GOODYEAR TIRE & RUBBER CO /OH/ (GT) FY 2023 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

All per share amounts are diluted and refer to Goodyear net income.

OVERVIEW

The Goodyear Tire & Rubber Company is one of the world’s leading manufacturers of tires, with one of the most recognizable brand names in the world and operations in most regions of the world. We have a broad global footprint with 55 manufacturing facilities in 22 countries, including the United States. We operate our business through three operating segments representing our regional tire businesses: Americas; Europe, Middle East and Africa ("EMEA"); and Asia Pacific.

This management's discussion and analysis provides comparisons of material changes in the consolidated financial statements for the years ended December 31, 2023 and 2022. For a comparison of the years ended December 31, 2022 and 2021, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the year ended December 31, 2022.

On November 15, 2023, we announced a transformation plan, Goodyear Forward, that is intended to optimize our portfolio of products, deliver segment margin expansion and reduce our leverage in order to drive sustainable, long-term shareholder value creation. Optimization of our portfolio consists of a strategic review of three major asset groups: our chemical operations which produces synthetic rubber and other chemical products from four plants in our Americas segment, the Dunlop brand for which we own rights in certain markets throughout the world, but is primarily used in our EMEA segment, and our off-the-road tire product operations. Our plans for margin expansion include brand optimization and tiering to capitalize on premium tire pricing and volume and a reduction of our overall exposure related to lower-tiered products either through margin expansion or product line rationalization. Our plans for margin expansion also include a reduction of our cost structure by $1 billion, including actions related to our manufacturing footprint, plant optimization, further improvement of our purchasing leverage, reduction of Selling Administrative and General expenses (“SAG”) and improvements in our supply chain planning and logistics. We anticipate the accumulated benefit of these actions will improve our segment operating margin to 10% by the end of 2025.

As part of the Goodyear Forward transformation plan, on November 15, 2023, we approved a rationalization plan in EMEA to permanently close our Fulda, Germany tire manufacturing facility (“Fulda”) and our Fürstenwalde, Germany tire manufacturing facility (“Fürstenwalde”). This plan amends and replaces the plan that was previously approved on May 31, 2023 to permanently reduce production at Fulda by approximately 50%. The proposed actions would lead to a reduction of approximately 1,750 positions at Fulda and Fürstenwalde. We expect the closure of Fulda will be substantially complete in 2025 and the closure of Fürstenwalde will be substantially complete by the end of 2027. Relevant portions of the plan remain subject to consultation with employee representative bodies.

Additionally, as part of our transformation efforts, on September 5, 2023, we approved a rationalization and workforce reorganization plan in EMEA to improve our cost structure. The proposed actions would lead to a reduction of approximately 1,200 positions across multiple countries within EMEA while also creating approximately 500 new roles principally in our existing shared services organization in Romania, resulting in an overall net reduction of approximately 700 positions. In certain countries, relevant portions of the plan remain subject to consultation with employee representative bodies. We expect these actions will be substantially complete in 2025.

We anticipate the closure of Fulda and Fürstenwalde and the rationalization and workforce reorganization plan will improve EMEA’s segment operating income by achieving annual run rate savings of approximately $160 million by the end of 2025 and a full run rate savings of approximately $220 million by the end of 2027.

Results of Operations

During 2023, our operating results reflected the impact of the ongoing effects of inflation and increases in interest rates on the global economy. While global tire industry demand remains below 2019, the weakness in the replacement market we experienced during the first half of 2023 improved during the second half of the year. Industry volumes grew in several of our markets, including the U.S., where industry volume increased during the second half of the year. We saw continued improvement in demand from our OE customers throughout 2023, including growth in China. These trends can be seen in our operating results as operating margins improved for each of our segments during the second half of 2023, exceeding the margins achieved during the second half of 2022.

The inflationary cost pressures we experienced in the first half of 2023 eased in the second half as decreases in raw material and transportation costs offset inflation. However, cost pressures remain on wages and benefits as we continue to experience increased labor-related costs and manufacturing inefficiencies associated with the ongoing tight labor supply, particularly in the U.S. Additionally, energy costs remain elevated in EMEA, driven by the indirect impacts of the war in Ukraine.

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During the second quarter of 2023, a severe storm in the U.S. significantly damaged and caused the temporary shut-down of our tire manufacturing facility and adjacent warehouse in Tupelo, Mississippi. The damage to Tupelo was significant; however, we were able to restart production earlier than expected and returned to full production in the beginning of the third quarter. We estimate the negative impact of the Tupelo storm on sales in Americas for 2023 was $110 million. We estimate that the negative impact on our earnings for 2023 was $69 million ($56 million after-tax and minority). The negative impact on our earnings for 2023 included $55 million in Americas segment operating income and $14 million of corporate expense for an insurance deductible.

During the third quarter of 2023, a fire significantly damaged a portion of the tire curing area and caused the temporary shutdown of our tire manufacturing facility in Debica, Poland (“Debica”). Tire production at Debica resumed in August at approximately 55% of capacity and is currently at approximately 70% of capacity. We estimate the negative impact on our earnings during 2023 was approximately $28 million ($24 million after-tax and minority), including $10 million of corporate expense for an insurance deductible and an $18 million impact on EMEA’s segment operating income, primarily comprised of fixed costs incurred during the plant shutdown and subsequent ramp-up. There was no significant impact from lost sales during 2023 as a result of leveraging existing inventory and increasing production at other facilities.

We maintain third-party insurance coverage for property damage, repair expenses and business interruption, subject to a $15 million deductible for each of the events at Tupelo and Debica. While we expect to be reimbursed for a significant portion of our business interruption impacts for Tupelo and Debica by our third-party insurance coverage, consistent with past practice, we will record a receivable related to the business interruption once the claim is substantially complete.

During 2023, in order to address softening industry demand and prevent the buildup of excess inventory, we reduced production at many of our tire manufacturing facilities, resulting in a reduction of 14.2 million units compared to production in 2022, primarily in Americas and EMEA. Decisions to change production levels in the future will be based on an evaluation of market demand signals and inventory and supply levels, as well as the availability of sufficient qualified labor.

Our results for 2023 include a 6.1% decrease in tire unit shipments compared to 2022, primarily due to lower global replacement tire volume, partially offset by growth in OE, primarily in Asia Pacific and EMEA. In 2023, we realized approximately $394 million of additional costs related to inflation and other cost pressures.

Net sales were $20,066 million in 2023, compared to $20,805 million in 2022. Net sales decreased in 2023 due to lower tire volume, primarily in Americas and EMEA, partially offset by higher tire volume in Asia Pacific, unfavorable foreign currency translation, driven by the strengthening of the U.S. dollar, a decrease in sales in other tire-related businesses, primarily related to a decrease in third-party chemical sales in Americas and retread sales in EMEA, partially offset by higher global aviation sales and growth in EMEA's Fleet Solutions, and the negative impact of the Tupelo storm on sales. These decreases were partially offset by global improvements in price and product mix.

Goodyear net loss in 2023 was $689 million, or $2.42 per share, compared to net income of $202 million, or $0.71 per share, in 2022. The change in Goodyear net income (loss) was primarily due to higher rationalization charges, lower segment operating income, a non-cash goodwill impairment charge, higher interest expense and higher other expense. These decreases were partially offset by lower U.S. and Foreign Tax Expense driven by the pre-tax loss.

Our total segment operating income for 2023 was $968 million, compared to $1,276 million in 2022. The $308 million decrease was primarily due to increased conversion costs of $599 million driven by the effect of decreased tire production on fixed cost absorption, inflation and higher energy costs, lower tire volume of $250 million, primarily in Americas and EMEA, a $55 million negative impact due to the Tupelo storm, an increase in SAG of $30 million, unfavorable foreign currency translation of $23 million driven by the strengthening of the U.S. dollar, and an $18 million negative impact due to the Debica fire. These decreases were partially offset by global improvements in price and product mix of $579 million, lower raw material costs of $67 million, and lower research and development costs of $25 million. Refer to "Results of Operations — Segment Information" for additional information.

Liquidity

At December 31, 2023, we had $902 million of Cash and Cash Equivalents as well as $4,247 million of unused availability under our various credit agreements, compared to $1,227 million and $4,035 million, respectively, at December 31, 2022. The decrease in cash and cash equivalents of $325 million was primarily due to capital expenditures of $1,050 million, net debt repayment of $343 million and loans to TireHub, LLC of $79 million, partially offset by cash provided by operating activities of $1,032 million and cash proceeds from asset sales of $115 million, primarily related to sale and leaseback transactions in Americas. Cash provided by operating activities reflects the net loss for the period of $687 million, which includes non-cash charges for depreciation and amortization of $1,001 million, non-cash rationalization charges of $502 million and a non-cash goodwill impairment charge of $230 million, partially offset by a non-cash gain on asset sales of $104 million, primarily related to the Americas sale and leaseback transactions. Operating activities also includes cash provided by working capital of $299

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million, partially offset by rationalization payments of $99 million and pension contributions of $54 million. Refer to "Liquidity and Capital Resources" for additional information.

Outlook

In November 2023, we announced a transformation plan, Goodyear Forward, to optimize our portfolio, deliver significant margin expansion and reduce leverage to drive substantial shareholder value creation. During 2023, we began laying the foundation to drive the execution of that plan. We expect this plan to benefit segment operating income by approximately $350 million in 2024.

In the first quarter of 2024, we expect our tire volume will be down slightly, driven by consumer and commercial replacement in Americas and EMEA. This volume decrease will be partially offset by growth in Asia Pacific replacement and OE volume, driven by the continued benefits of new OE fitment wins.

We expect our raw material costs to be lower by approximately $245 million in the first quarter of 2024 compared to the first quarter of 2023. We anticipate price and product mix, when netted with the lower raw material costs, will be a benefit of approximately $115 million in the first quarter of 2024. Price and product mix are expected to reflect lower selling prices to customers with contractual raw material index adjustments and the continuing negative impact of lower commercial tire volume. Natural and synthetic rubber prices and other commodity prices historically have been volatile, and our raw material costs could change based on future cost fluctuations and changes in foreign exchange rates. We continue to focus on price and product mix, to substitute lower cost materials where possible, to work to identify additional substitution opportunities, to reduce the amount of material required in each tire, and to pursue alternative raw materials to minimize the impact of higher raw material costs.

Additionally, we expect cost pressures to persist in the first quarter of 2024. We expect the negative impact on segment operating income from non-raw material inflation and other costs will be approximately $25 million compared with the first quarter of 2023. Separate from the impact of inflation on our first quarter 2024 results, we expect savings of approximately $50 million from initiatives underway as part of our Goodyear Forward plan. We also expect the lower production levels in the fourth quarter of 2023 as a result of the fire in Debica will negatively impact our EMEA segment operating results by approximately $15 million in the first quarter of 2024.

We continue to focus on actions to offset costs other than raw materials through cost savings initiatives, including initiatives related to the Goodyear Forward plan, rationalization actions, and improvements in price and product mix. For the full year of 2024, we anticipate incurring approximately $100 million of advisory, legal and consulting fees and other costs associated with asset sales in connection with our Goodyear Forward plan.

