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UNITED STATES

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

For the fiscal year ended December 31, 2003

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 o                         No þ

      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. o

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

Yes þ                         No o

      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 30, 2003, was approximately $970,120,000.

Shares of Common Stock, Without Par Value, outstanding at April 30, 2004:

175,339,715

DOCUMENTS INCORPORATED BY REFERENCE:

      None

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THE GOODYEAR TIRE & RUBBER COMPANY

Annual Report on Form 10-K

For the Fiscal Year Ended December 31, 2003

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PART I.

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 2003 net sales were $15.12 billion and its net loss for 2003 was $802.1 million.

      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 practicable after we file or furnish such reports to the Securities and Exchange Commission (the “SEC”). The information on our website is not a part of this Annual Report on Form 10-K.

RECENT DEVELOPMENTS

Restatement of Financial Statements and Audit Committee and SEC Investigations. In October 2003, our management and Audit Committee determined that it was appropriate to restate our previously issued financial statements to record adjustments resulting from various accounting matters, primarily related to account reconciliations, along with adjustments in our Chemical Products segment and tax adjustments. When improper accounting issues were identified in our overseas operations and in our administration of workers’ compensation claims, these matters were also included in the restatement, along with adjustments primarily resulting from additional account reconciliations and discount rate adjustments relating to certain employee benefit programs. These financial statements have been restated to reflect adjustments to the Company’s previously reported financial information on Form 10-K for the years ended December 31, 2002 and 2001. The Company’s 2003 and 2002 quarterly financial information also has been restated to reflect adjustments to the Company’s previously reported financial information on Form 10-Q for the quarters ended March 31, 2003, June 30, 2003, and September 30, 2003. The restatement also affects periods prior to 2001. As a result of the restatement, the Company identified adjustments through the current date that were required to be recorded which reduced previously reported net income by a total of $280.8 million. For additional information on the restatement, see Note 2 of the Notes to Financial Statements.

      In October 2003, the Audit Committee launched an internal investigation into the account reconciliation issues that led to the restatement. In December 2003, the Audit Committee began an investigation of

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      On October 22, 2003, we announced that we would restate our financial results for the years ended 1998 through 2002 and for the first and second quarters of 2003. Following this announcement, the SEC advised us that it had initiated an informal inquiry into the facts and circumstances related to the restatement. On February 5, 2004, the SEC advised us that it had approved the issuance of a formal order of investigation. The order authorizes an investigation into possible violations of the securities laws related to the restatement and previous public filings. We are cooperating fully with the SEC and have provided requested information as expeditiously as possible. Because the SEC investigation is currently ongoing, the outcome cannot be predicted at this time.

      The Company will restate the quarterly periods ended March 31, 2003; June 30, 2003; and September 30, 2003 on Forms 10-Q/ A to be filed as expeditiously as possible following the filing of the Form 10-Q for the quarterly period ended March 31, 2004.

Recent Financing Activities. On February 23, 2004, we completed the addition of a $650 million tranche to our $1.30 billion Senior Secured Asset-Backed Facility. Approximately $335 million of the proceeds of the new tranche was used to partially pay down our U.S. term facility. On March 12, 2004, we completed a private offering of $650 million of senior secured notes, consisting of $450 million of 11% senior secured notes due 2011 and $200 million of floating rate notes at LIBOR plus 8% due 2011. The proceeds of the notes were used to repay the remaining amount outstanding under our U.S. term facility, to permanently reduce our commitment under our U.S. revolving credit facility by $70 million and for general corporate purposes. In connection with these financing activities, each of our restructured credit facilities was amended on February 19, 2004, principally to permit additional financings.

Late Form 10-Q Filing and Bank Amendments. On May 11, 2004, we announced that we would not file our first quarter 2004 Form 10-Q by May 30, as required in our loan agreements, and that we would initiate discussions with our lenders to extend the deadline for filing by 30 days. While we do not expect to need to access the facilities during this 30-day period, in the absence of an extension, we would not be able to access them. If we do not obtain an extension, we would still have until June 30 to file our Form 10-Q and regain access, but if we do not file our Form 10-Q by then, there could be an event of default under the loan agreements and thereafter under other debt instruments.

      On May 18, 2004, we obtained an amendment from our European credit facility lenders to allow until June 4, 2004 for delivery to our lenders of the 2003 audited financial statements for our Goodyear Dunlop Tires Europe B.V. joint venture. These financial statements, which have historically been completed after our Form 10-K was filed, were previously required to be delivered by May 19, 2004. We must complete these financial statements by June 4, 2004 in order to avoid defaults under our principal credit facilities.

Product Launch. On February 6, 2004, we launched our new line of Assurance™ passenger tires. The Goodyear Assurance featuring ComforTred Technology™ is a premium auto tire that promises a quiet ride and high comfort, a choice for drivers of premium luxury vehicles. Assurance featuring TripleTred Technology™ features all weather performance through three unique tread zones – Water Zone, Ice Zone and Dry Zone, and is intended for broad market appeal. In February 2004, we also launched two new lines of high performance summer passenger tires in Europe: Goodyear HydraGrip™, specially developed for rainy and wet weather conditions featuring DynamicDrain TRED technology; and Dunlop Sport Maxx™, a tire with outstanding dry handling capability featuring Multi Radius Tread technology.

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Completion of Purchase of Sava Tires and Dackia. On April 7, 2004, we announced that we had exercised our right to acquire the remainder of Sava Tires d.o.o., a joint venture tire manufacturing company in Kranj, Slovenia. We plan to complete the purchase of the remaining 20% of Sava Tires owned by Sava d.d. for approximately $52 million in June 2004. We acquired our original 60% stake in the joint venture in 1998 and purchased an additional 20% share in 2002. Our stake in Sava Tires is held by our 75 percent-owned Goodyear Dunlop Tires Europe affiliate. On April 16, 2004, we announced that we will purchase the remaining 50% of Dackia, one of Sweden’s major retail tire groups for approximately $10 million. We plan to complete the transaction in June 2004.

Early Termination of the Rights Plan. On February 3, 2004, we announced that our Board of Directors voted to amend Goodyear’s shareholder rights plan to accelerate its expiration date from July 29, 2006 to June 1, 2004. This effectively terminates the shareholder rights plan on June 1. The Board also instituted a policy with respect to the adoption of a rights plan in the future. This policy is contained in our Corporate Governance Guidelines, which may be viewed on our website at http://www.goodyear.com/investor/governance.html. Please note, however, that information contained on our website is not incorporated by reference in, or considered to be a part of, this Annual Report on Form 10-K.

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:

	•	we have not yet completed the implementation of our plan to improve our internal controls and may be unable to remedy certain internal control weaknesses identified by our external auditors and take other actions in time to meet the March 1, 2005 deadline for complying with Section 404 of the Sarbanes-Oxley Act of 2002;
	•	pending litigation relating to our restatement could have a material adverse effect on our financial condition;
	•	we must complete and deliver to our lenders the financial statements for our Goodyear Dunlop Tires B.V. joint venture by June 4, 2004 in order to avoid defaults under our principal credit facilities;
	•	we have not yet filed our Form 10-Q for the first quarter of 2004, if we do not file it by June 30, 2004 there could be an event of default under our principal credit facilities;
	•	an ongoing SEC investigation regarding our accounting restatement could materially adversely affect us;
	•	we have experienced significant losses in 2001, 2002 and 2003. We cannot assure you that we will be able to achieve future profitability. Our future profitability is dependent upon our ability to successfully implement our turnaround strategy for our North American Tire segment and our previously announced rationalization actions;
	•	we face significant global competition, including increasingly from lower cost manufacturers, and our market share could decline;
	•	our secured credit facilities limit the amount of capital expenditures that we may make;
	•	higher raw material and energy costs may materially adversely affect our operating results and financial condition;
	•	continued pricing pressures from vehicle manufacturers may materially adversely affect our business;
	•	our financial position, results of operations and liquidity could be materially adversely affected if we experience a labor strike, work stoppage or other similar difficulty and the United Steelworkers of America currently has the right to strike after going through a grievance process;

