Good morning. My name is Janice and I will be your conference operator today. At this time, I would like to welcome everyone to the Goodyear first quarter 2008 conference call. (Operator Instructions) Mr. Dooley, you may begin your conference.

Thank you, Janice. Good morning, everyone and thank you for joining us for Goodyear's first quarter 2008 results review and strategy update. Joining me on the call are Bob Keegan, Chairman and CEO; Mark Schmitz, Executive Vice President 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 website, investor.goodyear.com. We will file our form 10-Q this morning. This morning’s discussion will be available for replay after 3:00 p.m. Eastern Time today by dialing 706-634-4556, or on our website 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’ll turn the discussion over to Bob Keegan.

Thank you, Greg and good morning, everyone. At Goodyear, we fully recognize that the focus at present is on the economy so on today’s call, we’ll review our outstanding first quarter results, the progress we are making in growing our business and in improving our cost structure, and provide an updated outlook for our markets given weaker economic activity in some key markets. Our goal is to provide a clear look at our current business position and the successful strategies that are driving it. Now, to provide more information, more granularity and ultimately more clarity, I want to announce a Goodyear investor meeting scheduled for June 26th in New York, and this meeting will not only provide an opportunity to gauge Goodyear's strategic depth but will also give you an opportunity to meet Goodyear's global leaders and share insights at our future business plans with them. Since our February year-end call, we have received several company recognitions from major business publications that are noteworthy, and I’ll go through these rather quickly. Although we previously received considerable recognition for Goodyear's continual stream of great new products, this recent recognition is of a much broader nature. First, last month Fortune Magazine announced that Goodyear was the world’s most admired motor vehicle parts manufacturer. Goodyear topped the list in four key attributes -- people management, use of assets, global orientation and innovation, which as you are all well aware, has been the cornerstone of our progress as a company. And this most admired recognition represents an aspirational goal of ours that dates back five years and is a huge accomplishment by the people in our company. Second, Forbes Magazine and Audit Integrity Inc. recognized Goodyear as one of America’s most trustworthy companies. Third, Corporate Responsibility Officer Magazine named Goodyear one of the 100…

Thanks, Bob. As Bob said, it was continued execution of our strategies that led to our strong results in the first quarter. Turning first to the income statement, our 10% revenue growth was driven by the continuation of price and mix improvements and favorable foreign currency translation. These positive impacts were offset partially by a 3% decline in unit volume driven by a 9% decline in global OE volumes, much of which occurred in North America. Gross margin was 19.9% in the quarter versus 16.8% in last year’s first quarter. Note that last year’s gross margin was adversely impacted by non-recurring items, such as the strike. This year’s margin performance was achieved through price and mix improvements in excess of raw material cost increases, growth in our high margin international operations, and cost savings actions consistent with our four point cost savings plan. Selling, administrative, and general costs declined by $28 million year over year. SAG as a percent of sales declined by 190 basis points in the first quarter to 12.8% of sales. The company continues to take actions to control costs and reduce SAG expense and this remains a key area of focus for us going forward. SAG expense in 2007 also included $37 million of salary benefit curtailment charges. Income from continuing operations was $147 million, or $0.60 per share in the first quarter, versus a loss of $110 million or $0.61 per share in the prior year. Reported income from continuing operations included $43 million, or $0.18 per share in financing fees related to debt repayment, gains on asset sales of approximately $33 million, or $0.13 per share, and an after-tax gain on an excise tax settlement in Latin America of $8 million, or $0.03 per share. We also incurred rationalization charges of $13 million, or…

Thank you, Mark and I’d say reflecting on Mark’s assessment, I think you and I heard three key themes, which are going to be critical to our performance improvement both in the near-term and in the longer term. First, continued growth and success in key premium market segments globally, including the U.S. Second, stronger profitable growth in our international businesses and third, the right steps are being taken in focus areas like North American manufacturing and our global supply chain, which will significantly improve our competitive position over time. And we really like our position. Now before we open up the call to your questions, I would like to summarize our updated outlook for the industry in 2008. In North America, we now expect the consumer replacement market to be flat to down 1% in 2008 versus our previous forecast of flat to up 2%. Our forecast for the consumer OE market is now down 7% to 10% versus our previous forecast of down 2% to 4%. And here we recognize that’s a somewhat conservative forecast, but that’s our strong feeling at this point. Our forecast for commercial OE has been revised to up 10% to 15% compared to our previous forecast of up 20% to 30%, and for OE, this reflects a current uncertain environment but one that is expected to improve in the second half of this year. Our forecast for the commercial replacement market is unchanged at flat to up 2%, as key freight demand indicators continue to improve as Mark indicated in his comments. In Europe, for the full year our forecast for the consumer replacement market is now flat to down 1% compared to our previous forecast of flat to up 1%, as a result of some recent softness in the markets and frankly the…

