Earnings Call Transcript - GT Q4 2024

Operator, Operator

Good morning. My name is Margo, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Goodyear's Fourth Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After some opening remarks, there will be a question-and-answer session. Please note this call may be recorded. It is now my pleasure to turn the conference over to Greg Shank, Senior Director, Investor Relations. Please go ahead.

Greg Shank, Senior Director, Investor Relations

Thank you, Margo. Good morning, and welcome to our fourth quarter 2024 earnings call. Today on the call, we have Mark Stewart, our CEO and President; and Christina Zamarro, our Executive Vice President and CFO. During this call, we will refer to forward-looking statements and non-GAAP financial measures. Forward-looking statements involve risks, assumptions and uncertainties that could cause actual results to differ materially from those forward-looking statements. For more information on the most significant factors that could affect future results, please refer to Slide 21 of the supporting presentation for today's call and our filings with the SEC. These materials can be found on our website at investor.goodyear.com, where a replay of this call will also be available. A reconciliation of the non-GAAP financial measures discussed on today's call to the comparable GAAP measures is also included in the appendix of that presentation. With that, I will now turn the call over to Mark.

Mark Stewart, CEO

Thank you, Greg, and good morning, everyone. Welcome to our fourth quarter earnings call. I'd like to begin today by thanking our associates, our customers and all of our suppliers for helping us to deliver an outstanding year in 2024. As I'm sure you've seen in our release, we delivered fourth quarter segment operating income ahead of expectations and alongside of it, some exceptionally strong free cash flow relative to our past few years. It was a fitting end to the year marked by transformation, as we set out to strengthen Goodyear's financial foundation and position the company for long-term success. Looking back over my first year with the company, I'm really energized by all we've accomplished. Across our organization, we put the emphasis and the full force of our talented team on Goodyear Forward, and together, we executed nearly $500 million of transformation benefits through relentless program execution and follow-through. It's a truly remarkable outcome, given the program kicked off in November of '23. To put this effort into perspective, we've now successfully delivered five consecutive quarters of margin expansion under our Goodyear Forward plan. We accomplished this growth by exceeding our Goodyear Forward targets each and every quarter this past year. The end result is, together, we've generated a turnaround in our earnings with full year segment operating income growth of $350 million over $200 million, excluding the benefits from the insurance recoveries. 2024 was the first year that Goodyear has grown segment operating income and margin since 2015, excluding the recovery year immediately following COVID. Our commitment to continued progress is clear throughout the entire company. We will continue to drive execution to unlock Goodyear's full potential as we move forward. In addition to our progress on earnings, we have also completed the divestiture of our OTR, the off-the-road business, and announced an agreement as well to sell the Dunlop brand, both part of our strategic review process. It's a clear demonstration that we're focused on delivering the plan and positioning the company for future growth. As with all transformation, it hasn't come without some challenges, as we look at the top-line this past year, we've seen growth in the low-end imports impacting the consumer replacement industry in the U.S., Europe, as well Brazil. The inflows at the low end of the market over the last two years are unprecedented. Looking to the U.S. market, low-cost imported tires are largely sourced from Southeast Asia, including from a number of countries that are either not subject to anti-dumping or countervailing duty tariffs or where the production has been shifted to avoid the level of tariffs that the U.S. has sought to impose in order to counteract unfair foreign subsidies in our industry. It remains to be seen how the tariffs in our markets will evolve this year in 2025. The Tier 1 tire manufacturers, including Goodyear, source our volumes from factories located in all three USMCA countries to support both the OE as well as the replacement customers in the U.S. As you would all expect, we have been quite active in our discussions with government officials, emphasizing the significance of Goodyear having the largest manufacturing footprint in the U.S., as well as