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	•	decline in the value of the securities held by our employee benefit plans or a decline in interest rates would increase our pension expense and underfunding levels. Termination by the Pension Benefit Guaranty Corporation of any of our U.S. pension plans would further increase our pension expense and could result in additional liens on material amounts of our assets;
	•	our long-term ability to meet current obligations and to repay maturing indebtedness, including long-term debt maturing in 2005 and 2006 of approximately $1,343 million and $1,481 million, respectively, is dependent on our ability to access capital markets in the future and to improve our operating results;
	•	we have a substantial amount of debt, which could restrict our growth, place us at a competitive disadvantage or otherwise materially adversely affect our financial health;
	•	any failure to be in compliance with any material provision or covenant of our secured credit facilities and the indenture governing our senior secured notes could have a material adverse effect on our liquidity and our operations;
	•	our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly;
	•	if we fail to manage healthcare costs successfully, our financial results may be materially adversely affected;
	•	we may incur significant costs in connection with product liability and other tort claims;
	•	our reserves for product liability and other tort claims and our recorded insurance assets are subject to various uncertainties, the outcome of which may result in our actual costs being significantly higher than the amounts recorded;
	•	we may be required to deposit cash collateral to support an appeal bond if we are subject to a significant adverse judgment, which may have a material adverse effect on our liquidity;
	•	we are subject to extensive government regulations that may materially adversely affect our ongoing operating results;
	•	our international operations have certain risks that may materially adversely affect our operating results;
	•	the terms and conditions of our global alliance with Sumitomo Rubber Industries, Ltd. (SRI) provide for certain exit rights available to SRI upon the occurrence of certain events, which could require us to make a substantial payment to acquire SRI’s interest in certain of our joint venture alliances (which include much of our operations in Europe);
	•	we have foreign currency translation and transaction risks that may materially adversely affect our operating results; and
	•	if we are unable to attract and retain key personnel, our business could be materially adversely affected.

      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.

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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, 2003 appears in Note 18 of the Notes to Financial Statements, 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
	•	trucks
	•	buses
	•	aircraft
	•	motorcycles
	•	farm implements
	•	earthmoving equipment
	•	industrial equipment
	•	various other applications

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:

	•	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.
	•	manufacture and sell flaps for truck tires and other types of tires.

      The principal products of the Tire Segments are new tires for most applications. Approximately 78.3% of our consolidated sales in 2003 were new tire sales (77.5% (as restated) in 2002 and 76.9% (as restated) in 2001). The percentages of each Tire Segment’s sales attributable to new tires during the periods indicated were:

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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, 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. (“Sumitomo”). 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 western 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

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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 ten 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 Assurance™ with ComforTred Technology™ for the luxury market, Assurance™ with TripleTred Technology™ with broad market appeal, 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 778 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

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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 approximately 967 retail outlets (including auto service centers, commercial tire and service centers and leased space in department stores) under the Goodyear name or under the Wingfoot Commercial Tire Systems, Allied or Just Tires trade styles. Several lines of house brand tires and private and associate brand tires are sold to independent dealers, national and regional wholesale marketing organizations and various other retail marketers.

      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.

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 western Europe, 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 and Fulda-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 EEAME 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.

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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, Fulda-brand, Debica-brand and Sava-brand tires, are distributed through independent dealers, regional distributors and retail outlets, of which approximately 365 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, bicycle and construction equipment tires in eastern Europe, Africa and the Middle East. EEAME Tire manufactures tires in Poland, Slovenia, Turkey, Morocco and South Africa. 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.
	•	manufactures and sells Goodyear-brand, Kelly-brand, Debica-brand, Sava-brand and Fulda-brand tires and sells Dunlop-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.

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      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 and sub-Saharan Africa, tires are also sold through a retail chain of approximately 180 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 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 (closed in the first quarter of 2004), 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

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ASIA TIRE

Our tire business in Asia manufactures and sells tires for automobiles, light and medium trucks, farm and construction equipment and aircraft throughout the Asia and Pacific markets. Asia Tire manufactures tires in China, India, Indonesia, Japan, Malaysia, the Philippines, Taiwan and Thailand. Asia Tire also retreads aircraft tires and provides miscellaneous other products and services.

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 two tire manufacturing plants and 17 retread plants. SPT sells Goodyear-brand, Dunlop-brand and other house and private brand tires through its chain of 423 retail stores, commercial tire centers and independent dealers. For more information regarding SPT, see Note 18 of the Notes to Financial Statements.

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:

	•	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.
	•	anti-vibration products.
	•	tank tracks.
	•	miscellaneous products and services.

      Engineered Products manufactures products at eight plants in the United States and 20 plants in Australia, Brazil, Canada, Chile, China, France, 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.

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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. Sales are both to Goodyear and other customers. Chemical Products owns and operates four manufacturing facilities, a natural rubber plantation and processing facility in Indonesia and conducts natural rubber purchasing operations. We are exploring the sale of our Chemical business, or portions thereof, to both enhance our financial flexibility and focus future investments on our core business.

      Approximately 63% of the total pounds of synthetic materials sold by our Chemical Products Segment in 2003 were to our other segments. All production is in the United States.

Markets and Other Information

All of the natural rubber produced by Goodyear’s plantation and processing facility is used by Goodyear. Most external sales of natural rubber 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 and Dow. 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 2003, we anticipate the continued availability of all raw materials we will require during 2004, 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 2003, raw materials costs increased from 2002 levels. Raw materials costs are expected to increase during 2004 driven by increases in costs of oil and natural rubber. Prices for raw material and fuel may fluctuate significantly during 2004.

Patents and Trademarks

Goodyear owns approximately 2,400 product, process and equipment patents issued by the United States Patent Office and approximately 5,700 patents issued or granted in other countries around the world. Goodyear also has licenses under numerous patents of others. Goodyear also has approximately 550

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      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 9,500 registrations and 1,100 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 and significant modification of new and existing products and services and the formulation and design of new, and significant improvements to existing, manufacturing processes and equipment during the periods indicated were:

Employees

At December 31, 2003, Goodyear employed approximately 86,000 people throughout the world, including approximately 36,000 persons in the United States. Approximately 14,000 of our employees in the United States were covered by a master collective bargaining agreement, dated August 20, 2003, with the United Steelworkers of America, A.F.L.-C.I.O.-C.L.C. (“USWA”), which expires on July 20, 2006. In addition, approximately 1,000 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, Latin America and Asia 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 $13 million during 2004 and approximately $16 million during 2005.

      In addition, we expended approximately $71 million during 2003 and expect to expend approximately $62 million during 2004 and $57 million during 2005, to maintain and operate our pollution control facilities and conduct our other environmental activities, including the control and disposal of hazardous substances. These expenditures are expected to be sufficient to comply with existing environmental 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

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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, 2003 appears in Note 18 of the Notes to Financial Statements, 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.

Goodyear manufactures its products in 95 manufacturing facilities located around the world. There are 31 plants in the United States and 64 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 23.5 million square feet and consist of:

	•	13 tire plants (ten in the United States and three in Canada),
	•	one steel tire wire cord plant,
	•	one tire mold plant,
	•	two textile mills,
	•	three tread rubber plants, and
	•	two aero retread plants.

      Goodyear also owns one tire plant in Huntsville, Alabama that was closed during 2003 and has floor space aggregating approximately 1.3 million square feet.

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,
	•	one tire mold and tire manufacturing machines facility, and
	•	two tire retread plants.

      These facilities have floor space aggregating approximately 13.0 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, one of which (Guatemala) was closed in the first quarter of 2004. Goodyear also manufactures tread rubber and tire molds and operates a fabric processing facility in Brazil and manufactures batteries in Chile. The Latin American facilities have floor space aggregating approximately 6.0 million square feet.

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ASIA TIRE MANUFACTURING FACILITIES. Goodyear owns nine tire plants operated by Asia Tire. These facilities have floor space aggregating approximately 4.8 million square feet.