(Operator Instructions) Your first question comes from the line of Himanshu Patel with J.P. Morgan.

Can I get into the North American volume numbers? It looks like on a year-over-year basis, volumes fell 1.5 million units. But I mean if you adjust for the strike, the decline was almost twice that. Can I get an understanding of how that broke down between consumer and commercial and replacement and OE?

Let me kick this off -- you are right. Our volume was down about 8% in North America. That is mostly OE. And there is also some reduction at -- I would call it at the lower end of consumer replacement. Certainly all the premium or high value-added markets continued to grow, and I would also comment that our share of market in the branded tire business was up as well here in the first quarter. So those would be my kind of kick-off comments. We increased share in our targeted market segments. The OE markets certainly were weak in the quarter, reflecting what you have seen from the various automakers. Other comments?

No, just to reemphasize we really are very pleased with the share performance of our higher value-added products, our branded products, our Goodyear products.

I think it’s -- just another point here; we continue throughout the world to be constrained by our capacity for high value-added product and certainly sales could have been higher in North America had we had the product and that’s part of why we are making the investments we are making going forward.

Are we at a point now where the softness in consumer OE cannot be easily transferred over, the capacity can’t be transferred over or redirected to consumer replacement given the simultaneous weakness in that space and --

Well, I would tell you that as we look at things today, and as I’ve said we’ve got a pretty conservative, in our eyes, outlook for the OE business over the balance of the year, but we think that’s prudent for planning purposes, that we see about half of the weakness that we’ve seen, about 50% is able to be transferred into the consumer replacement business. And that’s an approximate figure but of course therefore about 50% would not be transferred to the consumer replacement so it starts to have an impact on our overall volume and frankly will have an impact on profitability to a degree going forward as well.

Okay, and one last volume question -- Latin American volumes I noticed were down slight, despite a strong industry. What happened there?

I would say -- you know, it’s interesting that the Latin American volumes are down. We’ve made some transition from OE to replacement in the quarter and we did that for margin purposes and we are continually tweaking that system. But what we see is some weakness in Mexico and if you exclude Mexico from the equation, the rest of Latin America would have had healthy industry and so would our volumes have been healthy in those countries. And in fact overall, we gained share in the critical for us in Latin America, the consumer replacement business.

Okay, and then on transitional costs, I know you mentioned there was another $40 million or so this quarter. Any way to give some sort of guidance on how that is going to trend over the rest of the year? I know you said it would linger but does it trend down in the next couple of quarters?

Good question and a critical area for us, and Darren, you may -- because you’ve done a huge amount of work in that area, make your comments.

Just stepping back, looking at the conversion costs that you will see in North America, and there will be a few more comments in the 10-Q as that comes out, but what you will see is conversion cost performance in the first quarter for North America was an unfavorable $12 million, and that’s after adjusting for the strike. So obviously some good news from not having the strike impact this year. But an unfavorable $12 million made up of three factors -- first we had structural cost savings at levels similar to what we saw in the fourth quarter, so you see about $54 million of structural cost savings. Then you see the $42 million negative from what we call the transitional cost and what I would say about those is part of those relate, I’ll call $10 million to $15 million of that number is related to the shutdown in Tyler, Texas, so the inefficiency related to the shutdown process in the fourth quarter that came through in cost of goods sold in the first quarter. And certainly that effect will not recur in the second quarter. The remainder of those transition costs I think to Mark’s comments is going to be amounts that we continue at some level into future quarters but decline over time. There is a third impact, because if you take those two together, you get a positive 12 conversion cost and what you will see in the disclosures is a negative 12, which means there is another $24 million negative, which is the third point, which is principally related to higher inflation levels, that in this environment where we are making a lot of changes in the plants can’t be entirely offset by continuous improvement actions, so the higher inflation is having some impact there as well, all of which are affecting our North American results. But going forward, we will continue to see some additional cost savings from things like the Tyler closure. We’ll also start to get in the second half of the year some savings from the VEBA, and if we look out to the third quarter there, we might expect a half-a-quarter’s worth of savings, so $10 million to $15 million of savings in Q3, provided it’s approved, as we are optimistic it will be. And then in Q4, we’d get the full VEBA savings of around $25 million. So that’s a long-winded answer but it says that the transitional costs will go down over time and particularly the ones related to Tyler, and we’ve got some increased savings coming in future quarters here from structural savings as well.

