Bridgestone profit drops on rising material costs, plant closure
TOKYO – Tire maker Bridgestone Corp. reported a 68 percent plunge in profit for the first half Wednesday, blaming expenses related to closing a U.S. plant and the surging cost of raw materials, including crude oil and rubber.Profit at Bridgestone for the six months ended June 30 slid to 32.8 billion yen ($285 million) from 101.7 billion yen in the first half of 2005.The profit drop came despite a 13 percent jump in first half sales to 1.4 trillion yen ($12 billion), boosted by healthy sales of trucks and cars in Japan and Europe. The Tokyo-based company, the world’s second-biggest tire maker by volume after France’s Michelin SA, didn’t break down quarterly numbers.Plant closure costs amounted to 15.8 billion yen ($137 million) during the period, including 13.6 billion yen ($118 million) that went into shuttering a money-losing factory in Oklahoma City operated by Bridgestone’s U.S. subsidiary, Bridgestone Firestone North American Tire.Bridgestone still has seven other tire plants in North America, but the demand was falling for the low-end tires produced at the plant amid intensifying competition from cheaper Asian makers.The soaring costs of crude oil and rubber took their toll on Bridgestone earnings. The absence of a Japanese pension-related reimbursement that boosted previous-year earnings was also a factor in bringing down profits, the company said.Bridgestone lowered its profit forecast for the fiscal year through March 2007 to 62 billion yen ($539 million) from an earlier forecast for 65 billion yen ($565 million, citing costs for closing a plant in Chile that couldn’t keep up with competition.The revised profit would amount to a 66 percent slide from the previous year.Bridgestone kept unchanged its sales forecast at 2.95 trillion yen ($26 billion), up 10 percent from fiscal 2005.By region, sales in North and South America increased 20 percent during the first six months of this year, as a strong dollar helped boost profits, the company said. Sales in Japan increased 9 percent, while they were up 12 percent in Europe. In other regions, sales surged 21 percent.Bridgestone’s books have been battered by a massive recall six years ago involving its U.S. unit, but have recovered in recent years. The recall came after at least 271 people were reported killed and hundreds more injured in accidents involving Firestone ATX and AT tires.Last month Bridgeston said the recall had been highly successful, replacing about 95 percent of the 6.5 million tires involved, and the company has settled hundreds of lawsuits related to the recall. The company shut down the plant in Decatur, Ill., that made those tires.Bridgestone blamed the accidents on defects in some Ford Motor Co. vehicles, while Ford said the tires were at fault. The dispute ended a relationship with the U.S. automaker that had spanned decades, although Ford uses Bridgestone tires for vehicles outside the U.S. Last year, Bridgestone Firestone agreed to pay Ford $240 million to settle their dispute.Bridgestone shares, which have recently lost the 30 percent gain they chalked up earlier this year, slipped 0.2 percent to close at 2,145 yen ($19) in Tokyo.
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