the quality, the safety and the technology that we bring to consumers with our products and our services right here in the U.S. marketplace. We look forward to continuing our collaborations with the leaders in Washington, as we work to address these critical issues impacting our business. In the meantime, we're working across our operations to mitigate any potential near-term impacts of tariffs related to our Canadian and Mexican supply. As the tariff situation may be fluid, we will remain agile and execute efficiently. We will also remain steadfast on our execution of the Goodyear Forward, which will bolster our top-line and our cost performance with benefits of $750 million planned in 2025. This is continuing on the foundation that we executed in '24 and will allow us to continue to push forward on several fronts this year. We're going to take advantage of the strategic moves we made in '24 to advance new products, modernize our manufacturing footprint, enhance our sales effectiveness and evolve our regional operational models. In the U.S., we will accelerate the introduction of new products to more effectively compete in the premium tiers and capitalize on blank space opportunities. In our last conference call, I shared how we will refresh our U.S. portfolio of offerings, while also increasing our coverage to a much broader spectrum of high-end, high-margin SKUs. We will introduce five new product lines in the U.S. this year, each with significant improvements in the large rim SKU coverage than the predecessor lines. On the manufacturing side, we're increasing our capabilities in our Oklahoma facility with a modernization project that will add about 10 million units of new capacity for premium tires in 2025 and 2026. We will ensure we're running at the optimal level of output and efficiency, and we're running the products that will yield the highest opportunities for profitability this year. As we look to our new portfolio in the market, we're also investing in our sales capabilities, both in strengthening our customer service through global digital platforms, as well as strengthening our overall value proposition for our customers, all with a clear objective to grow with the products our customers and consumers demand, across the Goodyear family of brands. On the cost side, we're lowering our SG&A and optimizing our manufacturing assets, as we look at both footprint as well as plant optimization. In early January, we announced the addition of Don Metzelaar as our SVP of Global Manufacturing and Supply Chain, reporting directly to me. Don brings more than thirty years of experience in developing, transforming and leading complex, multi-site, world-class manufacturing operations. He'll be instrumental in taking our global manufacturing capabilities to the next level. We have a significant opportunity as we look across our KPIs to drive both higher output and lower cost. In addition, Alain Kohnen has joined our organization from our European manufacturing operation. Alain has many years with the company and a demonstrated strength in leading manufacturing. Alain is now leading our manufacturing in the Americas. Don Metzelaar is one of six leaders I've added to the leadership team over this last year. These leadership changes have been crucial to our business transformation and creating a culture of high performance in the company. In addition, with the right leadership in place, we will capitalize on opportunities to streamline our operating model and address duplication of effort, and excess costs that are inherently incurred under our current decentralized structured model. Today, we operate from within three regions, meaning, each region manages their own product portfolio, their product development, sourcing and manufacturing. By aligning our structure and process globally, we will be able to innovate and operate with speed around the world, leveraging the benefits of standardization, optimization and our key assets, meaning our people around the world. This new structure will translate to better products, lower costs, better service and quicker refreshing of our products across the world. The transition will take some time, but the model is one that many companies are already leveraging and will shape the future of Goodyear as well. Looking ahead, we will continue to prioritize Goodyear Forward and advance several strategic initiatives, to ensure we're positioned for long-term growth for our shareholders. We successfully navigated a very challenging landscape in '24 and our focus on discipline and execution will continue to support us, as we work to further strengthen our financial and operational foundation in the coming years. Next, I'll turn it over to Christina, and she'll take you through the financials and we'll move on to the Q&A. Thank you.