Thanks, Darren.

Thank you.

Your next question comes from the line of Rod Lache with Deutsche Bank.

Good morning. Just first of all two points of clarification -- can you repeat what happened to North American replacement and OE volume? You said that pretty quickly earlier. This is just for the quarter. And also on slide 10, the footprint savings didn’t change since the same slide was shown last quarter but you shut down Tyler. Is that because that was just offset by transitional costs?

I’ll take the second one first. The savings from the Tyler shutdown, we’ll have to run through inventory so you will see that come out in Q2.

That is just strictly lag effect on the P&L.

Okay.

And the volume point again was that North America’s volume is about 8% off. Most of that is from OE. We do have some volume reduction in the low-end of consumer replacement and frankly, I said that HBA market growth continues a pace. We continue to grow share, our branded share of the market and frankly, some concerns I know probably Rod, you had and we had, about people trading down in the market in North America towards the low end. At this point, we are fact-based and we are not seeing any empirical evidence that that is taking place. In fact, the weaker part of the market is the lower end and the upper end seems to be holding up very well at this point.

I’d just add one thing to that, Bob, to say that we are really intent upon supply chain management during this period of economic weakness. Part of the volume weakness you will see from us that we are trying to make sure we don’t grow inventories anymore.

Can you just repeat the numbers? I think you said passenger replacement was down 4%. I missed those numbers.

The industry -- the industry number -- in the first quarter was off about 4%. Remember we had some --

Right.

-- reduction over January, February, it was a little weaker in the March month.

Right, that I have. I just thought that you had actually given us what Goodyear's has done.

We hadn’t guided you to any specific Goodyear number, no.

Okay, and then did you say you are cutting production by 5 million units over the course of the year? Could you just be more specific on what the trajectory is there? Any color on price increases, what you guys may be thinking? And lastly, SG&A looks as low as I think I’ve ever seen as a percentage of sales. And maybe give us some color on that.

Let me answer the pricing question first, because we never give forward guidance on pricing and there’s a host of reasons for that, most of them competitive, so we won’t do that. I will also comment on the SAG. Remember last year, we had some increase in SAG and we mentioned that I was not particularly happy with that and we were going to be more aggressive, and we are being more aggressive. And our goal certainly is to take SAG down as a percentage of sales while yet having the same impact on our markets to generate demand that we’ve always had, and that continues to be our goal. The first quarter was a 12.8% of sales and we are happy with that. But SAG is going to bounce around a little bit, depending on competitive situation and market situation, but that’s a key focus area. It’s part of the cost, the four-point cost plan for our company. Mark, you may want to go back and talk a little bit about the $5 million.

The $5 million is a reduction that is going to take place through the remainder of the year. It’s a full-year reduction, Rod. And I don’t want to spell out how much by quarter but it will be throughout the year.

And it’s driven primarily by OE and includes not only demand impact but as Mark said, also inventory adjustments. Remember we said our goal is to drive an advantaged supply chain and over time, you are going to see us operating with lower inventories and that is the right thing to do to build our business long-term and may have some negative effects certainly on EBIT in the short-term, but it will be positive on cash flow, which is -- cash is king here.

Thank you.

Your next question comes from the line of Kirk Ludtke with CRT Capital Group.

Good morning. You’ve mentioned a couple of times that you don’t see any evidence of the U.S. consumer trading down and I’m just curious if you could give us some perspective on how the consumer behaved in prior recessions. Was the high-end, the higher price points able to hold up as prior recessions?

