Back to GetFilings.com

Table of Contents

UNITED STATES

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

For the fiscal year ended December 31, 2002

Commission File Number: 1-1927

Registrant’s telephone number, including area code: (330) 796-2121

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

      Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

Yes þ                         No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein or in the definitive proxy statement incorporated by reference in Part III of this Form 10-K. þ

      Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

      The aggregate market value of the voting stock held by nonaffiliates of the Registrant, computed by reference to the last sales price of such stock as of the closing of trading on June 28, 2002, was approximately $3,276,226,000.

Shares of Common Stock, Without Par Value, outstanding at March 10, 2003:

175,313,428

DOCUMENTS INCORPORATED BY REFERENCE:

      Portions of Registrant’s definitive Proxy Statement to be used in connection with its 2003 Annual Meeting of Shareholders are incorporated by reference into Part III.

Table of Contents

THE GOODYEAR TIRE & RUBBER COMPANY

Annual Report on Form 10-K

For the Fiscal Year Ended December 31, 2002

Table of Contents

Table of Contents

PART I.

ITEM 1.     BUSINESS.

BUSINESS OF GOODYEAR

      The Goodyear Tire & Rubber Company (the “Company”) is an Ohio corporation organized in 1898. Its principal offices are located at 1144 East Market Street, Akron, Ohio 44316-0001. Its telephone number is (330) 796-2121. The terms “Goodyear” and “we,” “us” or “our” wherever used herein refer to the Company together with all of its consolidated domestic and foreign subsidiary companies, unless the context indicates to the contrary.

      Goodyear is one of the world’s leading manufacturers of tires and rubber products, engaging in operations in most regions of the world. Goodyear’s 2002 net sales were $13.9 billion and its net loss for 2002 was $1.1 billion.

      Goodyear’s principal business is the development, manufacture, distribution and sale of tires for most applications. We also:

	•	manufacture and market —

	•	several lines of rubber and other products for the transportation industry and various other industrial and consumer markets; and
	•	synthetic rubber and rubber-related chemicals for various applications.

	•	provide automotive repair and other services at retail and commercial outlets.
	•	sell various other products.

AVAILABLE INFORMATION

      We make available free of charge on our website, http://www.goodyear.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practical after we file or furnish such reports to the SEC. The information on our website is not a part of this Annual Report on Form 10-K. We also will post on our website the code of ethics that we adopt for our principal executive officer and senior financial officers, as well as amendments and waivers.

RECENT DEVELOPMENTS

      On April 1, 2003 Goodyear completed a comprehensive refinancing and restructuring of its bank credit and receivables securitization facilities. After completing the refinancing and restructuring, Goodyear replaced a total of $2,938 million in finance facilities with a total of $3,345 million in finance facilities including:

	•	$750 million Senior Secured U.S. Revolving Credit Facility due April 2005;
	•	$645 million Senior Secured U.S. Term Facility due April 2005;
	•	$650 million Senior Secured European Facilities due April 2005; and
	•	$1,300 million Senior Secured Asset-Backed Facilities due March 2006.

      The restructured facilities replaced financial facilities that generally had shorter maturities than the restructured facilities and were unsecured with the exception of approximately $700 million in domestic accounts receivable securitizations and $63 million in Canadian accounts receivable securitizations. The restructuring left in place certain international accounts receivable securitizations.

      During 2002 and early 2003 there was a series of reductions in Goodyear’s credit ratings, and Goodyear perceived the possibility that it would not continue to comply with covenants in its financing agreements relating to pension plan funding and minimum net worth in its existing financing agreements. Accordingly, Goodyear entered into discussions with its lenders regarding amendments of its financing agreements, and obtained waivers of compliance with these covenants. Goodyear also reviewed with its lenders its publicly announced plan to improve its operational and financial performance, involving revitalization of its North American consumer

1

Table of Contents

      We pledged substantial collateral to secure our obligations under the restructured agreements. The agreements also limit our ability to incur additional indebtedness, make capital expenditures, sell assets and pay dividends. In the event we sell assets, we are required, subject to certain exceptions, to provide the lenders with certain percentages of the net proceeds we receive from such sales. For more information on the restructuring and refinancing of our loan agreements, see “Credit Sources” under Management’s Discussion and Analysis of Financial Condition and Results of Operations on page 40 of this Annual Report on Form 10-K.

      In connection with the refinancing and restructuring, on March 3, 2003, Sumitomo Rubber Industries, Ltd., Goodyear’s global alliance partner, consented to various transactions, including: Goodyear Dunlop Tires Europe B.V.’s purchase of Goodyear’s interest in Sava Tires Joint Venture Holding d.o.o.; and Goodyear Dunlop Tires Europe’s pledge of collateral to secure obligations under the new $650 million Senior Secured European Facilities. In addition, on January 1, 2003, Goodyear and Sumitomo agreed, among other things, to extend the period during which the parties are restricted from exercising their previously agreed respective global alliance exit rights from September 2004 to September 2009.

      In October 2000, Goodyear and Arkansas Best Corporation formed a joint venture company, Wingfoot Commercial Tire Systems LLC (“Wingfoot”) to engage in selling and servicing commercial truck tires, providing retread services and conducting related businesses. Goodyear transferred its commercial truck tire outlets and related assets in exchange for 81% of the equity of the joint venture and Arkansas Best Corporation’s subsidiary, Treadco Inc., contributed substantially all of its assets to Wingfoot in exchange for 19% of Wingfoot. On March 19, 2003, Arkansas Best Corporation notified Goodyear of its intention to exercise its right to put its 19% ownership interest to Goodyear for a cash price of approximately $71.3 million. The transaction is expected to close on or about April 28, 2003 after which Goodyear will own 100% of Wingfoot.

FORWARD-LOOKING INFORMATION — SAFE HARBOR STATEMENT

      Certain information set forth herein (other than historical data and information) may constitute forward-looking statements regarding events and trends which may affect our future operating results and financial position. The words “estimate,” “expect,” “intend” and “project,” as well as other words or expressions of similar meaning, are intended to identify forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Annual Report. Such statements are based on current expectations and assumptions, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including:

	•	changes in general economic and industry conditions in the various markets served by our operations;
	•	price and product competition;
	•	increased competitive activity;
	•	changes in demand levels for our products;
	•	fluctuations in the prices paid for raw materials and energy;
	•	our ability to control costs and expenses;
	•	changes in the monetary policies of various countries where we have significant operations;
	•	changes in interest and currency exchange rates;
	•	actions by rating agencies;
	•	our ability to access the capital markets;
	•	our ability to meet financial covenants contained in credit agreements;
	•	litigation and regulatory costs and expenses;

2

Table of Contents

	•	economic disruptions and risks of loss associated with global events, including war, acts of terror and civil obstructions; and
	•	other unanticipated events and conditions.

It is not possible to foresee or identify all such factors. We will not revise or update any forward-looking statement or disclose any facts, events or circumstances that occur after the date hereof that may affect the accuracy of any forward-looking statement.

DESCRIPTION OF GOODYEAR’S BUSINESS

GENERAL SEGMENT INFORMATION

      Goodyear’s operating segments are North American Tire, European Union Tire, Eastern Europe, Africa and Middle East Tire (“EEAME Tire”), Latin American Tire and Asia Tire (collectively, the “Tire Segments”), Engineered Products and Chemical Products.

FINANCIAL INFORMATION ABOUT OUR SEGMENTS

      Financial information relating to our operating “segments” for the three year period ended December 31, 2002 appears in Note 19 of the Notes to Financial Statements at pages 87 through 93, and is incorporated herein by reference.

GENERAL INFORMATION REGARDING TIRE SEGMENTS

      Our principal business is the development, manufacture, distribution and sale of tires and related products and services worldwide. We manufacture and market numerous lines of rubber tires for:

• automobiles

in each case for sale to vehicle manufacturers for mounting as original equipment (“OE”) and in replacement markets worldwide. We manufacture and sell tires under the Goodyear-brand, the Dunlop-brand, the Kelly-brand, the Fulda-brand, the Debica-brand, the Sava-brand and various other Goodyear owned “house” brands, and the brands of certain customers. In certain markets we also:

	•	manufacture and sell flaps for truck tires and other types of tires.
	•	retread truck, aircraft and heavy equipment tires.
	•	manufacture and sell tread rubber and other tire retreading materials.
	•	provide automotive repair services and miscellaneous other products and services.

      The principal products of the Tire Segments are new tires for most applications. Approximately 83.0% of our consolidated sales in 2002 were new tire sales (83.1% in 2001 and 81.2% in 2000). The percentages of each Tire Segment’s sales attributable to new tires during the periods indicated were:

3

Table of Contents

      Each Tire Segment exports tires to other Tire Segments. The financial results of each Tire Segment exclude sales but include operating income from tires sold to other Tire Segments and include sales and operating income derived from the sale of tires imported from other Tire Segments. Sales to unaffiliated customers are attributed to the segment that makes the sale to the unaffiliated customer.

      Tire unit sales for each Tire Segment and for Goodyear worldwide during the periods indicated were:

GOODYEAR’S ANNUAL TIRE UNIT SALES

      Our worldwide tire unit sales in the replacement and OE markets during the periods indicated were:

GOODYEAR WORLDWIDE ANNUAL TIRE UNIT SALES — REPLACEMENT AND OE

      New tires are sold under highly competitive conditions throughout the world. On a worldwide basis, Goodyear has two major competitors: Bridgestone (based in Japan) and Michelin (based in France). Other significant competitors include Continental, Cooper Tire, Pirelli, Toyo, Yokohama, Kumho, Hankook and various regional tire manufacturers.

      Goodyear competes with other tire manufacturers on the basis of product design, performance, price and reputation, warranty terms, customer service and consumer convenience. Goodyear-brand and Dunlop-brand tires enjoy a high recognition factor and have a reputation for performance, quality and value. Kelly-brand, Fulda-brand, Debica-brand, Sava-brand and various other house brand tire lines offered by Goodyear, and tires manufactured and sold by Goodyear to private brand customers, compete primarily on the basis of value and price.

      Goodyear does not consider its tire businesses to be seasonal to any significant degree. A significant inventory of new tires is maintained in order to optimize production schedules consistent with anticipated demand and assure prompt delivery to customers, especially “just in time” deliveries of tires or tire and wheel assemblies to OE manufacturers. Tire inventories are maintained at levels designed to optimize production schedules and prompt delivery to customers and minimize working capital requirements.

      Global Alliance. In 1999, Goodyear entered into a global alliance with Sumitomo Rubber Industries, Ltd. Under the global alliance agreements, Goodyear acquired 75%, and Sumitomo owned 25%, of Goodyear Dunlop Tires Europe B.V., a Netherlands holding company. Concurrently, the holding company acquired substantially all of Sumitomo’s tire businesses in Europe and most of Goodyear’s tire businesses in Europe.

      Goodyear also acquired 75%, and Sumitomo acquired 25%, of Goodyear Dunlop Tires North America, Ltd., a holding company that purchased Sumitomo’s tire manufacturing operations in North America and certain of its related tire sales and distribution operations. The global alliance involved other transactions, including Goodyear’s acquisition of 100% of the balance of Sumitomo’s Dunlop Tire replacement distribution and sales operations in the United States and Canada. The global alliance agreements also provided for the investment by Goodyear and Sumitomo in the common stock of the other. The cost of the acquired businesses totaled

4

Table of Contents

NORTH AMERICAN TIRE

      Goodyear’s largest segment, the North American tire business (North American Tire), develops, manufactures, distributes and sells tires and related products and services in the United States and Canada. North American Tire manufactures tires in eleven plants in the United States and three plants in Canada. Certain Dunlop-brand related businesses of North American Tire are conducted by Goodyear Dunlop Tires North America, Ltd., which is 75% owned by Goodyear and 25% owned by Sumitomo.

      Tires. North American Tire manufactures and sells tires for automobiles, trucks, motorcycles, buses, farm implements, earthmoving equipment, commercial and military aircraft and industrial equipment and for various other applications.

      Goodyear-brand radial passenger tire lines sold in North America include Eagle high performance and run-flat extended mobility technology (EMT) tires. Dunlop-brand radial passenger tire lines sold in North America include SP Sport performance tires. The major lines of Goodyear-brand radial tires offered in the United States and Canada for sport utility vehicles and light trucks are Wrangler and Fortera. Goodyear also offers Dunlop-brand radials for light trucks such as the Rover and Grandtrek lines. North American Tire also manufactures and sells several lines of Kelly-brand, other house brands and several lines of private brand radial passenger tires in the United States and Canada.

      A full line of Goodyear-brand all-steel cord and belt construction radial medium truck tires, the Unisteel series, for various applications, including line haul highway use and off-road service are manufactured and sold. In addition, various lines of Dunlop-brand, Kelly-brand, other house and private brand radial truck tires are sold in the United States and Canadian replacement markets.

      Related Products and Services. North American Tire also:

	•	retreads truck, aircraft and heavy equipment tires, primarily as a service to its commercial customers.
	•	manufactures tread rubber and other tire retreading materials for trucks, heavy equipment and aircraft.
	•	manufactures rubber track for agricultural and construction equipment.
	•	provides automotive maintenance and repair services at approximately 800 retail outlets.
	•	sells automotive repair and maintenance items, automotive equipment and accessories and other items to dealers and consumers.
	•	provides miscellaneous other products and services.