For the full year of 2024, we expect working capital to be flat as compared to 2023. We anticipate our capital expenditures will be $1.2 billion to $1.3 billion, excluding repairs related to the Tupelo tornado and the Debica fire, which we expect to be funded by insurance claim recoveries. We anticipate our cash flows will include rationalization payments of approximately $300 million, as we continue to implement elements of our Goodyear Forward plan and improve our cost structure.

Refer to "Item 1A. Risk Factors" for a discussion of the factors that may impact our business, results of operations, financial condition or liquidity and "Forward-Looking Information — Safe Harbor Statement" for a discussion of our use of forward-looking statements.

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RESULTS OF OPERATIONS — CONSOLIDATED

Goodyear net loss in 2023 was $689 million, or $2.42 per share, compared to net income of $202 million, or $0.71 per share, in 2022. The change in Goodyear net income (loss) was primarily due to higher rationalization charges, lower segment operating income, a non-cash goodwill impairment charge, higher interest expense and higher other expense. These decreases were partially offset by lower U.S. and Foreign Tax Expense driven by the pre-tax loss.

Net Sales

Net sales in 2023 of $20,066 million decreased $739 million, or 3.6%, compared to $20,805 million in 2022, primarily due to lower tire volume of $1,053 million, representing lower tire volume in Americas and EMEA, partially offset by higher tire volume in Asia Pacific, unfavorable foreign currency translation of $169 million, driven by the strengthening of the U.S. dollar, a decrease in sales in other tire-related businesses of $110 million, primarily due to a decrease in third-party chemical sales in Americas and lower retread sales in EMEA, partially offset by higher global aviation sales and growth in EMEA's Fleet Solutions, and the unfavorable impact of the Tupelo storm of $110 million. These decreases were partially offset by global improvements in price and product mix of $696 million. Goodyear worldwide tire unit net sales were $17,288 million and $17,886 million in 2023 and 2022, respectively. Consumer and commercial net sales were $12,894 million and $3,731 million in 2023, respectively. Consumer and commercial net sales were $13,163 million and $4,205 million in 2022, respectively.

The following table presents our tire unit sales for the periods indicated:

The decrease in worldwide tire unit sales of 11.2 million units, or 6.1%, compared to 2022, included a decrease of 13.7 million replacement tire units, or 9.5%, reflecting decreases in each region. OE tire units increased by 2.5 million units, or 6.3%, reflecting share gains from new OE fitments in Asia Pacific and EMEA and continued recovery of OE vehicle production in 2023. Consumer and commercial unit sales in 2023 were 159.4 million and 12.1 million, respectively. Consumer and commercial unit sales in 2022 were 169.0 million and 13.6 million, respectively.

Cost of Goods Sold

Cost of Goods Sold ("CGS") was $16,557 million in 2023, decreasing $396 million, or 2.3%, from $16,953 million in 2022. CGS was 82.5% of sales in 2023 compared to 81.5% of sales in 2022. CGS in 2023 decreased primarily due to lower tire volume of $803 million, lower costs in other tire-related businesses of $136 million, driven by a decrease in third-party chemical sales in Americas, foreign currency translation of $129 million, driven by the strengthening of the U.S. dollar, lower raw material costs of $67 million, primarily in Americas, a $55 million net reduction as a result of the Tupelo storm, and a $5 million ($4 million after-tax and minority) reversal of a portion of the estimated cleanup costs associated with the permanent closure of Gadsden. These decreases were partially offset by higher conversion costs of $599 million driven by the effect of decreased tire production on fixed cost absorption, inflation and higher energy costs, higher costs related to product mix of $117 million, primarily in Americas, an increase in accelerated depreciation and asset write-offs of $37 million primarily for rationalization activities, and a $7 million ($5 million after-tax and minority) estimated cleanup charge associated with a previously closed Goodyear location.

CGS in 2023 included pension expense of $15 million compared to $22 million in 2022. CGS in 2023 also included the favorable impact of a successful legal claim of $3 million ($3 million after-tax and minority) related to a 2005 warehouse fire in Spain. CGS in 2022 also included a gain of $7 million ($6 million after-tax and minority) in Americas related to insurance recoveries.

Selling, Administrative and General Expense

SAG was $2,814 million in 2023, increasing $16 million, or 0.6%, from $2,798 million in 2022. SAG was 14.0% of sales in 2023 compared to 13.4% of sales in 2022. SAG increased primarily due to the impact of inflation on costs and $35 million ($26 million after-tax and minority) of costs related to the Goodyear Forward plan, primarily consisting of advisory, legal and

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consulting fees incurred to support development and execution of the plan, including costs associated with planned asset sales. These increases were partially offset by lower advertising costs of $28 million, lower accelerated depreciation and asset write-off charges of $28 million, foreign currency translation of $17 million, primarily in EMEA and Asia Pacific, driven by the strengthening of the U.S. dollar, and recoveries of previously written-off accounts receivable and other assets related to our exited business in Russia of $10 million. SAG in 2023 included pension expense of $11 million compared to $15 million in 2022. SAG in 2023 included incremental savings from rationalization plans of $50 million compared to $12 million in 2022.

CGS and SAG in 2023 included $46 million ($42 million after-tax and minority) of accelerated depreciation and asset write-offs and $10 million ($10 million after-tax and minority) of recoveries of previously written-off accounts receivable and other assets related to our exited business in Russia, respectively, which related to rationalization activities.

CGS and SAG in 2022 included $9 million and $28 million, respectively, of accelerated depreciation and asset write-offs, of which $30 million ($27 million after-tax and minority) related to rationalization activities.

Rationalizations

We recorded net rationalization charges of $502 million ($436 million after-tax and minority) in 2023. Net rationalization charges include $250 million related to the proposed plan to close Fulda and Fürstenwalde, $166 million for the proposed rationalization and workforce reorganization plan in EMEA, $21 million for the plan to improve profitability in our Australia and New Zealand operations, and $18 million related to the plan to streamline our EMEA distribution network.

We recorded net rationalization charges of $129 million ($120 million after-tax and minority) in 2022. Net rationalization charges include $37 million for the plan primarily to reduce salaried staff globally, $34 million for the plan to close Cooper Tire's Melksham, United Kingdom facility, $24 million for a plan to reduce duplicative global SAG headcount and close redundant warehouse locations in Americas as part of the integration of Cooper Tire, $16 million related to the permanent closure of our tire manufacturing facility in Gadsden, Alabama, and $14 million related to the exit of our retail operations in South Africa.

Upon completion of new plans initiated in 2023, we estimate that annual segment operating income will improve by approximately $320 million (approximately $200 million SAG and approximately $120 million CGS). The savings realized in 2023 from rationalization plans totaled approximately $50 million (primarily SAG).

For further information, refer to Note to the Consolidated Financial Statements No. 4, Costs Associated with Rationalization Programs.

Goodwill Impairment

During 2023, we recorded a non-cash impairment charge of $230 million ($216 million after-tax and minority) to write off all of the goodwill of our EMEA reporting unit. For further information, refer to "Critical Accounting Policies - Goodwill and Intangible Assets" and Notes to the Consolidated Financial Statements No. 12, Goodwill and Intangible Assets, in this Form 10-K.

Interest Expense

Interest expense was $532 million in 2023, increasing $81 million from $451 million in 2022. The increase was primarily due to a higher average debt balance of $8,561 million in 2023 compared to $8,266 million in 2022 and a higher average interest rate of 6.21% in 2023 compared to 5.46% in 2022.

Other (Income) Expense

Other (Income) Expense was $108 million and $75 million of expense in 2023 and 2022, respectively. The $33 million increase in expense was primarily due to a $75 million net increase in foreign currency exchange losses, primarily due to the weakening of the Argentine peso, partially offset by an increase in interest income of $50 million, primarily in Argentina, and a $19 million increase in fees related to accounts receivable factoring programs driven by higher interest rates. Additionally, the change in Other (Income) Expense reflects $31 million ($24 million after-tax and minority) of expense in 2023 for non-indemnified costs for product liability claims related to products manufactured by a formerly consolidated joint venture entity and net gains on asset and other sales in 2023 of $94 million ($69 million after-tax and minority), primarily related to sale and leaseback transactions in Americas, compared to a gain of $115 million ($87 million after-tax and minority) in 2022, primarily related to a sale and leaseback transaction in Americas. These increases were partially offset by a net decrease in non-service related pension and other postretirement benefits cost of $30 million primarily due to lower pension settlement charges of $40 million ($30 million after-tax and minority) in 2023 compared to pension settlement charges of $124 million ($93 million after-tax and minority) in 2022, partially offset by an increase in net periodic cost due to higher interest rates, and $5 million ($5 million after-tax and minority) of income for the write-off of accumulated foreign currency translation related to our exited business in Russia. Other (Income) Expense in 2023 includes $11 million ($8 million after-tax and minority) of income related to a

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favorable court decision setting aside a previous unfavorable verdict on intellectual property-related legal claims. The impact of that verdict and other fees in 2022 related to these claims was $15 million of expense ($11 after-tax and minority).

For further information, refer to Note to the Consolidated Financial Statements No. 6, Other (Income) Expense.

Income Taxes

Income tax expense in 2023 was $10 million on a loss before income taxes of $677 million. In 2023, income tax expense includes net discrete tax benefits totaling $9 million ($10 million after minority interest), primarily related to additional prior year withholding tax creditable in the U.S. as a result of a tax law change.

Income tax expense in 2022 was $190 million on income before income taxes of $399 million. In 2022, income tax expense includes net discrete tax expense totaling $23 million ($23 million after minority interest), including a charge of $14 million to write off deferred tax assets related to tax loss carryforwards in the U.K. and a charge of $11 million to establish a full valuation allowance on our net deferred tax assets in Russia, partially offset by a net benefit of $2 million for various other items.

The difference between our effective tax rate and the U.S. statutory rate of 21% for both 2023 and 2022 primarily relates to losses in certain foreign jurisdictions in which no tax benefits are recorded, income in certain foreign jurisdictions taxed at rates higher than the U.S. statutory rate, and the discrete items described above.

At December 31, 2023 and December 31, 2022, we had approximately $1.2 billion and $1.1 billion of U.S. federal, state and local net deferred tax assets, respectively, inclusive of valuation allowances totaling $22 million and $26 million in each period, respectively, primarily for state tax loss carryforwards with limited lives. As of December 31, 2023, approximately $1.0 billion of these U.S. net deferred tax assets have unlimited lives and approximately $200 million have limited lives, including $22 million of foreign tax credits, and the majority do not start to expire until 2031. As of December 31, 2022, approximately $700 million of these U.S. net deferred tax assets had unlimited lives and approximately $400 million had limited lives, including $230 million of foreign tax credits, and had expiration dates between 2023 and 2042. In the U.S., as of December 31, 2023, we emerged from a three-year cumulative loss which was driven by business disruptions created by the COVID-19 pandemic. Our U.S. cumulative income for the three-years ended December 31, 2023 is primarily a result of gains from other comprehensive income rather than consistently profitable U.S. operating results. Our 2023 U.S. operating results in the first six months of the year were negatively impacted by lower sales volumes due to commercial replacement tire channel destocking, reduced consumer industry demand and the Tupelo storm. However, our second half of 2023 showed improvement and profitability in our U.S. operating results.