I understand the question. I wish I had the data but one of the things I would mention here is there has been such -- if we go back the last two recessions in North America, ’91 and 2001, the market was so fundamentally different, go back to ’91, I’m not sure what we called high value-added or premium product, so there’s been a tremendous difference in the products that have been purchased and in buying behavior. So from the standpoint of trying to relate high value-added and low-end, the data is pretty spartan in that regard because the markets have just fundamentally changed so much. We do know that in both of those recessions there were reductions in volume driven essentially by the OE business with I think in 2001, the replacement business was off 3% and in ’91 it was up 1%. So that’s the empirical data as we are looking at it today. I wish we had more ability to look at the data and reflect on it but it is just not available because of the fundamental change in the market.

I also am curious about the recent trends in some categories like -- are you seeing any trends in U.S. tire imports, given the fall of the dollar, the acceptance of price increases by tire manufacturers -- anything that you can comment on on those fronts?

Well, I’d comment that from the standpoint of pricing as we see it in our markets -- maybe I’ll comment globally a bit here. That in North America, I’d say the markets have been fairly disciplined in approach. Prices continue to go up and there are continual amounts of price increases, as you know. And give raw materials, that’s not surprising. We are seeing some increase now in pricing from a host of manufacturers in Europe as well, and that’s been a bit of a challenging market for the industry I think in terms of price increases. And certainly in -- I’m commenting on the consumer replacement business but certainly in the truck business, which has a higher product content of natural rubber, those price increases have been happening pretty consistently and that’s why you are seeing from us price mix outweighing raw materials over several years. You know, we had some anomalies in the first quarter that Mark mentioned in terms of lag of raw materials hitting us in the first quarter. That will catch up in the second and third and fourth quarter. Any other comments, guys?

No, I would just say that we are actually pretty optimistic about the continued favorable outcome of the equation, price and mix versus raws, even though raws are going to grow, materials are going to be higher in the second quarter than they were in the first quarter. We’ve also so far continued to be out in front of that in terms of the gains in price and mix, and that engine is not stopping. We continue to add HBA capacity and the price increases that we’ve put out so far this year have -- you know, they keep us ahead of the game.

Okay, and then lastly on working capital, it was a big use in the quarter, which it is typically. But it looks like maybe turns have deteriorated and I am curious where you see your turns going.

In the first quarter, you did see a normal seasonal growth in working capital. The increase in inventory is more than you might have seen in other circumstances, and it reflects a couple of things. Certainly the inventories, we were still struggling to build inventories a year ago after the strike, so we couldn’t put as many units into inventory as we would have liked to. But this year, no question the softness in sales, particularly at the end of the quarter, both in North America and Europe, resulted in some inventory being higher than we’d like it to be at the end of the quarter and that is part of what is leading to the production cuts that Mark referred to.

Okay, great. Thank you very much.

(Operator Instructions)

Janice, can I interrupt for a second here?

Yes, sir.

I guess I can. But I just -- we’ll come back to questions in a minute but I know a number of you are going off to another call at 10:00 o’clock and we’ll go beyond 10:00 o’clock in terms of responding to your questions, but I did have a closing comment and it’s about elaboration on plans for the investor meeting at the end of June in New York and I did want you to hear that. On that day, we intend to focus the majority of our attention in three areas. First, the trends we see in the global tire markets; second, our strategies that will enable us to take advantage of those trends and the resulting what we consider attractive market opportunities; and then third, we’ll talk about the investments we intend to make to help us deliver on those opportunities and that result in importantly high returns on those investments. Also on that day, as I mentioned earlier, our leaders from each of our businesses and key functions will be there on the day to answer questions and to help all of you appreciate the extent of the opportunities we see in our markets. So I just wanted to make that comment. Sorry to interrupt the flow of questions but I know some people will probably exit the call getting ready for the 10:00 o’clock. Janice, we can now return to Q&A.

Thank you, sir. Your next question comes from the line of Al Kabili with Goldman Sachs.

Good morning, guys. Thanks for taking my question. Just a first question on the inventories in North America -- you talked earlier that you are still constrained on the HBA. So is that really then -- can we assume that all of that is OE related?

