Earnings Labs

The Goodyear Tire & Rubber Company (GT)

Q3 2008 Earnings Call· Mon, Nov 3, 2008

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Transcript

Operator

Operator

Good morning. My name is [Thea] and I will be the conference operator today. At this time, I would like to welcome everyone to the Goodyear third quarter 2008 conference call. (Operator Instructions) At this time I will turn the conference over to Patrick Stobb. Sir, you may begin.

Patrick Stobb

Management

Thank you Thea. Good morning everyone and welcome to Goodyear’s third quarter conference call. Joining me on the call are Bob Keegan, Chairman and Chief Executive Officer and Darren Wells, Executive Vice President and Chief Financial Officer. Before we get started, there are a few items I’d like to cover. To begin, the webcast of this morning’s discussion and supporting slide presentation are now available on our website at investor.goodyear.com. A replay of this call will be available later this afternoon. Replay instructions can be found in our earnings release issued this morning. The last item we plan to file our Form 10-Q later today. If I could now direct your attention to the safe harbor statement on Slide 2 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 our 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. Turning now to the agenda, on today’s call Bob will begin with an executive summary and Q3 highlights followed by a detailed business discussion. Darren will follow with review of the financial results and a summary of our latest industry outlook before opening the call to your questions. Now I will turn the discussion over to Bob Keegan.

Robert J. Keegan

Management

Well thank you Pat and good morning everyone. Thank you for joining us today. Before I address our solid Q3 and strong nine month results, I wanted to welcome Darren Wells to his first call as Goodyear’s Chief Financial Officer. I am particularly pleased to have Darren in his new role. Since joining Goodyear six years ago, Darren has been a key contributor to our company’s progress in a broad set of areas. He was the lead architect of our financial restructuring plan. He [estelled] effectively with a wide range of opportunities and asset sales and refinancing and during the past 14 months has also been working shoulder to shoulder with me on corporate strategy. He is certainly well known to you as investors and analysts and is the perfect fit to help us navigate through the volatility that all businesses are facing today. As I said when we named Darren CFO he will use his strong business and financial skills, along with his leadership capabilities to help drive shareholder value for Goodyear. A few overall comments seem appropriate before Darren and I get into the detail of our call this morning. As I mentioned at the outset, I am pleased to say that company reported another quarter of solid results, contributing to a strong performance for the first nine months of the year. That success has been a result of a very strong business model developed in concert with our strategies; effective execution versus our strategies; taking decisive actions to reduce the risk profile of the company, via the strengthening of our balance sheet and an intense focus on the opportunities presented to us to diversify our company geographically in the emerging markets; significant progress towards the goals of our four point cost savings plan; the effectiveness of the…

Darren R. Wells

Management

Thanks Bob and good morning everyone. First of all, I’d like to say I appreciate Bob’s comments and the notes and calls that I’ve received from many of you. The time I’ve spent engaged with the investment community has been of tremendous value in my prior position and is even more valuable to me in the CFO role. And now to the business at hand. As you assess the quarterly results, I would focus you on five key points. First, we have to acknowledge the weak demand environment, particularly in North America and Europe. Earnings reflect not only the lost margin on these sales but also the unabsorbed factory costs related to cutting production. A key point, however, is the impact of the production cuts on earnings in the second half is greater than the sales volumes would imply. The impact reflects lower 2008 sales and targeted lower year end inventories for expected market weakness going into ’09. So in essence, it’s a double hit. So clearly a tough environment. Against that backdrop, there were clear positives. Price mix more than offset even the substantially higher raw material costs we saw in the quarter. Raw materials in the third quarter were up about 16% versus 4 to 5% in the first half. Asia and Latin America both continued to grow profitably in the quarter with Asia showing year-over-year gains and segment operating income for the 15th consecutive quarter. Our liquidity remains strong which continues to be an advantage in this environment. And finally, we’re taking actions to deal with today’s more difficult conditions through increased cost savings and other activities to drive earnings and cash flow. As you review the income statement, you’ll see sales up 2%. As Bob mentioned, sales were up about 5% excluding the impact of investiture…

