Good morning. My name is Gigi, and I will be your conference operator today. I would like to welcome everyone to Goodyear's Third Quarter 2023 Earnings Call. All lines have been muted to minimize background noise. After some introductory comments, there will be a question-and-answer session. On the call today, we have Rich Kramer, Goodyear's Chairman and Chief Executive Officer; and Christina Zamarro, Chief Financial Officer. We will discuss forward-looking statements and non-GAAP financial measures during this call. Forward-looking statements involve risks, assumptions, and uncertainties that could lead to actual results differing significantly from those statements. For more information on key factors that could influence future results, please refer to the important disclosures section of Goodyear's Third Quarter 2023 Investor Letter and their filings with the SEC, available on their website at investor.goodyear.com, where a replay of this call will also be accessible. A reconciliation of the non-GAAP financial measures that might be discussed today with the corresponding GAAP measures is also included in the investor letter. I will now hand the call over to Rich Kramer, Chairman and CEO.

Great. Thank you, Gigi. Good morning, everyone, and thanks for joining the call today. By now, you've seen our investor letter covering Q3 results and also an announcement that we'll be with you again next Wednesday, November 15, with an update on the results coming out of our strategic and operating review. Now with that in mind, we're happy to take questions on the quarter this morning, but I'd ask that you hold any questions related to the review until next week, when we'll be able to say more. So thank you for that. And Gigi, with that, let's go ahead and take the first question.

Thank you. I will take our first question from Rod Lache with Wolfe Research. Please go ahead. Your line is open.

Good morning. I would like to ask two higher-level questions. I understand you are not ready to share details on the strategic and operational review. First, could you provide some insight on the European business, which remains quite weak with a 1.5% margin? There is a concern that it faces significant structural challenges that may require substantial investment. Currently, your restructuring efforts seem to require $3 to $4 in cash for every dollar saved. Could you discuss the changes being implemented and whether you anticipate any structural adjustments that could make the situation more manageable? On the strategic front, I assume we will get more specifics in the coming weeks, but could you share any high-level insights regarding interest in businesses within Goodyear?

Rod, first of all, I think we would agree with you relative to the performance of EMEA. You may recall, we said our near-term goal was to get back to the sort of the pre-COVID $50 million per quarter run rate. And Q3, while a little bit better than Q2, certainly is well below that run rate, and that's the issue that needs to be addressed to your point. I'd point out, again, as you know, the industry is still really challenged relative to 2019. As you've seen in our investor letter, we included the 2019 numbers where you see the consumer business is down, let's say approximately 15% in the truck business, 22% versus 2019. So look, it's not back to normal. But having said that, to your point, we've been and are evaluating EMEA and looking at all options to generate value in the near term and continuing to assess sort of the long-term solutions as given the macro environment and what's going on over there. And particularly, I think we've all seen a number of articles talking about the ICE to EV conversion, the competitive challenges, high cost of doing business there and the like. And I think that's the tough environment that you've referred to. So I'd say, Rod, near term, like we have, we're acting now. And I'd say more to come. What we're doing now is, as you've pointed out, we've announced already some manufacturing and some plant actions there and some SAG actions as well over the last two quarters. You've also seen some competitors do some similar things like that. And also in the near term, what we're looking to do is make sure that we stabilize those earnings in the near term and not lose the benefit of those cost savings that we've done as we know that's happened in the past as well. So I'm going to go back to my opening statement and say, look, we are continuing to actively assess this, including with our review committee. And I would just say more comments to come next week as we look at this. But it is certainly a challenging year, I would agree with you.

At a high level, are you receiving any indications of interest from other players in your businesses? It's known that you're undergoing a strategic review, and while more details will be provided later, can you share any general comments on that?

Yes, Rod, again, I'd have to say we'll be back to you next Wednesday on a separate call that the committee is doing all-inclusive, including EMEA in a comprehensive review, evaluating all the options, again, with the idea of maximizing shareholder value. So we'll come back to you on Wednesday.

Okay. Then just maybe one thing that you may be able to answer is just you've had a pretty nice improvement in raw materials versus net pricing again this quarter. But obviously, oil prices are starting to move in an adverse direction. Any thoughts on how things are kind of shaping up into early 2024?

Yes. I mean, Rod, maybe I'll let Christina jump in. I would just maybe add to your point. We're still seeing a very stable pricing environment in Q3. We continue to see that in October as well. And our business this quarter really focused on those areas where we can drive value, again, which is that premium part of the market where our value proposition holds up really well. And that's what we did, that's what we saw. And I would tell you that part of the market, even as we get into 2024, and Rod, you'll remember this as we sort of bifurcate the market, the premium part of the market still has the dynamics that are favorable to us. Certainly, in terms of segments, it's the most profitable profit pool, if you will, of the market. It's where we have 18 inches above growing fairly significantly, I think about 7% in 2023. Our products, our brand, our technology, both Goodyear and Cooper really work well there. And again, the demand to supply dynamics still work in our favor. And I think that's what you saw in Q3. That's what you'll see in Q4 as we move ahead. And look, maybe I'll turn it over to Christina. We'll certainly still see some inflation coming at us, and you'd be right to think that we're going to have to offset that in the marketplace with the value of our products. But Christina, you might want to jump in on it.

I'll just anchor us back to what we said on the second quarter call, and we had given some guidance for the first half of next year, indicating that we had our raw material tailwind would be about $400 million over the first half with the increase in spot rates across our base commodities. We would say that feedstocks are down about $120 million since then. So we find a benefit of about $280 million in the first half. I think we right now would still see a benefit in Q3, maybe a headwind in Q4. But we are continuing to assess all opportunities on non-feedstock savings as well. Some of those energy transportation costs are coming down. So we'll continue to refine the assumptions and come back to you on our fourth quarter call, but that's how we're seeing it right now.

Thank you. We will move next with James Picariello from BNP Paribas.

Hey, good morning. Just for the fourth quarter guidance framework, if we want to call it that. The only missing piece, and of course, you continue to appreciate the color on the quarterly outlook roll-up. The only missing piece would be the other line, right? So in the third quarter, for instance, you had your chemicals business incur a $21 million headwind, $32 million overall for other. How should we be thinking about that one line item in the 4Q guidance for SOI?

Yes, James. We indicated a $15 million impact on SOI from the fires at our factory in Poland during the third quarter as a separate item. We do not expect to see a continued impact from chemical sales like we experienced earlier in the year, and we will be comparing against that in Q4.

Okay. So excluding the fire impact, the other line should be something close to neutral is what you're saying?

Yes.

Okay. Understood. And then as we think about restructuring spend and free cash flow for next year and just focusing on the series of actions that you guys have announced throughout this year with detail on what the intended cash spend is for those actions. Can you speak to what cash restructuring could look like for next year, relative to the $100 million that you're guiding for this year?

Yes. So we've announced programs in flat program so far this year, totaling $100 million in savings for 2024. And Rich mentioned earlier a couple of programs in EMEA; that was a larger SAG restructuring program, also a reduction in our production at a facility. And then there's also been an announcement related to a change in our go-to-market model in Asia-Pacific and Australia, in particular. So with those in-flight programs and what's been announced to date, restructuring cash next year would be around $300 million in 2024. Those programs also have a stub into 2025 of about $60 million.

Okay. Thank you very much.

Thank you. And this does conclude our Q&A session as well as our conference call. Thank you all for your participation, and you may disconnect at any time.