Market and Other Information

      Tire unit sales in the replacement and OE markets in the United States and Canada during the periods indicated were:

NORTH AMERICAN TIRE UNIT SALES — REPLACEMENT AND OE

      We are a major supplier of tires to most manufacturers of automobiles, motorcycles, trucks, farm and construction equipment and aircraft that have production facilities located in North America.

      Goodyear-brand, Dunlop-brand and Kelly-brand tires are sold in the United States and Canadian replacement markets through several channels of distribution. The principal channel for Goodyear-brand tires is a large network of independent dealers. Goodyear-brand, Dunlop-brand and Kelly-brand tires are also sold to numerous national and regional retail marketing firms in the United States. North American Tire also operates approxi-

5

Table of Contents

      Automotive parts, automotive maintenance and repair services and associated merchandise are sold under highly competitive conditions in the United States and Canada through retail outlets operated by us.

      North American Tire from time to time offers various financing and extended payment programs to certain of its tire customers in the replacement market. Goodyear does not believe these programs, when considered in the aggregate, require an unusual amount of working capital relative to the volume of sales involved and are consistent with prevailing tire industry practices.

      We are subject to regulation by the National Highway Traffic Safety Administration (“NHTSA”), which has established various standards and regulations applicable to tires sold in the United States for highway use. NHTSA has the authority to order the recall of automotive products, including tires, having safety defects related to motor vehicle safety. NHTSA’s regulatory authority was expanded in November 2000 as a result of the enactment of The Transportation Recall Enhancement, Accountability, and Documentation Act (the “TREAD Act”).

      The TREAD Act imposes numerous requirements with respect to tire recalls and also requires tire manufacturers, among other things, to remedy tire safety defects without charge for five (5) years, and to conform with revised and more rigorous tire standards, once the revised standards are implemented.

      In addition, in November 2003, manufacturers of light vehicles must begin a phase-in process for equipping those vehicles with a tire pressure monitoring system. Compliance with the TREAD Act regulations increases the cost of producing and distributing tires in the United States.

EUROPEAN UNION TIRE

      Our second largest Tire Segment, European Union Tire, develops, manufactures, distributes and sells tires for automobiles, motorcycles, trucks, farm implements and construction equipment in the member states of the European Union and in Norway and Switzerland, exports tires to other regions of the world and provides related products and services. European Union Tire manufactures tires in plants located in England, France, Germany and Luxembourg. Substantially all of the operations and assets of European Union Tire are owned and operated by Goodyear Dunlop Tires Europe B.V., a 75% owned subsidiary of Goodyear.

      European Union Tire:

	•	manufactures and sells Goodyear-brand, Dunlop-brand, Fulda-brand, Kelly-brand and other house brand passenger, truck, motorcycle, farm and heavy equipment tires.
	•	sells Debica-brand and Sava-brand passenger, truck and farm tires manufactured by the Eastern Europe, Africa and Middle East Tire Segment.
	•	sells new, and manufactures and sells retreaded, aircraft tires.
	•	provides various retreading and related services for truck and heavy equipment tires, primarily for its commercial truck tire customers.
	•	offers automotive repair services at retail outlets in which it owns a controlling interest.
	•	provides miscellaneous related products and services.

6

Table of Contents

Markets and Other Information

      European Union Tire distributes and sells tires throughout western Europe. Tire unit sales to OE customers and in the replacement markets served by European Union Tire were:

EUROPEAN UNION TIRE UNIT SALES — REPLACEMENT AND OE

      European Union Tire is a significant supplier of tires to most manufacturers of automobiles, trucks and farm and construction equipment located in western Europe.

      Goodyear’s primary competitor in western Europe is Michelin. Other significant competitors include Continental, Bridgestone, Pirelli, several regional tire producers and imports from other regions, primarily Eastern Europe and Asia.

      Goodyear-brand and Dunlop-brand tires are sold in the several replacement markets served by European Union Tire through various channels of distribution, principally independent multi-brand tire dealers. In some markets, Goodyear-brand tires, as well as Dunlop-brand, Kelly-brand, Fulda-brand, Debica-brand and Sava-brand tires, are distributed through independent dealers, regional distributors and retail outlets, of which approximately 430 are owned by Goodyear.

EASTERN EUROPE, AFRICA AND MIDDLE EAST TIRE

      Our Eastern Europe, Africa and Middle East Tire Segment (“EEAME Tire”) manufactures and sells passenger, truck, farm and construction equipment tires in eastern Europe, Africa and the Middle East. EEAME Tire manufactures tires in Morocco, Poland, Slovenia, South Africa and Turkey. EEAME Tire:

	•	maintains sales operations in most countries in eastern Europe (including Russia), Africa and the Middle East.
	•	exports tires for sale in western Europe, North America and other regions of the world.
	•	provides related products and services in certain markets.

      EEAME Tire:

	•	manufactures and sells Goodyear-brand, Kelly-brand, Debica-brand and Sava-brand tires and sells Dunlop-brand and Fulda-brand tires manufactured by European Union Tire.
	•	sells new and retreaded aircraft tires.
	•	provides various retreading and related services for truck and heavy equipment tires.
	•	sells automotive parts and accessories.
	•	provides automotive repair services.

Markets and Other Information

      EEAME Tire distributes and sells tires to all classes of customers in most countries in eastern Europe, Africa and the Middle East.

7

Table of Contents

      Tire unit sales by EEAME Tire to OE customers and in the several replacement markets served were:

EEAME TIRE UNIT SALES — REPLACEMENT AND OE

      EEAME Tire has a significant share of each of the markets it serves and is a significant supplier of tires to manufacturers of automobiles, trucks, and farm and construction equipment in Morocco, Poland, South Africa and Turkey. Its major competitors are Michelin, Bridgestone, Continental and Pirelli. Other competition includes regional and local tire producers and imports from other regions, primarily Asia.

      Goodyear-brand tires are sold by EEAME Tire in the various replacement markets primarily through independent tire dealers and wholesalers who sell several brands of tires. In some countries, Goodyear-brand, Dunlop-brand, Kelly-brand, Fulda-brand, Debica-brand and Sava-brand tires are sold through regional distributors and multi-brand dealers. In South Africa, tires are also sold through a retail chain of approximately 174 retail stores operated by Goodyear. In the Middle East and most of Africa, tires are sold primarily to regional distributors for resale to independent dealers.

LATIN AMERICAN TIRE

      Our Latin American Tire Business Segment manufactures and sells automobile, truck and farm tires in Mexico and throughout Central and South America (“Latin America”), sells tires to various export markets, retreads and sells commercial truck, aircraft and heavy equipment tires, and provides other products and services. Latin American Tire manufactures tires in Brazil, Chile, Colombia, Guatemala, Peru and Venezuela.

      Latin American Tire manufactures and sells several lines of passenger, light and medium truck and farm tires. Latin American Tire also:

	•	manufactures and sells pre-cured treads for truck and heavy equipment tires.
	•	retreads, and provides various materials and related services for retreading, truck, aircraft and heavy equipment tires.
	•	manufactures other products, including batteries for motor vehicles.
	•	manufactures and sells new aircraft tires.
	•	provides miscellaneous other products and services.

Markets and Other Information

      Latin American Tire is a major supplier of tires to most automobile and truck manufacturers in Latin America and sells tires to independent dealers and distributors in the various replacement markets in Latin America. We are a leading participant in each of the markets served by Latin American Tire.

      Tire unit sales by Latin American Tire to OE customers and in the replacement markets served were:

LATIN AMERICAN TIRE UNIT SALES — REPLACEMENT AND OE

ASIA TIRE

      Our tire business in Asia manufactures and sells tires for automobiles, light and medium trucks, farm implements, construction equipment and aircraft throughout east, southeast and south Asia and the western Pacific. Asia Tire manufactures tires in China, India, Indonesia, Japan, Malaysia, the Philippines, Taiwan and

8

Table of Contents

Markets and Other Information

      The number of tires sold by Asia Tire in the replacement markets and to OE customers during the periods indicated were:

ASIA TIRE UNIT SALES — REPLACEMENT AND OE

      Asia Tire information does not include the operations of South Pacific Tyres, an Australian Partnership, and South Pacific Tyres N.Z. Limited, a New Zealand Company (together, “SPT”), joint ventures 50% owned by Goodyear and 50% owned by Ansell Ltd. SPT is the largest tire manufacturer in Australia and New Zealand, with 2 tire manufacturing plants and 17 retread plants. SPT sells Goodyear-brand, Dunlop-brand and other house and private brand tires through its chain of 466 retail stores and commercial tire centers. For more information regarding SPT, see Notes 19 and 20 of the Notes to Financial Statements at pages 87 through 94.

ENGINEERED PRODUCTS

      Our Engineered Products Segment develops, manufactures, distributes and sells numerous rubber and thermoplastic products worldwide. The products and services offered by Engineered Products include:

	•	antivibration products.
	•	belts and hoses for motor vehicles.
	•	conveyor and power transmission belts.
	•	air, water, steam, hydraulic, petroleum, fuel, chemical and materials handling hose for industrial applications.
	•	tank tracks.
	•	miscellaneous products and services.

Engineered Products manufactures products at nine plants in the United States and 15 plants in Australia, Brazil, Canada, Chile, China, Mexico, Slovenia, South Africa and Venezuela.

Markets and Other Information

      Engineered Products sells its products to manufacturers of vehicles and various industrial products and to independent wholesale distributors. More than 50 major firms participate in the various markets served by Engineered Products. There are several suppliers of automotive belts and hose products, air springs, engine mounts and other rubber components for motor vehicles. Goodyear is a significant supplier of these products. Goodyear is a leading supplier of conveyor and power transmission belts and industrial hose products. The principal competitors of Engineered Products include Dana, Mark IV, Gates, Bridgestone, Conti-Tech, Trelleborg, Tokai/ DTR, Unipoly and Habasit.

      These markets are highly competitive, with quality, service and price all being significant factors to most customers. Goodyear believes the products offered by Engineered Products are considered to be high quality and competitive in price and performance.

CHEMICAL PRODUCTS

      Our Chemical Products Segment develops, manufactures, distributes and sells synthetic rubber and rubber latices, various resins and organic chemicals used in rubber and plastic processing, and other chemical products to

9

Table of Contents

      Approximately 65% of Chemical Products synthetic materials sales are to our other segments. All production is in the United States.

Markets and Other Information

      The Tire Segments purchase approximately 70% of the synthetic rubber, and a significant portion of the rubber processing chemicals, produced by Chemical Products. All of the natural rubber produced by Goodyear’s plantation and processing facility is used by Goodyear. All external sales of rubber processing and other chemical products are made directly to manufacturers of various products.

      Several major firms are significant suppliers of one or more chemical products similar to those manufactured by Goodyear. The principal competitors of Chemical Products include Bayer, Dow and Ameripol Synpol. The markets are highly competitive, with product quality and price being the most significant factors to most customers. Goodyear believes the products offered by Chemical Products are generally considered to be high quality and competitive in price.

GENERAL BUSINESS INFORMATION

Sources and Availability of Raw Materials

      The principal raw materials used by Goodyear are synthetic and natural rubber. We purchase substantially all of our requirements for natural rubber in the world market. Synthetic rubber typically accounts for slightly more than half of all rubber consumed by Goodyear on an annual basis. Our plants located in Beaumont, and Houston, Texas, supply the major portion of our synthetic rubber requirements in North America. We purchase a significant amount of our synthetic rubber requirements outside North America from third parties.

      We use nylon and polyester yarns, substantial quantities of which are processed in our textile mills. Significant quantities of steel wire are used for radial tires, a portion of which we produce. Other important raw materials used by Goodyear are carbon black, pigments, chemicals and bead wire. Substantially all of these raw materials are purchased from independent suppliers, except for certain chemicals we manufacture. We purchase most raw materials in significant quantities from several suppliers, except in those instances where only one or a few qualified sources are available. As in 2002, we anticipate the continued availability of all raw materials we will require during 2003, subject to spot shortages.

      Substantial quantities of hydrocarbon-based chemicals and fuels are used in the production of tires and other rubber products, synthetic rubber, latex and other products. Supplies of chemicals and fuels have been and are expected to continue to be available to us in quantities sufficient to satisfy our anticipated requirements, subject to spot shortages.

      In 2002, raw materials costs decreased from 2001 levels. Raw materials costs are expected to increase during 2003 driven by increases in costs of oil and natural rubber. Prices for raw materials and fuels may fluctuate significantly during 2003.

Patents and Trademarks

      Goodyear owns approximately 2,300 product, process and equipment patents issued by the United States Patent Office and approximately 6,000 patents issued or granted in other countries around the world. Goodyear also has licenses under numerous patents of others. Goodyear also has approximately 650 applications for United States Patents pending and approximately 4,700 patent applications on file in other countries around the world. While such patents, patent applications and licenses as a group are important, we do not consider any patent, patent application or license, or any related group of them, to be of such importance that the loss or expiration thereof would materially affect Goodyear or any segment.

10

Table of Contents

      Goodyear owns or controls and uses approximately 1,400 different trademarks, including several using the word “Goodyear” or the word “Dunlop.” These trademarks are protected by approximately 9,100 registrations and 900 pending applications worldwide. While such trademarks as a group are important, the only trademarks we consider material to our business or to the business of any of our segments are those using the word “Goodyear,” which we believe are valid and most of which are of unlimited duration as long as they are adequately protected and appropriately used.

Backlog

      Our backlog of orders is not considered material to, or a significant factor in, evaluating and understanding any of our segments or our businesses considered as a whole.