In assessing our ability to utilize our net deferred tax assets, we primarily considered objectively verifiable information, including the improvement in our U.S. operating results during the second half of 2023 as a result of improved tire volume and lower raw material and transportation costs compared to the first half of 2023. In addition, we consider our current forecasts of future profitability in assessing our ability to realize our deferred tax assets as well as the impact of tax planning strategies. These forecasts include the impact of recent trends and various macroeconomic factors such as the impact of raw material, transportation, labor and energy costs on our profitability. Our tax planning strategies include accelerating income on cross border transactions, including sales of inventory or raw materials to our subsidiaries, reducing U.S. interest expense by, for example, reducing intercompany loans through repatriating current year earnings of foreign subsidiaries, repatriation of certain foreign royalty income, and other financing transactions, all of which would increase our domestic profitability.

We believe our improvement in U.S. operating results during the second half of 2023 and forecasts of future profitability provide us sufficient positive evidence to conclude that it is more likely than not that, at December 31, 2023, our U.S. net deferred tax assets will be fully utilized. However, macroeconomic factors such as raw material, transportation, labor and energy costs possess a high degree of volatility and can significantly impact our profitability. In addition, certain tax provisions, such as the annual interest expense limitation under Section 163(j) of the Internal Revenue Code of 1986, if amended, could impact our analysis of the realizability of our U.S. deferred tax assets. If our U.S. operating results significantly decline in the future, we may need to record a valuation allowance which could adversely impact our operating results. As such, we will closely monitor our U.S. operations as well as any tax law changes to assess the realizability of our U.S. deferred tax assets.

At December 31, 2023 and December 31, 2022, we also had approximately $1.5 billion and $1.2 billion of foreign net deferred tax assets, respectively, and related valuation allowances of approximately $1.2 billion and $1.0 billion, respectively. Our losses in various foreign taxing jurisdictions in recent periods represented sufficient negative evidence to require us to maintain a full valuation allowance against certain of these net foreign deferred tax assets. Most notably, in Luxembourg, we maintain a valuation allowance of approximately $1.0 billion on all of our net deferred tax assets. Each reporting period, we assess available positive and negative evidence and estimate if sufficient future taxable income will be generated to utilize these existing deferred tax assets. We do not believe that sufficient positive evidence required to release valuation allowances on our foreign deferred tax assets having a significant impact on our financial position or results of operations will exist within the next twelve months.

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For further information regarding income taxes and the realizability of our deferred tax assets, refer to "Critical Accounting Policies" and Note to the Consolidated Financial Statements No. 7, Income Taxes.

Minority Shareholders’ Net Income

Minority shareholders’ net income was $2 million in 2023, compared to $7 million in 2022.

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RESULTS OF OPERATIONS — SEGMENT INFORMATION

Segment information reflects our strategic business units ("SBUs"), which are organized to meet customer requirements and global competition and are segmented on a regional basis.

Results of operations are measured based on net sales to unaffiliated customers and segment operating income. Each segment exports tires to other segments. The financial results of each segment exclude sales of tires exported to other segments, but include operating income derived from such transactions. Segment operating income is computed as follows: Net Sales less CGS (excluding asset write-off and accelerated depreciation charges) and SAG (including certain allocated corporate administrative expenses). Segment operating income also includes certain royalties and equity in earnings of most affiliates. Segment operating income does not include net rationalization charges, asset sales, goodwill and other asset impairment charges and certain other items.

Total segment operating income in 2023 was $968 million, a decrease of $308 million, or 24.1%, from $1,276 million in 2022. Total segment operating margin (segment operating income divided by segment sales) in 2023 was 4.8% compared to 6.1% in 2022.

Management believes that total segment operating income is useful because it represents the aggregate value of income created by our SBUs and excludes items not directly related to the SBUs for performance evaluation purposes. Total segment operating income is the sum of the individual SBUs’ segment operating income. Refer to Note to the Consolidated Financial Statements No. 9, Business Segments, for further information and for a reconciliation of total segment operating income to Income (Loss) before Income Taxes.

Americas

Americas unit sales in 2023 decreased 7.7 million units, or 8.0%, to 87.3 million units. Replacement tire volume decreased 7.3 million units, or 9.1%, primarily due to a decrease in our consumer business, driven by increased competitiveness in the U.S. market, the impact of the Tupelo storm, and lower share in Mexico and Brazil as a result of increased imports. OE tire volume decreased 0.4 million units, or 2.3%, primarily due to our commercial business, driven by reduced industry demand in the U.S.

Net sales in 2023 were $11,993 million, decreasing $773 million, or 6.1%, from $12,766 million in 2022. The decrease in net sales was primarily due to lower tire volume of $705 million, decreased sales in other tire-related businesses of $114 million, primarily due to lower third-party chemical sales, partially offset by higher aviation and retail sales, and the unfavorable impact of the Tupelo storm of $110 million. These decreases were partially offset by improvements in price and product mix of $121 million, driven by price increases, and favorable foreign currency translation of $32 million, primarily related to strengthening of the Mexican peso and the Brazilian real, partially offset by weakening in the Canadian dollar.

Operating income in 2023 was $749 million, decreasing $345 million, or 31.5%, from $1,094 million in 2022. The decrease in operating income was due to higher conversion costs of $327 million, driven by the effect of decreased tire production on fixed cost absorption and inflation, lower tire volume of $171 million, and a $55 million negative impact as a result of the Tupelo storm. These decreases were partially offset by lower raw material costs of $154 million, higher earnings in other tire-related businesses of $28 million, primarily due to higher aviation sales, partially offset by lower third-party chemical sales, lower SAG of $11 million, and improvements in price and product mix of $6 million. SAG includes incremental savings from rationalization plans of $36 million. Operating income in 2022 includes a gain of $7 million related to insurance recoveries from a plant fire.

Operating income in 2023 excluded net gains on asset sales of $104 million, primarily related to sale and leaseback transactions, net rationalization charges of $19 million, and accelerated depreciation and asset write-offs of $19 million. Operating income in 2022 excluded net gains on asset sales of $122 million, primarily related to a sale and leaseback transaction and a sale and exit of certain retail locations, and net rationalization charges of $32 million.

Americas' results are highly dependent upon the United States, which accounted for 83% of Americas' net sales in 2023 and 84% in 2022. Results of operations in the United States are expected to continue to have a significant impact on Americas' future performance.

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Europe, Middle East and Africa

Europe, Middle East and Africa unit sales in 2023 decreased 5.2 million units, or 9.5%, to 49.9 million units. Replacement tire volume decreased 6.2 million units, or 14.4%, primarily in our consumer business, reflecting the impacts of continued industry declines. OE tire volume increased 1.0 million units, or 7.9%, reflecting stabilization of OE production.

Net sales in 2023 were $5,606 million, decreasing $39 million, or 0.7%, from $5,645 million in 2022. The decrease in net sales was driven by lower tire volume of $458 million and unfavorable foreign currency translation of $97 million, driven by a weaker Turkish lira and South African rand, partially offset by a stronger euro and Polish zloty. These decreases were partially offset by improvements in price and product mix of $501 million, driven by price increases, and higher sales in other tire-related businesses of $14 million, primarily due to growth in Fleet Solutions, partially offset by lower retread and retail sales.

Operating income in 2023 was $17 million, decreasing $44 million, or 72.1%, from $61 million in 2022. The decrease in operating income was primarily due to higher conversion costs of $261 million, driven by inflation, the effect of decreased tire production on fixed cost absorption and higher energy costs, lower tire volume of $100 million, higher SAG of $42 million, primarily due to inflation and higher consulting costs, higher transportation costs of $29 million, unfavorable foreign currency translation of $18 million, $18 million as a result of the Debica fire, and lower earnings in other tire-related businesses of $6 million, primarily due to lower Fleet Solutions earnings. These decreases were partially offset by improvements in price and product mix of $496 million, which more than offset higher raw material costs of $78 million, and lower research and development costs of $12 million. SAG for 2023 includes incremental savings from rationalization plans of $15 million.

Operating income in 2023 excluded a non-cash goodwill impairment charge of $230 million, net rationalization charges of $409 million, accelerated depreciation of $27 million and recoveries of previously written-off accounts receivable and other assets of $10 million in Russia. Operating income in 2022 excluded net rationalization charges of $92 million and accelerated depreciation and asset write-offs of $20 million.

EMEA’s results are highly dependent upon Germany, which accounted for 15% of EMEA’s net sales in both 2023 and 2022. Results of operations in Germany are expected to continue to have a significant impact on EMEA’s future performance.

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Asia Pacific

Asia Pacific unit sales in 2023 increased 1.7 million units, or 4.9%, to 36.1 million units. OE tire volume increased 1.9 million units, or 13.8%, primarily driven by new consumer fitments in China and India. Replacement tire volume decreased 0.2 million units, or 1.2%, primarily in our consumer business, driven by decreased demand in most of our markets, partially offset by recovery in China.

Net sales in 2023 were $2,467 million, increasing $73 million, or 3.0%, from $2,394 million in 2022. Net sales increased due to higher tire volume of $110 million and improvements in price and product mix of $74 million, driven by price increases. These increases were partially offset by unfavorable foreign currency translation of $104 million, primarily related to the strengthening of the U.S. dollar.

Operating income in 2023 was $202 million, increasing $81 million, or 66.9%, from $121 million in 2022. The increase in operating income was primarily due to improvements in price and product mix of $77 million and higher tire volume of $21 million, partially offset by higher raw material costs of $9 million and unfavorable foreign currency translation of $9 million related to the strengthening of the U.S. dollar.

Operating income in 2023 excluded net rationalization charges of $25 million.

Asia Pacific’s results are highly dependent upon China and Australia. China accounted for 33% and 29% of Asia Pacific’s net sales in 2023 and 2022, respectively. Australia accounted for 21% and 24% of Asia Pacific’s net sales in 2023 and 2022, respectively. Results of operations in China and Australia are expected to continue to have a significant impact on Asia Pacific's future performance.

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LIQUIDITY AND CAPITAL RESOURCES

Overview

Our primary sources of liquidity are cash generated from our operating and financing activities. Our cash flows from operating activities are driven primarily by our operating results and changes in our working capital requirements and our cash flows from financing activities are dependent upon our ability to access credit or other capital.

At December 31, 2023, we had $902 million of Cash and Cash Equivalents, compared to $1,227 million at December 31, 2022. The decrease in cash and cash equivalents of $325 million was primarily due to capital expenditures of $1,050 million, net debt repayment of $343 million and loans to TireHub, LLC of $79 million, partially offset by cash provided by operating activities of $1,032 million and cash proceeds from asset sales of $115 million, primarily related to the sale and leaseback transactions in Americas. Cash provided by operating activities reflects the net loss for the period of $687 million, which includes non-cash charges for depreciation and amortization of $1,001 million, non-cash rationalization charges of $502 million, a non-cash goodwill impairment charge of $230 million and a non-cash gain on asset sales of $104 million, primarily related to the Americas sale and leaseback transactions. Operating activities also include cash provided by working capital of $299 million, partially offset by rationalization payments of $99 million and pension contributions of $54 million.