ENGINEERED PRODUCTS MANUFACTURING FACILITIES. Goodyear owns (or leases with the right to purchase at a nominal price) 28 facilities at eight United States and 20 international locations operated by Engineered Products. These facilities have floor space aggregating approximately 6.0 million square feet. Certain facilities manufacture more than one group of products. The facilities include:

      Goodyear also owns one tire fabric processing facility in Cartersville, Georgia that was closed during 2003 and has floor space aggregating approximately 0.6 million square feet.

CHEMICAL PRODUCTS MANUFACTURING FACILITIES. Goodyear owns four manufacturing facilities operated by Chemical Products. These facilities have floor space aggregating approximately 1.8 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 88% during 2003, compared to approximately 86% during 2002 and 89% during 2001. 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 and rubber processing facility in Indonesia, four research and development facilities and technical centers, and six tire proving grounds. We also operate approximately 1,535 retail outlets for the sale of our tires to consumers, approximately 103 tire retreading facilities and approximately 220 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 9, “Properties and Plants,” and Note 10, “Leased Assets,” of the Notes to Financial Statements.

ITEM 3.     LEGAL PROCEEDINGS.

Heatway Litigation and Proposed Settlement

Goodyear is subject to a number of lawsuits relating to a rubber hose product, Entran II, it supplied from 1989 to 1993 to Chiles Power Supply, Inc. (d/b/a Heatway Systems), a designer and marketer of hydronic radiant heating systems headquartered in Springfield, Missouri. Heating systems using Entran II are typically attached or embedded in either indoor flooring or outdoor pavement, and use Entran II hose as a conduit to circulate warm fluid as a source of heat.

      In 1997, Goodyear sued Heatway in the United States District Court for the Northern District of Ohio, Eastern Division, for non-payment of approximately $2.0 million of hose supplied to Heatway. Heatway filed counterclaims alleging that the Entran II hose was defective and that Goodyear was liable to Heatway for any claims brought by homeowners. Following a trial, the jury rendered its verdict in favor of Goodyear, finding that Goodyear did not breach the implied warranty of merchantability in respect of the 25 million feet of

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      Beginning in late 1997, property owners, primarily homeowners, began to file lawsuits against Goodyear, Heatway and others relating to the alleged failure of Entran II in their heating systems. As to Goodyear, the plaintiffs in these lawsuits generally allege that Entran II undergoes progressive deterioration in the heating system and ultimately fails, resulting in leakage and property damage. The plaintiffs in these lawsuits typically seek recovery under various tort, contract and statutory causes of action, including breach of express warranty, breach of implied warranty of merchantability, breach of implied warranty of fitness for a particular purpose, negligence, strict liability and violation of state consumer protection statutes. Goodyear denies that Entran II hose is unsafe or defective and contends that the hose was manufactured in accordance with specifications agreed upon with Heatway, for use in custom designed heating systems for which Heatway was responsible for supplying design and installation services and maintenance information. Goodyear maintains that any leakage is attributable to improper design, installation, and maintenance of heating systems by Heatway and by the unsupervised contractors to whom Heatway distributed Entran II in bulk quantities, contrary to its representations to Goodyear.

      Goodyear is currently subject to 22 Entran II class actions and putative class actions in federal and state courts in Alaska, California, Colorado, New Jersey, New Mexico, New York, Massachusetts, Pennsylvania, South Dakota, Utah, Washington, Wisconsin and Wyoming and in Canada. These actions are:

     State Court Actions

	•	Anderson, et al. v. Goodyear, et al. (Case No. 98CV439, District Court of Eagle County, Colorado).
	•	Jane Bates, et al. v. Goodyear (Case No. D-0101-CV-2001-359, First Judicial District Court, Santa Fe County, New Mexico).
	•	Crawford, et al. v. Goodyear (Case No. 001206, Superior Court, Philadelphia County, Pennsylvania).
	•	Feldman v. Goodyear (Case No. 002790, Common Pleas Court, Philadelphia County, Pennsylvania).
	•	McFarland et al. v. Goodyear (Case No. 03-1653, Circuit Court for the Second Judicial Circuit, Minnehaha County, South Dakota).
	•	The Seth Peterson Cottage Conservancy, Inc. et al. v. Goodyear et al. (Case No. 03 CV 1399, Circuit Court, Dane County, Wisconsin).
	•	James E. Simon v. Goodyear, et al. (Case No. BC294423, Superior Court of California, County of Los Angeles).

     Federal Court Actions

	•	Bates, et al. v. Goodyear (Case No. 02-CV-0662A, United States District Court, Western District of New York).
	•	Ditlow, et al. v. Goodyear (Case No. CV-03-5004, United States District Court, District of New Jersey).
	•	Ronald J. Frank, et al. v. Goodyear (Case No. 02-CV-0985, United States District Court for the Northern District of New York).
	•	Galanti, et al. v. Goodyear (Case No. 03-209, United States District Court, Southern District of New Jersey).
	•	Glanville, et al. v. Goodyear (Case No. A03-018, United States District Court for the District of Alaska).
	•	Huber, et al. v. Goodyear (Case No. CO 31290 C, United States District Court, Western District of Washington).
	•	Mingalone et al. v. Goodyear (Case No. 03-3539, United States District Court, District of New Jersey).
	•	Nye et al. v. Goodyear (Case No. 03-CV-1037, United States District Court, District of Wyoming).

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	•	Stephen Payne, et al. v. Goodyear (Case No. 01-10118-NG,United States District Court, District of Massachusetts).
	•	Pena, et al. v. Goodyear (Case No. 02-0600147, United States District Court, Central Division of Utah).

     Canadian Actions

	•	Shirley and David Ford v. Goodyear Canada Inc. and Goodyear (Case Number 03-CV-255653CP, Superior Court, Ontario, Canada).
	•	Gary and Janis Kelman v. Goodyear and Goodyear Canada Inc., (Case No. 42665, Superior Court, Ontario, Canada).
	•	Mona Lahaie v. Goodyear Canada Inc. and Goodyear (Case No. 0303 13282, District Court, Alberta, Canada).
	•	Allen May v. Goodyear Canada Inc. and Goodyear (Case No. L 032196, Supreme Court of British Columbia).
	•	Mike Myshack Management Ltd. v. Goodyear and Goodyear Canada Inc. (Case No. 0301-15976, Court of Queen’s Bench of Alberta, District of Calgary, Canada).

      In addition to the class actions and putative class actions, Goodyear is also a defendant in three cases involving homeowners in Colorado: Davis et al. v. Goodyear (Case No. 99CV594, District Court, Eagle County, Colorado); Albers v. Goodyear (Case No. 04CV2100, District Court, Arapahoe County, Colorado); and Holmes v. Goodyear (Case No. 98CV268-A, District Court, Pitkin County, Colorado). These individual cases involve between one and 38 property owners. Holmes, a case involving one site, is scheduled to go to trial on June 7, 2004. The plaintiff in Holmes has opted out of the Proposed Settlement (as defined below). Goodyear has also been named as a third party defendant in a case pending in New Mexico, Zubchenok, et al. v. Quintana, et al. v. Goodyear (Case No. D101-CV-2003-01980, District Court, Santa Fe County, New Mexico). Two additional cases are on appeal following a verdict. 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 were trebled under the Colorado Consumer Protection Act. The total damages awarded are approximately $22.7 million, including interest, attorney’s fees and costs. In another case in Colorado state court involving six sites, Sumerel et al. v. Goodyear et al. (Case No. 02CA1997, Colorado Court of Appeals), a judgment was entered against Goodyear in the amount of $1.3 million plus interest and costs. Also, in Loughridge v. Goodyear and Chiles Power Supply, Inc. (Case No. 98-B-1302, United States District Court for the District of Colorado), a case consolidating claims involving 36 Entran II sites, on June 19, 2003, a federal jury in Colorado awarded 34 homeowners aggregate damages of $8.2 million. The jury allocated 50% of the fault to Goodyear and 50% to Heatway, resulting in a judgment against Goodyear of approximately $4.1 million. On September 8, 2003, judgment was entered in Loughridge and an additional $5.7 million in prejudgment interest was awarded to the plaintiffs, all of which is allocated to Goodyear. Post-trial motions have been filed in Loughridge by all parties seeking modifications to the judgment. In addition, in Malek, et al. v. Goodyear (Case No. 02-B-1172, United States District Court for the District of Colorado), a case involving 25 homesites, on May 13, 2004, a federal jury awarded the plaintiffs aggregate damages of $8.1 million. The jury allocated 40% of the fault to Goodyear and 60% to Heatway resulting in a judgment against Goodyear of $3.2 million.