Research and Development

      Our direct and indirect expenditures on research, development and certain engineering activities relating to the design, development, improvement and modification of new and existing products and services and the formulation and design of new, and improvements to existing, manufacturing processes and equipment during the periods indicated were:

Employees

      At December 31, 2002, Goodyear employed approximately 92,742 people throughout the world, including approximately 38,503 persons in the United States. Approximately 11,367 of our employees in the United States were covered by a master collective bargaining agreement, dated May 9, 1997 (as supplemented in 2000), with the United Steel Workers of America, A.F.L.-C.I.O.-C.L.C. (“USWA”), which expires on April 19, 2003. The Company is currently negotiating a new agreement with the USWA. As of April 3, 2003 it was uncertain whether an agreement would be reached without interruption of production. In addition, approximately 8,732 of our employees in the United States were covered by other contracts with the USWA and various other unions. The major portion of Goodyear’s employees in Europe and Latin America are represented by unions.

Compliance with Environmental Regulations

      Goodyear is subject to extensive regulation under environmental and occupational health and safety laws and regulations. These laws and regulations relate to, among other things, air emissions, discharges to surface and underground waters and the generation, handling, storage, transportation and disposal of waste materials and hazardous substances. We have several continuing programs designed to ensure compliance with federal, state and local environmental and occupational safety and health laws and regulations. We expect capital expenditures for pollution control facilities and occupational safety and health projects will be approximately $20 million during 2003 and approximately $18 million during 2004.

      In addition, we expended approximately $68 million during 2002, and expect to expend approximately $69 million during 2003 and approximately $55 million during 2004, to maintain and operate our pollution control facilities and conduct our other environmental and occupational safety and health activities, including the control and disposal of hazardous substances. These expenditures are expected to be sufficient to comply with existing environmental and occupational safety and health laws and regulations and are not expected to have a material adverse effect on our competitive position.

      In the future we may incur increased costs and additional charges associated with environmental compliance and cleanup projects necessitated by the identification of new waste sites, the impact of new environmental laws and regulatory standards, or the availability of new technologies. Compliance with federal, state and local environmental laws and regulations in the future may require a material increase in our capital expenditures and could adversely affect our earnings and competitive position.

11

Table of Contents

INFORMATION ABOUT INTERNATIONAL OPERATIONS

      Goodyear engages in manufacturing and/or sales operations in most countries in the world, often through subsidiary companies. We have manufacturing operations in the United States and 27 other countries. Most of our international manufacturing operations relate to the production of tires. Several engineered rubber and certain other products are also manufactured in plants located outside the United States. Financial information relating to our geographic areas for the three year period ended December 31, 2002 appears in Note 19 of the Notes to Financial Statements at pages 87 through 93, and is incorporated herein by reference.

      In addition to the ordinary risks of the marketplace, our operations in some countries are affected by price controls, import controls, labor regulations, tariffs, extreme inflation and/or fluctuations in currency values. Furthermore, in certain countries where we operate, transfers of funds into or out of such countries are generally or periodically subject to various restrictive governmental regulations.

ITEM 2.     PROPERTIES.

      Goodyear manufactures its products in 85 manufacturing facilities located around the world. There are 30 plants in the United States and 55 plants in 27 other countries.

      NORTH AMERICAN TIRE MANUFACTURING FACILITIES. Goodyear owns (or leases with the right to purchase at a nominal price) and operates 22 manufacturing facilities operated by North American Tire. These facilities have floor space aggregating approximately 24.6 million square feet and consist of:

	•	14 tire plants (11 in the United States and three in Canada),
	•	one steel tire wire cord plant,
	•	one tire mold plant,
	•	three textile mills, and
	•	three tread rubber plants.

      EUROPEAN UNION TIRE MANUFACTURING FACILITIES. European Union Tire owns and operates:

	•	13 tire plants,
	•	one tire fabric processing facility,
	•	one steel tire wire cord plant, and
	•	one tire mold and tire manufacturing machines facility.

These facilities have floor space aggregating approximately 12.6 million square feet.

      EASTERN EUROPE, AFRICA AND MIDDLE EAST TIRE MANUFACTURING FACILITIES. Goodyear owns six tire plants operated by EEAME Tire. These facilities have floor space aggregating approximately 7.5 million square feet.

      LATIN AMERICAN TIRE MANUFACTURING FACILITIES. Goodyear owns seven tire manufacturing plants operated by Latin American Tire. Goodyear also manufactures tread rubber and tire molds in Brazil and batteries in Chile. The Latin American facilities have floor space aggregating approximately 6.1 million square feet.

      ASIA TIRE MANUFACTURING FACILITIES. Goodyear owns nine tire plants operated by Asia Tire. These facilities have floor space aggregating approximately 5.2 million square feet.

      ENGINEERED PRODUCTS MANUFACTURING FACILITIES. Goodyear owns (or leases with the right to purchase at a nominal price) 23 facilities at eight United States and 15 international locations operated by Engineered Products. These facilities have floor space aggregating approximately 6.4 million square feet. Certain facilities manufacture more than one group of products. The facilities include:

12

Table of Contents

      CHEMICAL PRODUCTS MANUFACTURING FACILITIES. Goodyear owns four manufacturing facilities operated by Chemical Products. These facilities have floor space aggregating approximately 1.9 million square feet. The facilities are located in the United States and produce synthetic rubber and rubber latices, synthetic resins, and other organic chemical products.

      PLANT UTILIZATION. Our worldwide tire capacity utilization rate was approximately 86% during 2002, compared to approximately 89% during 2001 and 95% during 2000. We expect to have production capacity sufficient to satisfy presently anticipated demand for our tires and other products for the foreseeable future.

      OTHER FACILITIES. Goodyear also owns and operates a rubber plantation processing facility in Indonesia, four research and development facilities and technical centers, and six tire proving grounds. We also operate approximately 1,664 retail outlets for the sale of our tires to consumers, approximately 110 tire retreading facilities and approximately 197 warehouse distribution facilities. Substantially all of these facilities are leased. We do not consider any one of these leased properties to be material to our operations. For additional information regarding leased properties, see Note 8, “Properties and Plants,” and Note 9, “Leased Assets,” of the Notes to Financial Statements at pages 69 through 71.

ITEM 3.     LEGAL PROCEEDINGS.

      At April 3, 2003, Goodyear was a party to the following material legal proceedings, as defined in the Instructions to Item 103 of Regulation S-K:

      (A) A series of 66 civil actions were filed against the Company in the United States District Court for the District of Maryland relating to the alleged exposure of former employees of a former subsidiary (and now a part) of the Company, to allegedly toxic substances while working at a tire plant that was closed in 1987. The plaintiffs alleged, among other things, that the Company, as the manufacturer or seller of certain materials, negligently failed to warn them of the health risks associated with their employment at the plant and failed to implement procedures to preserve their health and safety. The plaintiffs sought an aggregate of $650 million in compensatory damages and $6.46 billion in punitive damages. On January 28, 1999, the District Court granted the Company’s motion for summary judgment on causation and issued an order and judgment dismissing each case with prejudice and assessing costs to the plaintiffs. The decision of the District Court was ultimately affirmed by the United States Court of Appeals for the Fourth Circuit. The Supreme Court of the United States has denied the plaintiffs’ petition for a Writ of Certiorari seeking a review of the District Court’s decision.

      (B) On June 7, 1990, a civil action, Teresa Boggs, et al. v. Divested Atomic Corporation, et al. (Case No. C-1-90-450), was filed in the United States District Court for the Southern District of Ohio by Teresa Boggs and certain other named plaintiffs on behalf of themselves and a putative class comprised of certain other persons who resided near the Portsmouth Uranium Enrichment Complex, a facility owned by the United States Department of Energy located in Pike County, Ohio (the “DOE Plant”), against Divested Atomic Corporation (“DAC”), the successor by merger of Goodyear Atomic Corporation (“GAC”), the Company, and Lockheed Martin Energy Systems (“LMES”). GAC operated the DOE Plant for several years pursuant to a series of contracts with the DOE until LMES assumed operation of the DOE Plant on November 16, 1986. The plaintiffs allege that the operators of the DOE Plant contaminated certain areas near the DOE Plant with radioactive and/or other hazardous materials causing property damage and emotional distress. Plaintiffs claim $300 million in

13

Table of Contents

      (C) On March 15, 1995, a civil action, Orion Tire Corporation, et al. v. Goodyear, et al. (Case No. SA CV 95-221), was filed in the United States District Court for the Central District of California, against the Company, Goodyear International Corporation, a subsidiary of the Company (“GIC”), and five individuals, including Samir G. Gibara, Chairman of the Board and then Chief Executive Officer of the Company, by Orion Tire Corporation (“Orion”), China Tire Holdings Limited (“China Tire”), and China Strategic Holdings Limited (“China Strategic”). The plaintiffs allege, among other things, that in connection with Goodyear’s 1994 acquisition of a 75% interest in a tire manufacturing facility in Dalian, People’s Republic of China (the “Dalian Facility”), the Company and GIC engaged in tortious interference with certain alleged contractual relationships of plaintiffs involving the Dalian Facility and committed trade libel and defamation by making oral defamatory and written libelous statements concerning the plaintiffs to various parties. The plaintiffs claimed more than $1.0 billion in actual damages and $3.0 billion in exemplary damages from the Company and GIC and such further relief as the court may deem appropriate. On motions made by the Company, the District Court dismissed all individual defendants from the proceedings for lack of jurisdiction, dismissed all claims made by China Strategic and most of the claims made by Orion and China Tire, and, on August 12, 1999, entered an order dismissing the entire cause of action. The dismissal was reversed and vacated in part by the United States Court of Appeals for the Ninth Circuit. On June 28, 2002, China Tire and Orion filed a second amended complaint, which was dismissed by the District Court on January 13, 2003.

      (D) In January of 1997, the Company filed a civil action, Goodyear v. Chiles Power Supply Inc. (Case No. 5:97CV0335), in the United States District Court for the Northern District of Ohio, Eastern Division, against Chiles Power Supply Inc. (“Heatway”) seeking (a) to collect approximately $2.0 million for Entran II hose sold to Heatway and (b) to obtain a declaratory judgment in respect of Entran II hose sold to Heatway. Heatway counterclaimed for damages allegedly in excess of $2.0 billion, claiming, among other things, that the Entran II hose did not comply with the implied warranty of merchantability. Following a trial, the jury rendered its verdict in favor of the Company, finding that the Company did not breach the implied warranty of merchantability in respect of the 25 million feet of Entran II hose sold to Heatway. On February 4, 2000, the Court entered its order terminating and dismissing all of the counterclaims of Heatway and entering a judgment against Heatway for $2.07 million, plus interest and costs. On February 25, 2000, Heatway filed a voluntary petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court, Western District of Missouri.

      The Company is a defendant in the following civil actions relating to Entran II hose used in Heatway systems:

(1)

In November 1998, a class action complaint was filed in the District Court of Eagle County, Colorado, Anderson, et al. v. Goodyear, et al. (Case No. 98CV439), on behalf of a putative class consisting of all persons who have or have had an ownership interest in real property located in Colorado in which Heatway heating systems using Entran II hose had been installed. These plaintiffs claim, among other things, breach of express warranties, breach of implied warranties of merchantability and fitness for a particular purpose, negligence and strict liability for defective product against both Heatway and Goodyear. On November 7, 2001, the court issued an order certifying a class to consist of all persons who presently own or have owned