At December 31, 2023 and 2022, we had $4,247 million and $4,035 million, respectively, of unused availability under our various credit agreements. The table below provides unused availability by our significant credit facilities as of December 31:

We expect our 2024 cash flow needs to include capital expenditures of $1.2 billion to $1.3 billion. We also expect interest expense to be $520 million to $540 million; rationalization payments to be approximately $300 million; income tax payments to be approximately $200 million, excluding one-time items; and contributions to our funded pension plans to be $25 million to $50 million. We expect working capital to be flat as compared to 2023.

We actively monitor our liquidity and intend to operate our business in a way that allows us to address our cash flow needs with our existing cash and available credit if they cannot be funded by cash generated from operating or other financing activities. We believe that our liquidity position is adequate to fund our operating and investing needs and debt maturities for the next twelve months and to provide us with the ability to respond to further changes in the business environment.

Our ability to service debt and operational requirements is also dependent, in part, on the ability of our subsidiaries to make distributions of cash to various other entities in our consolidated group, whether in the form of dividends, loans or otherwise. In certain countries where we operate, such as China, South Africa, Serbia and Argentina, transfers of funds into or out of such countries by way of dividends, loans, advances or payments to third-party or affiliated suppliers are generally or periodically subject to certain requirements, such as obtaining approval from the foreign government and/or currency exchange board before net assets can be transferred out of the country. In addition, certain of our credit agreements and other debt instruments limit the ability of foreign subsidiaries to make distributions of cash. Thus, we would have to repay and/or amend these credit agreements and other debt instruments in order to use this cash to service our consolidated debt. Because of the inherent uncertainty of satisfactorily meeting these requirements or limitations, we do not consider the net assets of our subsidiaries, including our Chinese, South African, Serbian and Argentinian subsidiaries, which are subject to such requirements or limitations to be integral to our liquidity or our ability to service our debt and operational requirements. At December 31, 2023, approximately $875 million of net assets, including approximately $194 million of cash and cash equivalents, were subject to such requirements. The requirements we must comply with to transfer funds out of China, South Africa, Serbia and Argentina have not adversely impacted our ability to make transfers out of those countries.

Cash Position

At December 31, 2023, significant concentrations of cash and cash equivalents held by our international subsidiaries included the following amounts:

•
$297 million or 33% in EMEA, primarily France, England and Poland ($361 million or 29% at December 31, 2022),

•
$244 million or 27% in Asia Pacific, primarily China, India and Australia ($301 million or 25% at December 31, 2022), and

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•
$237 million or 26% in Americas, primarily Brazil, Mexico and Argentina ($316 million or 26% at December 31, 2022).

We have deposited our cash and cash equivalents and entered into various credit agreements and derivative contracts with financial institutions that we considered to be substantial and creditworthy at the time of such transactions. We seek to control our exposure to these financial institutions by diversifying our deposits, credit agreements and derivative contracts across multiple financial institutions, by setting deposit and counterparty credit limits based on long term credit ratings and other indicators of credit risk such as credit default swap spreads and default probabilities, and by monitoring the financial strength of these financial institutions on a regular basis. We also enter into master netting agreements with counterparties when possible. By controlling and monitoring exposure to financial institutions in this manner, we believe that we effectively manage the risk of loss due to nonperformance by a financial institution. However, we cannot provide assurance that we will not experience losses or delays in accessing our deposits or lines of credit due to the nonperformance of a financial institution. Our inability to access our cash deposits or make draws on our lines of credit, or the inability of a counterparty to fulfill its contractual obligations to us, could have a material adverse effect on our liquidity, financial condition or results of operations in the period in which it occurs.

Operating Activities

Net cash provided by operating activities was $1,032 million in 2023, increasing $511 million compared to net cash provided by operating activities of $521 million in 2022.

The increase in net cash provided by operating activities reflects a net increase in cash provided by working capital of $988 million, partially offset by lower earnings in our SBUs of $308 million and higher cash taxes of $26 million.

The net increase in cash provided by working capital reflects an increase in cash provided by Inventory of $1,950 million and Accounts Receivable of $274 million and cash used for Accounts Payable - Trade of $1,236 million. These changes were driven by the decision to reduce inventory during 2023 to address industry demand trends.

Investing Activities

Net cash used for investing activities was $1,035 million in 2023, compared to $914 million in 2022. The $121 million increase in cash used for investing activities primarily relates to a net increase in loans to TireHub of $63 million and a net decrease in cash received from asset sale transactions of $45 million. Capital expenditures were $1,050 million in 2023, decreasing $11 million, compared to $1,061 million in 2022. Beyond expenditures required to sustain our facilities, capital expenditures in 2023 and 2022 primarily related to the modernization and expansion of tire manufacturing facilities around the world.

Financing Activities

Net cash used for financing activities was $333 million in 2023, compared to cash provided by financing activities of $575 million in 2022. The $908 million increase in cash used by financing activities reflects lower net borrowings due to utilization of cash flows from operations and cash on hand at the beginning of 2023 to fund increased cash for investing activities and to reduce our overall debt balance.

Credit Sources

In aggregate, we had total credit arrangements of $11,743 million available at December 31, 2023, of which $4,247 million were unused, compared to $11,806 million available at December 31, 2022, of which $4,035 million were unused. At December 31, 2023, we had long term credit arrangements totaling $10,983 million, of which $3,867 million were unused, compared to $10,925 million and $3,566 million, respectively, at December 31, 2022. At December 31, 2023, we had short term committed and uncommitted credit arrangements totaling $760 million, of which $380 million were unused, compared to $881 million and $469 million, respectively, at December 31, 2022. The continued availability of the short term uncommitted arrangements is at the discretion of the relevant lender and may be terminated at any time.

Outstanding Notes

At December 31, 2023, we had $5,571 million of outstanding notes, compared to $5,560 million at December 31, 2022.

$2.75 Billion Amended and Restated First Lien Revolving Credit Facility due 2026

Our first lien revolving credit facility matures on June 8, 2026 and is available in the form of loans or letters of credit. Up to $800 million in letters of credit and $50 million of swingline loans are available for issuance under the facility. Subject to the consent of the lenders whose commitments are to be increased, we may request that the facility be increased by up to $250 million. Based on our current liquidity, amounts drawn under this facility bear interest at SOFR plus 125 basis points. Undrawn amounts under the facility are subject to an annual commitment fee of 25 basis points.

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Availability under the facility is subject to a borrowing base, which is based on (i) eligible accounts receivable and inventory of The Goodyear Tire & Rubber Company and certain of its U.S. and Canadian subsidiaries, (ii) the value of our principal trademarks in an amount not to exceed $400 million, (iii) the value of eligible machinery and equipment, and (iv) certain cash in an amount not to exceed $275 million. To the extent that our eligible accounts receivable, inventory and other components of the borrowing base decline in value, our borrowing base will decrease and the availability under the facility may decrease below $2.75 billion. As of December 31, 2023, our borrowing base, and therefore our availability, under this facility was $123 million below the facility's stated amount of $2.75 billion.

At December 31, 2023, we had $385 million of borrowings and $1 million of letters of credit issued under the revolving credit facility. At December 31, 2022, we had no borrowings and $3 million of letters of credit issued under the revolving credit facility.

€800 Million Amended and Restated Senior Secured European Revolving Credit Facility due 2028

The European revolving credit facility matures on January 14, 2028 and consists of (i) a €180 million German tranche that is available only to Goodyear Germany GmbH and (ii) a €620 million all-borrower tranche that is available to Goodyear Europe B.V. ("GEBV"), Goodyear Germany and Goodyear Operations S.A. Up to €175 million of swingline loans and €75 million in letters of credit are available for issuance under the all-borrower tranche. Subject to the consent of the lenders whose commitments are to be increased, we may request that the facility be increased by up to €200 million. Amounts drawn under this facility will bear interest at SOFR plus 150 basis points for loans denominated in U.S. dollars, EURIBOR plus 150 basis points for loans denominated in euros, and SONIA plus 150 basis points for loans denominated in pounds sterling. Undrawn amounts under the facility are subject to an annual commitment fee of 25 basis points.

At December 31, 2023, we had no borrowings and no letters of credit outstanding under the European revolving credit facility. At December 31, 2022, there were no borrowings outstanding under the German tranche, $374 million (€350 million) of borrowings outstanding under the all-borrower tranche and no letters of credit outstanding under the European revolving credit facility.

Each of our first lien revolving credit facility and our European revolving credit facility have customary representations and warranties including, as a condition to borrowing, that all such representations and warranties are true and correct, in all material respects, on the date of the borrowing, including representations as to no material adverse change in our business or financial condition since December 31, 2020 under the first lien facility and December 31, 2021 under the European facility.

Accounts Receivable Securitization Facilities (On-Balance Sheet)

GEBV and certain other of our European subsidiaries are parties to a pan-European accounts receivable securitization facility that expires in 2027. The terms of the facility provide the flexibility to designate annually the maximum amount of funding available under the facility in an amount of not less than €30 million and not more than €450 million. For the period from October 20, 2022 through October 18, 2023, the designated maximum amount of the facility was €300 million. For the period from October 19, 2023 through October 16, 2024, the designated maximum amount of the facility will remain €300 million.

The facility involves an ongoing daily sale of substantially all of the trade accounts receivable of certain GEBV subsidiaries. These subsidiaries retain servicing responsibilities. Utilization under this facility is based on eligible receivable balances.

The funding commitments under the facility will expire upon the earliest to occur of: (a) October 19, 2027, (b) the non-renewal and expiration (without substitution) of all of the back-up liquidity commitments, (c) the early termination of the facility according to its terms (generally upon an Early Amortisation Event (as defined in the facility), which includes, among other things, events similar to the events of default under our first lien revolving credit facility; certain tax law changes; or certain changes to law, regulation or accounting standards), or (d) our request for early termination of the facility. The facility’s current back-up liquidity commitments will expire on October 16, 2024.

At December 31, 2023, the amounts available and utilized under this program totaled $244 million (€221 million). At December 31, 2022, the amounts available and utilized under this program totaled $267 million (€250 million). The program does not qualify for sale accounting, and accordingly, these amounts are included in Long Term Debt and Finance Leases.

Accounts Receivable Factoring Facilities (Off-Balance Sheet)

We have sold certain of our trade receivables under off-balance sheet programs. For these programs, we have concluded that there is generally no risk of loss to us from non-payment of the sold receivables. At December 31, 2023, the gross amount of receivables sold was $693 million, compared to $744 million at December 31, 2022.

Letters of Credit

At December 31, 2023, we had $223 million in letters of credit issued under bilateral letter of credit agreements and other foreign credit facilities.