Robert J. Keegan

Management

Well thanks, Darren. For 2009 there remains a high level of uncertainty concerning the impact of the global economic slowdown and the demand signals suggest certainly a challenging environment for the tire industry, especially in the first half as Darren indicated. As a result, our planned actions for 2009 will address a range of likely demand scenarios and we plan to manage both production output and costs aggressively for the foreseeable future. I reiterate that we are taking actions now to reduce our capital investments to those that maximize return, consistent with current and anticipated market demand, and overall we are managing the business to maximize our cash flow performance. We have a leadership team with the experience of operating effectively under extremely challenging conditions. We’ll continue to rely on their capabilities for innovation, creativity, and outstanding execution. Thank you for your interest in Goodyear this morning and we’ll now open the call to your questions.

Operator

Operator

(Operator Instructions) Your first question comes from Himanshu Patel – J.P. Morgan. Himanshu Patel – J.P. Morgan: Darren can we get just a bit more granularity on the North American walk for SOI? I think you said price mix versus raws were kind of a wash, unabsorbed overhead in North America was negative $90 million. What about the volume hit? What about non raw materials inflation? Could you give us some color on those items?

Darren R. Wells

Management

Yes. I think Himanshu on the question of non raw materials inflation, you’d see on the segment operating income chart that the inflation levels which weren’t quite as high as they were in the second quarter were still pretty high. So you would say that the – what you would see in the North American version costs are clearly going to reflect some inflationary pressures as well. In terms of the impact on volume, I think what I’d say there is you saw an impact but not too much different than we saw in the second quarter. In the second quarter I think the volume impact was around $28 million on segment operating income, and the drop in volume was about the same in the third quarter as it was in the second. So I think you’ll see it in the Q as we get that published later on but you can think of it as roughly the same magnitude. Himanshu Patel – J.P. Morgan: I noticed on Slide 27 most of your revisions to end market assumptions they were sort of the deepest in Europe both from consumer and commercial side. Are you guys – I mean, that’s volume. Are you guys seeing any deterioration in mix or pricing in Europe at this stage?

Darren R. Wells

Management

I would say Himanshu that you’re right. In terms of volume like what everyone I think we were surprised by the magnitude of the OE reductions late in the quarter and the replacement businesses about at the level we’ve been anticipating. Relative to mix, no significant change from mix at this point. We’re very happy with our share performance for both Goodyear and Dunlop brands. And from a pricing standpoint we’ve said before that we’ve had some challenges in the European market but we’re doing pretty well. My comment in my remarks about winter tires, clearly we’ve had a slow winter season, a start to that season, particularly at the low end. I’m speaking for the industry but that would also apply to Goodyear and Dunlop product. So where we’ve had the new product launches at the high end we’re doing quite well. In fact, I think probably when the year finishes that you’ll see winter tire mix has held up very well at the high end. Himanshu Patel – J.P. Morgan: Bob you had mentioned in your prepared comments earlier that mid tier brands were seeing some strengthening and the rate of premium tire sales were maybe slowing a little bit. Was that – does that imply that that was a comment particularly for North America?

Robert J. Keegan

Management

That was a North American comment. Yes, Himanshu, that was a North American comment. Himanshu Patel – J.P. Morgan: Then lastly Darren Slide 34, pension expense for the year you’re saying $195. I think it was $220 or $225 or something before. What caused that change?

Darren R. Wells

Management

Yes. It – our global pension expense we’ve revised some estimates down. We had some actuarial work that’s done mid-year every year and what you would see there is there’s some adjustment in the third quarter that we benefit from. And that’s taken the pension expense levels down.