Christina Zamarro, CFO

Thank you, Mark. 2024 was an important year for us as we've executed on our transformation plan, while continuing to build our savings pipeline for 2025. We feel very good about where we stand with respect to our targets, as we look at both the goal to attain 10% SOI margin in the fourth quarter and net leverage of 2x to 2.5x by the end of the year. I'll begin the year-end review with the income statement on Slide 8. Fourth quarter sales totaled $4.9 billion, down 3% from last year driven by lower volume. Unit volume was 4% lower versus last year in line with our expectations, given growth in low-end imports in the U.S. SG&A declined $77 million driven by Goodyear Forward work streams. As a percent of sales, SG&A declined one full point versus last year. Segment operating income for the quarter was $385 million and SOI margin increased to 7.8%. After adjusting for significant items, including the final settlement of an insurance claim related to storm damage we incurred in 2023, our earnings per share were $0.39. Excluding insurance proceeds, SOI margin was 6.7%. Turning to the segment operating income walk on Slide 9. Lower tire unit volume and factory utilization were a headwind of $81 million in the quarter. Net price mix versus raw materials was unfavorable during the quarter, driven by increases in our raw material costs. Price mix was unfavorable $36 million. Now pricing was stable, but mix was negative, given declines in commercial replacement volume and an increase in our consumer OE volume. Continued strong execution on Goodyear Forward contributed $195 million, against inflation that was $50 million in the quarter. And as I referenced earlier, we collected $52 million of insurance proceeds in the final settlement related to our 2023 tornado claim. Other SOI was favorable $41 million, driven by lower incentive compensation, the recovery from last year's fire at our factory in Poland and higher earnings in other tire-related businesses. Turning to the cash flow and balance sheet on Slide 10. Free cash flow exceeded $1 billion in the quarter driven by strong working capital inflows. As we shared in an earlier press release, we finalized the sale of OTR on February 3. Pro forma for that transaction, year-end net debt was $6.1 billion and our net leverage was 3x, down nearly a full turn from year-end 2023. We intend to repay the $500 million principal outstanding on our 9.5% notes later this month, and the remaining proceeds from the sale will reduce our variable rate debt. Together, these actions should generate $70 million in annual interest expense savings. Finally, earlier in January, we announced a definitive agreement to sell the Dunlop brand to SRI. That transaction is expected to close midyear and the related upfront proceeds of about $700 million will be used to further reduce our leverage in 2025. The strategic review of our Chemicals business remains in process. Moving to our SBU results and starting on Slide 13. America’s unit volume decreased about 1 million units driven by consumer replacement. As we look at the industry, the U.S. consumer replacement industry declined about 2%, low-end imports outperformed the industry and grew 11%, rising to an all-time high as a result of channel stocking and pre-buy activity related to potential tariffs. On the other hand, our U.S. consumer OE volume grew approximately 20%, driven by new fitment wins and the recovery from last year's UAW strike, resulting in year-over-year share gains of approximately 4 points. Commercial OE and replacement volume declined following industry weakness. Segment operating income for the Americas totaled $262 million or 9.1% of sales. America’s earnings reflect unfavorable net price/mix versus raw material costs and lower volume, partly offset by Goodyear Forward benefits and insurance proceeds. Moving to Slide 14. EMEA's fourth quarter unit volume increased 2%. Our volume reflects growth in the consumer replacement market, driven by a strong winter tire selling season. The robust market was in part due to new regulations in Germany that require 3 peak Mountain Snowflake labeling on both winter and all-season tires. Our OE volume was about flat in consumer but was down about 10% in commercial given industry weakness. Segment operating income was $41 million. Goodyear Forward benefits more than offset net price/mix versus raw material cost headwinds and general inflation. Turning to Asia Pacific on Slide 15. Fourth quarter unit volume decreased 9%, driven by actions to reduce lower-margin business in key markets and channel destocking in China. Segment operating income totaled $82 million and 13.5% sales, an increase of $14 million compared to last year. Turning to our outlook. We expect that our first half SOI will decline based on prudent assumptions around our volume, carryover effects of production cuts in the fourth quarter and significant increases in our raw material costs. In the second half, we expect modest volume growth and price mix to more than offset raw material inflation, which when combined with Goodyear Forward benefits, should support earnings and margin growth, particularly in the fourth quarter. In addition, we expect consulting fees and other costs related to Goodyear Forward to decline by about $80 million versus last year. As we look at risks to our 2025 plan, a further step-up in raw materials later this year could limit our earnings growth in the second half as it typically takes us time to offset increases in our raw material costs with price and mix. Similarly, potential tariff impact related to Canada and Mexico are difficult to predict, including both primary and secondary effects. In any case, we'll manage near-term volatility with the benefit of the stronger cost base we've gained under Goodyear Forward. Sources of upside to our plan include growth in volume and price mix related to the potential for U.S. tariffs impacting countries outside of those currently contemplated. Similarly, we also anticipate that the European Commission may make a tariff determination as to unfair competition related to consumer tire imports in the coming months. Finally, we could see raw material prices decline if pre-buy and channel stocking of low-cost inventory abates. As we look at the outlook drivers specific to the first quarter, we expect global unit volumes to decline approximately 2% to 3% versus last year, reflecting elevated wholesale channel inventories in the U.S. and consumer OE declines as a result of lower OE production. In addition, we expect higher unabsorbed fixed costs of about $25 million, driven by lower production during the fourth quarter. Price mix is expected to be a tailwind of about $65 million, driven by pricing actions we have implemented and raw material index contracts with OE and fleet customers. Raw materials will increase approximately $175 million, driven by natural and synthetic rubber price increases. At current spot rates, we would expect to see raw material cost increases of about $350 million in total in the first half of 2025 with about $50 million of that driven by transactional currency impacts. Goodyear Forward will drive approximately $200 million of benefits, reflecting continued progress across all work streams. Inflation and other costs are expected to be a headwind of approximately $75 million, reflecting increases in transportation rates over and above core inflation. Foreign exchange will be a headwind of $15 million and the non-repeat of costs related to the fire in our Dambisa Poland facility last year will be an $11 million benefit. Also for modeling adjustments related to the OTR transaction, our full year 2024 OTR revenue was about $600 million and SOI was $65 million. Depreciation and amortization was $18 million. We expect the transaction to reduce 2025 SOI by approximately $80 million inclusive of stranded costs, primarily in Asia. Other financial assumptions have been updated to reflect our expectations for 2025. Interest expense will be approximately $60 million lower than last year, driven by debt reduction. Higher restructuring reflects footprint actions announced under Goodyear Forward, including a recently announced plan in our Danville, Virginia facility. With major cost programs announced in 3 of our factories this year, we expect to incur some transitory manufacturing costs, approximately $30 million in the second half of the year. With inflows in working capital and lower CapEx spend relative to 2024, we expect to generate positive free cash flow in 2025 consistent with our deleveraging objectives. With that, we'll open the line for your questions.