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Supplier Financing

We have entered into payment processing agreements with several financial institutions. Under these agreements, the financial institutions act as our paying agents with respect to accounts payable due to our suppliers. These agreements also allow our suppliers to sell their receivables to the financial institutions at the sole discretion of both the supplier and the financial institution on terms that are negotiated between them. We are not always notified when our suppliers sell receivables under these programs. Our obligations to our suppliers, including the amounts due and scheduled payment dates, are not impacted by our suppliers' decisions to sell their receivables under these programs. Agreements for such supplier financing programs totaled up to $892 million and $920 million at December 31, 2023 and 2022, respectively. The amounts confirmed to the financial institutions were $580 million and $710 million at December 31, 2023 and December 31, 2022, respectively, and are included in Accounts Payable — Trade in our Consolidated Balance Sheets. All activity related to these obligations is presented within operating activities on the Consolidated Statements of Cash Flows.

Further Information

For a further description of the terms of our outstanding notes, first lien revolving credit facility, European revolving credit facility and pan-European accounts receivable securitization facility, refer to Note to the Consolidated Financial Statements No. 16, Financing Arrangements and Derivative Financial Instruments.

Covenant Compliance

Our first lien revolving credit facility and some of the indentures governing our notes contain certain covenants that, among other things, limit our ability to incur additional debt or issue redeemable preferred stock, pay dividends, repurchase shares or make certain other restricted payments or investments, incur liens, sell assets, incur restrictions on the ability of our subsidiaries to pay dividends or to make other payments to us, enter into affiliate transactions, engage in sale and leaseback transactions, and consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications. Our first lien revolving credit facility and the indentures governing our notes also have customary defaults, including cross-defaults to material indebtedness of Goodyear and its subsidiaries.

We have an additional financial covenant in our first lien revolving credit facility that is currently not applicable. We become subject to that financial covenant when the aggregate amount of our Parent Company (The Goodyear Tire & Rubber Company) and guarantor subsidiaries cash and cash equivalents (“Available Cash”) plus our availability under our first lien revolving credit facility is less than $275 million. If this were to occur, our ratio of EBITDA to Consolidated Interest Expense may not be less than 2.0 to 1.0 for the most recent period of four consecutive fiscal quarters. As of December 31, 2023, our unused availability under this facility of $2,241 million plus our Available Cash of $121 million totaled $2,362 million, which is in excess of $275 million.

In addition, our European revolving credit facility contains non-financial covenants similar to the non-financial covenants in our first lien revolving credit facility that are described above, similar non-financial covenants specifically applicable to GEBV and its subsidiaries, and a financial covenant applicable only to GEBV and its subsidiaries. This financial covenant provides that we are not permitted to allow GEBV’s ratio of Consolidated Net GEBV Indebtedness to Consolidated GEBV EBITDA for a period of four consecutive fiscal quarters to be greater than 3.0 to 1.0 at the end of any fiscal quarter. Consolidated Net GEBV Indebtedness is determined net of the sum of cash and cash equivalents in excess of $100 million held by GEBV and its subsidiaries, cash and cash equivalents in excess of $150 million held by the Parent Company and its U.S. subsidiaries, and availability under our first lien revolving credit facility if the ratio of EBITDA to Consolidated Interest Expense described above is not applicable and the conditions to borrowing under the first lien revolving credit facility are met. Consolidated Net GEBV Indebtedness also excludes loans from other consolidated Goodyear entities. This financial covenant is also included in our pan-European accounts receivable securitization facility. At December 31, 2023, we were in compliance with this financial covenant.

Our credit facilities also state that we may only incur additional debt or make restricted payments that are not otherwise expressly permitted if, after giving effect to the debt incurrence or the restricted payment, our ratio of EBITDA to Consolidated Interest Expense for the prior four fiscal quarters would exceed 2.0 to 1.0. Certain of our senior note indentures have substantially similar limitations on incurring debt and making restricted payments. Our credit facilities and indentures also permit the incurrence of additional debt through other provisions in those agreements without regard to our ability to satisfy the ratio-based incurrence test described above. We believe that these other provisions provide us with sufficient flexibility to incur additional debt necessary to meet our operating, investing and financing needs without regard to our ability to satisfy the ratio-based incurrence test.

Covenants could change based upon a refinancing or amendment of an existing facility, or additional covenants may be added in connection with the incurrence of new debt.

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As of December 31, 2023, we were in compliance with the currently applicable material covenants imposed by our principal credit facilities and indentures.

The terms “Available Cash,” “EBITDA,” “Consolidated Interest Expense,” “Consolidated Net GEBV Indebtedness” and “Consolidated GEBV EBITDA” have the meanings given them in the respective credit facilities.

Potential Future Financings

In addition to the financing activities described above, we may seek to undertake additional financing actions which could include restructuring bank debt or capital markets transactions, possibly including the issuance of additional debt or equity. Given the inherent uncertainty of market conditions, access to the capital markets cannot be assured.

Our future liquidity requirements may make it necessary for us to incur additional debt. However, a substantial portion of our assets are already subject to liens securing our indebtedness. As a result, we are limited in our ability to pledge our remaining assets as security for additional secured indebtedness. In addition, no assurance can be given as to our ability to raise additional unsecured debt.

Dividends and Common Stock Repurchase Program

Under our primary credit facilities and some of our note indentures, we are permitted to pay dividends on and repurchase our capital stock (which constitute restricted payments) as long as no default will have occurred and be continuing, additional indebtedness can be incurred under the credit facilities or indentures following the payment, and certain financial tests are satisfied.

No cash dividends were paid on our common stock in 2023, 2022 or 2021.

We may repurchase shares delivered to us by employees as payment for the exercise price of stock options and the withholding taxes due upon the exercise of stock options or the vesting or payment of stock awards. During 2023, 2022 and 2021, we did not repurchase any shares from our employees.

The restrictions imposed by our credit facilities and indentures are not expected to affect our ability to pay dividends or repurchase our capital stock in the future.

Asset Dispositions

The restrictions on asset sales imposed by our material indebtedness have not affected our ability to divest non-core businesses. We may undertake additional asset sales and sale and leaseback transactions in the future. The restrictions imposed by our material indebtedness may require us to seek waivers or amendments of covenants or alternative sources of financing to proceed with future transactions. We cannot assure you that such waivers, amendments or alternative financing could be obtained, or if obtained, would be on terms acceptable to us.

Supplemental Guarantor Financial Information

Certain of our subsidiaries, which are listed on Exhibit 22.1 to this Annual Report on Form 10-K and are generally holding or operating companies, have guaranteed our obligations under the $800 million outstanding principal amount of 9.5% senior notes due 2025, the $900 million outstanding principal amount of 5% senior notes due 2026, the $700 million outstanding principal amount of 4.875% senior notes due 2027, the $850 million outstanding principal amount of 5% senior notes due 2029, the $550 million outstanding principal amount of 5.25% senior notes due April 2031, the $600 million outstanding principal amount of 5.25% senior notes due July 2031 and the $450 million outstanding principal amount of 5.625% senior notes due 2033 (collectively, the “Notes”).

The Notes have been issued by The Goodyear Tire & Rubber Company (the “Parent Company”) and are its senior unsecured obligations. The Notes rank equally in right of payment with all of our existing and future senior unsecured obligations and senior to any of our future subordinated indebtedness. The Notes are effectively subordinated to our existing and future secured indebtedness to the extent of the assets securing that indebtedness. The Notes are fully and unconditionally guaranteed on a joint and several basis by each of our wholly-owned U.S. and Canadian subsidiaries that also guarantee our obligations under our first lien revolving credit facility (such guarantees, the “Guarantees”; and, such guaranteeing subsidiaries, the “Subsidiary Guarantors”). The Guarantees are senior unsecured obligations of the Subsidiary Guarantors and rank equally in right of payment with all existing and future senior unsecured obligations of our Subsidiary Guarantors. The Guarantees are effectively subordinated to existing and future secured indebtedness of the Subsidiary Guarantors to the extent of the assets securing that indebtedness.

The Notes are structurally subordinated to all of the existing and future debt and other liabilities, including trade payables, of our subsidiaries that do not guarantee the Notes (the “Non-Guarantor Subsidiaries”). The Non-Guarantor Subsidiaries will have no obligation, contingent or otherwise, to pay amounts due under the Notes or to make funds available to pay those amounts. Certain Non-Guarantor Subsidiaries are limited in their ability to remit funds to us by means of dividends, advances or loans

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due to required foreign government and/or currency exchange board approvals or limitations in credit agreements or other debt instruments of those subsidiaries.

The Subsidiary Guarantors, as primary obligors and not merely as sureties, jointly and severally irrevocably and unconditionally guarantee on a senior unsecured basis the performance and full and punctual payment when due of all obligations of the Parent Company under the Notes and the related indentures, whether for payment of principal of or interest on the Notes, expenses, indemnification or otherwise. The Guarantees of the Subsidiary Guarantors are subject to release in limited circumstances only upon the occurrence of certain customary conditions.

Although the Guarantees provide the holders of Notes with a direct unsecured claim against the assets of the Subsidiary Guarantors, under U.S. federal bankruptcy law and comparable provisions of U.S. state fraudulent transfer laws, in certain circumstances a court could cancel a Guarantee and order the return of any payments made thereunder to the Subsidiary Guarantor or to a fund for the benefit of its creditors.

A court might take these actions if it found, among other things, that when the Subsidiary Guarantors incurred the debt evidenced by their Guarantee (i) they received less than reasonably equivalent value or fair consideration for the incurrence of the debt and (ii) any one of the following conditions was satisfied:

•
the Subsidiary Guarantor was insolvent or rendered insolvent by reason of the incurrence;

•
the Subsidiary Guarantor was engaged in a business or transaction for which its remaining assets constituted unreasonably small capital; or

•
the Subsidiary Guarantor intended to incur, or believed (or reasonably should have believed) that it would incur, debts beyond its ability to pay as those debts matured.

In applying the above factors, a court would likely find that a Subsidiary Guarantor did not receive fair consideration or reasonably equivalent value for its Guarantee, except to the extent that it benefited directly or indirectly from the issuance of the Notes. The determination of whether a guarantor was or was not rendered “insolvent” when it entered into its guarantee will vary depending on the law of the jurisdiction being applied. Generally, an entity would be considered insolvent if the sum of its debts (including contingent or unliquidated debts) is greater than all of its assets at a fair valuation or if the present fair salable value of its assets is less than the amount that will be required to pay its probable liability on its existing debts, including contingent or unliquidated debts, as they mature.

Under Canadian federal bankruptcy and insolvency laws and comparable provincial laws on preferences, fraudulent conveyances or other challengeable or voidable transactions, the Guarantees could be challenged as a preference, fraudulent conveyance, transfer at undervalue or other challengeable or voidable transaction. The test to be applied varies among the different pieces of legislation, but as a general matter these types of challenges may arise in circumstances where:

•
such action was intended to defeat, hinder, delay, defraud or prejudice creditors or others;

•
such action was taken within a specified period of time prior to the commencement of proceedings under Canadian bankruptcy, insolvency or restructuring legislation in respect of a Subsidiary Guarantor, the consideration received by the Subsidiary Guarantor was conspicuously less than the fair market value of the consideration given, and the Subsidiary Guarantor was insolvent or rendered insolvent by such action and (in some circumstances, or) such action was intended to defraud, defeat or delay a creditor;

•
such action was taken within a specified period of time prior to the commencement of proceedings under Canadian bankruptcy, insolvency or restructuring legislation in respect of a Subsidiary Guarantor and such action was taken, or is deemed to have been taken, with a view to giving a creditor a preference over other creditors or, in some circumstances, had the effect of giving a creditor a preference over other creditors; or

•
a Subsidiary Guarantor is found to have acted in a manner that was oppressive, unfairly prejudicial to or unfairly disregarded the interests of any shareholder, creditor, director, officer or other interested party.