      On October 8, 2003, attorneys representing certain class members filed a proposed settlement (the “Proposed Settlement”) covering all pending Entran II actions in the United States and Canada except for the claims of persons arising from property they own or have owned in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont. The Proposed Settlement was initiated through the filing of a national class action complaint in Galanti et al. v. Goodyear on October 6, 2003 and motion for preliminary approval of settlement filed October 8, 2003. On October 9, 2003, the judge in Galanti gave preliminary approval to the Proposed Settlement and conditionally certified the class. A national class has also been conditionally certified in Canada. On February 9, 2004, notice of the settlement was given to potential class members pursuant to a court approved notice plan. The Galanti court will conduct a fairness hearing to resolve any objections to final approval of the settlement. Class members who object to the settlement had the right to

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      Under the Proposed Settlement, Goodyear will make annual cash contributions to a settlement fund of $40 million, $6 million, $6 million, $8 million and $16 million in 2004, 2005, 2006, 2007 and 2008, respectively. Goodyear will also make additional contingent payments of $10 million in each of 2005, 2006, 2007 and 2008 if Goodyear meets the following EBITDA targets: $1.2 billion in 2004 and $1.4 billion in each of 2005, 2006 and 2007. For purposes of the Proposed Settlement, EBITDA is defined by reference to the definition of “Consolidated EBITDA” in Goodyear’s $645 million U.S. term loan agreement. In the event the EBITDA target is not met in any given year, the contingent payment will remain payable in the first subsequent year in which the following cumulative EBITDA targets are met: $2.6 billion in 2005, $4.0 billion in 2006 and $5.4 billion in 2007. Please see page 50 for the appropriate calculation of Consolidated EBITDA for the year ended December 31, 2003. The settlement fund will be used to pay for damage awards to class members, class counsel’s attorney fees, the cost of notice to the class and the cost to administer the claims process. In addition to the required contributions of Goodyear, 80% of Goodyear’s insurance recoveries from Entran II claims will be paid into the settlement fund. The settlement agreement provides that if these insurance recoveries, plus any additional amounts that Goodyear elects to pay into the settlement fund, were less than $120 million by February 23, 2004, the plaintiffs may withdraw from the settlement. Since less than $120 million was paid into the settlement fund by February 23, 2004, the plaintiffs have the right, which has not yet been exercised, to withdraw from the settlement. No assurance can be given as to the Company’s ability to recover insurance proceeds sufficient to adequately fund the settlement.

      Goodyear remains subject to Payne et al. v. Goodyear, a class action in the United States District Court for the District of Massachusetts covering six northeastern states. The members of the class in Payne are owners of real property or improvements in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont in which Entran II hose was or is installed in a hydronic heating system. According to the plaintiffs in Payne, approximately 5 million feet of Entran II hose sold to Heatway was installed in these states. On October 24, 2003, at the request of the plaintiffs’ attorneys, the judge in Payne enjoined Goodyear from entering into a settlement that would affect the class certified in Payne. This injunction is currently under appeal by Goodyear. The Payne case is presently scheduled for trial commencing September 30, 2004.

      Goodyear is also subject to Anderson, et al. v. Goodyear, et al., a class action in state court in Colorado, and Jane Bates, et al. v. Goodyear, a class action in state court in New Mexico. Plaintiff attorneys in both Anderson and Bates filed motions seeking to exclude the Colorado and New Mexico state court plaintiffs from the Proposed Settlement. However, the judge in Galanti has issued an order enjoining the plaintiffs’ counsel in both Anderson and Bates from engaging in any activities that interfere with the settlement process. On March 2, 2004, the court in Galanti issued an order preventing the Anderson case from proceeding to trial during the settlement notice and opt-out period. The Anderson trial is now scheduled to begin on July 12, 2004.

      The ultimate cost of disposing of Entran II claims is dependent upon a number of factors, including the Company’s ability to satisfy the contingencies in any settlement, the number of claimants that opt out of any settlement, final approval of the terms of any settlement, Goodyear’s ability to resolve claims not subject to any settlement (including the cases in which the Company received adverse judgments), and, in the event Goodyear fails to consummate a settlement for any reason, future judgments by courts in other currently pending or yet unasserted actions. Depending on the resolution of these uncertainties, the costs associated with

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SEC Investigation

On October 22, 2003, Goodyear announced that it would restate its financial results for the years ended 1998 through 2002 and for the first and second quarters of 2003. Following this announcement, the SEC advised the Company that the SEC had initiated an informal inquiry into the facts and circumstances related to the restatement. On February 5, 2004, the SEC advised Goodyear that it had approved the issuance of a formal order of investigation. The order authorizes an investigation into possible violations of the securities laws related to the restatement and previous public filings. Goodyear is cooperating fully with the SEC and has provided requested information as expeditiously as possible. Because the SEC investigation is currently ongoing, the outcome cannot be predicted at this time.

Securities Litigation

On October 23, 2003, following the announcement of the restatement, a purported class action lawsuit was filed against the Company in the United States District Court for the Northern District of Ohio on behalf of purchasers of Goodyear common stock alleging violations of the federal securities laws. After that date, a total of 20 of these purported class actions were filed against Goodyear in that court. These lawsuits name as defendants several of the Company’s present or former officers and directors, including Goodyear’s current chief executive officer, Robert J. Keegan, and Goodyear’s current chief financial officer, Robert W. Tieken, and allege, among other things, that Goodyear and the other named defendants violated federal securities laws by artificially inflating and maintaining the market price of Goodyear’s securities. Since October 24, 2003, three derivative lawsuits have also been filed by purported shareholders on behalf of Goodyear in the United States District Court for the Northern District of Ohio and two similar derivative lawsuits originally filed in the Court of Common Pleas for Summit County, Ohio were removed to federal court. The derivative actions are against present and former directors, Goodyear’s present and former chief executive officers and Goodyear’s chief financial officer and allege, among other things, breach of fiduciary duty and corporate waste arising out of the same events and circumstances upon which the securities class actions are based. The plaintiffs in the federal derivative actions also allege violations of Section 304 of the Sarbanes-Oxley Act of 2002, by certain of the named defendants. Finally, since October 27, 2003, at least 11 lawsuits have been filed in the United States District Court for the Northern District of Ohio against Goodyear, The Northern Trust Company, and current and/or former officers of Goodyear asserting breach of fiduciary claims under the Employee Retirement Income Security Act (ERISA) on behalf of a putative class of participants in Goodyear’s Employee Savings Plan for Bargaining Unit Employees and Goodyear’s Savings Plan for Salaried Employees. The plaintiffs’ claims in these actions arise out of the same events and circumstances upon which the securities class actions and derivative actions are based. All of the above actions have been consolidated before the Honorable Judge John Adams in the United States District Court for the Northern District of Ohio. While Goodyear believes these claims are without merit and intends to vigorously defend them, it is unable to predict their outcome.

Asbestos Litigation

Goodyear is currently one of several (typically 50 to 80) defendants in civil actions involving approximately 114,800 claimants (as of December 31, 2003) 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

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Load Range D and E Matters

On December 4, 2003, Goodyear entered into a conditional settlement agreement resolving a national class action with respect to allegedly defective Goodyear, Kelly and house brand load range E light truck and recreational vehicle tires. On December 5, 2003, the settlement was preliminarily approved by the court in Baugh et al. v. Goodyear, Civil Action No. 00-L-1154, Circuit Court of the Third Judicial Circuit, Madison County, Illinois (formerly styled Julie Harper et al. v. Goodyear et al.). The settlement received final approval at an April 28, 2004, fairness hearing. The settlement class includes persons who purchased load range E tires manufactured between January 1, 1992 and June 30, 2000. Notwithstanding the settlement, Goodyear maintains that the subject tires are not defective.