Operator, Operator

We'll take our first question from James Picariello with BNP Paribas.

James Picariello, Analyst

My first question is just on your price mix expectation for the year? I know it's harder to call the farther out. But can you just confirm what the expectation is for the first half, if you already provided that. And then thoughts on the second half, raw materials, should we assume neutral or an additional headwind potential based on spot pricing? And have you seen any pricing actions from your peers thus far given the rather substantial raw material headwinds that the industry is facing?

Christina Zamarro, CFO

Yes. Sure. James, I'll start, and I'll have Mark follow up on the pricing environment. When we look at our SOI bridge for 2025, your price/mix should grow from the first quarter on into the second and third quarter. A part of that is the realization of our OE RMIs and our raw material index contracts with our fleets. Those generally were priced six months in arrears. And so we don't have nearly the full run rate here in Q1. There's also been pricing actions that we've taken in our key markets around the world in the first quarter as well. And I'll let Mark follow up on that. When we look at the raw materials, what I would say is the $350 million is baked based on current spot rates for the first half. If spot rates hold, we could see a headwind of about $100 million to $150 million in the back half of the year. Of course, while spot prices have been pretty volatile, so we'll continue to update you on that. But again, looking for price mix to grow into Q2 and Q3 before leveling off or just depending on what happens the rest of the year with gross. Mark?

Mark Stewart, CEO

Yes, James. Yes, just talking through some of our pricing actions that we've already happened, as Christina mentioned, right, since the third quarter call, pricing actions we've taken. We've done multiple rounds of pricing globally, commercial tires in Turkey, for example, across the Latin American countries as well as consumer pricing in Europe as well as the Middle East. And then across the U.S. on specific product lines, we've taken product actions in both in quarter 4 as well as rolling into quarter 1. So we'd expect to see the benefit of that going into the quarter 2 time period as that flows through the system. We continue to watch things to make sure that we are competitively priced based on our upgraded marketing intelligence. As we mentioned, it's a big area we focused on in '24 was our scraping and making sure that we're benchmarking that we're in the right price position across each of the categories and really taking a look at that from a consumer-facing standpoint so that we are competitive in the marketplace.

