Goodyear Retreats, Retreads

In retrospect, 1998 wasn't such a good year for Goodyear (NYSE: GT  ) . The tire maker also didn't have it as good as originally reported in 1999, 2000, 2001, 2002, and, heck, through the first three quarters of 2003 as well.

Due to a shockingly undetected error in the company's accounting software, it had overstated its earnings by roughly $100 million over the past five years and change. Walking around with a little mud-flap splatter in the face is Merrill Lynch (NYSE: MER  ) , which had upgraded the stock just hours before Goodyear's admission. In the broker's defense, the upgrade consisted of shifting Goodyear's rating from "sell" to "neutral." In grade-schoolspeak, that's the equivalent of saying that I still don't like you, but now I don't think that rubbing elbows with you will give me the cooties.

But poor Goodyear. Last year, it posted a $1.1 billion loss that is now apparently even worse. It's stuck in a dud of a sector. Rival Michelin warned of lower sales yesterday. Whether you blame this on the pricing wars that recently broke out after Ford (NYSE: F  ) duked it out with Firestone over the Explorer tire-recall fiasco or the recent state of dried-up demand and squeezed margins, this isn't the tire industry's best moment.

Goodyear's got a flat. In the rain. In a pool of quicksand.

It's been a long time since Goodyear lived up to its name. That's not going to change anytime soon. When you're down to retreading balding financials, the potholes that lie ahead look like bunkers.

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