specific number curve. But, I guess, what I would tell you as we look at our credit facilities, we look at our other unsecured debt that we have out there, we don't feel that there is any significant restrictions in allowing us to do something like a third lean transaction or anything like that.

And then, last question. I'll raise it, because no one else has. But, is there any update on the internal puts, anything that -- any developments that you want to share?

The short answer is no, Kirk. Our feelings are the same as they were when we talked on the Q4 call that with both parties achieving significant benefits. And there is no update.

Okay. Thank you very much.

...good relationship both parties to arriving benefits.

Thank you.

Thank you, Kirk. This is Pat. This concludes today's call. Thank you very much for joining us today. If you have any follow-up questions, please feel free to contact me.

Thanks everyone.

Thanks.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.