James Picariello, Analyst

Got it. That's helpful. I have a quick two-part question. First, regarding volume, you mentioned the full year industry volume assumption with consumer flat and commercial up 3% at the midpoint. I’d like to hear your thoughts on Goodyear's volume performance for the year, especially since we anticipate a decline of 2% to 3% in the first quarter. What are your expectations for the second half with easier comparisons? Is there a potential path for growth considering the current channel inventory levels? Secondly, regarding the Goodyear Forward savings in the fourth quarter, there was notable upside. Can you explain what contributed to that upside? Was it primarily due to your pricing actions?

Mark Stewart, CEO

Yes. I will begin by discussing volumes and then transition to Goodyear Forward with Christina. As noted, we anticipate overall global growth in 2025 for the consumer replacement segment, particularly with a stronger market in Europe and Asia. However, we expect some volatility in the U.S. market regarding imports. In Latin America, particularly Brazil, we predict a decline in imports due to newly implemented tariffs that started in October. For consumer original equipment, we expect a flat first half with growth anticipated in the latter part of the year in the U.S. Regarding commercial replacement demand, we foresee stabilization throughout the year, although non-imports may decline as new tariffs take effect, particularly those from Thailand. Overall, the first half for commercial original equipment is likely to remain soft, continuing the trend from last year, while we expect a stronger second half as new regulations are introduced, with fleets beginning pre-buy activities in anticipation of these changes. To address the expected lower volumes, we are taking multiple approaches. As mentioned in the quarter, we are making aggressive growth strides in areas where we previously lagged. We restructured our engineering SWAT teams and go-to-market teams and are focusing on introducing around 200 additional SKUs in high-end, profitable segments that will yield better returns at premium prices. This is a crucial area of focus for us. We have five new product lines launching globally this year, including WeatherReady 2s, Wrangler workhorses, ASMs 6 aimed at the premium UHP market, Eagle F1 all-season tires, and MaxLife 2, all of which will be introduced in volume and with the appropriate number of SKUs for each line, which gives us confidence for the second half, James.

Christina Zamarro, CFO

And James, just a follow-up to your question then. I mean there's a lot of time Mark just spent on price action and a lot of that started in Q3 last year. And so you're seeing that in the Goodyear Forward programs, especially in the premium end of the market.

Operator, Operator

We'll take our next question from Emmanuel Rosner with Wolfe Research.

Emmanuel Rosner, Analyst

I wanted to follow up on the topic of volume and price mix outlook between the first and second halves. It seems that the outlook suggests a decline in the first half, followed by growth in the second half. Can you reiterate what the anticipated drivers of improvement in volume, price, and mix will be for the second half? Also, how much visibility and confidence do you have regarding this at the moment?

Christina Zamarro, CFO

Sure. I'll start out with the SOI Bridge for 2025. And if you look at the puts and takes, as we've talked about them, our 2024 SOI was about $1.3 billion. If we adjust that for insurance proceeds, we are at $1.2 billion. Now Goodyear Forward, of course, going to add $750 million for us against that base inflation of $225 million. We said we're also going to have headwinds in other costs outside of core inflation, and that's mostly driven by transportation. It's going to run $20 million a quarter. We also have three factories that we are ramping down or decreasing production in the third and fourth quarter of this year. So that will increase our manufacturing costs through some transitory inefficiencies in the third and fourth quarter by about $30 million. We talked a lot about raw material headwinds, about $350 million in the first half, about $100 million, maybe up to $150 million at current spot prices in the second half. And then spent a lot of time already on the call about how we're thinking around price/mix. We've given you the first quarter, but that should grow pretty materially in Q2 and Q3 and get to a run rate by Q4. And that's driven by pricing actions that we've implemented in the first quarter already. Pricing through our OE RMI indexed agreements with fleets as well. And then, obviously, Mark just spent a lot of time on the new product development, new product lines we're bringing into the market, which should also support our mix. OTR should be a headwind. We've outlined that in the presentation, $80 million on a full year basis, and then it does come down to volume. What we've laid out is a lower first half driven mostly by the U.S. channel stocking of low-end imports and lower OE volumes just following OEM production broadly and then moderate growth in the second half for us, driven by very low comps and a recovering industry broadly in commercial and in consumer OE. And so once you put all of that together, I think it's safe to say you should be able to model a level of SOI that's in line with our current year, including the insurance, which means that we should be demonstrating a very strong level of underlying growth in the business, something on the order of 10%.