14

Table of Contents

	real property located in Colorado on which Entran II hose was used in Heatway systems and have suffered or will suffer damages due to the alleged defective nature of Entran II hose. A number of property owners have opted out of the class action, and the class action now involves approximately 600 property sites. Goodyear’s motion to decertify the class was denied on January 17, 2003. This matter is scheduled for trial in July of 2003.
(2)	In March 2001, a class action complaint was filed against the Company (Stephen Payne, et al. v. Goodyear, Case No. 01-10118-NG) in the United States District Court, District of Massachusetts, by the named plaintiffs individually and on behalf of a putative class consisting of all property owners in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont who have Entran II hose installed as part of a Heatway radiant floor heating system in their homes, buildings or other structures alleging, among other things, that Entran II hose as designed was defective, not of merchantable quality, and that Goodyear breached implied warranties of merchantability and fitness for a particular purpose. Plaintiffs seek damages in unspecified amounts, certain statutory damages, interest, costs and expenses and such further relief as the court shall deem proper. The court has yet to take action with respect to class certification.
(3)	The Company is the defendant in a class action, Jane Bates, et al. v. Goodyear (Case No. D-0101-CV-2001-359), in the First Judicial District Court, Santa Fe County, New Mexico, filed in February 2001 on behalf of owners of 3 sites individually and as representatives of a class of similarly situated homeowners in New Mexico as of March 1, 2002, alleging, among other things, that Entran II hose used in the Heatway heating systems installed in their homes is defective and unfit for that purpose and seeking unspecified damages to include, among other things, punitive damages. Goodyear is appealing the certification of the class.
(4)	On July 30, 2002, a class action complaint, Ronald J. Frank, et al. v. Goodyear (Case No. 02-CV-0985), was filed in the United States District Court for the Northern District of New York on behalf of all owners of radiant heating systems incorporating Entran II hose located in the State of New York alleging, among other things, that the Entran II hose was defectively designed, that Goodyear failed to warn of foreseeable risks associated with the use of Entran II hose in radiant heating systems, that Goodyear breached implied warranties of merchantability and fitness for a particular purpose, that Goodyear was unjustly enriched and that Goodyear violated certain sections of the New York consumer protection and deceptive acts and practices statute. The plaintiffs are seeking damages, restitution of profits, attorney’s fees and costs and such other relief as the court may deem proper. Three similar class actions initially filed in state court have all been removed by Goodyear to federal court: Bates, et al. v. Goodyear, filed on August 9, 2002 (Case No. 02-CV-0662A, United States District Court, Western District of New York); Crawford, et al. v. Goodyear, filed on November 8, 2002 (Case No. 02-8989, United States District Court, Eastern District of Pennsylvania); and Galanti, et al. v. Goodyear, filed on December 6, 2002 (Case No. 03-209, United States District Court, Southern District of New Jersey). Goodyear is subject to two additional class actions, Glanville, et al. v. Goodyear (Case No. A03-018), filed on January 22, 2003, in the United States District Court for the District of Alaska and Ditlow, et al. v. Goodyear (Case No. 20030521), filed on January 30, 2003, in the Court of Common Pleas, Dauphin County, Pennsylvania.
(5)	On September 16, 2002, a civil complaint, Malek, et al. v. Goodyear (Case No. 02-B-1172), was filed by owners of 27 sites in the United States District Court for the District of Colorado alleging, among other things, that Goodyear’s Entran II hose was defective and that Goodyear violated the Colorado Consumer Protection Act and seeking unspecified damages equal to three times actual damages, incidental and consequential damages, exemplary damages and attorney’s fees and costs. Goodyear is subject to four similar actions in federal and state courts in Colorado: Loughridge v. Chiles Power Supply, Inc. v. Goodyear (Case No. 98-B-1302, United States District Court for the District of Colorado) involving 36 sites and set for trial on April 28, 2003; Davis et al. v. Goodyear (Case No. 99CV594, District Court, Eagle County, Colorado) involving 11 sites; Albers v. Goodyear (Case No. 02CV613, District Court, Eagle County, Colorado) involving 1 site; and Holmes v. Goodyear, (Case No. 98CV268-A, District Court, Pitkin County, Colorado) involving 1 site and set for trial on October 7, 2003.
(6)	In Goodyear v. Vista Resorts, Inc. (Case No. 02CA1690, Colorado Court of Appeals), an action involving five homesites, a trial was held in Colorado State Court, and on February 28, 2002 a jury rendered a verdict in favor of plaintiffs in the aggregate amount of approximately $5.9 million, which damages are trebled under

15

Table of Contents

the Colorado Consumer Protections Act. The total damages awarded are approximately $22.7 million, including interest, attorney’s fees and costs. In another case in Colorado State Court (Sumerel et at. v. Goodyear et al., Case No. 02CA1997, Colorado Court of Appeals), a judgment was entered against the Company in the amount of $1.3 million plus interest and costs. The Company has appealed these decisions.

      (E) A class action seeking damages and equitable relief, Julie Harper et al. v. Goodyear et al., is pending in Circuit Court No. 18, 3rd Judicial Circuit, Madison County, Illinois (Case No. 00L11540). The plaintiffs, on behalf of themselves and all persons nationwide (other than claimants for personal injury or wrongful death) who own or lease vehicles on which are mounted specified types of Goodyear-brand, Kelly-brand and certain house-brand load range E and load range D light truck and recreational vehicle tires, allege, among other things, that (i) Goodyear engaged in a “silent recall” of the specified types of load range D and E tires, thereby committing an unfair and deceptive trade practice, (ii) the specified types of tires did not conform to the express and implied warranties of merchantability, and (iii) Goodyear was negligent in the design and manufacture of the specified types tires. Plaintiffs are seeking actual damages, costs of suit, reasonable attorney’s fees, prejudgment interest, punitive or exemplary damages, a court supervised recall and repair or replacement program, and a public awareness campaign to alert the public to any defects in the specified types of tires. In addition, eleven civil lawsuits related to deaths or serious injuries involving allegedly defective Goodyear manufactured load range E light truck tires were pending as of December 31, 2002. The plaintiffs in these cases are claiming actual and punitive damages in various amounts.

      (F) Goodyear is currently one of several (typically 50 to 80) defendants in civil actions involving approximately 97,000 claimants (as of December 31, 2002) relating to their alleged exposure to materials containing asbestos in products manufactured by Goodyear or asbestos materials at Goodyear facilities. These cases are pending in various state courts, including primarily courts in Florida, Maryland, Michigan, Mississippi, New York, Ohio, Pennsylvania, Texas and West Virginia, and in certain federal courts relating to the plaintiffs’ alleged exposure to materials containing asbestos. Goodyear manufactured, among other things, rubber coated asbestos sheet gasket materials from 1914 through 1973 and aircraft brake assemblies containing asbestos materials prior to 1987. Some of the claimants are independent contractors or their employees who allege exposure to asbestos while working at certain Goodyear facilities. It is expected that in a substantial portion of these cases there will be no evidence of exposure to a Goodyear manufactured product containing asbestos or asbestos in Goodyear facilities. Goodyear has disposed of approximately 23,500 similar civil actions in the past through dismissals and settlements. The amount expended by Goodyear on defense and claim resolution during 2002 was approximately $19.3 million (before recovery of insurance proceeds). The plaintiffs in the pending cases allege that they were exposed to asbestos and, as a result of such exposure suffer from various respiratory diseases, including in some cases mesothelioma and lung cancer. The plaintiffs are seeking unspecified actual and punitive damages and other relief.

      (G) In addition to the legal proceedings described above, various other legal actions, claims and governmental investigations and proceedings covering a wide range of matters were pending against Goodyear at April 3, 2003, including claims and proceedings relating to several waste disposal sites that have been identified by the United States Environmental Protection Agency and similar agencies of various States for remedial investigation and cleanup, which sites were allegedly used by Goodyear in the past for the disposal of industrial waste materials. Based on available information, we do not consider any such action, claim, investigation or proceeding to be material, within the meaning of that term as used in Item 103 of Regulation S-K and the instructions thereto.

      Based on available information, we have determined, in the case of each legal proceeding pending against us at April 3, 2003 that either (i) it is not reasonably possible that Goodyear has incurred liability in respect thereof or (ii) any liability ultimately incurred will not exceed the amount, if any, recorded in respect of such proceeding at December 31, 2002, by a material amount relative to the consolidated financial position, results of operations or liquidity of Goodyear at December 31, 2002. However, in the event of an unanticipated adverse final determination in respect of certain proceedings, Goodyear’s results of operations, financial position and liquidity for the period in which such determination occurs could be materially affected.

16

Table of Contents

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

      No matter was submitted to a vote of the security holders of the Company during the quarter ended December 31, 2002.

EXECUTIVE OFFICERS OF THE REGISTRANT

      Set forth below are: (1) the names and ages of all executive officers of the Company at April 3, 2003, (2) all positions with the Company presently held by each such person and (3) the positions held by, and principal areas of responsibility of, each such person during the last five years.

17

Table of Contents

18

Table of Contents

19

Table of Contents

20

Table of Contents

PART II.

      The principal market for Goodyear’s common stock is the New York Stock Exchange (Stock Exchange Symbol GT). Goodyear’s common stock is also listed on the Chicago Stock Exchange and The Pacific Exchange.

      Information relating to the high and low sale prices of shares of Goodyear’s common stock and the dividends paid on such shares during 2002 and 2001 appears under the caption “Quarterly Data and Market Price Information” in Item 8 of this Annual Report, at page 103, and is incorporated herein by reference.

      At March 10, 2003, there were 29,356 record holders of the 175,313,428 shares of Goodyear’s common stock then outstanding. Approximately 24,649,509 shares of Goodyear’s common stock were beneficially owned by 31,141 participants in four employee savings plans sponsored by Goodyear and certain subsidiaries. The Northern Trust Company is the trustee for three of the plans. Fidelity Management Trust Company is the trustee for the other plan.

RECENT SALES OF UNREGISTERED SECURITIES

      On September 12, 2002, Goodyear issued 11,300,000 shares of its common stock to The Goodyear Tire & Rubber Company Directed Retirement Trust as a contribution to two Goodyear sponsored domestic pension plans. The fair market value (determined based on the average of the high and low sale prices per share of Goodyear common stock on The New York Stock Exchange composite transactions tape on September 12, 2002) of the 11,300,000 shares of the common stock contributed was approximately $146.0 million on September 12, 2002. The value of the contributed shares appearing in Goodyear’s financial statements, approximately $137.9 million, reflects a discount applied to the contributed shares as a result of an independent valuation, which assessed, among other things, the restricted nature of the common stock. The issuance of the shares of Goodyear’s common stock to the trust was exempt from registration under the Securities Act of 1933, as amended (the “Act”), pursuant to Section 4(2) of the Act as a transaction by an issuer not involving a public offering. Goodyear entered into a Registration Rights Agreement dated as of September 12, 2002, with Northern Trust Company, as the trustee and investment advisor of the Directed Retirement Trust, with respect to the registration under the Act of 15,600,000 shares of its common stock.

      On September 19, 2002, Goodyear sold 693,740 shares of its common stock to Koc Holding A.S. and certain of its affiliates (the “Purchasers”) for an aggregate sale price of $15,949,083 in cash. The proceeds of the sale were used to acquire from the Purchasers approximately 15.2% of the outstanding shares of Goodyear Lastikleri T.A.S., now a 74.61% owned subsidiary of Goodyear. Goodyear’s issuance and sale of the shares of its common stock to the Purchasers were exempt from registration under the Act pursuant to Rule 506 of Regulation D of the Act and Section 4(2) of the Act as a transaction by an issuer not involving a public offering.

      In each transaction, the shares of common stock issued by Goodyear are subject to certain restrictions on transfer. No commission or fee was paid in connection with the issuance of the common stock in either of the transactions.

21

Table of Contents

ITEM 6.     SELECTED FINANCIAL DATA.

Notes:

(1)	See “Principles of Consolidation” at Note 1 (“Accounting Policies”) to the Financial Statements at page 56.
(2)	Net Income in 2002 included net after-tax benefit of $10.2 million, or $.06 per share-diluted for rationalizations, asset sales, writeoff of a miscellaneous investment and a net rationalization reversal at Goodyear’s SPT equity investment. Net income in 2002 also included a non-cash charge of $1,081.5 million, or $6.48 per share-diluted to establish a valuation allowance against its net federal and state deferred tax assets.
(3)	Net Income in 2001 included net after-tax charges of $170.1 million, or $1.06 per share-diluted, for rationalizations, the sale of the Specialty Chemical Business and other asset sales, costs related to a tire replacement program and rationalization costs at Goodyear’s SPT equity investment.
(4)	Net Income in 2000 included a net after-tax charge of $63.0 million, or $.40 per share-diluted, for rationalizations and asset sales, change in Goodyear’s domestic inventory costing method from LIFO to FIFO and rationalization costs at Goodyear’s SPT equity investment.
(5)	Net Income in 1999 included net after-tax benefit of $22.3 million, or $.13 per share-diluted, resulting from the net after-tax gains of $154.8 million, or $.97 per share-diluted, from the change in control of the businesses contributed by the Company to the Goodyear Dunlop joint venture in Europe and the sale of certain rubber chemical assets and net rationalization charges of $132.5 million after tax, or $.84 per share-diluted.
(6)	Net Income in 1998 included a net after-tax gain of $61.3 million, or $.38 per share-diluted, from the sale of the All American Pipeline System and related assets, rationalizations and the sale of other assets.

22

Table of Contents

RESULTS OF OPERATIONS

(All per share amounts are diluted)

CONSOLIDATED

Net sales in 2002 were $13.85 billion, compared to $14.15 billion in 2001 and $14.42 billion in 2000.

      A net loss of $1.11 billion, $6.62 per share, was recorded in 2002, primarily resulting from a non-cash charge of $1.08 billion to establish a valuation allowance against Goodyear’s net Federal and state deferred tax assets. The valuation allowance was determined in accordance with the provisions of Statement of Financial Accounting Standards No. 109 (SFAS 109), “Accounting for Income Taxes.” A net loss of $203.6 million, $1.27 per share, was recorded in 2001 and net income of $40.3 million, $.25 per share, was recorded in 2000.

Net Sales

Goodyear’s worldwide tire unit sales in 2002 were 214.3 million units, a decrease of 5.0 million units or 2.3% compared to 2001. North American Tire (U.S. and Canada) volume decreased 8.1 million units or 7.2% in 2002, while international unit sales increased 3.1 million units or 2.9%. Worldwide replacement unit sales decreased 4.9% from 2001, due to decreases in North American Tire and European Union Tire. Original equipment unit sales increased 4.0% in 2002, due to increases in all regions except Latin American Tire and Eastern Europe, Africa and Middle East Tire. Unit sales in 2002 included approximately 500 thousand tires in connection with the Ford Motor Company (“Ford”) tire replacement program, compared to approximately 5 million in 2001.

      Goodyear’s worldwide tire unit sales in 2001 were 219.3 million units, a decrease of 4.0 million units or 1.8% compared to 2000. North American Tire volume decreased 3.9 million units or 3.4% in 2001, while international unit sales decreased .1 million units or .1%. Worldwide replacement unit sales decreased 1.6% in 2001, primarily in European Union Tire, Eastern Europe, Africa and Middle East Tire and Latin American Tire. Original equipment unit sales were 2.2% lower in 2001, primarily in North American Tire and Eastern Europe, Africa and Middle East Tire.

