Goodyear Tire & Rubber, the world's largest tyremaker, on Monday said it would cut $65m from its net income reported between 1997 and 2003 as a result of a four-month internal inquiry into the company's accounts in Europe and the US.
Its share price rose more than 5 per cent to $9.11 at midday amid relief that the probe, most of which focused on accounting issues in Europe, had not widened. But the development is unlikely to remove the uncertainty over the company's financial health that has dogged the tyremaker in the last 16 months.
Ed Wiest, senior analyst at Moody's, the credit rating agency, said: "We would see nothing for us to change our ratings at this time."
Goodyear is still struggling to restore credibility with investors as it tries to turn round its loss-making North American business and stem falling market share there amid rising raw material prices. Goodyear is also awaiting the outcome of a Securities and Exchange Commission investigation into earnings restatements in November that are unrelated to its internal probe.
Goodyear said that $10m of the net income restated related to business in the European Union, $20m related to US workers' compensation claims, and the rest connected to fixed assets, product liability and inventory.
In spite of progress in healing relations with dealers and cutting costs in North America - which accounts for half of its business - Goodyear is beset with rising raw material costs, over-capacity in the region and lower-cost Asian competition.
The company is sticking by a target for cost reductions of $1bn-$1.5bn by 2005. The company, which has about $1bn in cash, said it was in talks with lenders about extending by 30 days a deadline of April 19 by which it is required under loan agreements to submit its 2003 results. Goodyear said that if it failed to file its earnings by May 19, "there could be an event of default under the loan agreements and therefore under other debt instruments".
Rod Lache, auto analyst at Deutsche Bank in New York, said that, while the company had not communicated enough to investors, recent developments did not indicate signs of possible fraud. "The company has had this 'radio silence' policy . . . But this is no Parmalat, it's not a company that's lied to the public."