Operator

Operator

Your next question comes from Rod Lache – Deutsche Bank Securities. Rod Lache – Deutsche Bank Securities: There’s in the reconciliation slide on the operating income that you have in your press release, there’s a $7 million income item in corporate incentive and stock comp which I assume is related to the stock price decline but there’s also a $7 million income from inter-company eliminations. Can you just walk through what normal corporate overhead should be, assuming that those kinds of variances and what would contribute to inter-company actually being a positive?

Darren R. Wells

Management

You know, Rod, I can take the question generally. Yes I think what you see there is there are some transactions between business units as you might expect. I think that – I’m not sure in recent years we could point to a normal but I think that the walk that we have between the business units and what you’d view as to the segment operating income and the way you’d use the corporate EBIT will include those inter-company eliminations as well as certain items that we don’t report in our business unit results. An example of that would be accelerated depreciation, which does not show up in our business unit results but is part of the EBIT calculation you would make. So there is a lot of ups and downs as you see different items as a result of restructuring, but I think as you look right now when volumes are changing this dramatically, and that can have a big impact on our inter-company transactions, and I think that’s part of what you’re seeing there. Rod Lache – Deutsche Bank Securities: Inventories obviously high right now and I appreciate that you guys are taking that down through year end, but could you just help us a little bit on you mentioned higher costs in the fourth quarter, there was a $120 million impact in the third quarter which $70 was recognized but I assume that the remaining $50 comes in in the fourth quarter but then there’s more because you’re taking inventories down further. So how do we sort of triangulate on a number through the year end or in the fourth quarter on that overhead issue?

Darren R. Wells

Management

Rod it’s a good question and as usually the case there’s not a precise answer to it. But think of it this way. In the third quarter we recognized in our cost of goods sold about $120 million for unabsorbed overhead or unabsorbed fixed costs. About $70 million of that was period costs that we took that related to production cuts in the third quarter. The other $50 million was unabsorbed overhead that was run through inventory at a normal pace. So it was coming – principally coming through from the second quarter. You might have had a little bit from the third quarter production cuts, but most of that’s coming through as unabsorbed overhead from second quarter production. So what you would think about now going into the fourth quarter is what is left in inventory from the production cuts that we took in the third quarter? And what level of FAS 151 period costs would we take given the fact that we’ve got in the fourth quarter we’ve said assume production cuts of 6 million units in North America and 5 million in units, both of which are significantly above what we saw in Q3.

Robert J. Keegan

Management

Rod I’d like to just add as Darren said earlier, those numbers include I would say aggressive positioning by us on inventory, to get inventories down and at the lean end of that a bit as we enter 2009. Rod Lache – Deutsche Bank Securities: Just to make sure that we get this straight, you’re saying that there’s still $50 million in inventory now that’s going to be expensed plus there’s going to be a bigger charge in –

Darren R. Wells

Management

Rod we haven’t really – we have not quantified for you what’s in inventory. What you would say is that you saw in the third quarter and the piece of this equation that’s missing and it’s very hard to pin down because it’s going to differ based on different circumstances, but you’ll get a direct calculation of the per unit amount. But what we saw in the third quarter is of the – whatever unabsorbed overhead cost was created in the third quarter production, $70 million of it has been written off in the third quarter and some amount that we’ve not provided is being carried over to Q4. All right, if you take that $70 million that was based on production cuts of 4.5 million units in North America and 3 million in Europe, so if you take that to the fourth quarter and say yes you would expect those period costs are going to get higher in the fourth quarter as well, given 6 million unit production cut in North America and 5 in Europe. Rod Lache – Deutsche Bank Securities: My last questions are just prospective pricing, maybe you could just give us some color on how you’re thinking about that, particularly in markets where you’ve got some FX deflation. Is that still something you intend to roll out there even in a weak demand environment? And any kind of color on the Latin American outlook you can provide?