      Pursuant to the settlement, class members are eligible to receive benefits pursuant to an enhanced warranty program or a rebate program. Additionally, Goodyear has agreed to continue to provide consumer education regarding tire safety. Goodyear has also agreed to bear the costs associated with publishing notice to the class members and with the administration of the settlement. Subject to court approval, Goodyear will pay class counsel attorneys fees in the amount of $1.745 million plus interest. The class does not include, among others, persons who may have a claim for personal injury or damage to property, owners of 15 passenger vans notified under NHTSA campaign number 02X-001, or resellers of tires. Goodyear remains subject to a number of civil lawsuits related to death or injury involving allegedly defective Goodyear manufactured load range E light truck tires. The settlement does not include these actions. Actions related to alleged breaches of warranty or product defects relating to certain of Goodyear’s load range D light truck tires were dismissed in the fourth quarter of 2003.

DOE Facility Litigation

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 compensatory damages, $300 million in punitive damages and unspecified amounts for medical monitoring and cleanup costs. This civil action is no longer a class action as a result of rulings of the District Court decertifying the class. On June 8, 1998, a civil action, Adkins, et al. v. Divested Atomic Corporation, et al. (Case No. C2 98-595), was filed in the United States District Court for the Southern District of Ohio, Eastern Division, against DAC, the Company and LMES on behalf of approximately 276 persons who currently reside, or in the past resided, near the DOE Plant. The plaintiffs allege, on behalf of themselves and a putative class of all persons who were residents, property owners or lessees of property subject to alleged windborne particulates and water run off from the DOE Plant, that DAC (and, therefore, the Company) and LMES in their operation of the Portsmouth DOE Plant (i) negligently contaminated, and are strictly liable for contaminating, the plaintiffs and their property with allegedly toxic substances, (ii) have in the past maintained, and are continuing to maintain, a private nuisance, (iii) have committed, and continue to commit, trespass, and (iv) violated the Comprehensive Environmental Response, Compensation and Liability Act of 1980. The plaintiffs are seeking $30 million in actual damages,

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Orion Tire Litigation

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, then Chairman of the Board and 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. 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.

      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 December 31, 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. For additional information regarding the Company’s legal proceedings, see Note 20, “Commitments and Contingent Liabilities” of the Notes to Financial Statements.

No matter was submitted to a vote of the security holders of the Company during the quarter ended December 31, 2003.

EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below are: (1) the names and ages of all executive officers of the Company at May 19, 2004, (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.

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      No family relationship exists between any of the above named executive officers or between said executive officers and any director or nominee for director of the Company.

      Each executive officer is elected by the Board of Directors of the Company at its annual meeting to a term of one year or until his or her successor is duly elected, except in those instances where the person is elected at other than an annual meeting in which event such person’s term will expire at the next annual meeting.

PART II.

The principal market for Goodyear’s common stock is the New York Stock Exchange (Stock Exchange Symbol GT).

      Information relating to the high and low sale prices of shares of Goodyear’s common stock and the dividends paid on such shares during 2003 and 2002 appears under the caption “Quarterly Data and Market Price Information” in Item 8 of this Annual Report, at page 124, and is incorporated herein by reference. Certain of the Company’s credit agreements prohibit the Company from paying dividends on its common stock. At April 30, 2004, there were 28,443 record holders of the 175,339,715 shares of Goodyear’s common stock then outstanding.

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Notes:

The information contained in the following notes has been restated. Refer to Note 2 to the financial statements for further information.

(1)	Information on the impact of the restatement follows:

As discussed in Note 2, restatement adjustments were classified as “Accounting Irregularities,” “Account Reconciliations,” “Out-of-Period,” “Discount Rate,” “Chemical Products Segment” and “Tax Adjustments.”

      The decrease in net income of $50.5 million in 2001 was principally the result of the timing of the recognition of manufacturing variances to reflect the actual cost of inventories of the Chemical Products Segment, the erroneous recording of cost of goods sold for the sale of inventory at Wingfoot Commercial Tire Systems, LLC, Accounting Irregularities adjustments and other Account Reconciliation adjustments. On November 1, 2000, Goodyear made a contribution, which included inventory, to Wingfoot Commercial Tire Systems, LLC, a consolidated subsidiary. On a consolidated basis, the inventory was valued at Goodyear’s historical cost. Upon the sale of the inventory, consolidated cost of goods sold was understated by $11 million. Additionally, inventory and fixed asset losses totaling $4.2 million were not expensed as incurred and were written off. The Chemical Products Segment adjustments were the result of a stand-alone audit conducted in 2003 of a portion of the Chemical Products business segment.

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      For the restatement of 2001, pretax income was reduced by $12.8 million due to the impact of Account Reconciliations, $13.2 million due to Accounting Irregularities, $18.9 million due to Chemical Products Segment, $14.5 million due to Out-of-Period and $5.5 million due to Discount Rate. The tax effect of restatement adjustments was a benefit of $14.4 million.

      The increase in net income of $11.0 million in 2000 was principally the result of the Chemical Products Segment adjustments and the Account Reconciliation adjustments, primarily Interplant and Wingfoot Commercial Tire Systems, LLC.

      For the restatement of 2000, pretax income was reduced by $21.7 million due to the impact of Account Reconciliations. Pretax income increased by $19.1 million due to the impact of Chemical Products Segment, $14.5 million due to Discount Rate, $5.8 million due to Out-of-Period and $0.6 million due to Accounting Irregularities. The tax effect of restatement adjustments was an expense of $7.3 million.

      The decrease in net income of $18.2 million in 1999 was principally the result of the erroneous recording of accounts receivable, the improper deferral of manufacturing variances at one of the Company’s United States tire manufacturing plants in 1998 which was recorded in 1999 when it was discovered, and which was adjusted in the 1998 results in this restatement, and other Account Reconciliation adjustments. The adjustment to accounts receivable was attributable to amounts erroneously recorded in the Company’s general ledger. Goodyear had implemented certain modules of an ERP accounting system, which were not properly integrated with existing systems and resulted in an overstatement of sales and accounts receivable in the general ledger. However, billings to customers and cash collections were appropriate.

      For the restatement of 1999, pretax income was reduced by $38.0 million due to the impact of Account Reconciliations and $4.9 million due to Chemical Products Segment. Pretax income was increased by $13.1 million due to the impact of Accounting Irregularities and $6.4 million due to Out-of-Period. The tax effect of restatement adjustments was a benefit of $5.2 million.

(2)	See “Principles of Consolidation” at Note 1 (“Accounting Policies”) to the Financial Statements.
(3)	Net Loss in 2003 included net after-tax charges of $524.5 million, or $2.73 per share-diluted, for rationalizations, asset sales, general and product liability-discontinued products, accelerated depreciation, asset impairments, asset writeoffs, favorable settlement of prior year tax liability and rationalization costs at Goodyear’s SPT equity investment.
(4)	Net Loss in 2002 included net after-tax benefit of $14.3 million (as restated), or $0.09 per share-diluted (as restated) for rationalizations, asset sales, writeoff of a miscellaneous investment and a net rationalization reversal at Goodyear’s SPT equity investment. Net loss in 2002 also included a non-cash charge of $1.20 billion (as restated), or $6.86 per share-diluted (as restated), to establish a valuation allowance against its net federal and state deferred tax assets.
(5)	Net Loss in 2001 included net after-tax charges of $172.4 million (as restated), or $1.08 per share-diluted (as restated), 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.
(6)	Net Income in 2000 included a net after-tax charge of $62.0 million (as restated), or $0.39 per share-diluted (as restated), 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.
(7)	Net Income in 1999 included net after-tax benefit of $14.9 million (as restated), or $0.08 per share-diluted (as restated), resulting from the net after-tax gains of $154.8 million, or $0.97 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 $139.9 million after tax (as restated), or $0.89 per share-diluted (as restated).