      Revenues decreased 2.1% in 2002 primarily due to lower tire unit volume, lower revenues as a result of the sale of the Specialty Chemical Business in the fourth quarter 2001 and the effects of currency translation on international results. The Specialty Chemical Business contributed approximately $127 million of sales in 2001. Goodyear estimates that versus 2001, currency movements adversely affected revenues in 2002 by approximately $74 million. Revenues were favorably affected by tire pricing improvements.

      Revenues decreased 1.9% in 2001 compared to 2000 primarily due to lower tire unit sales and the effect of currency translation on international results. Goodyear estimates that versus 2000, currency translation adversely affected revenues by approximately $395 million.

Cost of Goods Sold

Cost of goods sold (CGS) was 81.7% of sales in 2002, compared to 82.1% in 2001 and 80.7% in 2000. CGS in 2002 benefited by approximately $206 million from lower raw material costs and other purchasing savings. CGS also decreased as a result of lower sales volume compared to 2001 and the impact of the sale of the Specialty Chemical Business, which contributed approximately $103 million of CGS in 2001. CGS was also unfavorably impacted by $10 million related to the return of tires previously sold by Goodyear to Penske Automotive Centers. On April 6, 2002, Penske Automotive Centers announced plans to close its 563 stores in the United States. Annual sales to Penske totaled approximately $60 million. CGS benefited by approximately $34 million due to currency movements. Compared to 2001, CGS in 2002 was adversely affected by lower demand and approximately $60 million in higher unit costs primarily resulting from significantly lower levels of plant utilization. In addition, 2001 CGS included a charge of $30 million for a proactive tire replacement program covering certain tires in service on 15-passenger vans and ambulances.

23

Table of Contents

      Compared to 2000, CGS in 2001 reflected higher unit conversion costs resulting from lower levels of plant utilization as Goodyear reduced finished goods inventory levels, as well as higher raw material costs. Production cutbacks relative to 2000 levels resulted in higher unit costs due to less efficient absorption of approximately $320 million of fixed costs during 2001. Costs were favorably impacted by the effects of the previous rationalization actions and ongoing cost containment measures.

      Research and development expenses are included in CGS and were $380.0 million in 2002, compared to $375.5 million in 2001 and $423.1 million in 2000. Research and development expenditures in 2003 are expected to be approximately $365 million.

Selling, Administrative and General Expense

Selling, administrative and general expense (SAG) in 2002 was 16.1% of sales, compared to 15.9% in 2001 and 15.5% in 2000. SAG decreased in dollars in 2002 compared to 2001 primarily as a result of the absence of expenses for amortization of goodwill and intangible assets with indefinite useful lives of approximately $19 million due to Goodyear’s adoption of Statement of Financial Accounting Standards No. 142 (SFAS 142), “Goodwill and Other Intangible Assets.” SAG also decreased as a result of the impact of the sale of the Speciality Chemical Business, which contributed approximately $12 million of SAG in 2001. In addition, reductions in media expense of approximately $20 million (including advertising and administrative expenses), reductions in warehousing and distribution costs in North America of approximately $18 million, reductions in computer related charges of approximately $12 million and cost reduction programs also benefited SAG. SAG was adversely impacted by increased wage and benefit costs of approximately $58 million in 2002 compared to 2001.

      SAG increased in dollars and as a percent to sales in 2001 compared to 2000 primarily due to increased warehousing and distribution costs in North America. SAG decreased in all international strategic business units (“SBUs”) due to cost containment initiatives and the favorable effect on SAG of foreign currency exchange rates in 2001.

Other Financial Information

Net income (loss) in 2001 and 2000 included expenses related to amortization of goodwill and intangible assets with indefinite useful lives totaling $29.0 million and $28.3 million, respectively. In accordance with SFAS 142, amortization of goodwill and intangible assets with indefinite useful lives ceased at January 1, 2002. For further information, refer to the note to the financial statements No. 6, Goodwill and Other Intangible Assets.

      During 2002, Goodyear announced the suspension of the matching contribution portion of its savings plans for all salaried associates, effective January 1, 2003. In April 2003, Goodyear’s master contract with the United Steelworkers of America will expire, at which time the Company plans to suspend the matching contribution portion of the savings plan for those employees covered by that contract. Goodyear contributed approximately $38 million to the savings plans in 2002. In addition, the Company changed its vacation policy for domestic salaried associates in 2002. As a result of the changes to the policy, the Company will not incur vacation expense for domestic salaried associates in 2003. Vacation expense is expected to be reduced by approximately $50 million due to this change in vacation policy.

      Revenues in future periods may continue to be adversely affected by competitive pricing conditions and changes in product mix and channels of distribution. Revenues and earnings in future periods are likely to be unfavorably impacted if the dollar strengthens versus various foreign currencies. In addition, lower demand from the original equipment industry, loss of market share in the replacement market and increases in raw material, energy and labor costs, which may not be recoverable in the market due to pricing pressures present in today’s highly competitive market, may also adversely affect earnings in future periods. Currency fluctuations, increased financing costs and general economic and industry conditions may also adversely impact sales and earnings in future periods.

24

Table of Contents

Interest Expense

Interest expense in 2002 was $241.3 million, compared to $292.4 million in 2001 and $282.6 million in 2000. Interest expense decreased in 2002 compared to 2001 due to both lower average debt levels and lower interest rates. Interest expense increased in 2001 compared to 2000 due to higher average debt levels.

Other (Income) and Expense

Other (income) and expense was $25.8 million in 2002, compared to $11.8 million in 2001 and $27.8 million in 2000. Other (income) and expense included accounts receivable sales fees and commitment fees totaling $46.0 million, $53.3 million and $43.9 million in 2002, 2001 and 2000, respectively.

      Other (income) and expense in 2002 also included gains of $25.7 million ($22.0 million after tax or $.13 per share) resulting from the sale of land and buildings in the Latin American Tire, Engineered Products and European Union Tire Segments. The writeoff of a miscellaneous investment of $4.1 million ($4.1 million after tax or $.02 per share) was also included in Other (income) and expense in 2002.

      Other (income) and expense in 2001 included gains of $17.0 million ($13.9 million after tax or $.09 per share) resulting from the sale of land and buildings in the European Union Tire Segment and $27.4 million ($16.9 million after tax or $.10 per share) resulting from the sale of Goodyear’s Specialty Chemical Business.

      Other (income) and expense in 2000 included a gain of $5.0 million ($3.2 million after tax or $.02 per share) on the sale of land at a manufacturing facility in the Latin American Tire Segment.

      For further information, refer to the note to the financial statements No. 3, Other (Income) and Expense.

Foreign Currency Exchange

Foreign currency exchange gain was $10.2 million in 2002, compared to a loss of $.1 million in 2001 and a gain of $6.7 million in 2000. Foreign currency exchange in 2002 benefited by approximately $16 million from currency movements on U.S. dollar denominated monetary items in Brazil. A loss of approximately $8 million resulting from currency movements on U.S. dollar denominated monetary items in Argentina was also incurred in 2002.

Equity in (Earnings) Losses of Affiliates

Equity in (earnings) losses of affiliates was $8.8 million in 2002, compared to $40.6 million and $22.4 million in 2001 and 2000, respectively. Equity in (earnings) losses of affiliates improved in 2002 compared to 2001 and 2000 due to the rationalization charges incurred in 2001 and 2000 by South Pacific Tyres, Ltd. (SPT), an Australian tire manufacturer in which Goodyear owns a 50% equity interest. Goodyear’s share of a net rationalization credit recorded by SPT was $1.1 million ($1.1 million after tax or $.01 per share) in 2002. Goodyear’s share of rationalization charges recorded by SPT in 2001 and 2000 totaled approximately $24.0 million ($24.0 million after tax or $.15 per share) and $16.1 million ($10.5 million after tax or $.07 per share), respectively.

Income Taxes

The effective tax rate for 2002 was significantly more than the U.S. statutory rate due to a non-cash charge of $1.08 billion ($6.48 per share) to establish a valuation allowance against net Federal and state deferred tax assets. Goodyear had a tax benefit at an effective rate of 25.4% for 2001. Goodyear’s effective tax rate was 20.0% in 2000.

      In 2002, Goodyear also determined that earnings of certain international subsidiaries would no longer be permanently reinvested in working capital. Accordingly, Goodyear recorded a provision of $50.2 million for the incremental taxes incurred or to be incurred upon inclusion of such earnings in Federal taxable income.

      For further information, refer to the note to the financial statements No. 15, Income Taxes.

25

Table of Contents

Rationalization Activity

To maintain global competitiveness, Goodyear has implemented rationalization actions over the past several years for the purpose of reducing excess capacity, eliminating redundancies and reducing costs. Goodyear recorded net rationalization costs of $8.6 million in 2002, $206.8 million in 2001 and $124.1 million in 2000. Goodyear has reduced employment levels by approximately 12,000 from December 31, 2000 and almost 21,000 since 1998, primarily as a result of rationalization activities.

2003 Actions

Goodyear expects to record a rationalization charge of approximately $62 million to $68 million in the first quarter of 2003. These actions consist of retail and administrative consolidations in North America and Europe and provide for the release of approximately 900 associates. Of the estimated charge, approximately $36 million to $40 million relates to future cash outflows, primarily associate severance costs, and $26 million to $28 million are non-cash charges, primarily the writeoff of equipment taken out of service and pension curtailments. The Company is in the process of finalizing the costs of these plans. Upon completion of these plans, the Company estimates that it will further reduce annual operating costs by approximately $50 million to $60 million.

2002 Program

Goodyear recorded a net rationalization charge of $8.6 million ($8.8 million after tax or $.05 per share) in 2002, which included reversals of $17.9 million ($14.2 million after tax or $.09 per share) for reserves from rationalization actions no longer needed for their originally intended purposes and new charges of $26.5 million ($23.0 million after tax or $.14 per share). The 2002 rationalization actions consisted of a manufacturing facility consolidation in Europe, the closure of a mold manufacturing facility and a plant consolidation in the United States and administrative consolidations. Of the $26.5 million charge, $24.2 million related to future cash outflows, primarily associate severance costs, and $2.3 million related to a non-cash writeoff of equipment taken out of service in the Engineered Products and North American Tire Segments. Goodyear estimates that, upon completion of these actions, it will further reduce annual operating costs by approximately $75 million (approximately $45 million CGS and approximately $30 million SAG). The reversals are primarily the result of lower than initially estimated associate-related payments of approximately $6.0 million, lower lease cancellation fees in the European Union of approximately $6.0 million and sublease contract signings in North America of approximately $3.0 million. Also included in the reversals is $1.7 million, which represents a portion of a legal reserve related to a previous rationalization plan in the Asia region, determined to be no longer necessary as a result of a court ruling in Goodyear’s favor. These reversals do not represent a change in the plan originally approved by management. Goodyear plans to complete these actions during 2003.

      The 2002 actions included associate-related costs of $20.3 million for the release of approximately 1,000 manufacturing and administrative associates in Europe and the United States. Rationalization costs, other than associate-related costs, totaled $6.2 million and were primarily for the writeoff of equipment taken out of service in the Engineered Products and North American Tire Segments and noncancellable contract costs. Goodyear incurred $2.7 million of associate-related costs during 2002 for the release of approximately 250 associates and $2.9 million of other than associate-related costs, primarily for the writeoff of equipment taken out of service. The remaining reserve for costs related to the completion of these actions was $20.7 million at December 31, 2002.

Fourth Quarter 2001 Program

Goodyear recorded a net rationalization charge totaling $127.8 million ($101.2 million after tax or $.62 per share) in the fourth quarter of 2001, which included a $4.1 million reversal of reserves no longer needed for their originally intended purposes. These actions were in response to continued competitive conditions in the markets served by Goodyear and worldwide economic uncertainty. Under these actions, Goodyear provided for worldwide associate reductions through retail and administrative consolidation and manufacturing plant downsizing and consolidation.

26

Table of Contents

      The 2001 fourth quarter actions included associate-related costs of $53.1 million for the release of approximately 2,200 associates around the world, primarily production and administrative associates in Europe. To date, approximately 2,000 associates have been released. $41.0 million was incurred in 2002 for the release of 1,700 associates. Rationalization costs, other than associate-related costs, totaled $78.8 million, of which $40.0 million related to the writeoff of tire manufacturing equipment taken out of service, principally in the Asia Tire Segment, and noncancellable lease contracts. Goodyear incurred $4.9 million of other than associate-related costs in 2002, primarily for lease termination costs. During 2002, Goodyear reversed $15.8 million of reserves, from the fourth quarter 2001 program, no longer needed for their originally intended purposes. Of the $15.8 million reversal, $5.4 million was primarily the result of lower than initially estimated associate-related payments, including associates who exited on their own accord prior to implementation of the plan, and $10.4 million was primarily the result of lower than initially estimated lease cancellation fees in the European Union, sublease contracts signed in North America and a favorable court ruling in Asia. The remaining reserve for costs related to the completion of these actions was $26.1 million and $87.8 million at December 31, 2002 and 2001, respectively. Goodyear plans to complete these actions during the second quarter of 2003.