Robert J. Keegan

Management

Okay Rod then maybe I’ll kick off and Darren may have a point or two to make as well. Relative to I’ll call it the emerging markets overall including Latin America, Asia, Europe where currencies have fallen significantly and are I would say quote, unquote “weak” at this point you bet we’ll be aggressive there in taking appropriate price actions. Even if the demand environment is somewhat weak, we almost have to do that. And it will also be aggressive in terms of pushing mix. Remember this is gain for us, it’s not just price. Its price and mix. So we’ll continue to have new product introductions and to capitalize on those new product introductions in those markets as well. So I said that’s the comment that relative to the markets overall where currency is weak. And if you look at the European situation, I would just say that we’ll continue on the price mix half that we’ve been on. Rod Lache – Deutsche Bank Securities: Does that apply to Europe as well, Bob?

Robert J. Keegan

Management

Yes to Western Europe as well. I’m not making a price comment. I’m telling you in terms of price mix that strategy goes ahead. And you will see it in the winter tire market this fall with the new products that have gotten such dramatically positive acclaim. Rod Lache – Deutsche Bank Securities: Outlook for Latin America, is it softening further? How should we be thinking about that?

Robert J. Keegan

Management

Well I would say what we’re seeing in Latin America certainly is some challenges on the demand side in replacement markets and OE as well. I would mention because OE is a relatively recent phenomenon. So we’re seeing some softness in Latin America. But the fundamentals of our business in Latin America continue to be positive. And there again we’ve got dramatic new products that have been introduced to the market in ’08 and more that will come in 2009. And we’ve got I would say Rod a very experienced leadership team in Latin America that knows how to handle the volatility of those markets both from a currency standpoint and from a demand spiking or declining standpoint as well.

Operator

Operator

Your next question comes from Patrick Archambault – Goldman Sachs. Patrick Archambault – Goldman Sachs: On the pension question can you just provide a little bit more detail on the potential cash requirement? As far as I knew it was depending on what the change of your funded status was or the under funding I think it’s below 95% you would have to raid away contribute a certain amount to get you back up to that level. But of course you’re saying that contributions probably aren’t likely to be material until 2010. Is that because of past credits? Or can you give us just a little bit more color on that?

Darren R. Wells

Management

No, Patrick, it isn’t anything as esoteric as past credits. Effectively it is a reflection on what time we’ve got to meet contribution requirements for the 2008 plan year. And essentially we have until September of 2010 to complete the required contributions, but your point is right. The under funded amount as it’s measured for ERISA purposes it’ll get measured at year end. And the basic construct there, although it’s not quite as simple as this, but the basic idea is you have about seven years over which to make up the additional unfunded amount. Patrick Archambault – Goldman Sachs: On FX I understand that there’s a lot of moving parts there but can you give us a broad sense about how we think about modeling that? What kind of a margin have you traditionally had on foreign currency and what impact are their hedges and other things that might sort of offset it?

Darren R. Wells

Management

Well the good news and bad news on this is that we don’t do a lot of hedging. So what you see in the marketplace is what you’ll tend to see in our results. I think that we have to acknowledge up front that the weaker dollar has been a good thing for Goodyear, given the strength of our overseas earnings. But we have strategies to deal with the stronger dollar as well. But if I look and think about where foreign exchange has been helping us, if we look at the second quarter we had about $300 million year-over-year sales improvement for foreign currency. That $300 million is down to about $100 million in the third quarter. So it’s clearly affecting our sales growth. And if I look at our earnings, we’ve had give or take this year, first quarter, second quarter we’ve been benefiting from around $30 million of year-over-year improvement in segment operating income from currency. And now we see here that in the third quarter we have a lot less benefit from it. Patrick Archambault – Goldman Sachs: It sounds like what about a 10% margin on currency, 30 on $300 in the second quarter? That’s what you said?

Darren R. Wells

Management

Well that’s certainly the way it worked out in that timeframe but I can tell you that depending on the geographies we’re dealing with; it’s very hard to come up with rules of thumb. We’ve tried but we’ve never come up with one that was particularly consistent. Patrick Archambault – Goldman Sachs: I guess just simply said though if we expect that next year FX is actually going to be a tailwind, the margin on that might be up for debate given the moving parts but clearly it’s going to be impactful.

