GOODYEAR TIRE & RUBBER CO /OH/ (GT) stock intrinsic value fair value estimate & owner earnings analysis

Goodyear makes and sells tires under the Goodyear, Cooper and Mastercraft names, mostly to drivers replacing worn tires and to carmakers and truck fleets. It also runs company-owned service centers. Sales were $18.3 billion in 2025. In 2025 Goodyear sold three businesses to cut debt: the off-the-road mining tire business (sold to Yokohama in February 2025), the Dunlop brand (sold to Sumitomo Rubber) and the polymer chemicals plants in Houston and Beaumont, Texas ($650 million, closed October 31, 2025). Together the sales brought in $1.8 billion. How we measure earnings: we start with cash from operations, take out swings in working capital and stock-based pay, and take out all capital spending. Sales have fallen in most years, so none of that spending counts as growth investment. Two things stay in as real recurring costs: plant-closure and restructuring payments, which Goodyear has made every year for a decade ($59 to $431 million a year), and pension contributions. Goodwill write-offs ($674 million in 2025), the $1.36 billion deferred-tax charge, and the gains on the three business sales are non-cash or one-time, so they are left out. On that basis, cash earnings per share were $3.06 in 2016, $2.13 in 2017, $1.49 in 2018, $0.52 in 2019 and -$3.21 in 2020. After the Cooper Tire purchase in 2021 they were $1.67, $1.12, -$1.67, -$1.24 and -$1.24. Before paying lenders, the business produced about $1.1 billion in 2016. In 2023-2025 that fell to only $39 million, $159 million and $56 million a year. Over the same three years it paid $414-515 million a year in interest. Starting point: we measure from the 2021 Cooper merger, because earlier years describe a different company. That window covers both the 2021-2022 boom and the 2023-2025 slump. Restructuring payments in 2025 ($431 million) were well above the ten-year average (about $168 million). With that one item set at its average, the median for 2021-2025 is about $320 million a year before interest. The 10-K says the Dunlop and chemical sales will take about $185 million out of 2026 operating income, which leaves a normal level of about $170 million a year (about $0.59 per share). Cash earnings per share went from -$1.24 in 2024 to -$1.24 in 2025, essentially no change. Before interest, cash flow fell about 65%. For 2026 we assume $100 million, below the normal level. First-half 2026 results do not support more. Sales were $8.1 billion against $8.7 billion a year earlier, the net loss was $453 million, and pre-working-capital operating cash flow was about zero, against $102 million a year earlier. The only offsets are lower capital spending ($342 million vs $466 million) and lower restructuring payments ($123 million vs $204 million). Debt: at June 30, 2026 Goodyear owed $7.19 billion and held $861 million in cash. Working capital builds in the first half of every year and then reverses, so we add back the $620 million first-half build. That gives net debt of about $5.71 billion. Add $162 million owned by minority partners in subsidiaries, and claims ahead of shareholders come to about $5.87 billion, or $20.31 per share. Maturities are heavy: $1.18 billion in 2026, $1.04 billion in 2027, $0.80 billion in 2028 and $0.86 billion in 2029. All figures are discounted at 6%. Base case (-$10.74 per share): the business keeps producing about $170 million a year before interest, with no growth credited. Tires are a lasting replacement-demand business with a brand dating to 1898, so we do not end the story at year 10. But the record shows no named driver that lifts cash flow back toward the pre-2020 levels. The business is worth about $2.77 billion against $5.87 billion of claims, so the company appears to owe roughly $3.1 billion more than it is worth. At this level the business does not cover its own interest bill. It has been bridging the gap with asset sales, and that cannot go on forever. Bear case (-$19.87 per share): from 2027 the business earns the 2023-2025 average of about $85 million a year before interest. Low-cost imports, lower tire volumes (volume cut 2025 sales by $363 million) and tariff and raw-material costs keep pressing, and that level fades to zero over the following decade. Refinancing about $3 billion of 2026-2028 maturities at junk-bond rates about 2 points above 6% costs roughly $335 million more in today's money. The business is worth about $0.46 billion against $6.2 billion owed. Shareholders would be left with nothing in a restructuring. Bull case ($4.98 per share): the 10-K says Goodyear Forward will deliver about $300 million of extra savings in 2026. That money has largely been spent already: $629 million of restructuring cash in 2024-2025 went into closing plants and cutting jobs. In this case the savings stick and are not eaten up by volume and cost pressure, and pre-interest cash flow reaches about $450 million a year from 2027 and holds. That covers the roughly $400 million interest bill. The business would be worth about $7.3 billion against $5.87 billion owed. Even this case leaves shareholders with only a thin slice. Change from our prior view: we previously showed a base value of about -$4.50 and a bull value near $16. That earlier work subtracted debt from earnings that had already paid interest, which counted the debt twice. It also leaned on a mid-cycle earnings level the company has not reached since 2022. The new work counts the debt once, against cash flow before interest. It also reflects $1.8 billion of asset-sale proceeds that cut debt, which helps, and the earnings those businesses took with them, which hurts. Rebuilt this way, the result is still negative. What would make this wrong: if the Goodyear Forward cost cuts lift pre-interest cash flow above about $450 million a year for two straight years while debt keeps falling, the shares would carry real value. Nothing in the filings through June 2026 shows that yet.