      When the fourth quarter 2001 program was approved, Goodyear estimated that, upon completion of the program, annual operating costs would be reduced by approximately $85 million, primarily in lower compensation and benefit costs. Goodyear estimated that these savings would result in reductions of $40 million in CGS, of which $5 million related to depreciation, and $45 million in SAG. Goodyear estimates that operating costs were reduced by approximately $41 million in 2002 as a result of the implementation of this program. Plan savings have been substantially offset by higher conversion costs including increased compensation and benefit costs.

First Quarter 2001/2000 Program

Goodyear recorded a rationalization charge totaling $119.4 million ($94.9 million after tax or $.60 per share) during the third and fourth quarters of 2000. These 2000 actions were for global workforce reductions and manufacturing facility consolidations including the closure of a tire plant in Latin America.

      Goodyear recorded a rationalization charge totaling $79.0 million ($57.1 million after tax or $.36 per share) in the 2001 first quarter. Of the $79.0 million charge, $12.5 million related to the closure of Goodyear’s manufacturing facility in Italy announced in 1999 and $66.5 million continued the rationalization program announced in 2000.

      Pursuant to the program recorded in the third and fourth quarters of 2000 and the first quarter of 2001, Goodyear has released approximately 7,100 associates to date. $5.0 million was incurred in 2002 for the release of approximately 300 associates. Rationalization costs, other than associate-related costs, totaling $1.8 million, were incurred during 2002 for ongoing payments under noncancellable lease contracts. These programs are substantially complete with the exception of ongoing associate severance and noncancellable lease payments. The remaining reserve for costs related to the completion of these actions totaled $2.5 million and $9.3 million at December 31, 2002 and 2001, respectively.

      When the first quarter 2001/2000 program was approved, Goodyear estimated that upon completion of the program, annual pretax savings would be approximately $260 million (approximately $200 million of CGS and approximately $60 million of SAG). These savings are the result of lower compensation and benefit costs related to associates who were released in accordance with the program. Plan savings have been substantially offset by higher conversion costs including increased compensation and benefit costs.

      For further information, refer to the note to the financial statements No. 2, Rationalizations.

CRITICAL ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND UNCERTAINTIES

General Market Uncertainties

Goodyear’s results of operations, financial position and liquidity could be adversely affected in future periods by loss of market share or lower demand in the replacement market or from the original equipment industry, which would result in lower levels of plant utilization that would increase unit costs. Also, Goodyear could experience unexpected higher raw material and energy prices in future periods. These costs, if incurred, may not be

27

Table of Contents

Critical Accounting Policies, Use of Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to financial statements. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates, including those related to the allowance for doubtful accounts, recoverability of intangibles and other long-lived assets, deferred tax asset valuation allowance, warranty, workers’ compensation, litigation, general and product liabilities, environmental liabilities, pension and postretirement benefits, and various other operating allowances and accruals, based on currently available information. Changes in facts and circumstances may alter such estimates and affect results of operations and financial position in future periods.

General and Product Liability and Other Litigation. The ultimate liability of Goodyear in respect of the various claims, lawsuits and other legal proceedings to which it is a party cannot be estimated with certainty. Goodyear’s accounting policy is to determine whether a liability should be recorded, and to estimate the amount of such liability based on the information available and assumptions and methods it has concluded are appropriate, in accordance with the provisions of Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies,” and related pronouncements. As additional information becomes available, Goodyear will reassess its evaluation of the pending claims, lawsuits and other proceedings.

      At December 31, 2002, Goodyear had recorded liabilities totaling $229.1 million ($218.7 million at December 31, 2001) for potential product liability and other tort claims, including related legal fees expected to be incurred, presently asserted against Goodyear. Generally, the amount recorded was determined on the basis of an assessment of the potential liability using an analysis of available information with respect to pending claims, historical experience and, where available, current trends.

      Goodyear has established a liability, as part of its general and product liability, in respect of the approximately 97,000 asbestos claims pending at December 31, 2002 (approximately 62,000 claims at December 31, 2001), and an asset for expected recoveries under coverage-in-place agreements with certain primary insurance carriers. The claims relate to alleged exposure to asbestos in certain rubber coated products manufactured by Goodyear in the past or to asbestos in certain Goodyear facilities. During 2002, Goodyear received approximately 36,500 new asbestos claims and resolved approximately 1,500 asbestos claims, compared to approximately 18,000 new claims and 9,500 claims resolved in 2001. The amount spent on asbestos litigation defense and claim resolution (before recovery of insurance proceeds) was $19.3 million during 2002 compared to $15.5 million during 2001.

      The portion of the recorded liabilities relating to asbestos claims is based on pending claims only. The amount recorded reflects an estimate of the cost of defending and resolving pending claims, based on available information and our experience in disposing of asbestos claims in the past. No liability has been recorded for unknown asbestos claims, and Goodyear cannot predict the number of future asbestos claims, the ultimate cost of disposing of existing and future claims, or the future ability to recover from insurance carriers. Goodyear believes it will recover a substantial portion of its liability from the proceeds of existing insurance policies, most of which are not subject to coverage-in-place agreements.

28

Table of Contents

      Goodyear also has claims asserted in other legal proceedings to which it is currently a party. The Company appealed judgments of $22.7 million and $1.3 million in civil actions in Colorado State Court, related to alleged breaches of warranties and defects in the Company’s Entran II hose installed as a part of Heatway radiant heating systems in the property of the claimants. The Company believes the verdicts were based on material errors of fact and law. The Company is also a defendant in eight class actions and five other civil actions in various Federal and state courts related to the Company’s Entran II hose installed in the homes or other structures of the claimants. The Company is also party to a class action relating to alleged breaches of warranty or product defects relating to certain of Goodyear’s Load Range D and E light truck tires.

      Goodyear’s recorded liability for general and product liability (other than asbestos claims) is based on assumptions about the number of claims filed and expected to be filed and the amount expected to be paid per claim. The expected number of claims is developed based in part on industry statistics and past claims experience. The amount expected to be paid per claim is based in part on whether the claim involves Goodyear’s products or other alleged tort liability. It also includes assumptions about future judicial actions related to the potential aggregation of claims, expected trends in litigation costs and the nature of claims not yet received or reviewed by Goodyear. If the actual experience differs from expectations, Goodyear’s results of operations, financial position and liquidity would be affected.

      Subject to the uncertainties referred to above, Goodyear has concluded that in respect of any of the above described liabilities, it is not reasonably possible that it would incur a loss exceeding the amount currently accrued for at December 31, 2002, with respect thereto which would be material relative to the consolidated financial position, results of operations or liquidity of Goodyear at December 31, 2002, although an unanticipated adverse final determination in these proceedings could have a material impact on Goodyear’s results of operations, financial position and liquidity in any quarter or for the year.

Environmental Matters. At December 31, 2002, Goodyear had recorded liabilities totaling $53.5 million ($66.5 million at December 31, 2001) for anticipated costs related to various environmental matters, primarily the remediation of numerous waste disposal sites and certain properties sold by Goodyear. These costs include legal and consulting fees, site studies, the design and implementation of remediation plans, post-remediation monitoring and related activities and will be paid over several years. The amount of Goodyear’s ultimate liability in respect of these matters may be affected by several uncertainties, primarily the ultimate cost of required remediation and the extent to which other responsible parties contribute.

Workers’ Compensation. Goodyear had recorded liabilities totaling $136.7 million and $124.5 million for anticipated costs related to workers’ compensation at December 31, 2002 and 2001, respectively. The costs include an estimate of expected settlements on pending claims, defense costs and a provision for claims incurred but not reported. These estimates are based on Goodyear’s assessment of potential liability using an analysis of available information with respect to pending claims, historical experience, and current cost trends. The amount of Goodyear’s ultimate liability in respect of these matters may differ from these estimates.

Deferred Tax Asset Valuation Allowance. At December 31, 2002, Goodyear had valuation allowances aggregating $1.65 billion against all of its net Federal and state and some of its international subsidiaries deferred tax assets.

      The net Federal and state deferred tax assets are almost entirely composed of deductions available to reduce Federal and state taxable income in future years. The international deferred tax assets include loss carryforwards as well as deductions available to reduce future international taxable income.

      The valuation allowance was calculated in accordance with the provisions of SFAS 109 which requires an assessment of both negative and positive evidence when measuring the need for a valuation allowance. In accordance with SFAS 109, evidence, such as operating results during the most recent three-year period, is given more weight than our expectations of future profitability which are inherently uncertain. Goodyear’s U.S. losses in recent periods represented sufficient negative evidence to require a full valuation allowance against its net Federal and state deferred tax assets under SFAS 109. Goodyear intends to maintain a valuation allowance against its deferred tax assets until sufficient positive evidence exists to support realization of the Federal and state deferred tax assets.

29

Table of Contents

Pensions and Postretirement Benefits. Goodyear’s recorded liability for pensions and postretirement benefits other than pensions is based on a number of assumptions, including future health care costs, maximum company covered benefit costs, life expectancies, retirement rates, discount rates, long term rates of return on plan assets and future compensation levels. Certain of these assumptions are determined with the assistance of outside actuaries. Assumptions about health care costs, life expectancies, retirement rates and future compensation levels are based on past experience and anticipated future trends, including an assumption about inflation. Discount rates are based on market indicators at the time these assumptions are established. The expected return on plan assets is determined using historical compound annualized returns of Goodyear’s pension fund for 15 or more years. These assumptions are regularly reviewed and revised when appropriate, and changes in one or more of them could affect the amount of Goodyear’s recorded expenses for these benefits. If the actual experience differs from expectations, Goodyear’s financial position, results of operations and liquidity in future periods could be affected.

      As of December 31, 2002, the aggregate projected benefit obligation for Goodyear’s pension plans was $5.83 billion. A 25 basis point change in the U.S. discount rate would change the projected benefit obligation and Accumulated Other Comprehensive Income by approximately $100 million and would impact pension expense in 2003 by approximately $9 million. As of December 31, 2002, Goodyear’s accumulated postretirement benefit obligation was $2.61 billion. A 25 basis point change in the discount rate for its main U.S. plans would change the accumulated postretirement benefit obligation by approximately $50 million and would impact 2003 postretirement benefit expense by approximately $2 million.

      Effective January 1, 2003, Goodyear has reduced its expected return on U.S. pension plan assets from 9.5% to 8.5% to reflect lower expectations for long term investment returns. This change is expected to increase pension expense approximately $25 million for the year. Amortization of existing losses is expected to increase pension expense substantially in future periods. The investment mix of the U.S. pension assets is typically approximately 70% equities and 30% bonds.

      Goodyear’s U.S. pension asset returns were a negative 14.7% for the year ended December 31, 2002. The unfunded amount of Goodyear’s benefit obligation at December 31, 2002 was $2.23 billion, compared to $1.04 billion at December 31, 2001. For the year ended December 31, 2002, Goodyear incurred a $1.26 billion charge to Accumulated Other Comprehensive Income for unfunded pension benefit obligations, compared to a $235.4 million charge for the year ended December 31, 2001. If market conditions continue to deteriorate, these charges could continue to increase in future periods.

      Although subject to change in view of the volatility of the capital markets, based on current estimates, Goodyear expects to make contributions to its domestic pension plans of approximately $375 million to $425 million in 2004 in order to satisfy statutory minimum funding requirements. Goodyear will be subject to additional statutory minimum funding requirements after 2004. The amount of funding requirements could be substantial and will be based on a number of factors, including the value of the pension assets at the time as well as the interest rate for the relevant period.

Recently Issued Accounting Standards

The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 143 (SFAS 143), “Accounting for Asset Retirement Obligations.” SFAS 143 requires companies to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. The amount recorded as a liability will be capitalized by increasing the carrying amount of the related long-lived asset, which is then depreciated over its useful life. SFAS 143 became effective for Goodyear on January 1, 2003. Goodyear does not expect the adoption of SFAS 143 to have a material impact on its financial position, results of operations or liquidity.

      The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 146 (SFAS 146), “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred and establishes that fair value is the objective for initial measurement of the liability. The provisions of SFAS 146 are

30

Table of Contents

      The Financial Accounting Standards Board has issued Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” FIN 45 requires disclosures by guarantors about the nature of, and maximum potential payments under, contracts that contingently require the guarantor to make payments to the guaranteed party under certain circumstances (such as financial guarantees and product warranties). FIN 45 also requires the recognition by guarantors of a liability, at fair value, for the obligation to stand ready to perform under the terms of the contract. The recognition provisions of FIN 45 do not apply to product warranties. The disclosure provisions of FIN 45 are effective for periods ending after December 15, 2002. The recognition provisions are effective on a prospective basis to guarantees issued or modified after December 31, 2002. Goodyear does not expect the adoption of FIN 45 to have a material impact on its financial position, results of operations or liquidity. For further information, refer to the note to the financial statements No. 22, Commitments and Contingent Liabilities.

      The Financial Accounting Standards Board has issued Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities.” FIN 46 requires companies to consolidate, at fair value, the assets, liabilities and results of operations of variable interest entities (VIEs) in which the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties or in which they hold a controlling financial interest through means other than the majority ownership of voting equity. Controlling financial interests typically are present when a company either 1) has the direct or indirect ability to make decisions about the VIE’s activities, 2) holds an obligation to absorb expected losses of a VIE, or 3) is entitled to receive the expected residual returns of a VIE. FIN 46 requires disclosures by companies, effective with financial statements issued after January 31, 2003, about the nature, purpose, size and activities of VIEs covered by its provisions, and their maximum exposure to loss. FIN 46 also requires companies to consolidate VIEs created before February 1, 2003, in financial statements for periods beginning after June 15, 2003. Early adoption is permitted.

