Why Goodyear is all in on making tires from corn and soybean oil

The era of making tires solely from various unfriendly Earth materials is coming to a close, at least according to Goodyear Chairman and CEO Rich Kramer.

"It's the right thing to do as we think about the sustainability goals that we and our customers have," Kramer told Yahoo Finance Live from the floor of this week's Consumer Electronics Show (CES) in Las Vegas. "Secondly, it's what our customers are asking for."

Goodyear revealed a new "demonstration tire" at CES comprised of 90% sustainable material content. It was just in January 2022 that the company unveiled a 70% sustainable material tire.

A NASCAR crew member performs work on Goodyear Racing Eagle tires at Texas Motor Speedway on September 25, 2022 in Fort Worth. (Photo: Michael C. Johnson-USA TODAY Sports)
A NASCAR crew member performs work on Goodyear Racing Eagle tires at Texas Motor Speedway on September 25, 2022 in Fort Worth. (Photo: Michael C. Johnson-USA TODAY Sports)

The latest iteration is composed of "ingredients" like soybean oil and rice husk waste.

"As we look at soybean oil, it makes a tire more pliable in cold conditions and that gives it more grip," Kramer explained. "And on rice husk ash, we use it in place of petro-based silica. And what that does for us is actually improves rolling resistance on the tread. So this is a way of actually moving to those bio-based materials and not giving up any performance, and in fact, in many cases, enhancing performance."

According to Kramer, Goodyear remains on track to release a tire made from 100% sustainable materials by 2030.

'Input costs have gone up so dramatically'

The company's latest innovation push comes amid several challenging quarters as global economies slow, inflation remains stubbornly high, and consumers push back on price hikes.

In late October 2022, Goodyear revealed third-quarter tire unit volumes fell 3% from the prior fiscal quarter. Replacement tire volume dropped 9%, under-performing a 3.5% decline for the overall industry. Adjusted net income declined 43% year on year to $116 million, while earnings came in shy of analyst estimates.

The company predicted many of the "underlying" trends it saw in its business for the third quarter would continue into the fourth quarter.

Goodyear shares lost about 53% in 2022.

Kramer shared that inflation remains a headwind for Goodyear, but maintained that he isn't seeing consumers push back too hard at inflation-based price increases.

"We look very closely at tread wear as we take tires off as they get replaced," he said. "And I would tell you, we're not seeing tread wear going down to levels beyond what is normal. And that tells me that consumers are still in the mode of changing tires at a normal cycle. That's a really good thing. And yes, tire pricing has gone up, but that's also because as we said earlier, those input costs have gone up so dramatically."

Wall Street, nonetheless, looks to be taking a wait-and-see approach on Goodyear before becoming more constructive on the stock.

"While Goodyear continues to impress in its ability to generate price/mix gains in excess of tire raw materials inflation — and this is significantly differentiated versus its last experience with rising commodity costs over the 2017-2019 timeframe — the higher-than-expected general inflationary backdrop (impacting many areas of its business, including freight, labor, and, perhaps most notably, energy costs such as electricity and natural gas, particularly in Europe) has proven more difficult to offset via price increases," JP Morgan Analyst Ryan Brinkman wrote in a client note.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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