Darren R. Wells

Management

If you assume that the dollar remains strong, then that’s going to be something that’s going to make it tougher for us not easier.

Robert J. Keegan

Management

But Patrick again we have tools at our disposal, price mix being a significant set of tools, to be able to counteract that. Patrick Archambault – Goldman Sachs: My last one was on raw materials. I guess can we start to – when you say that rate is going to peak in Q1 in terms of the year on year headwinds and then start to subside, I mean just given some of the substantial declines we’ve seen, maybe not in synthetic but at least in natural rubber and oil, would the outlook call for a moderation in the increase in raw materials inflation? Or could you actually even see raw materials become a tailwind as you get into the second half of next year, provided you’ve kind of stayed at these levels?

Robert J. Keegan

Management

Well Patrick I’ll just kick off and say that clearly with the declines we’re seeing at some point you’ll see moderation of increase and could perhaps even see some decreases year on year at yesterday’s levels. By the way, we’re not spending a lot of our time trying to forecast exactly where that is. We spend a lot of our time doing contingency planning to handle what the market provides.

Operator

Operator

Your next question comes from John Murphy – Merrill Lynch. John Murphy – Merrill Lynch: I wanted to touch on the balance sheet for a second and I’m probably missing something here. I just want to clarify something. I’m looking at total debt at the end of the second quarter of about $3.6 billion. That ramps up to about $5.4 billion at the end of the third quarter. I was just wondering is that the result of a large revolver drawn outside of the U.S. because I thought the revolver drawn on the U.S. was $600 million. And is the bulk of that going into working capital which it looks like there was a big use in the quarter?

Darren R. Wells

Management

John, you’re coming to the right conclusion there. Around the world we have peak working capital needs in the third quarter. Particularly think about Europe, given the winter tire sell in which requires us to fund a large increase in working capital. So you would have seen credit lines drawn in Europe and credit lines drawn in the U.S. for some different reasons but that’s what you’re seeing. So you’ve gotten the right conclusion there.

Robert J. Keegan

Management

And the expectation will be if this is high working capital, low is at the end of the year. John Murphy – Merrill Lynch: Then I just wanted to explore your pullback in your CapEx next year a little bit and I’m just really thinking about what’s going on in North America and is your capacity you’re selling into the OE’s truly fungible work and it can just be turned around and sold in the after market? And also as you think about this, there’s two large players out there or maybe three depending on how you look at it on the OE side that are in extreme duress, distress, however you want to say it. But it looked like they might be massively smaller in the near term. I was just wondering as you’re making these CapEx decisions and thinking about your capacity how you work through the contingency planning for that potential event?

Robert J. Keegan

Management

Okay, let me kick off here by saying that certainly the capacity whether frankly it’s flexible, whether it’s OE or replacement, we’ve got flexibility in that area so that’s point number one. And I would say point number two in terms of the way we try to forecast demand and again we do scenario planning, incorporates the optimistic and I would say slightly pessimistic view. And that includes with regard to the U.S. OE, so we’re continually in that situation. Interestingly enough we still have some capacity issues on some of our North America iconic products, the high value added product that we’ve launched in the last couple of years. So we still have some capacity issues there under one demand scenario. Under another demand scenario for OE it disappears. And I would also tell you that certainly we did the right thing six years ago when we said that we were going to diversify our OE business and we’ve made moves to diversify there. So the key question for us is the SAR number and then there’s a number – a series of numbers that we have to look at relative to the individual OE’s. But the key number for us is the SAR number. John Murphy – Merrill Lynch: Bob you made a very interesting comment about 3% of your consumers are leaving scores that previously would have replaced tires. And that’s very interesting. I’m just wondering if there’s any way to gauge what – how much tread life is left on those 3% that are leaving there? It’s like how much – how long before these guys would have to come back to you?