      The Company is a party to lease agreements with two unrelated special purpose entities (SPEs) that are VIEs as defined by FIN 46. The agreements are related to certain North American distribution facilities and certain corporate aircraft. The fair value of the assets and liabilities, and the Company’s maximum exposure to loss prior to insurance recoveries, is approximately $30 million in each SPE. Upon consolidation of the assets, liabilities and results of operations of these SPEs, the Company expects its property, plant and equipment and long term debt to each increase by approximately $60 million. Financing costs recognized in the Company’s financial statements are not expected to change significantly. Financing costs related to these two SPEs are currently included in SAG, and will be recognized prospectively as Interest Expense upon the consolidation of the SPEs.

      Wingfoot A/R LLC, a qualified SPE that purchases certain of the Company’s domestic accounts receivable, is excluded from the scope of FIN 46 as it is accounted for in accordance with Statement of Financial Accounting Standards No. 140 (SFAS 140), “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.”

SEGMENT INFORMATION

Segment information reflects the strategic business units of Goodyear, which are organized to meet customer requirements and global competition. The Tire business is managed on a regional basis. Engineered Products and Chemical Products are managed on a global basis.

      Results of operations in the Tire and Engineered Products Segments were measured based on net sales to unaffiliated customers and segment operating income. Results of operations of the Chemical Products Segment were measured based on net sales (including sales to other SBUs) and segment operating income. Segment operating income included transfers to other SBUs. Segment operating income was computed as follows: Net Sales less CGS and SAG (excluding corporate administrative expenses). Segment operating income also included equity (earnings) losses in affiliates. Segment operating income did not include the previously discussed rationalization charges and certain other items.

31

Table of Contents

      Segment operating income was $420.3 million in 2002, $366.7 million in 2001 and $599.0 million in 2000. Segment operating margin (segment operating income divided by segment sales) in 2002 was 2.9%, compared to 2.5% in 2001 and 4.0% in 2000.

      For further information, refer to the note to the financial statements No. 19, Business Segments.

North American Tire

North American Tire Segment unit sales in 2002 decreased 8.1 million units or 7.2% from 2001 and 12.0 million units or 10.4% from 2000. Replacement unit sales in 2002 decreased 12.5% from 2001 and 12.3% from 2000. Original equipment volume in 2002 increased 5.5% from 2001 and decreased 6.4% from 2000.

      Revenues in 2002 decreased 6.3% from 2001 and 5.7% from 2000. Sales in 2002 decreased compared to 2001 due to reduced volume in certain segments of the replacement market and the lower tire units delivered in connection with the Ford tire replacement program initiated in 2001. Unfavorable product mix also negatively impacted sales compared to 2001. Sales were favorably affected by increased sales to original equipment manufacturers in 2002 as automakers increased production.

      During 2002, Goodyear supplied approximately 500 thousand tire units with a segment operating income benefit of approximately $10 million in connection with the Ford tire replacement program. Ford ended the replacement program on March 31, 2002. During 2001, Goodyear supplied approximately 5 million tire units with a segment operating income benefit of approximately $95 million in connection with the Ford replacement program.

      Revenues in 2001 increased compared to 2000 due to the favorable impact of a change in product mix to higher priced tires, price increases in the replacement market and units delivered in connection with the Ford tire replacement program for certain light truck tires of a competitor. Sales were adversely affected in 2001 by lower original equipment volume resulting from production cutbacks by the manufacturers of automobiles and commercial trucks that Goodyear supplies, and lower volume in the replacement market during the fourth quarter, as economic conditions deteriorated. As previously mentioned, during 2001 Goodyear supplied approximately 5 million tire units with a segment operating income impact of approximately $95 million in connection with the Ford tire replacement program.

      North American Tire segment operating income decreased substantially from 2001 due to lower tonnage and higher plant compensation costs and operating expenses of approximately $155 million. Segment operating income was also negatively impacted by lower replacement sales volume, including the Ford program, of approximately $150 million. Product mix, primarily replacement consumer and commercial, unfavorably impacted segment operating income by approximately $33 million as did the impact of the $10 million charge related to the closure of Penske Automotive Centers in the United States on April 6, 2002. Segment operating income in 2002 was favorably impacted by a decrease in raw material costs of approximately $120 million and in SAG expenses of approximately $28 million. In addition, 2001 included a charge of $30 million for a proactive tire replacement program covering certain tires in service on 15-passenger vans and ambulances.

      Segment operating income in 2001 decreased from 2000 due to higher unit conversion costs resulting from lower levels of plant utilization, higher raw material costs, higher SAG costs, lower sales volume and the charge for Goodyear’s tire replacement program. Segment operating income was favorably impacted by price increases in the replacement market, a shift in mix to higher margin tires, the Ford replacement program and lower research and development costs.

32

Table of Contents

      Segment operating income in 2001 and 2000 included expenses related to amortization of goodwill and intangible assets with indefinite useful lives totaling $3.5 million and $3.4 million, respectively. In accordance with SFAS 142, amortization of goodwill and intangible assets with indefinite useful lives ceased at January 1, 2002.

      Segment operating income did not include net rationalization charges (credits) totaling $(1.9) million in 2002, $31.6 million in 2001 and $(.7) million in 2000. Segment operating income in 2002 also did not include the writeoff of a miscellaneous investment totaling $4.1 million.

      Revenues and segment operating income in the North American Tire Segment may be adversely affected in future periods by the effects of continued competitive pricing conditions, reduced demand in the replacement market, changes in product mix, unanticipated increases in raw material and energy prices, higher wage and benefit costs and general economic conditions. On April 19, 2003, Goodyear’s master contract with the United Steelworkers of America will expire. Approximately 8,400 employees or 26% of the segment’s employees are covered by this contract. It is uncertain at this time whether an agreement will be reached without interruption of production, and the terms of any agreement ultimately reached could result in higher wage and benefit costs in the United States.

European Union Tire

European Union Tire Segment unit sales in 2002 increased .4 million units or .6% from 2001 and 1.2 million units or 2.0% from 2000. Replacement unit sales in 2002 decreased .9% from 2001 and 2.8% from 2000. Original equipment volume in 2002 increased 3.8% from 2001 and 13.7% from 2000.

      Revenues in 2002 increased 6.0% from 2001 and 3.6% from 2000. Revenues increased in 2002 compared to 2001 primarily due to the favorable impact of currency translation of approximately $199 million. Revenues were also positively impacted by increased prices, higher volume in the original equipment market, and increased sales of high performance and winter tires.

      Revenues decreased in 2001 from 2000 due primarily to currency translation. Currency translation adversely affected European Union Tire Segment sales by approximately $85 million in 2001 compared to 2000. Revenues also decreased in 2001 due to a shift in mix toward lower-priced original equipment tires and competitive pricing pressures, particularly in the first half of 2001. Revenues were favorably impacted by higher volume.

      European Union Tire segment operating income increased 79.4% from 2001 and 17.7% from 2000. Segment operating income increased in 2002 due primarily to lower raw material costs of approximately $28 million, higher production tonnage and cost containment programs of approximately $17 million, and the impact of currency translation of approximately $6 million. Segment operating income in 2002 was also favorably impacted by higher volume and improved pricing. Higher SAG expenses of approximately $21 million adversely impacted segment operating income in 2002.

      Segment operating income decreased in 2001 from 2000 due to higher raw material costs, a change in mix to lower margin original equipment tires and currency translation, which reduced operating income by approximately $5 million in 2001 compared to 2000. Segment operating income was favorably impacted by higher sales volume and lower SAG costs resulting from cost containment and rationalization programs.

      Segment operating income in 2001 and 2000 included expenses related to amortization of goodwill and intangible assets with indefinite useful lives totaling $13.0 million and $12.6 million, respectively. In accordance with SFAS 142, amortization of goodwill and intangible assets with indefinite useful lives ceased at January 1, 2002.

33

Table of Contents

      Segment operating income did not include net rationalization charges totaling $2.7 million and gains on asset sales of $11.4 million in 2002, net rationalization charges totaling $81.5 million and gains on asset sales of $17.0 million in 2001 and net rationalization charges totaling $23.3 million in 2000.

      Revenues and segment operating income in the European Union Tire Segment may be adversely affected in future periods by the effects of continued competitive pricing conditions, changes in mix, unanticipated increases in raw material and energy prices, currency translation and the general economic slowdown in the region.

Eastern Europe, Africa and Middle East Tire

Eastern Europe, Africa and Middle East Tire Segment (“Eastern Europe Tire”) unit sales in 2002 increased 2.1 million units or 15.5% from 2001 and .5 million units or 3.2% from 2000. Replacement unit sales in 2002 increased 20.0% from 2001 and 10.2% from 2000. Original equipment volume in 2002 decreased 2.0% from 2001 and 18.8% from 2000.

      Revenues in 2002 increased 14.8% from 2001 and 1.8% from 2000. Revenues in 2002 increased from 2001 due to higher replacement volume and improved pricing. Currency translation, primarily in South Africa, adversely impacted revenue in 2002 by approximately $25 million.

      Revenues in 2001 decreased from 2000 due to currency devaluations in Turkey and South Africa and lower volume in both the original equipment and replacement markets. The effects of currency translation adversely affected Eastern Europe Tire Segment sales by approximately $120 million in 2001 compared to 2000.

      Eastern Europe Tire segment operating income in 2002 increased significantly from 2001 and 2000. Segment operating income in 2002 increased due to the benefit of cost reduction programs and higher levels of plant utilization of approximately $34 million, a change in mix to higher margin replacement tires of approximately $20 million and higher replacement volume of approximately $19 million. Segment operating income was also favorably affected by lower raw material costs and the impact of currency translation. Higher SAG costs adversely impacted segment operating income in 2002.

      Segment operating income in 2001 decreased from 2000 due to the economic crisis in Turkey, the effects of currency translation of approximately $25 million, lower sales volume and the effect of production cutbacks to align inventory levels with demand. Segment operating income was favorably impacted by reduced SAG resulting from cost containment and rationalization programs.

      Segment operating income in 2001 and 2000 included expenses related to amortization of goodwill totaling $4.2 million and $4.3 million, respectively. In accordance with SFAS 142, amortization of goodwill ceased at January 1, 2002.

      Segment operating income did not include net rationalization charges (credits) totaling $(.4) million in 2002, $11.2 million in 2001 and $9.6 million in 2000.

      Revenues and segment operating income in the Eastern Europe Tire Segment may be adversely affected in future periods by the effects of continued competitive pricing conditions, changes in mix, unanticipated increases in raw material and energy prices, continued volatile economic conditions and currency translation.

34

Table of Contents

Latin American Tire

Latin American Tire Segment unit sales in 2002 decreased .1 million units or .3% from 2001 but increased ..2 million units or 1.0% from 2000. Replacement unit sales in 2002 increased 1.7% from 2001 but decreased 4.7% from 2000. Original equipment volume in 2002 decreased 4.7% from 2001 but increased 19.0% from 2000.

      Revenues in 2002 decreased 6.4% from 2001 and 9.6% from 2000. Revenues in 2002 were adversely impacted by approximately $227 million due to the effects of currency translation, particularly in Argentina, Brazil, Venezuela and Mexico. Revenues were favorably impacted by price increases, improved product mix and higher volume in the replacement market.

      Revenues in 2001 decreased compared to 2000 due to currency translation, particularly in Brazil, of approximately $85 million, a shift in mix toward lower-priced original equipment tires, lower volume in the replacement market due to an economic slowdown and weak economic conditions in the region. Revenues benefited from price adjustments partially offsetting currency movements and higher volume.

      Latin American Tire segment operating income in 2002 increased 14.0% from 2001 and 46.7% from 2000. Segment operating income in 2002 was favorably impacted by approximately $45 million related to pricing and product mix, approximately $20 million related to lower raw material costs and higher replacement sales volume. Segment operating income in 2002 was adversely impacted by the effects of currency translation of approximately $46 million and increased SAG expenses.

      Segment operating income in 2001 reflected price adjustments partially offsetting currency movements, the benefits of cost reduction programs, rationalizations, lower raw material costs and higher volume compared to 2000. Segment operating income in 2001 was adversely affected by currency translation of approximately $35 million and a change in mix to lower margin original equipment tires.

      Segment operating income in 2001 included expenses related to the amortization of goodwill totaling $.1 million. In accordance with SFAS 142, amortization of goodwill ceased at January 1, 2002.

      Segment operating income did not include the gain from the sale of land and buildings in Mexico totaling $13.7 million in 2002, rationalization charges totaling $.2 million in 2001 and rationalization charges totaling $65.7 million and a $5.0 million gain on the sale of land at a manufacturing facility in Mexico in 2000.

      Revenues and segment operating income in the Latin American Tire Segment may be adversely affected in future periods by the effects of continued competitive pricing conditions, changes in mix, unanticipated increases in raw material and energy prices, continued volatile economic conditions, future adverse economic conditions in the region and currency translation.

Asia Tire

Asia Tire Segment unit sales in 2002 increased ..7 million units or 5.5% from 2001 and 1.1 million units or 9.3% from 2000. Replacement unit sales in 2002 increased 3.6% from 2001 and 2000. Original equipment volume in 2002 increased 10.5% from 2001 and 24.1% from 2000.

35

Table of Contents

      Revenues in 2002 increased 7.7% from 2001 and 1.4% from 2000. Revenues in 2002 increased compared to 2001 due primarily to higher original equipment and replacement volume and improved selling prices on replacement tires. The effects of currency translation also had a favorable impact on sales of approximately $2 million in 2002.