In addition, in certain insolvency proceedings a Canadian court may subordinate claims in respect of the Guarantees to other claims against a Subsidiary Guarantor under the principle of equitable subordination if the court determines that (1) the holder of Notes engaged in some type of inequitable or improper conduct, (2) the inequitable or improper conduct resulted in injury to other creditors or conferred an unfair advantage upon the holder of Notes and (3) equitable subordination is not inconsistent with the provisions of the relevant solvency statute.

If a court canceled a Guarantee, the holders of Notes would no longer have a claim against that Subsidiary Guarantor or its assets.

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Each Guarantee is limited, by its terms, to an amount not to exceed the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor without rendering the Guarantee, as it relates to that Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

Each Subsidiary Guarantor is a consolidated subsidiary of the Parent Company at the date of the balance sheet presented. The following tables present summarized financial information for the Parent Company and the Subsidiary Guarantors on a combined basis after elimination of (i) intercompany transactions and balances among the Parent Company and the Subsidiary Guarantors and (ii) equity in earnings from and investments in any Non-Guarantor Subsidiary.

(1)
Includes receivables due from Non-Guarantor Subsidiaries of $2,214 million as of December 31, 2023.

(2)
Includes income from intercompany transactions with Non-Guarantor Subsidiaries of $711 million for the year ended December 31, 2023, primarily from royalties, dividends, interest and intercompany product sales.

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COMMITMENTS AND CONTINGENT LIABILITIES

Contractual Obligations

The following table presents our contractual obligations and commitments to make future payments as of December 31, 2023:

(1)
Debt obligations include Notes Payable and Overdrafts, and excludes the impact of deferred financing fees, unamortized discounts, and a fair value step-up related to the Cooper Tire acquisition.

(2)
The minimum lease payments for finance lease obligations are $755 million.

(3)
These amounts represent future interest payments related to our existing debt obligations and finance leases based on fixed and variable interest rates specified in the associated debt and lease agreements. The amounts provided relate only to existing debt obligations and do not assume the refinancing or replacement of such debt or future changes in variable interest rates.

(4)
Operating lease obligations have not been reduced by minimum sublease rentals of $8 million, $8 million, $5 million, $3 million, $2 million and $3 million in each of the periods above, respectively, for a total of $29 million. Payments, net of minimum sublease rentals, total $1,305 million. The present value of the net operating lease payments, including sublease rentals, is $1,001 million. The operating leases relate to, among other things, real estate, vehicles, data processing equipment and miscellaneous other assets. No asset is leased from any related party.

(5)
The obligation related to pension benefits is actuarially determined and is reflective of obligations as of December 31, 2023. Although subject to change, the amounts set forth in the table represent the mid-point of the range of our expected contributions for funded U.S. and non-U.S. pension plans, plus expected cash funding of direct participant payments to our U.S. and non-U.S. pension plans.

We made significant contributions to fully fund our U.S. pension plans in 2013 and 2014. We have no minimum funding requirements for our funded U.S. pension plans under current ERISA law or the provisions of our USW collective bargaining agreement, including a provision which requires us to maintain an annual ERISA funded status for the Goodyear hourly U.S. pension plan of at least 97%.

Future U.S. pension contributions will be affected by our ability to offset changes in future interest rates with returns from our asset portfolios and any changes to ERISA law. For further information on the U.S. pension investment strategy, refer to Note to the Consolidated Financial Statements No. 18, Pension, Other Postretirement Benefits and Savings Plans.

Future non-U.S. contributions are affected by factors such as:

•
future interest rate levels,

•
the amount and timing of asset returns, and

•
how contributions in excess of the minimum requirements could impact the amount and timing of future contributions.

(6)
The payments presented above are expected payments for the next 10 years. The payments for other postretirement benefits reflect the estimated benefit payments of the plans using the provisions currently in effect. Under the relevant summary plan descriptions or plan documents, we have the right to modify or terminate the plans. The obligation related to other postretirement benefits is actuarially determined on an annual basis.

(7)
The payments for workers’ compensation obligations are based upon recent historical payment patterns on claims. The present value of anticipated claims payments for workers’ compensation is $167 million.

(8)
Binding commitments are for raw materials, capital expenditures, utilities, and various other types of contracts. The obligations to purchase raw materials include supply contracts at both fixed and variable prices. Those with variable prices are based on index rates for those commodities at December 31, 2023.

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(9)
These amounts primarily represent expected payments with interest for uncertain income tax positions as of December 31, 2023. We have reflected them in the period in which we believe they will be ultimately settled based upon our experience with these matters.

Additional other long term liabilities include items such as general and product liabilities, environmental liabilities and miscellaneous other long term liabilities. These other liabilities are not contractual obligations by nature. We cannot, with any degree of reliability, determine the years in which these liabilities might ultimately be settled. Accordingly, these other long term liabilities are not included in the above table.

In addition, pursuant to certain long term agreements, we will purchase varying amounts of certain raw materials and finished goods at agreed upon base prices that may be subject to periodic adjustments for changes in raw material costs and market price adjustments, or in quantities that may be subject to periodic adjustments for changes in our or our suppliers' production levels. These contingent contractual obligations, the amounts of which cannot be estimated, are not included in the table above.

We do not engage in the trading of commodity contracts or any related derivative contracts. We generally purchase raw materials and energy through short term, intermediate and long term supply contracts at fixed prices or at formula prices related to market prices or negotiated prices. We may, however, from time to time, enter into contracts to hedge our energy costs.

We have an agreement to provide a revolving loan commitment to TireHub, LLC of up to $100 million. At December 31, 2023, $96 million was drawn on this commitment, which includes $2 million of interest.

Off-Balance Sheet Arrangements

An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has:

•
made guarantees,

•
retained or held a contingent interest in transferred assets,

•
undertaken an obligation under certain derivative instruments, or

•
undertaken any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the company, or that engages in leasing, hedging or research and development arrangements with the company.

We have entered into certain arrangements under which we have provided guarantees that are off-balance sheet arrangements. Those guarantees totaled $31 million at December 31, 2023. For further information about our guarantees, refer to Note to the Consolidated Financial Statements No. 20, Commitments and Contingent Liabilities.

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CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to the financial statements. On an ongoing basis, management reviews its estimates based on currently available information. Changes in facts and circumstances may alter such estimates and affect our results of operations and financial position in future periods. Our critical accounting policies relate to:

•
goodwill and intangible assets,

•
general and product liability and other litigation,

•
workers’ compensation,

•
deferred tax asset valuation allowances and uncertain income tax positions, and

•
pensions and other postretirement benefits.

Goodwill and Intangible Assets. Goodwill and indefinite-lived intangible assets are tested for impairment annually or more frequently if an indicator of impairment is present. Intangible assets with finite lives are amortized over their useful lives and are reviewed for impairment whenever events or circumstances warrant such review. Goodwill and intangible assets are written down to fair value if considered impaired. Goodwill and Intangible Assets totaled $781 million and $969 million, respectively, at December 31, 2023, compared to $1,014 million and $1,004 million, respectively, at December 31, 2022. At December 31, 2023, the goodwill associated with reporting units in our Americas and Asia Pacific segments was $724 million and $57 million, respectively. Goodwill totaling $230 million previously associated with our EMEA reporting unit was fully impaired during the fourth quarter of 2023.

Goodwill and intangible assets with indefinite useful lives are not amortized but are assessed for impairment annually on October 31st with the option to perform a qualitative assessment to determine whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of the reporting unit or indefinite-lived intangible asset to its carrying value. In addition to the annual assessment, impairment evaluation is considered during interim periods when events occur or circumstances change that would more likely than not reduce the fair value of the asset below its carrying value. During our annual impairment assessment and in subsequent interim periods, we review events that occur or circumstances that change, including the macroeconomic environment, our business performance and our market capitalization, to determine if a quantitative impairment assessment is necessary. We review our business performance and the macroeconomic environment against our recent expectations and evaluate book value compared to market capitalization, including fluctuations in our stock price, to determine if this could be an indicator of potential impairment. Consideration is given as to whether a fluctuation in our stock price is a result of current market conditions, due to a transitory event or an event that is expected to continue to affect us, or is consistent with our historical stock price volatility. We also consider these factors compared to the results of our most recent quantitative goodwill impairment assessment.

Under the qualitative assessment, we assess whether it is more likely than not (defined as a likelihood of more than 50%) that the fair value of our goodwill or indefinite-lived intangible assets is less than the respective carrying values. If it is more likely than not that an impairment exists, then a quantitative impairment assessment is performed. If under the quantitative assessment the fair value is less than the carrying value, an impairment loss will be recorded for the difference between the carrying value and the fair value. Under the quantitative assessment, we estimate the fair value of goodwill of a reporting unit using a combined discounted cash flows and market approach. For indefinite-lived intangible assets we estimate the fair value using discounted cash flows following a relief-from-royalty method utilizing a market-based royalty rate. Forecasts of future cash flows are based on our best estimate of projected revenue and projected operating margin, based primarily on sales and production volume, pricing, raw material costs, market share, industry outlook, general economic conditions, and certain strategic actions we plan to implement. Cash flows are discounted using our weighted average cost of capital. Under the market approach, market multiples are derived from market prices of stocks of companies that are in the tire or similar manufacturing industry. The appropriate multiple is applied to the forecasted revenues and earnings before interest, taxes, depreciation and amortization of the reporting unit to obtain an estimated fair value.

As part of our annual impairment analysis as of October 31, 2023, we completed a quantitative impairment analysis at our North America, Asia Pacific and EMEA reporting units to determine if their fair values were less than their carrying amounts. Based on the quantitative test, the fair values of the North America and Asia Pacific reporting units substantially exceeded their carrying values.

As previously disclosed, during the third quarter of 2023, we reduced the near-term and long-term outlook of our EMEA segment based on recent business performance and the industry outlook. As a result, we performed a quantitative analysis as of September 30, 2023 of the fair value of the EMEA reporting unit which resulted in an estimated fair value that exceeded its carrying value, including goodwill. During the fourth quarter of 2023, the industry continued to decline, which resulted in a further reduction in our near-term and long-term outlook to include the updated industry outlook and additional strategic actions

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and rationalizations. The forecast resulted in lower than previously projected cash flows for the EMEA reporting unit, which negatively affected the valuation compared to the previous valuation. As a result, the fair value of the EMEA reporting unit as of October 31, 2023 was less than its carrying value resulting in a non-cash impairment charge of $230 million during the fourth quarter of 2023.