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OVERVIEW

The Goodyear Tire & Rubber Company is one of the world’s leading manufacturers of tires and rubber products with one of the most recognized brand names in the world. We have a broad global footprint with 95 manufacturing facilities in 28 countries. Our business is run through seven operating segments: North American Tire; European Union Tire; Eastern Europe, Africa and Middle East Tire; Latin America Tire; Asia Tire; Engineered Products; and Chemical Products.

      In each of the last three years we have experienced significant net losses. Our net losses for 2003, 2002 and 2001 were $802.1 million, $1,227.0 million (as restated and including a non-cash charge of $1.20 billion to establish a tax valuation allowance) and $254.1 million (as restated), respectively. Our results are highly dependent upon the results of our North American Tire segment, which accounted for approximately 45% of our consolidated net sales in 2003. In recent years, North American Tire results have been negatively impacted by several factors, including over-capacity which limits pricing leverage, weakness in the replacement tire market, increased competition from low cost manufacturers, a decline in market share and increases in medical and pension costs. In 2003, North American Tire has a segment operating loss of $128.7 million compared to a segment operating loss of $57.1 million (as restated) for 2002 and segment operating income of $100.9 million (as restated) for 2001. In our second largest segment, European Union Tire, we had segment operating income of $133.5 million, $100.2 million (as restated) and $44.2 million (as restated) in 2003, 2002 and 2001, respectively. Approximately 29% of the increase in segment operating income from 2002 to 2003 is attributable to the strength of the Euro. The segment operating income of our five other operating segments has remained strong and has increased each year since 2001.

      In addition to the disappointing results of our North American Tire segment, increases in raw material and energy costs have offset many of the benefits of the numerous cost reduction actions we have taken over the past year. In particular, in 2003, the price of one of our most important raw materials, natural rubber, increased approximately 36% and the cost of oil increased approximately 25% over the same period. We estimate that the rise in raw material costs increased our Cost of Goods Sold by approximately $335 million in 2003. We expect that the price of oil and natural rubber will continue to increase in 2004. Increased interest expense and financing fees also negatively impacted our results in 2003. Interest expense increased from $241.7 million (as restated) in 2002 to $296.3 million in 2003 primarily due to our refinancing efforts. Fees and expenses related to our refinancing efforts in 2003 totaled approximately $120 million, of which $45.6 million was charged against income in 2003. The amount charged against income in 2003 of $45.6 million included the writeoff of unamortized fees associated with the facilities that were replaced. Financing activities completed in the first quarter of 2004 will further increase our interest expense.

      A key indicator of our operating performance is market share, especially in our two largest regions, North America and western Europe. Listed below is our estimated market share in each of these two regions for our two primary tire markets: Original Equipment and Replacement.

The above percentages are estimates only and are based on a combination of industry publications and surveys and internal company surveys. In the North American replacement market, a significant increase in business in our dealer channel was not enough to offset a large loss in the lower margin private label market primarily due to aggressive competition by low cost foreign manufacturers. The North American original equipment market remained steady even as we became more selective in the fitments we pursued with vehicle manufacturers. In western Europe, the increase in the replacement market was due to the successful

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      We refinanced most of our debt on April 1, 2003 with facilities that are secured by a substantial portion of our assets. While we completed additional debt refinancing in the first quarter of 2004, we must take additional actions, including accessing the capital markets or refinancing additional debt, to ensure that we have sufficient liquidity over the long term. For example, we have a number of obligations coming due over the next few years, including substantial required domestic pension plan obligations of approximately $160 million in 2004 and approximately $325 million to $350 million in 2005. In addition, after taking into account the paydown of certain obligations in connection with our recent financing activities, we have an aggregate of $1,343 million and $1,481 million of long-term debt coming due in 2005 and 2006, respectively. We expect to meet our obligations as they come due through available cash and cash equivalents, internally generated funds and borrowings. While new financing may be available to us, access to such financing cannot be assured given the recent performance of our business, our current debt ratings and restrictions on our ability to pledge additional assets as security. Failure to obtain new financing could have a material adverse effect on our liquidity.

      Given these and other obligations, unanticipated events could significantly impact our liquidity. For example, although we have entered into a conditional settlement agreement to resolve a substantial portion of product liability claims relating to a rubber hose product we previously manufactured, unless this settlement is finalized, we will be subject to numerous claims, the resolution of which could have a material adverse effect on our results of operations, financial position and liquidity.

      During the third quarter of 2003, our management and our Audit Committee determined that it was appropriate to restate our previously issued financial results to record adjustments resulting from various accounting matters. The results of an investigation into potential accounting improprieties in our overseas operations led to an additional restatement. The impact of these restatements is described in Note 2 to our Financial Statements. We are currently subject to an SEC investigation into the facts and circumstances surrounding the restatement. We cannot predict the outcome of the investigation, and any adverse developments in connection with the investigation, including the initiation of an enforcement action, could be costly and could seriously harm our business.

RESULTS OF OPERATIONS

(All per share amounts are diluted)

CONSOLIDATED

Net sales in 2003 were $15.12 billion, compared to $13.86 billion (as restated) in 2002 and $14.16 billion (as restated) in 2001.

      A net loss of $802.1 million, $4.58 per share, was recorded in 2003. A net loss of $1.23 billion (as restated), $7.35 per share (as restated), was recorded in 2002, primarily resulting from a non-cash charge of $1.20 billion (as restated) 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 $254.1 million (as restated), $1.59 per share (as restated), was recorded in 2001.

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Net Sales

Goodyear’s worldwide tire unit sales decreased 0.3% in 2003 compared to 2002. North American Tire (U.S. and Canada) volume decreased 2.5% in 2003, while international unit sales increased 1.7%. Worldwide replacement unit sales increased 2.0% from 2002, due to increases in all regions except North American and Asia Tire. Original equipment unit sales decreased 5.6% in 2003, due to decreases in all regions except Eastern Europe, Africa and Middle East Tire and Asia Tire.

      Goodyear’s worldwide tire unit sales in 2002 decreased 2.3% compared to 2001. North American Tire (U.S. and Canada) volume decreased 7.2% in 2002, while international unit sales increased 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 North American Tire 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.

      Revenues increased 9.1% in 2003 primarily due to favorable currency translation of approximately $737 million, largely related to the strong Euro. Favorable pricing and product mix in all business units, but primarily in Latin American Tire, Chemical Products and North American Tire, accounted for approximately $418 million of the increase in revenues. In Europe, strong replacement sales also had a favorable impact on 2003 net sales of approximately $104 million.

      Revenues (as restated) decreased 2.2% in 2002 compared to 2001 primarily due to lower tire unit volume of approximately $250 million, largely in North American Tire, and the negative impact of currency translation on international results of approximately $102 million (as restated), primarily in Latin American Tire. Revenues in 2002 were also negatively impacted as a result of the sale of the Specialty Chemical Business in the fourth quarter of 2001. The Specialty Chemical Business contributed approximately $127 million of sales in 2001. Revenues were favorably affected by tire pricing and product mix improvements, mainly in Latin American Tire, of approximately $167 million.

Cost of Goods Sold

Cost of goods sold (CGS) was 82.6% of sales in 2003, compared to 81.6% in 2002 and 82.5% in 2001. CGS in 2003 was adversely impacted by approximately $554 million due to currency movements, primarily in Europe, and by approximately $335 million in higher raw material costs, largely natural and synthetic rubber. CGS in 2003 was also unfavorably impacted by approximately $133 million related to accelerated depreciation charges, asset impairment charges and writeoffs, related to the 2003 rationalization actions. Changes in product mix of approximately $184 million, primarily in North American Tire and inflationary cost increases in Latin American Tire also negatively impacted 2003 CGS. Savings from rationalization programs of approximately $61 million, mainly European Union Tire and North American Tire, and the change in vacation policy described below of approximately $33 million favorably impacted 2003 CGS.