Robert J. Keegan

Management

John I’d say very, very difficult to do. We just know that in some cases individual consumers are altering their purchase behavior from what we normally see. By the way, this is not the first time we’ve seen it. We’ve seen this in previous recessions or near recessions in the United States. And we’ve always gotten a bounce back in terms of demand within a year or two. You can only defer so long and that bounce back I’m talking about is the macro of all our sales. But these individuals are just postponing the inevitable. And probably I’m using semantic anecdotal information with tread depths today they’re going to have to replace within a short period of time. John Murphy – Merrill Lynch: And then just lastly sort of an offbeat question when you sold the farm tire business to Titan to 2005 you licensed the Goodyear name on those tires. Just wondering how long that license or that agreement lasts for and if there would be any point in time where you could potentially pull that back?

Darren R. Wells

Management

You know, John, I think the way to think about that is that there was – you’d consider a fairly long term license agreement involved in that agreement to allow them to use the brand name for a number of years in exchange for a royalty. And that’s something that’s subject to renewal and we won’t get into discussions about that at this point. You can assume that they would have wanted to have a right to use the name for some significant period.

Robert J. Keegan

Management

And from our standpoint we’ve got the right kinds of conditions and at this point are pleased with what’s happening there.

Operator

Operator

Your next question comes from Kirk Ludtke – CRT Capital Group. Kirk Ludtke – CRT Capital Group: I’ve got one question regarding materials and I recognize that we probably haven’t been through the kind of volatility that we’ve seen the last year or two but if you think back to the previous cycle in material costs, how long did it take before you started seeing downward pressure on consumer prices?

Robert J. Keegan

Management

Kirk as you can imagine, we’ve tried to study all of the historic data and extrapolate it into the current condition. And we’ve concluded from that there’s just too many changes. I mean, it’s just dramatic the changes that have taken place in our industry. The last cycle no one talked about HVA tires, for example. So given the changes in the fundamental market, we’re less trying to extrapolate the history than to just keep up with what the market’s telling us and what we’re seeing from the market and doing the best job we can analytically there. The history really isn’t a very good determinant except that we know that people are going to have to replace tires and we know this is a product category that people need. So in the terms of the pricing, the competitive dynamics here have changed considerably over the past five to ten years. I wish I could give you a more definitive answer but that’s how we’re approaching it. Kirk Ludtke – CRT Capital Group: With respect to the – I think just as a follow-up to an earlier question about you mentioned you had flexibility to sell tires that you had made for original equipment manufacturers and the after market, I’m assuming that – is it safe to assume that you don’t really have any practical limitations? You have unlimited ability to sell tires that you had designed for car makers into the after market?

Robert J. Keegan

Management

Yes. That’s virtually true. I mean the only constraint that we have is whether we have demand in the after market. But aside from that, the individual products, etc., can be moved in the after market. Kirk Ludtke – CRT Capital Group: You’ve got a contract with the Steelworkers that expires in July of ’09 I believe?

Robert J. Keegan

Management

We’ll start those negotiations in June of ’09. Kirk Ludtke – CRT Capital Group: Given that you took a pretty lengthy strike last time around, is the contract – would you expect this next round of negotiations to go more smoothly given that you won some flexibility last time around?

Robert J. Keegan

Management

Well I’ll simply say here is Darren and I will both be active participants in that along with Rich [Cramer] and his team. We can’t give any indication here. We don’t want to do anything that gets in the way of very productive discussions and we think we’ll have productive discussions with the Steelworkers. But that’s as far as I can go at this point.

Operator

Operator

Your last question comes from [Monica Keeney] – Morgan Stanley. Monica Keeney – Morgan Stanley: I was wondering do you have the balance of the gross amount receivables sold in the quarter?

