Digging Into Goodyear

Goodyear Tire & Rubber (NYSE: GT) is not the most beloved stock in the Motley Fool community. In our Motley Fool CAPS stock rating service, the company is rated a mere two stars out of a possible five.

The most recommended comment among bullish players suggests that cost-cutting will fatten Goodyear's profit margins. Meanwhile, the most recommended bearish comment pointed out that recently improved earnings were nearly negative, and that the company carries a lot of debt.

I recently ran across some promising signs regarding Goodyear, though. At industryweek.com, Walt Rostykus of Humantech noted:

In 2004, the Akron, Ohio, tire maker was the safety leader in the global rubber manufacturing industry. Still, 27% of Goodyear worker injuries worldwide -- nearly 50% in the U.S. -- were the work-related musculoskeletal disorders (WMSDs) that consistently plague millions of factory workers. Today, Goodyear has cut its global OSHA incident rate by 52%, and realized improvements in profitability and employee engagement with the help of an enhanced focus on ergonomics.

The company had already enjoyed a respectable safety record. Better still, it lowered its accident rate significantly. It turns out that the lower accident rate wasn't just a matter of fewer accidents. Instead, the likelihood of accidents has been reduced. Rostykus also noted, "The most important achievements have come in the form of risk reduction. Since January 2005, more than 3,600 identified risks have been eliminated from the workplace through the ergonomics improvement process."

More digging
You can dig up some interesting facts with a little sleuthing online. Just by looking through the headlines for Goodyear at Yahoo! Finance, I learned that Goodyear "spent more than $1.5 million in the first half of 2007 to lobby the federal government, according to a recent disclosure form. The company lobbied on fuel economy standards, a defense spending bill, climate change, trade issues, tax credits and other matters."

An article by my colleague Rich Duprey shed some light on what some of Goodyear's lobbying might have achieved: a fat incentive package from the state of North Carolina. Rich also discussed sports retailer Cabela's (NYSE: CAB) tradition of seeking out special packages, along with noting success in that arena by Dell (Nasdaq: DELL) and Google (Nasdaq: GOOG).

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Despite Goodyear's promising signs, I'm not buying -- at least, not yet. Unless you simply can't find any more exciting and promising companies than Goodyear, you'll probably do well to look elsewhere, too.

These stats for Goodyear suggest that it's still far from stellar:

• Five-year average annual sales growth: 7.4%, vs. 13.9% for the S&P 500
• Dividends: Eliminated in 2003 to cut costs.
• Return on assets: A skimpy 2.7% from 2001 through 2006.
• Net profit margins: A negative 2.8% average over the same time period.

So let Goodyear offer some lessons on the usefulness of pursuing news reports -- but use those lessons to learn more about other contenders. And if you're still intrigued by Goodyear, add it to your watch list, and wait to see whether it improves itself.