No, again part of it -- the majority is OE related but there is some lower end consumer replacement volume reflected in those overall numbers as well. It’s both of those, okay? And we can’t -- and until we make our investments, which we were working on over about the past year to modernize our plants, we can’t just transfer a sale or capacity that might have been intended for low value-added to high value-added. We’ve actually got to modernize our capability to do that, so that is what is slowing down that transfer. That may get to the heart of your question.

Okay. And if we could, perhaps you could just give us a bridge from maybe the fourth quarter to the first quarter in terms of North America operating profit. Because you did have the benefit of the pricing actions that happened in February. I would assume with OE down so much, that freed up some capacity on a higher margin HVAC replacement sale, so just a -- the op profit just seemed a bit weaker than I would have expected, even with the soft volumes that we --

We’ll comment, Al, on what we can here relative to the bridge. Darren.

I think you brought up a couple of very good points, which is that we did benefit from continued improvements in pricing and continued growth in the high value-added markets. If we look at what the factors were that were working the other way, certainly the OE sales, OE volume in North America were down substantially. We also saw weakness at the low end of the market, which continued to be a big contributor. And to the explanation on manufacturing costs, for a couple of reasons, some ongoing and some more one-time in nature, we had increased manufacturing inefficiency reflected in the quarter versus Q4 as well. So those are all factors. I would also point out that there is some what we refer to as non-tire businesses that were particularly weak in the quarter and you will see this in our disclosure as well but if I just were to give an example there, I would say that some discretionary, more discretionary consumer industries, and as example, motorcycles, all-terrain vehicles, four-wheelers, et cetera, were real weak in the quarter. And in fact, if I look -- I mean, year over year the motorcycle business I think was -- our earnings in North America were hit by about $5 million year over year just for the motorcycle business, where we are a big player, a big player with Harley Davidson OE and fairly significant in some parts of the market that have been real soft here based on consumer reaction to the economy. So those are a number of the factors that were working against some of the positives that you mentioned.

Okay, and you did also highlight earlier, Darren, the cost inflation that you are seeing. Can you just highlight where some of the areas are on the cost inflation that’s really driving that number so we can get a gauge on how to track that and when that might actually come down?

No problem, Al. Obviously we can spend some more time on this but if we were to go through our cost of goods sold, I think what you would see is that we would really be focused in this case on areas of indirect materials and energy as a couple of the core areas aside from raw materials where we’ve seen substantial inflation rates. And we are seeing in a wide array of areas outside of the labor, which has not seen that level of inflation, but in some of these indirect materials and energies, even as broad categories we’re seeing inflation rates of 6% or 7%. And I’ll say that that’s entirely consistent with what you might find if you look at bureau of labor statistics, which tracks these inflation metrics. So we are being affected by the same things that are affecting all other manufacturers, but a lot of it, the cost of energy and commodities coming through in a variety of products that we purchase.

Okay, and then the final question is on the update on the raw material costs that you are seeing. You highlighted earlier that it is unchanged but just curious, given that since the last update we have seen natural rubber prices increase. We’ve seen also some healthy increases in steel as well. So is there something that you’ve been able to do to offset some of these recent increases or how should we be thinking about that?

Well, let me kick off and then Mark will have some words to comment, Al, and then we have to move on to the next person who has questions, because I know we’ve got people in the queue here. Look, frankly we don’t have the magic to eliminate raw material cost increases. We do have -- we are working hard at doing everything we can to minimize that but frankly what you are seeing in the first quarter is a lag effect on natural rubber purchases. And Mark, you may comment on that lag and the impact it’s had.

Just a couple of comments real quickly -- number one, the lag is as much as six months and perhaps in this particular quarter, it might even be a seven month lag when you look back at the comparable period from last year. So that’s one factor. The other factor though that we’ve got to keep in mind, and we talked about price and mix already, so I think everybody has heard that one loud and clear -- we continue to be optimistic about price and mix and recovered raw material but bear in mind also that we’ve got a natural hedge in the currency movements. You know, 60% of our revenue outside the United States and when you look at it versus currency movements, I’m not sure you see such an overwhelming increase in natural rubber or other raw material increases.