We determined the estimated fair value for the reporting units based on discounted cash flow projections and market values for comparable businesses. The most critical assumptions used in the calculation of the fair value of each reporting unit are the projected revenue, projected operating margin, discount rate and the selection of market multiples. Our forecast of future cash flows is based on our best estimate of projected revenue and projected operating margin, based primarily on pricing, raw material costs, market share, industry outlook, general economic conditions and strategic actions to improve our operating margin. The fair value of the reporting unit’s goodwill is sensitive to differences between estimated and actual cash flows, including changes in the projected revenue, projected operating margin, discount rate and the selection of market multiples used to evaluate the fair value of the reporting unit. Although we believe our estimate of fair value is reasonable, the reporting unit’s future financial performance is dependent on our ability to execute our business plan and to successfully implement certain strategic actions which we expect will improve our long-term operating margin. Future changes in the judgments, assumptions and estimates that are used in our impairment testing for goodwill, including discount rates and cash flow projections, could result in significantly different estimates of the fair values. A significant reduction in the estimated fair values could result in impairment charges that could adversely affect our results of operations.

As part of our annual impairment analysis as of October 31, 2023, we completed a quantitative impairment analysis of our indefinite-lived intangible assets to determine if their fair values were less than their carrying amounts. Based on the results of the quantitative impairment assessments, the Company determined that no impairment was required as the estimated fair values of our indefinite-lived intangible assets exceeded or approximated their respective carrying values. We determined the fair value of the indefinite-lived intangible assets using the relief from royalty method, which calculates the cost savings associated with owning rather than licensing the assets. The most critical assumptions used in the calculation of the fair value are projected revenue, discount rate and royalty rate. The fair value of the indefinite-lived intangible assets is sensitive to differences between estimated and actual revenue, including changes in the discount rate and royalty rate used to evaluate the fair value of these assets. We identified $530 million of indefinite-lived intangibles assets related to the recent Cooper Tire acquisition, for which the fair value exceeds the carrying value by approximately 5% and therefore, no impairment was required. For these indefinite-lived intangible assets a 50 basis point increase in our discount rate assumptions or 50 basis point decrease in projected revenue would not have resulted in an impairment and a 25 basis point decrease in our royalty rate assumptions would result in a carrying value which exceeds fair value by approximately 5%. Although we believe our estimate of fair value is reasonable, the indefinite-lived intangible asset performance is dependent on our ability to execute our business plan. If our future financial performance falls below our expectations, there are adverse revisions to significant assumptions, including projected revenues, discount rates or royalty rates, this could be indicative that the fair values of these indefinite-lived intangible assets has declined below their carrying values, and therefore we may need to record a material, non-cash impairment charge in a future period.

We assessed the period from October 31, 2023 to December 31, 2023 and determined there were no factors that caused us to change our conclusions as of October 31, 2023.

General and Product Liability and Other Litigation. We have recorded liabilities for both asserted and unasserted claims totaling $438 million, including related legal fees expected to be incurred, for potential product liability and other tort claims, including asbestos claims, at December 31, 2023. General and product liability and other litigation liabilities are recorded based on management’s assessment that a loss arising from these matters is probable. If the loss can be reasonably estimated, we record the amount of the estimated loss. If the loss is estimated within a range and no point within the range is more probable than another, we record the minimum amount in the range. As additional information becomes available, any potential liability related to these matters is assessed and the estimates are revised, if necessary. Loss ranges are based upon the specific facts of each claim or class of claims and are determined after review by counsel. Court rulings on our cases or similar cases may impact our assessment of the probability and our estimate of the loss, which may have an impact on our reported results of operations, financial position and liquidity. We record receivables for insurance recoveries related to our litigation claims when it is probable that we will receive reimbursement from the insurer. Specifically, we are a defendant in numerous lawsuits alleging various asbestos-related personal injuries purported to result from alleged exposure to asbestos in certain products previously manufactured by us or present in certain of our facilities. Typically, these lawsuits have been brought against multiple defendants in federal and state courts.

We periodically, and at least annually, update, using actuarial analyses, our existing reserves for pending claims, including a reasonable estimate of the liability associated with unasserted asbestos claims, and estimate our receivables from probable insurance recoveries. In determining the estimate of our asbestos liability, we evaluated claims over the next ten-year period. Due to the difficulties in making these estimates, analysis based on new data and/or changed circumstances arising in the future may result in an increase in the recorded obligation, and that increase may be significant. We had recorded gross liabilities for

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both asserted and unasserted asbestos claims, inclusive of defense costs, totaling $120 million and $125 million, respectively, at December 31, 2023 and December 31, 2022.

We maintain certain primary and excess insurance coverage under coverage-in-place agreements, and also have additional excess liability insurance with respect to asbestos liabilities. We record a receivable with respect to such policies when we determine that recovery is probable and we can reasonably estimate the amount of a particular recovery. This determination is based on consultation with our outside legal counsel and takes into consideration agreements with certain of our insurance carriers, the financial viability and legal obligations of our insurance carriers, and other relevant factors.

As of December 31, 2023 and December 31, 2022, we recorded a receivable related to asbestos claims of $66 million and $70 million, respectively, and we expect that approximately 55% of asbestos claim related losses would be recoverable through insurance through the period covered by the estimated liability. Of this amount, $10 million was included in Current Assets as part of Accounts Receivable at December 31, 2023. The recorded receivable consists of an amount we expect to collect under coverage-in-place agreements with certain primary and excess insurance carriers as well as an amount we believe is probable of recovery from certain of our other excess insurance carriers. Although we believe these amounts are collectible under primary and certain excess policies today, future disputes with insurers could result in significant charges to operations.

Workers’ Compensation. We have recorded liabilities, on a discounted basis, of $167 million and $187 million for anticipated costs related to U.S. workers’ compensation claims at December 31, 2023 and December 31, 2022, respectively. The costs include an estimate of expected settlements on pending claims, defense costs and a provision for claims incurred but not reported. These estimates are based on our assessment of potential liability using an analysis of available information with respect to pending claims, historical experience and current cost trends. The amount of our ultimate liability in respect of these matters may differ from these estimates. We periodically, and at least annually, update our loss development factors based on actuarial analyses. The liability is discounted using the risk-free rate of return.

For further information on general and product liability and other litigation and workers’ compensation, refer to Note to the Consolidated Financial Statements No. 20, Commitments and Contingent Liabilities.

Deferred Tax Asset Valuation Allowances and Uncertain Income Tax Positions. At December 31, 2023 and December 31, 2022, our valuation allowances on certain of our U.S. federal, state and local net deferred tax assets totaled $22 million and $26 million, respectively, and our valuation allowances on our foreign net deferred tax assets totaled approximately $1.2 billion and $1.0 billion, respectively.

We record a reduction to the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not such assets will not be realized. The valuation of deferred tax assets requires judgment in assessing future profitability by year, including the impact of tax planning strategies, relative to the expiration dates, if any, of the assets.

We consider both positive and negative evidence when measuring the need for a valuation allowance. The weight given to the evidence is commensurate with the extent to which it may be objectively verified. Current and cumulative financial reporting results are a source of objectively verifiable evidence. We give operating results during the most recent three-year period a significant weight in our analysis. We typically only consider forecasts of future profitability when positive cumulative operating results exist in the most recent three-year period. We perform scheduling exercises to determine if sufficient taxable income of the appropriate character exists in the periods required in order to realize our deferred tax assets with limited lives (such as tax loss carryforwards and tax credits) prior to their expiration. We also consider prudent tax planning strategies (including an assessment of their feasibility) to accelerate taxable income if required to utilize expiring deferred tax assets. A valuation allowance is not required to the extent that, in our judgment, positive evidence exists with a magnitude and duration sufficient to result in a conclusion that it is more likely than not that our deferred tax assets will be realized.

At December 31, 2023 and December 31, 2022, we had approximately $1.2 billion and $1.1 billion of U.S. federal, state and local net deferred tax assets, respectively, inclusive of valuation allowances totaling $22 million and $26 million in each period, respectively, primarily for state tax loss carryforwards with limited lives. As of December 31, 2023, approximately $1.0 billion of these U.S. net deferred tax assets have unlimited lives and approximately $200 million have limited lives, including $22 million of foreign tax credits, and the majority do not start to expire until 2031. As of December 31, 2022, approximately $700 million of these U.S. net deferred tax assets had unlimited lives and approximately $400 million had limited lives, including $230 million of foreign tax credits, and had expiration dates between 2023 and 2042. In the U.S., as of December 31, 2023, we emerged from a three-year cumulative loss which was driven by business disruptions created by the COVID-19 pandemic. Our U.S. cumulative income for the three-years ended December 31, 2023 is primarily a result of gains from other comprehensive income rather than consistently profitable U.S. operating results. Our 2023 U.S. operating results in the first six months of the year were negatively impacted by lower sales volumes due to commercial replacement tire channel destocking, reduced consumer industry demand and the Tupelo storm. However, our second half of 2023 showed improvement and profitability in our U.S. operating results.

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In assessing our ability to utilize our net deferred tax assets, we primarily considered objectively verifiable information, including the improvement in our U.S. operating results during the second half of 2023 as a result of improved tire volume and lower raw material and transportation costs compared to the first half of 2023. In addition, we consider our current forecasts of future profitability in assessing our ability to realize our deferred tax assets as well as the impact of tax planning strategies. These forecasts include the impact of recent trends and various macroeconomic factors such as the impact of raw material, transportation, labor and energy costs on our profitability. Our tax planning strategies include accelerating income on cross border transactions, including sales of inventory or raw materials to our subsidiaries, reducing U.S. interest expense by, for example, reducing intercompany loans through repatriating current year earnings of foreign subsidiaries, repatriation of certain foreign royalty income, and other financing transactions, all of which would increase our domestic profitability.

We believe our improvement in U.S. operating results during the second half of 2023 and forecasts of future profitability provide us sufficient positive evidence to conclude that it is more likely than not that, at December 31, 2023, our U.S. net deferred tax assets will be fully utilized. However, macroeconomic factors such as raw material, transportation, labor and energy costs possess a high degree of volatility and can significantly impact our profitability. In addition, certain tax provisions, such as the annual interest expense limitation under Section 163(j) of the Internal Revenue Code of 1986, if amended, could impact our analysis of the realizability of our U.S. deferred tax assets. If our U.S. operating results significantly decline in the future, we may need to record a valuation allowance which could adversely impact our operating results. As such, we will closely monitor our U.S. operations as well as any tax law changes to assess the realizability of our U.S. deferred tax assets.

At December 31, 2023 and December 31, 2022, we also had approximately $1.5 billion and $1.2 billion of foreign net deferred tax assets, respectively, and related valuation allowances of approximately $1.2 billion and $1.0 billion, respectively. Our losses in various foreign taxing jurisdictions in recent periods represented sufficient negative evidence to require us to maintain a full valuation allowance against certain of these net foreign deferred tax assets. Most notably, in Luxembourg, we maintain a valuation allowance of approximately $1.0 billion on all of our net deferred tax assets. Each reporting period, we assess available positive and negative evidence and estimate if sufficient future taxable income will be generated to utilize these existing deferred tax assets. We do not believe that sufficient positive evidence required to release valuation allowances on our foreign deferred tax assets having a significant impact on our financial position or results of operations will exist within the next twelve months.