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      CGS (as restated) in 2002 benefited by approximately $204 million from lower raw material costs and other purchasing savings. CGS also decreased by approximately $220 million (as restated) 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 benefited by approximately $82 million (as restated) due to currency movements, primarily in Brazil, Argentina and South Africa partially offset by unfavorable currency movements in European Union and by approximately $30 million due to lower transportation costs in North American Tire. Savings from rationalization programs of approximately $20 million also favorably impacted CGS in 2002. 2002 CGS increased approximately $238 million as a result of changes in product mix, mainly North American Tire and inflationary cost increases in Latin American Tire. CGS was unfavorably impacted by $10 million related to the closure of Penske Automotive Centers in 2002. Compared to 2001, CGS in 2002 was adversely affected by lower demand and approximately $76 million (as restated) 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.

      Research and development expenses are included in CGS and were $350.4 million in 2003, compared to $385.8 million (as restated) in 2002 and $371.8 million (as restated) in 2001. Research and development expenditures in 2004 are expected to be approximately $369 million.

Selling, Administrative and General Expense

Selling, administrative and general expense (SAG) in 2003 was 15.7% of sales, compared to 15.9% in 2002 and 15.7% in 2001. SAG increased in 2003 primarily due to foreign currency translation, mainly the Euro, of approximately $132 million and higher wages and benefits of approximately $72 million. Also negatively impacting SAG was increased advertising expense, largely in European Union Tire and North American Tire, of approximately $29 million and increased corporate consulting fees of approximately $23 million. SAG was favorably impacted by rationalization programs of approximately $74 million and by the change in vacation policy described below of approximately $34 million.

      SAG (as restated) 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 Specialty Chemical Business, which contributed approximately $12 million of SAG in 2001. In addition, reductions in media expense of approximately $31 million (as restated) (including advertising and administrative expenses), and reductions in computer related charges of approximately $20 million (as restated) also benefited SAG. SAG was adversely impacted by increased wage and benefit costs of approximately $60 million (as restated) in 2002 compared to 2001.

Other Financial Information

Net loss in 2001 included expenses related to amortization of goodwill and intangible assets with indefinite useful lives totaling $29.1 million before tax (as restated). 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. 7, 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. Effective April 20, 2003, the Company suspended the matching contribution portion of the savings plan for bargaining unit associates including those covered by Goodyear’s master contract with the United Steelworkers of America (“USWA”). 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 did not incur vacation expense for domestic salaried associates in 2003. Vacation expense was approximately $67 million lower in 2003 compared to 2002 due to this change in vacation policy.

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Interest Expense

Interest expense in 2003 was $296.3 million, compared to $241.7 million (as restated) in 2002 and $297.1 million (as restated) in 2001. Interest expense increased in 2003 due to higher average debt outstanding. Interest expense decreased in 2002 compared to 2001 due to both lower average debt levels and lower interest rates.

Other (Income) and Expense

Other (income) and expense was $267.3 million in 2003, compared to $56.8 million (as restated) in 2002 and $40.8 million (as restated) in 2001. Other (income) and expense included accounts receivable sales fees, debt refinancing fees and commitment fees totaling $99.4 million, $48.4 million and $50.1 million in 2003, 2002 and 2001, respectively. The increase in 2003 in financing fees and financial instruments is due to the costs incurred in connection with the restructuring and refinancing of the Company’s bank credit and receivables securitization facilities discussed below. Financing fees and financial instruments included $45.6 million in 2003 related to the new facilities. Refer to Note 11, Financing Arrangements and Derivative Financial Instruments, for further information about the restructuring and refinancing. Goodyear expects to incur additional financing fees in the future related to refinancings or capital market transactions.

      Other (income) and expense in 2003 included a loss of $17.6 million ($8.9 million after tax or $0.05 per share) on the sale of 20,833,000 shares of Sumitomo Rubber Industries, Ltd. (“SRI”) in the second quarter. 2003 included a loss of $11.6 million ($11.2 million after tax or $0.07 per share) on the sale of assets in the Engineered Products, North American Tire and European Union Tire Segments. 2003 also included a gain of $7.7 million ($6.4 million after tax or $0.04 per share) resulting from the sale of land in the Asia Tire Segment and assets in the Latin American and European Union Tire Segments.

      Other (income) and expense also includes General and product liability-discontinued products which includes charges for claims against Goodyear related to asbestos personal injury claims and for anticipated liabilities related to Entran II claims, primarily for a proposed settlement of such claims. Goodyear recorded net charges for General and product liability-discontinued products totaling approximately $145 million in 2003 which included recognition of a receivable of approximately $131 million from Goodyear’s insurance carriers. Refer to Note 20, Commitments and Contingent Liabilities, for further information about general and product liabilities.

      Other (income) and expense in 2002 included gains of $28.0 million (as restated) ($23.7 million after tax or $0.14 per share (as restated)) 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 $0.02 per share) was also included in Other (income) and expense in 2002.

      Other (income) and expense in 2001 included gains of $18.4 million (as restated) ($14.7 million after tax or $0.09 per share (as restated)) resulting from the sale of land and buildings in the European Union Tire Segment and $27.4 million ($16.9 million after tax or $0.10 per share) resulting from the sale of Goodyear’s Specialty Chemical Business.

      For further information, refer to the note to the financial statements as restated No. 4, Other (Income) and Expense.

Foreign Currency Exchange

Foreign currency exchange loss was $40.2 million in 2003, compared to a gain of $9.7 million (as restated) in 2002 and a loss of $10.0 million (as restated) in 2001. Foreign currency exchange in 2003 was adversely impacted by approximately $48 million due to currency movements on U.S. dollar denominated monetary items in Brazil and Chile. 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.

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Equity in (Earnings) Losses of Affiliates

Equity in (earnings) losses of affiliates was $12.1 million in 2003, compared to $13.2 million (as restated) and $39.7 million (as restated) in 2002 and 2001, respectively. Equity in (earnings) losses of affiliates improved in 2002 compared to 2001 due to the rationalization charges incurred in 2001 by South Pacific Tyres (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 $0.01 per share) in 2002. Goodyear’s share of rationalization charges recorded by SPT in 2001 totaled $24.0 million ($24.0 million after tax or $0.15 per share).

Income Taxes

For 2003, Goodyear recorded tax expense of $112.2 million on a loss before income taxes and minority interest in net income of subsidiaries of $654.9 million. The difference between Goodyear’s effective tax rate and the U.S. statutory rate was primarily attributable to the Company continuing to maintain a full valuation allowance against its net Federal and state deferred tax assets. In 2002, a non-cash charge of $1.20 billion (as restated) ($6.86 per share (as restated)) was recorded to establish the valuation allowance against the net Federal and state deferred tax assets. Goodyear had a tax benefit at an effective rate of 24.6% (as restated) for 2001.

      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. 14, Income Taxes.

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 $291.5 million in 2003, $5.5 million (as restated) in 2002 and $210.3 million (as restated) in 2001. As of December 31, 2003, Goodyear has reduced employment levels by approximately 16,400 from December 31, 2000 and almost 25,400 since 1998, primarily as a result of rationalization activities.

      During 2003, net charges of $291.5 million ($267.1 million after tax or $1.27 per share) were recorded, which included reversals of $15.7 million ($14.3 million after tax or $0.07 per share) for reserves from rationalization actions no longer needed for their originally intended purposes and new charges of $307.2 million ($281.4 million after tax or $1.34 per share). The 2003 rationalization actions consisted of manufacturing, research and development, administrative and retail consolidations in North America, Europe and Latin America. Of the $307.2 million of new charges, $174.8 million related to future cash outflows, primarily associate severance costs, and $132.4 million related primarily to non-cash special termination benefits and pension and retiree benefit curtailments. In 2003, $200.4 million and $15.5 million, respectively, was incurred primarily for severance payments and noncancellable lease costs. Approximately 4,400 associates will be released under the programs initiated in 2003, of which approximately 2,700 were exited in 2003. The majority of the remaining accrual balance for all programs of $141.9 million is expected to be utilized by the end of 2004.