But in terms of our outlook, we are still looking at 7% to 9% and we have -- you know, we’ve spent the right amount of analytic time looking at that and believe 7% to 9% is our best forecast for this year.

Thank you very much.

Your next question comes from the line of John Murphy with Merrill Lynch. Mr. Murphy, your line is open.

He may have gone on to another call, Janice, so we should go on.

Okay, sir. Your next question comes from the line of Jonathan Steinmetz with Morgan Stanley.

Just a few follow-up here on the raw materials side -- can you talk a little bit maybe about the cadence of the timing of when you expect to realize it in the P&L? Because if I just do the math on your 8%, it seems like you are going to end up somewhere in the neighborhood of $550 million or so, give or take, for the year. And I am just trying to figure out, does more of it come in 3Q and 4Q when you start to feel the lag effect of what’s happened earlier this year or do we see a lot of it in 2Q? If you could just give some commentary on that.

We sure can. Mark, do you want to take it?

Sure. The lag effect -- well, first of all, you are right in assuming that the increase is larger in the latter half of the year than it is in the first part. And that goes without saying when you consider how small the impact was in quarter one. But the lag effect varies by geography and it is most pronounced I think, when you look at all of our operations internationally, it’s most pronounced in North America, where you can pretty well count on there being a six-month lag. Less than that in Europe, less even more so in Asia. So it’s hard to generalize, Jonathan. I don’t know if I could be that precise about it except to say North America, we’re pretty sure it looks like six months.

Okay, and just to be clear, the 8% is your view on European as compared to, for example, the underlying commodities themselves?

Just to be clear on that, the -- when we estimate the 7% to 9% in our guidance, what we are estimating is what you will see us report as raw material cost increases, as we report our results. And we do report raw materials in each of our regions as they affect the local results. So if a location has currency benefits that reduce their local cost of purchasing raw materials, then their raw material cost increases will look lower.

Okay. Switching to the CapEx side, and I know you are going to give a lot more detail in June, but if I could just follow-up on something you said, Bob, about responding to the economic environment -- about a month ago at our conference, you talked about looking over time to migrate up to about the 6% of revenue average for global tire companies, which to me suggest somewhere in the low $1.2 billion or so type of range. Does this mean that if the environment is tough that you might push some of that spending out until 2010 or something when we start to see recovery, or are there some things with tight capacity you need to do right away?

Let me comment that I made that comment I response to a -- kind of a leading question. We’ve given really no guidance in terms of our overall number beyond what we did in 2007, and we said because we are -- you know, we are in the planning stage, we said we were considering not only modernizations to give us higher HVA but also looking at additional capacity, therefore CapEx that would drive lower cost manufacturing and we are looking at both Asia and Eastern Europe. We commented on that, but I’m going to steer clear of a quantification of all of that at this point, except to say that we’ve got to move in an upward direction no matter what the economy does this year. We are likely to have CapEx this year above last year and frankly, you are seeing that in the first quarter. Our spend in the first quarter was $226 million, so you are seeing that. So that’s where we -- that’s how I’d see things at this point.

Okay, and last one very quickly, I can’t remember if it was you guys or Cooper a few years ago that talked about consumers deferring purchase on tires and you had evidence from some tread depth sort of analysis. I’m just wondering if you still do that and if that is something you are continuing to see.

The answer is we do continue to do that analysis. I think that’s a trend that we saw that started back in 2006, and I think the unique thing about the environment we are in right now is that the weakness in the consumer buying patterns, particularly at the low-end, has been so prolonged. Historically it’s generally been call it between one and two years of weakness, where people were stretching out their tire lives and then we’ve seen them come back, because you can only do that for so long. I think in this case, we’ve seen it really start to stretch out to the long end here as we think about those consumer behaviors.

Janice, I think we have time for a couple more questions and I will remind everyone to please keep your -- limit yourself to one question, please.

Your next question comes from the line of Saul Ludwig with KeyBanc.

In the North America Tire, the other tire related businesses I guess that are left are primarily the external sales of your chemicals. What is the order of magnitude of those external chemical sales which would lead you back to what’s just tires? And then in conjunction with that, you note in your 10-Q that the operating income from these other tire related businesses was down $18 million. I was wondering if you could give a little color on chemicals and the decline of $18 million and how we should think about that sector of your business going forward.