Emmanuel Rosner, Analyst

That is super helpful. So, regarding currency, how does this align with 2024?

Christina Zamarro, CFO

In accordance with currency, I mean, in accordance with 2024?

Emmanuel Rosner, Analyst

'25 would be in line with '24, including the proceeds you got last year?

Christina Zamarro, CFO

Yes. So like the 1,320 level.

Emmanuel Rosner, Analyst

Got it. Yes. That was our understanding as well. Perfect. If you could help us with the free cash flow walk as well. You mentioned positive free cash flow, which I assume is before restructuring. How should we consider restructuring, which you quantified for this year, and how much additional spending is planned as part of the overall strategy?

Christina Zamarro, CFO

Certainly. The positive free cash flow includes $400 million for restructuring. We aim to remain positive, factoring in restructuring. This is primarily driven by the SOI we discussed, and we anticipate reaching an EBITDA of approximately $2.1 billion after considering the model related to SOI. Working capital will contribute positively, as we've outlined with restructuring. Regarding taxes, there will be a couple of hundred million dollars, specifically $400 million for restructuring. Interest expenses are decreasing compared to last year, while interest income will balance that out. We'll incur our usual financing fees, and CapEx will be significantly lower than in 2025. All these elements should lead to a favorable free cash flow expectation for 2025. Looking ahead to next year, we expect restructuring activities to normalize. There may be some carryover from the Goodyear Forward restructuring, with next year's spending anticipated to be between $100 million and $200 million. We will also see additional interest expense savings once we complete the Dunlop transaction and finalize the chemical strategic review. Thus, next year, we should be in a position to generate substantial positive cash flows that reflect the business's underlying earnings run rate.

Emmanuel Rosner, Analyst

That's very helpful. Just one final point. Is the overall spending on restructuring lower than expected? My memory might not be accurate, but I recall that the total budgets were projected to be over $1 billion. Now we're discussing just $400 million this year and maybe between $100 million to $200 million next year. Is this overall bill lower than anticipated?

Christina Zamarro, CFO

I think, yes. Emmanuel, we had set aside about $1 billion as part of Goodyear for restructuring. And as I've just laid it out, we spent $200 million in 2024. The capital that we're going to allocate in 2025 is about $400 million and then up to $200 million next year. So we're probably going to land right around $800 million or so as part of the overall program. I think some of that is terrific negotiations with our constituents around the world. I think a part of that also is just the execution that we've seen in what Mark's describing about generating efficiencies in the factories to increase our volumes. And so no other announcements planned, nothing else in the pipeline. If anything changes, we'll keep you updated.

Operator, Operator

And our next question comes from Doug Karson with Bank of America.

Doug Karson, Analyst

Great. I want to maybe turn to the balance sheet for a moment here. Net leverage now as it's 3x, almost a turn below what you had last year. So the forward program is certainly working. And I've just kind of pulled up your ratings at B1 and B Plus seemed pretty underrated relative to the progress you've made on the balance sheet. Have you had a chance to kind of refresh with the rating agencies to have them take a kind of newer look at where the balance sheet is headed? That's my first question.

Christina Zamarro, CFO

Yes. Thanks, Doug, for the question. And certainly, making a lot of progress on the balance sheet. We intend to close on the Dunlop transaction a little later this year, and that will bring in $700 million more of gross proceeds that we intend to use to deleverage even further. We do talk to each one of the rating agencies very regularly. Last night, in fact, was the most recent conversation. And I think they do look at our forward forecast. I think there was a lot of emphasis placed on 2024 free cash flow, which you can see was slightly negative because of a lot of the restructuring programs that we had in place. And so I think as we look ahead, we would expect more positive outlook and sentiment from the rating agencies, just given the progress so far.