We recognize the effects of changes in tax rates and laws on deferred tax balances in the period in which legislation is enacted. We remeasure existing deferred tax assets and liabilities considering the tax rates at which they will be realized. We also consider the effects of enacted tax laws in our analysis of the need for valuation allowances.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations, including those for transfer pricing. We recognize liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We also recognize income tax benefits to the extent that it is more likely than not that our positions will be sustained when challenged by the taxing authorities. We derecognize income tax benefits when, based on new information, we determine that it is no longer more likely than not that our position will be sustained. To the extent we prevail in matters for which liabilities have been established, or determine we need to derecognize tax benefits recorded in prior periods, our results of operations and effective tax rate in a given period could be materially affected. An unfavorable tax settlement would require use of our cash, and lead to recognition of expense to the extent the settlement amount exceeds recorded liabilities, resulting in an increase in our effective tax rate in the period of resolution. To reduce our risk of an unfavorable transfer price settlement, we apply consistent transfer pricing policies and practices globally, support pricing with economic studies and seek advance pricing agreements and joint audits to the extent possible. A favorable tax settlement would be recognized as a reduction of expense to the extent the settlement amount is lower than recorded liabilities and, in the case of an income tax settlement, would result in a reduction in our effective tax rate in the period of resolution. We report interest and penalties related to uncertain income tax positions as income tax expense.

For additional information regarding uncertain income tax positions and tax valuation allowances, refer to Note to the Consolidated Financial Statements No. 7, Income Taxes.

Pensions and Other Postretirement Benefits. We have recorded liabilities for pensions of $181 million and $94 million and other postretirement benefits of $287 million and $292 million, respectively, at December 31, 2023 and December 31, 2022. Our recorded liabilities and net periodic costs for pensions and other postretirement benefits are based on a number of assumptions, including:

•
life expectancies,

•
retirement rates,

•
discount rates,

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•
long term rates of return on plan assets,

•
inflation rates,

•
future health care costs, and

•
maximum company-covered benefit costs.

Certain of these assumptions are determined with the assistance of independent actuaries. Assumptions about life expectancies, retirement rates, future compensation levels and future health care costs are based on past experience and anticipated future trends. The discount rate for our U.S. plans is based on a yield curve derived from a portfolio of corporate bonds from issuers rated AA or higher by established rating agencies as of December 31 and is reviewed annually. Our expected benefit payment cash flows are discounted based on spot rates developed from the yield curve. The mortality assumption for our U.S. plans is based on actual historical experience or published actuarial tables, an assumed long term rate of future improvement based on published actuarial tables, and current government regulations related to lump sum payment factors. The long term rate of return on U.S. plan assets is based on estimates of future long term rates of return similar to the target allocation of substantially all fixed income securities. Actual U.S. pension fund asset allocations are reviewed on a monthly basis and the pension fund is rebalanced to target ranges on an as-needed basis. These assumptions are reviewed regularly and revised when appropriate. Changes in one or more of them may affect the amount of our recorded liabilities and net periodic costs for these benefits. Other assumptions involving demographic factors such as retirement age and turnover are evaluated periodically and are updated to reflect our experience and expectations for the future. If actual experience differs from expectations, our financial position, results of operations and liquidity in future periods may be affected.

The weighted average discount rate used in estimating the total liability for our U.S. pension and other postretirement benefit plans was 5.12% and 5.16%, respectively, at December 31, 2023, compared to 5.45% and 5.51%, respectively, at December 31, 2022. The decrease in the discount rate at December 31, 2023 was due primarily to lower yields on highly rated corporate bonds. Interest cost included in our U.S. net periodic pension cost was $195 million in 2023, compared to $133 million in 2022 and $94 million in 2021. Interest cost included in our worldwide net periodic other postretirement benefits cost was $16 million in 2023, compared to $12 million in 2022 and $9 million in 2021.

The following table presents the sensitivity of our U.S. projected pension benefit obligation and accumulated other postretirement benefits obligation to the indicated increase/decrease in the discount rate:

Changes in general interest rates and corporate (AA or better) credit spreads impact our discount rate and thereby our U.S. pension benefit obligation. Our U.S. pension plans are invested in a portfolio of substantially all fixed income securities designed to offset the impact of future discount rate movements on liabilities for these plans. If corporate (AA or better) interest rates increase or decrease in parallel (i.e., across all maturities), the investment portfolio described above is designed to mitigate a substantial portion of the expected change in our U.S. pension benefit obligation. For example, if corporate (AA or better) interest rates increased or decreased by 0.5%, the investment portfolio described above would be expected to mitigate approximately 95% of the expected change in our U.S. pension benefit obligation.

At December 31, 2023, our net actuarial loss included in Accumulated Other Comprehensive Loss ("AOCL") related to global pension plans was $2,268 million, $1,744 million of which related to our U.S. pension plans. The net actuarial loss included in AOCL related to our U.S. pension plans continues to decrease and is primarily due to declines in U.S. discount rates and plan asset losses that occurred prior to the funding and investment de-risking actions we undertook in 2013 and 2014, which were designed to mitigate further actuarial losses of a similar nature. For purposes of determining our 2023 U.S. pension total benefits cost, we recognized $132 million of the net actuarial losses in 2023. We will recognize approximately $100 million of net actuarial losses in 2024 U.S. net periodic pension cost. If our future experience is consistent with our assumptions as of December 31, 2023, actuarial loss recognition over the next few years will remain at an amount near that to be recognized in 2024 before it begins to gradually decline. In addition, if annual lump sum payments from a pension plan exceed annual service and interest cost for that plan, accelerated recognition of net actuarial losses will be required through a settlement in total benefits cost.

The actual rate of return on our U.S. pension fund was 7.90%, (17.00%) and 1.80% in 2023, 2022 and 2021, respectively, as compared to the expected rate of 6.27%, 4.23% and 3.74% in 2023, 2022 and 2021, respectively. We use the fair value of our pension assets in the calculation of pension expense for all of our U.S. pension plans.

The weighted average amortization period for our U.S. pension plans is approximately 15 years.

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Service cost of pension plans was recorded in CGS, as part of the cost of inventory sold during the period, or SAG in our Consolidated Statements of Operations, based on the specific roles (i.e., manufacturing vs. non-manufacturing) of employee groups covered by each of our pension plans. In 2023, 2022 and 2021, the amount of service cost included in CGS and SAG is approximately equal. Non-service related net periodic pension costs were recorded in Other (Income) Expense.

Globally, we expect our 2024 net periodic pension cost to be $120 million to $140 million, including approximately $30 million of service cost, compared to $122 million in 2023, which included $26 million of service cost.

The net actuarial gain of $85 million included in AOCL for our worldwide other postretirement benefit plans as of December 31, 2023 is a result of past increases in discount rates. For purposes of determining 2023 worldwide net periodic other postretirement benefits cost, we recognized $9 million of net actuarial gains in 2023. We will recognize approximately $9 million of net actuarial gains in 2024. If our future experience is consistent with our assumptions as of December 31, 2023, actuarial gain recognition over the next few years will remain at an amount near that to be recognized in 2024.

For further information on pensions and other postretirement benefits, refer to Note to the Consolidated Financial Statements No. 18, Pension, Other Postretirement Benefits and Savings Plans.

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FORWARD-LOOKING INFORMATION — SAFE HARBOR STATEMENT

Certain information in this Annual Report on Form 10-K (other than historical data and information) may constitute forward-looking statements regarding events and trends that may affect our future operating results and financial position. The words “estimate,” “expect,” “intend” and “project,” as well as other words or expressions of similar meaning, are intended to identify forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. Such statements are based on current expectations and assumptions, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including:

•
if we do not successfully implement the Goodyear Forward plan and our other strategic initiatives, our operating results, financial condition and liquidity may be materially adversely affected;

•
we face significant global competition and our market share could decline;

•
raw material cost increases may materially adversely affect our operating results and financial condition;

•
we are experiencing inflationary cost pressures, including with respect to wages, benefits, transportation and energy costs, that may materially adversely affect our operating results and financial condition;

•
delays or disruptions in our supply chain or in the provision of services, including utilities, to us could result in increased costs or disruptions in our operations;

•
a prolonged economic downturn or economic uncertainty could adversely affect our business and results of operations;

•
deteriorating economic conditions in any of our major markets, or an inability to access capital markets or third-party financing when necessary, may materially adversely affect our operating results, financial condition and liquidity;

•
if we experience a labor strike, work stoppage, labor shortage or other similar event at the Company or its joint ventures, our business, results of operations, financial condition and liquidity could be materially adversely affected;

•
financial difficulties, work stoppages, labor shortages, supply disruptions or economic conditions affecting our major OE customers, dealers or suppliers could harm our business;

•
our capital expenditures may not be adequate to maintain our competitive position and may not be implemented in a timely or cost-effective manner;

•
changes to tariffs, trade agreements or trade restrictions may materially adversely affect our operating results;

•
our international operations have certain risks that may materially adversely affect our operating results, financial condition and liquidity;

•
we have foreign currency translation and transaction risks that may materially adversely affect our operating results, financial condition and liquidity;

•
our long-term ability to meet our obligations, to repay maturing indebtedness or to implement strategic initiatives may be dependent on our ability to access capital markets in the future and to improve our operating results;

•
we have a substantial amount of debt, which could restrict our growth, place us at a competitive disadvantage or otherwise materially adversely affect our financial health;

•
any failure to be in compliance with any material provision or covenant of our debt instruments, or a material reduction in the borrowing base under our first lien revolving credit facility, could have a material adverse effect on our liquidity and operations;

•
our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly;

•
we have substantial fixed costs and, as a result, our operating income fluctuates disproportionately with changes in our net sales;

•
we may incur significant costs in connection with our contingent liabilities and tax matters;

•
our reserves for contingent liabilities and our recorded insurance assets are subject to various uncertainties, the outcome of which may result in our actual costs being significantly higher than the amounts recorded;

•
environmental issues, including climate change, or legal, regulatory or market measures to address environmental issues, may negatively affect our business and operations and cause us to incur significant costs;

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•
we are subject to extensive government regulations that may materially adversely affect our operating results;

•
we may be adversely affected by any disruption in, or failure of, our information technology systems due to computer viruses, unauthorized access, cyber-attack, natural disasters or other similar disruptions;

•
we may not be able to protect our intellectual property rights adequately;

•
if we are unable to attract and retain key personnel, our business could be materially adversely affected; and

•
we may be impacted by economic and supply disruptions associated with events beyond our control, such as war, including the current conflicts between Russia and Ukraine and between Israel and Hamas, acts of terror, political unrest, public health concerns, labor disputes or natural disasters.

It is not possible to foresee or identify all such factors. We will not revise or update any forward-looking statement or disclose any facts, events or circumstances that occur after the date hereof that may affect the accuracy of any forward-looking statement.

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