Saul, the first quarter is probably a bit of an anomaly there but I think Darren mentioned a while ago on this call that we saw a fairly substantial decline in profitability related to the motorcycle business.

That’s not tire related?

It’s in the $18 million you’re referring to, so it’s a non-reported tire business. And I guess the other thing that is probably worth mentioning in that regard is the tire and wheel assembly business is in that number too. Now that wasn’t a real profitable business for us -

I was going to say, you didn’t make much there.

Well, there was $4 million a year ago, $4 million of profit, of operating profit in there. So that’s another big piece of it.

And how about chemicals?

Chemicals, you know, I don’t have the revenue number on that but it doesn’t factor into this in a big way. That’s not an important factor here.

So how should we think about this $18 million drop as we look at each subsequent quarter? Is it -- you know, you are not going to have the tire and wheel for the rest of the year. That’s $4 million. Motorcycle business probably still going to be weak -- I mean, is this component of North America still going to be down $10 million, $15 million a quarter?

No, I wouldn’t look at it that way. I think you’ve got a bit of an anomaly here in quarter one but do bear in mind the motorcycle business will continue to be weak and of course, you won’t have tire and wheel assembly. So those two components --

Okay and with regard to the reduction in inventories, that’s going to contribute to unabsorbed overhead and you were talking about this transitional manufacturing expense, which was down, which was $42 million. We should take out $10 million to $15 million from Tyler, which goes away, so let’s say that puts it down to say $30 million. But is this reduction in inventory going to have the effect of boosting that up substantially? I mean, when you have unabsorbed overhead, you are talking $10, $12, $13 a tire. Is that where this impact of inventory reduction is going to reside?

Saul, the answer to that is yes. You are going to see under-absorbed overhead when we reduce inventory, which will have of course a -- two short-term impacts. One will be the P&L impact and the other will be the cash flow impact.

And then a quickie for Darren -- how much of your debt is now outside the U.S.? And then, on which you get deductability of interest and is that deductability factored into --when you gave us your tax rate of 25% on operating income, your taxes are really paid on pretax income, which would be after interest if there were interest allocated to foreign entities.

The short answer to the last part of the question, Saul, is that yes, we are having some luck moving some amount of debt overseas and we’ve got substantial credit facilities for instance in Europe.

How much of your debt right now is overseas?

You will still see the preponderance of it is in North America but I think that what you will see is about $1 billion of the $4 billion is overseas debt at the end of the quarter.

So the deductability of interest, I mean, does that affect the tax rate or have you sort of finessed that into the 25% on the operating income?

The answer is yes, it does. The actions that we have taken to try to bring cash back and push debt overseas over time have contributed to the reductions we’ve seen in our tax rate on overseas operating profit.

We don’t take your overseas operating profit and then subtract say $50 million of interest that may be applied to this debt, and then calculate the tax. We should just take 25% of the operating income, ignore the interest.

Right. That’s right.

Thank you.

Janice, I think we have time for one more question.

Your final question comes from Itay Michaeli with Citigroup.

Good morning. Real quick, back to working capital, as you cut production by 5 million units, could you just talk about how we should expect that to impact working capital and whether for the full year we should be expecting a use or a source?

Mark, do you want to cover that?

I would say the short answer of that is that we will see reductions. We are looking at reductions in inventory levels, notwithstanding a cut in production. So as we try to manage this, it’s a holistic equation. We are trying to take inventories down while we cut production and that’s probably why you see as large a number as 5 million units.

Okay, great. And just one follow-up, kind of big picture question -- as we look at oil continuing to increase, do you see a market opportunity with increasing supply of low roll resistant tires both for the OEs and the after-market potentially over the next couple of years?

Certainly in terms of the areas that we are investigating from a -- if you looked at our new product roadmaps, certainly low rolling resistance is one of the key areas of focus for us going forward and I think for the industry going forward. And the challenge to all of us is how do we not have significant trade-offs in other elements of performance when we do that. So but no, it’s a key focus area -- excellent question.

Great. Thanks, guys.

Janice, that was our last question. Thank you all very much for joining us this morning and thanks for your continued support.

And we hope to see most of you on June 26th. Take care.