Doug Karson, Analyst

That's great. It's well deserved. I was impressed to see the close to 50% increase in the Goodyear Forward cost savings up to $750 million. And as I look at the environment, we're in there so much volatility between tariffs and raw material fluctuations. Maybe just help us think about some of those big line items: you have $300 million for footprint optimization and $200 million for purchasing. Are some of these categories, less at risk, more at risk given the environment? Just trying to be thoughtful about the $750 million.

Mark Stewart, CEO

Yes, we feel very positive about the future. We executed exceptionally well in 2024, managing to initiate additional grassroots projects driven by our global associates. Our governance structure includes dedicated weekly sessions across five key work streams. As I noted at the beginning of the call, we've unified our manufacturing organization into a single global entity, with our three regional heads now reporting to Don Metzelaar, our new VP, who has an impressive 30-year track record. I personally spent considerable time last year with the teams focusing on the fundamental aspects of manufacturing, such as improving our efficiencies, equipment effectiveness, and scrap rates, as well as enhancing material flows. We are committed to refining the key performance indicators that significantly impact our strength in this area. We are optimistic about our plant optimization efforts. We announced actions to optimize our footprint last year and at the beginning of this year to position our commercial truck operation competitively in the marketplace with the right cost structure, continuing to advance those work streams. On the purchasing front, we are actively evaluating our costs and working with our suppliers on both current and upcoming programs, with a strong emphasis on improving efficiency in our indirect and maintenance, repair, and operations activities. Our confidence in this area is robust as we've taken steps throughout last year and early this year to ensure that our overhead structure is efficient, and we are monitoring this regularly to identify opportunities for greater efficiency. These efforts, alongside our R&D initiatives focused on enhancing our equipment standards, reflect our commitment to careful spending and negotiation. Overall, we are very confident that our improved savings rate will persist, and it has become a fundamental aspect of our operations.

Operator, Operator

We'll go next to Edison Yu with Deutsche Bank.

Edison Yu, Analyst

I wanted to ask about the chemical side. I know you mentioned that you're still on track for a sale. Has the reception been somewhat more subdued? We've talked to some chemical companies, and there are certainly challenges in the industry. What are your latest thoughts on that?

Christina Zamarro, CFO

We don't have much more to add beyond the fact that the review is still ongoing. Generally, there's been broad interest across all sectors, whether strategic or private equity. This was highlighted as we entered the market a bit later, with a particular focus on OTR and Dunlop in the earlier part of 2024.

Edison Yu, Analyst

And then just a quick one on the SOI in APAC. And I apologize if I missed it earlier. It was actually very, very strong margin. Was there anything kind of one-off there some sort of a benefit that doesn't carry over? Just wanted to double check on that.

Mark Stewart, CEO

No. We have a very strong operation in APAC. Their manufacturing process is robust, and pricing in the marketplace is favorable. We are introducing fresh products that are performing well, especially in the electric vehicle sector. Overall, operations in AP are doing quite well.

Edison Yu, Analyst

Got it. Actually, just one quick question. I heard earlier about the expansion in Oklahoma. Is that in any way a strategy to deal with the tariffs?

Mark Stewart, CEO

No. We would like to tell you our crystal ball was good enough to do that, but that was not the case. It's just necessary modernization that we needed to make across our footprint. And that's one of our larger facilities, and we just were taking all the right actions we needed to take there in terms of moving more into the higher RIM sizes, additional volume for the marketplace in that higher profit, higher margin segments.

Operator, Operator

And we have no further questions. I'd like to turn the call back over to Mark for any final or closing remarks.

Mark Stewart, CEO

Thank you all for joining us today for the fourth quarter earnings call. We have made significant progress over the last year and still have many tasks ahead, but I feel optimistic. We have the right leadership team and dedicated associates worldwide. We look forward to sharing the advancements we make on our Goodyear Forward initiatives as we progress through this year. Thank you again for being with us today, and have a wonderful day.

Operator, Operator

Thank you. And that does conclude today's conference. We appreciate your participation. You may disconnect at any time.