      Revenues in 2001 decreased from 2000, reflecting the adverse impacts of currency translation of approximately $35 million, softening demand in some markets and competitive pricing pressures.

      Asia Tire segment operating income increased substantially from 2001 and 2000. Segment operating income in 2002 increased compared to 2001 due to lower raw material costs of approximately $8 million, improved pricing and product mix of approximately $7 million and lower conversion costs as a result of cost containment programs of approximately $6 million. The effects of currency translation also had a favorable impact on segment operating income. Segment operating income in 2002 was adversely affected by higher SAG expenses.

      Segment operating income in 2001 increased from 2000 as the adverse effects of currency translation and price competition were offset by lower conversion costs as a result of cost containment programs, higher volume and lower raw material costs.

      Segment operating income in 2001 and 2000 included expenses related to the amortization of goodwill totaling $1.6 million and $2.4 million, respectively. In accordance with SFAS 142, amortization of goodwill ceased at January 1, 2002.

      Segment operating income did not include rationalization charges (credits) totaling $(1.7) million in 2002, $45.4 million in 2001 and $3.3 million in 2000.

      Revenues and segment operating income in the Asia Tire Segment may be adversely affected in future periods by the effects of continued competitive pricing conditions, changes in mix, unanticipated increases in raw material and energy costs and currency translation.

      Sales and segment operating income of the Asia Tire Segment reflect the results of Goodyear’s majority-owned tire business in the region. In addition, Goodyear owns a 50% interest in SPT, the largest tire manufacturer, marketer and exporter in Australia and New Zealand. Results of operations of SPT are not reported in segment results, and are reflected in Goodyear’s Consolidated Statement of Income using the equity method.

      The following table presents the sales and segment operating income of the Company’s Asia Tire Segment together with 100% of the sales and operating income of SPT:

SPT net sales in 2002 increased 8.8% from 2001, but decreased 7.1% from 2000. SPT net sales in 2002 increased from 2001 due to the strengthening of the Australian dollar against the U.S. dollar. SPT net sales in 2001 decreased from 2000 due to currency translation and competitive low cost imports aided by continued import tariff reductions in Australia.

      SPT operating income in 2002 increased 85.4% from 2001 and 66.7% from 2000. SPT operating income in 2002 increased compared to 2001 due to the benefits of the rationalization programs in the prior years. SPT

36

Table of Contents

      SPT operating income did not include a net rationalization credit of $2.1 million in 2002 or net rationalization charges of approximately $48.0 million in 2001 and $32.2 million in 2000.

      SPT debt totaled $131.3 million at December 31, 2002, of which $26.3 million was payable to Goodyear. At December 31, 2001, SPT debt totaled $67.4 million.

      For further information on SPT, refer to the note to the financial statements No. 20, Investment in Unconsolidated Affiliates.

Engineered Products

Engineered Products Segment sales in 2002 increased .4% from 2001 and decreased 4.1% from 2000. Revenues in 2002 increased from 2001 due largely to strong demand for military and custom products. Revenues in 2002 were adversely impacted by the effects of currency translation of approximately $29 million compared to 2001.

      Revenues in 2001 decreased from 2000 due to unit sales decreases resulting from low product demand from the automotive and transportation industries. Revenues were favorably impacted by increases in the conveyor belt and replacement products markets.

      Engineered Products segment operating income in 2002 increased from 2001 and 2000. Segment operating income in 2002 increased significantly from 2001 due to improved productivity of approximately $17 million, volume increases of approximately $12 million and decreased SAG expenses of approximately $16 million primarily due to aggressive cost containment measures. Segment operating income in 2002 was adversely impacted by an unfavorable change in price/mix and the effects of currency translation.

      Segment operating income in 2001 decreased from 2000 due primarily to lower revenues, increased SAG costs and increased costs associated with reduced capacity utilization resulting from reduced demand from the automotive industry. Segment operating income was favorably impacted by lower research and development and raw material costs.

      Segment operating income in 2001 included expenses related to amortization of goodwill totaling $1.0 million. In accordance with SFAS 142, amortization of goodwill ceased at January 1, 2002.

      Segment operating income did not include a gain from the sale of land and buildings totaling $.6 million and net rationalization charges of $4.6 million in 2002, and net rationalization charges of $1.5 million and $3.8 million in 2001 and 2000, respectively.

      Revenues and segment operating income in the Engineered Products Segment may be adversely affected in future periods by lower original equipment demand, competitive pricing pressures, expected continuing unfavorable economic conditions in certain markets, adverse economic conditions globally in the mining, construction and agriculture industries, unanticipated increases in raw material and energy prices, anticipated higher wage and benefit costs and currency translation. The Engineered Products Segment plants in the U.S. are included in Goodyear’s master contract with the United Steelworkers of America, which will expire in April 2003. It is uncertain at this time whether an agreement will be reached without interruption of production, and the terms of the agreement ultimately reached could result in higher wage and benefit costs in the United States.

37

Table of Contents

Chemical Products

Chemical Products Segment sales in 2002 decreased 9.6% from 2001 and 17.0% from 2000. Approximately 65% of Chemical Products synthetic materials sold are to Goodyear’s other segments. Natural rubber plantations, a rubber processing facility and natural rubber purchasing operations are included in the Chemical Products Segment.

      Revenues in 2002 decreased from 2001 primarily due to the impact of selling the Specialty Chemical Business in December 2001, which contributed approximately $127 million of revenue in 2001. Revenues in 2002 were also unfavorably impacted by lower net selling prices, which were caused by decreased raw material costs. Revenues were favorably impacted by approximately $6 million due to the effects of currency translation in 2002.

      Revenues in 2001 decreased from 2000 due to lower volume resulting from the slowdown in the tire industry and the tire inventory reductions at Goodyear.

      Chemical Products segment operating income in 2002 increased 15.3% from 2001 and 8.1% from 2000. Segment operating income in 2002 increased primarily due to lower plant utility costs of approximately $16 million, volume increases of approximately $10 million driven by the integration of internal synthetic rubber to Dunlop branded products, reduced manufacturing costs and the effect of currency translation compared to 2001. Lower raw material costs were primarily offset by reductions in net selling prices. The absence of approximately $12 million contributed by the Specialty Chemical Business in 2001 negatively impacted segment operating income.

      Segment operating income in 2001 decreased from 2000 primarily due to lower volume as a result of decreased demand from tire manufacturers (including Goodyear) and higher energy costs. Segment operating income benefited from lower raw material and fixed costs.

      Segment operating income did not include gains on asset sales of $27.4 million in 2001.

      The Company is exploring the possible sale of its Chemical business to both enhance its financial flexibility and focus future investments on its core business.

      Revenues and segment operating income in the Chemical Products Segment may be adversely affected in future periods by competitive pricing pressures, lower aggregate demand levels for its products and unanticipated increases in raw material and energy prices.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Net cash provided by operating activities was $676.4 million during 2002, as reported on the Company’s Consolidated Statement of Cash Flows. Working capital (accounts receivable and inventory less accounts payable) decreased $167.9 million to $2.33 billion at December 31, 2002, from $2.50 billion at December 31, 2001, due primarily to increased accounts payable.

Investing Activities

Net cash used in investing activities was $542.4 million during 2002. Capital expenditures in 2002 were $457.9 million, of which $227.3 million was used on projects to increase capacity and improve productivity and $230.6 million was used for tire molds and various other projects. Capital expenditures in 2002 and 2001 were reduced in response to current economic and business conditions. Capital expenditures are expected to

38

Table of Contents

Depreciation and amortization in 2001 and 2000 included $29.0 million and $28.3 million, respectively, of amortization related to goodwill and intangible assets with indefinite useful lives that are no longer amortized in accordance with SFAS 142. Depreciation and amortization are expected to be in the range of $550 million to $650 million in 2003.

      Investing activities in 2002 included net proceeds from the sale of land and buildings in the United States of $1.3 million, in Latin America of $23.3 million, and in Europe of $28.7 million. Also during 2002, Goodyear acquired additional shares of its tire manufacturing subsidiary in Slovenia at a cost of $38.9 million. The Company’s ownership of this subsidiary increased from 60% to 80%. The Company also acquired additional shares of its tire manufacturing subsidiary in Turkey at a cost of $15.9 million during 2002. Goodyear’s ownership of this subsidiary increased from 59.4% to 74.6%.

      At December 31, 2002, Goodyear had binding commitments for raw materials and investments in land, buildings and equipment of $440.3 million and off-balance-sheet financial guarantees written and other commitments totaling $77.4 million.

      For further information on investing activities, refer to the note to the financial statements No. 7, Investments.

Financing Activities

Net cash used in financing activities was $156.8 million during 2002.

Consolidated Debt as stated above at December 31, 2000, did not include the 1.2% Convertible Notes issued to Sumitomo ($56.9 million outstanding at December 31, 2000), which were converted into 2,278,896 shares of common stock of the Company in 2001.

      During the third quarter of 2002, the Company issued 693,740 shares of its common stock for $15.9 million in connection with the acquisition of additional shares of its tire manufacturing subsidiary in Turkey.

      Also during the third quarter of 2002, the Company issued 11.3 million shares of its common stock and recorded $137.9 million as a contribution to certain domestic pension plans.

      Certain of Goodyear’s affiliates are restricted from remitting funds to the parent company by means of dividends, advances or loans, primarily due to credit facility restrictions currently in place in those locations. At December 31, 2002, approximately $211 million was restricted, of which approximately $103 million related to affiliates not consolidated.

39

Table of Contents

Credit Sources

Restructuring and Refinancing of Credit Facilities

On April 1, 2003, the Company completed a comprehensive restructuring and refinancing of its bank credit and receivables securitization facilities. After completing the restructuring and refinancing, the Company replaced a total of $2,938 million in finance facilities with a total of $3,345 million of finance facilities including:

	•	$750 million Senior Secured U.S. Revolving Credit Facility due April 2005;
	•	$645 million Senior Secured U.S. Term Facility due April 2005;
	•	$650 million Senior Secured European Facilities due April 2005; and
	•	$1.30 billion Senior Secured Asset-Backed Facilities due March 2006.

      With the exception of approximately $700 million in domestic accounts receivable securitizations and $63 million in Canadian accounts receivable securitizations, each of the replaced finance facilities was unsecured. In addition to the restructured facilities, at April 1, 2003, various international subsidiaries of Goodyear had approximately $346 million of available borrowings under non-domestic accounts receivable securitization facilities. The Company expects these international accounts receivable securitization facilities to be reduced in the second quarter of 2003 and is evaluating alternatives to replace or restructure them. As of April 1, 2003, Goodyear estimates it has short term committed and uncommitted bank credit agreements totaling approximately $478 million. The continued availability of the uncommitted arrangements is at the discretion of the relevant lender, and the Company expects that a portion of these arrangements may be terminated as a result of the restructuring and refinancing.

      As of April 1, 2003, the Company estimates that the total fees and expenses incurred for the restructuring and refinancing will be approximately $120 million. In addition, the Company will pay a termination fee on the senior secured asset-backed facilities at termination estimated to be equal to 100 basis points of the aggregate principal amount. Of these costs, the Company estimates that approximately $15 million will be charged against income in the first quarter of 2003 and the remainder will be charged against income over the term of the agreements.

      The accounts receivable and debt that are subject to the new $1.30 billion asset-backed facilities will be included on Goodyear’s consolidated balance sheet. Accounts receivable subject to the terminated $763 million domestic and Canadian accounts receivable programs were not included on the consolidated balance sheet at December 31, 2002.

$750 Million Senior Secured U.S. Revolving Credit Facility

The Company’s amended and restated senior secured $750 million five-year revolving credit facility is with 26 domestic and international banks and provides for borrowing up to the $750 million commitment at any time until April 30, 2005. Up to $600 million of the facility is available for the issuance of letters of credit. The Company pays an annual commitment fee of 75 basis points on the undrawn portion of the commitment under the U.S. five-year revolving credit facility.

$645 Million Senior Secured U.S. Term Facility

The $645 million U.S. term facility is with 33 domestic and international banks and matures on April 30, 2005.

      The Company may obtain loans under both the U.S. five-year revolving credit facility and the U.S. term facility (collectively, the “U.S. facilities”) bearing interest at LIBOR plus 400 basis points or an alternative base rate (the higher of JPMorgan’s prime rate or the federal funds rate plus 5 basis points) plus 300 basis points. If loans under the $645 million term facility remain outstanding on April 30, 2004, fees equal to 100 basis points (or 75 basis points if such facility has been reduced to not more than $200 million) shall be paid to each lender on its ratable portion of the amount outstanding under the U.S. facilities.

40

Table of Contents

      The collateral pledged under the U.S. facilities includes:

	•	subject to certain exceptions, all of the capital stock of the Company’s domestic subsidiaries and 65% of the capital stock of its foreign subsidiaries;
	•	perfected first-priority security interests in and mortgages on certain property, plant and equipment with a book value of at least $1.00 billion;
	•	perfected first-priority security interests in and mortgages on substantially all of Goodyear’s other tangible and intangible assets including real property, equipment, contract rights and intellectual property; and
	•	perfected second-priority security interests in all accounts receivable and inventory pledged as security under the Company’s $1.30 billion senior secured asset-backed facilities, cash and cash accounts, and 65% of the capital stock of Goodyear Finance Holding S.A.