Goodyear comments on Venezuelan devaluation
On January 8, the Venezuelan government announced the
devaluation of its currency (the bolivar fuerte) and
the establishment of a two-tier exchange structure.
The official exchange rate has been devalued from 2.15
bolivar fuerte to each United States dollar to 4.30,
except in the case of essential goods, for which the
rate is 2.60. Some of the tires and raw materials The
Goodyear Tire & Rubber Company imports into Venezuela
have been classified as essential, while others have
not. The company is evaluating the list of goods classified
by the Venezuelan government as essential to determine
the exchange rates applicable to its imports.
Separately, Venezuela has been designated hyper-inflationary
effective January 1, 2010, and as such, all future foreign
currency fluctuations will be recorded in income.
Goodyear expects to record a charge associated with the
devaluation, which if calculated at the 4.30 exchange
rate would be approximately $150 million ($.62 per share)
in the first quarter of 2010.
This charge relates to the remeasurement of its balance
sheet, net of tax. To the extent that Goodyear imports
are classified as essential, this impact could be reduced.
On December 31, 2009, without giving effect to the devaluation,
Goodyear had approximately $370 million in cash denominated
in bolivar fuerte in Venezuela. The devaluation will
not have any impact on Goodyear’s 2009 results of operations
or financial position.
The future results of Goodyear’s Venezuelan operations
will be affected by many factors, including the company’s
ability to take actions to mitigate the effect of the
devaluation, further actions of the Venezuelan government,
economic conditions in Venezuela such as inflation and
consumer spending, and the availability of raw materials,
utilities and energy.
“We have a strong business in Venezuela with an outstanding
and experienced leadership team that is focused on managing
through the changes taking place in the Venezuelan market,”
said Robert J. Keegan, Goodyear’s chairman and chief