Darren R. Wells

Management

Monica, are you referring to the securitization that we have in Europe? Or are you looking at something else? Monica Keeney – Morgan Stanley: No. Yes. The factoring.

Darren R. Wells

Management

So the securitization in Europe is an on balance sheet program, right? So the receivables are still reflected in our receivables. Monica Keeney – Morgan Stanley: Wasn’t there also an off balance sheet amount?

Darren R. Wells

Management

You know, we have some small amounts in overseas markets that – Monica Keeney – Morgan Stanley: I think on June 30 it was like $180 that was sold?

Darren R. Wells

Management

No, I think what you might see is something that is in the same range or slightly – Monica Keeney – Morgan Stanley: I was wondering do you have a sense for what, and I don’t know if you mentioned this already, cash restructuring for ’08 and even like the trajectory for ’09? Sort of cash needs?

Darren R. Wells

Management

Yes, I think the cash restructuring, what we’ve seen over time is typically $50 to $100 million of cash restructuring charges. I think for 2009 we do have a substantial cash amount for the closure of the [Summerton] Manufacturing Facility, the tire plant in Australia, which I think was around $85 million of cash restructuring charges for that. So you might see 2009 just a bit above that as a result of the Australian plant closure. Monica Keeney – Morgan Stanley: So ’09 above the $50 to $100 million?

Darren R. Wells

Management

Yes. If you take that alone with other restructurings that we’ve announced or might announce, you might get to a point where you’re thinking a little higher than $100 million for next year. Monica Keeney – Morgan Stanley: Okay. And then on working capital for Q4 – obviously it’s always a big source, so directionally then for the year can you give us some guidance for the full year?

Darren R. Wells

Management

Yes, I mean Monica I think you’re right to point out that fourth quarter is a big cash flow – cash inflow quarter and we would expect that to be the case this year as well. We have continued the focus on cash flow. Bob made several comments about Cash is King and what we’re doing. I think you’d see making the production cuts that we’re taking, certainly that’s a big action toward generating cash and making sure that we’re running the business for cash. Looking carefully at all the expense categories is something else that we’re doing. So we’re doing everything we can, focused on protecting the balance sheet, focused on generating cash flow. We’re – over time there’s no question our philosophy has been to focus on generating positive cash flow but in an environment like this it’s a lot tougher to see out into the future than we might have thought even three or six months ago.

Robert J. Keegan

Management

The other thing Monica that we obviously are spending a fair amount of time on is receivables and in that area at this period of economic downturn, globally our operating people as well as our financial people are on top of that. Monica Keeney – Morgan Stanley: So I guess your point is you’re obviously doing everything you can but it’s hard to predict for the year if it’s going to be much of a source?

Darren R. Wells

Management

Yes. I think that’s a fair position. I mean Bob’s last point was an important one. We are really – I mean, we’re spending a lot of time now monitoring our customers, making sure that we understand the position that they’re in, given a lot of difficulties in the credit markets, I feel like we’re on top of that. I feel like we’re doing what we can do there but it’s something we have to continue to monitor. Monica Keeney – Morgan Stanley: When you gave those returns that was obviously for your pension, right, when you said September down 17%?

Darren R. Wells

Management

Yes. That’s actually for the U.S. pension portfolio. Monica Keeney – Morgan Stanley: Had you given ’09 guidance before on the cash for the pension?

Darren R. Wells

Management

No. Monica Keeney – Morgan Stanley: And you’re not going to hazard a guess today?

Darren R. Wells

Management

No. Not going to today. We’ll just say that returns this year don’t have that much of an affect on the cash contributions for next year.

Patrick Stobb

Management

All right. This is Pat. This concludes today’s call. I’ll be available this afternoon for your questions so please call me should you have any. Thanks again for joining us.

Robert J. Keegan

Management

Yes, thanks for being here. Bye.

Operator

Operator

Ladies and gentlemen, thank you for participating in today’s Goodyear third quarter 2008 conference call. You may now disconnect.