      As part of the 2003 rationalization program, Goodyear closed its Huntsville, Alabama tire facility in the fourth quarter. Of the $307.2 million of new charges, approximately $138 million related to the Huntsville closure primarily for associate-related costs, including severance, special termination benefits and pension and retiree benefit curtailments. The Huntsville closure also resulted in approximately $35 million of asset impairment charges and $85 million of accelerated depreciation charges and the writeoff of spare parts. Approximately $8 million of construction in progress was written off in the first quarter of 2003 related to the research and development rationalization plan. Approximately $5 million of accelerated depreciation charges were recorded for equipment taken out of service in the European Union related to two rationalization plans at

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      Goodyear recorded a net rationalization charge totaling $5.5 million (as restated) ($6.4 million after tax or $0.03 per share (as restated)) in 2002, which included reversals of $18.0 million (as restated) ($14.3 million after tax or $0.09 per share (as restated)) for reserves from rationalization actions no longer needed for their originally intended purposes, new charges of $26.5 million ($23.0 million after tax or $0.14 per share) and other credits of $3.0 million (as restated) ($2.3 million after tax or $0.02 per share (as restated)). 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 recorded net rationalization charges totaling $210.3 million (as restated) ($161.4 million after tax or $1.00 per share (as restated)) in 2001, which included $4.1 million of reversals of prior year reserves no longer needed for their originally intended purposes. These actions were in response to continued competitive market conditions and worldwide economic uncertainty. Under these actions, Goodyear provided for worldwide associate reductions through retail and administrative consolidation and manufacturing plant downsizing and consolidation. Of this charge, $132.0 million (as restated) related to future cash outflows, primarily associate severance and noncancellable lease costs, and $82.4 million (as restated) related to non-cash charges, primarily for the writeoff of equipment taken out of service. Goodyear completed these actions during 2003 with the exception of ongoing severance and noncancellable lease payments.

      Upon completion of the 2003 plans, the Company estimates that it will reduce annual operating costs by approximately $280 million (approximately $70 million SAG and approximately $210 million CGS). Goodyear estimates that SAG and CGS were reduced in 2003 by approximately $62 million as a result of the implementation of the 2003 plans, approximately $41 million as a result of the implementation of the 2002 plans and approximately $76 million as a result of the implementation of the 2001 plans. Plan savings have been substantially offset by higher SAG and conversion costs including increased compensation and benefit costs.

      The remaining reserve for costs related to the completion of the Company’s rationalization actions was $141.9 million at December 31, 2003, compared to $69.2 million at December 31, 2002.

      For further information, refer to the note to the financial statements No. 3, Costs Associated with Rationalization Programs.

UNION AGREEMENT

On September 15, 2003, the United Steelworkers of America (the “USWA”) and Goodyear announced the ratification of a new labor agreement. The agreement covers workers at 14 tire and engineered products plants in the United States and contains provisions governing healthcare benefits, pension service and wages. The agreement assigns protected plant status to 12 of the 14 plants and permits a 13th plant to achieve protected status if certain productivity goals are met. A protected plant cannot be closed during the duration of the agreement and Goodyear is generally required to maintain the current level of capital expenditures at these plants. The agreement also gives Goodyear the option to reduce the hourly workforce at protected plants by 15% compared to August 2003 staffing levels. Goodyear has also agreed to give USWA plants first consideration on all new products intended for sale in North America to the extent covered plants have the capacity and capability to manufacture the product. Goodyear retains the right to import tires from the Company’s plants outside of the United States to the extent the USWA plant that is manufacturing the product is operating at full capacity. Under the agreement, the USWA has the right to nominate an individual for a seat on Goodyear’s Board of Directors. Goodyear has also agreed to remain neutral should the USWA attempt to organize one of Goodyear’s non-union facilities. Goodyear must also require a buyer of any of Goodyear’s plants to negotiate a labor agreement as a precondition of the sale.

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      Goodyear also committed under the agreement to consummate the issuance or placement of at least $250 million of debt securities and at least $75 million of equity or equity-linked securities by December 31, 2003. Goodyear did not meet this commitment. As a result, the USWA may file a grievance and strike. In the event of a strike, the Company’s financial position, results of operations and liquidity could be materially adversely affected. Goodyear has also committed to launch, by December 1, 2004, a refinancing of its U.S. term loan and revolving credit facilities due in April 2005 with loans or securities having a term of at least three years. If Goodyear fails to complete this refinancing commitment, the USWA would have the right to strike and Goodyear would be required to pay each covered union employee (approximately 13,700 as of December 31, 2003) $1,000 and each covered union retiree (approximately 13,800 as of December 31, 2003) $500. Finally, Goodyear committed to remain in compliance with the Interest Expense Coverage Ratio, Consolidated Net Worth, and Senior Secured Indebtedness Ratio covenants in its U.S. revolving credit facility. If Goodyear fails to remain in compliance with these covenants, it has agreed to use its best efforts to seek a substantial private equity investment. Such investment would be expected to provide the investor with significant influence in the management and direction of Goodyear.

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 higher raw material and energy prices in future periods. These costs, if incurred, may not be recoverable due to pricing pressures present in today’s highly competitive market. Goodyear is unable to predict future currency fluctuations. Sales and earnings in future periods would be unfavorably impacted if the U.S. dollar strengthens versus various foreign currencies. A continuation of the current economic conditions in the United States and Europe is likely to unfavorably impact Goodyear’s sales and earnings in future periods. Similarly, continued volatile economic conditions in emerging markets could adversely affect sales and earnings in future periods. Goodyear may also be impacted by economic disruptions associated with global events including war, acts of terror and civil obstructions.

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. Goodyear had recorded liabilities totaling $491.7 million at December 31, 2003 and $240.7 million (as restated) at December 31, 2002 for potential product liability and other tort claims, including related legal fees expected to be incurred. Of these amounts, $142.5 million and $75.4 million (as restated) were included in Other current liabilities at December 31, 2003 and 2002, respectively. The amounts recorded were estimated on the basis of an assessment of potential liability using an analysis of available information with respect to pending claims, historical experience and, where available, recent and current trends. The Company had recorded insurance receivables for potential product liability and other tort claims of $199.3 million at December 31, 2003 and $81.0 million at December 31, 2002. Of this amount, $100.1 million and $24.7 million was included in Current Assets as part of Accounts and notes receivable at December 31, 2003 and December 31, 2002, respectively.

Asbestos. Goodyear is a defendant in numerous lawsuits alleging various asbestos related personal injuries purported to result from alleged exposure to asbestos in certain rubber encapsulated products or aircraft

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      In connection with the preparation of its 2003 financial statements, the Company engaged an independent asbestos valuation expert to assist the Company in reviewing its reserves for asbestos claims, and review the Company’s method of determining its receivables from probable insurance recoveries. Prior to the fourth quarter of 2003, the Company’s estimate for asbestos liability was based upon a review of the various characteristics of the pending claims by an experienced asbestos counsel.

      The Company, based on the advice of the valuation expert, has recorded liabilities for both asserted and unasserted claims at December 31, 2003 totaling $131.1 million, inclusive of defense costs. The recorded liability represents the Company’s estimated liability through 2008, which represents the period over which the liability can be reasonably estimated. Due to the difficulties in making these estimates, analysis based on new data and/or changed circumstances arising in the future could result in an increase in the recorded obligation in an amount that cannot currently be reasonably estimated, and that increase could be significant. The portion of the liability associated with unasserted asbestos claims at December 31, 2003 is $31.9 million. Prior to the fourth quarter of 2003, the Company did not have an accrual for unasserted claims as sufficient information was deemed to be not available to reliably estimate such an obligation. This conclusion was further confirmed by the valuation expert during the preparation of the 2003 financial statements. At December 31, 2003, the Company’s liability with respect to asserted claims and related defense costs was $99.2 million compared to $139.2 million at December 31, 2002, notwithstanding an increase in the number of pending claims between December 31, 2002 and December 31, 2003. The reduction in the amount recorded at December 31, 2003 compared to December 31, 2002 is due to refinements in certain assumptions used by the valuation expert.

      After reviewing the Company’s recent settlement history by jurisdiction, law firm, disease type and alleged date of first exposure, the valuation expert cited two primary reasons for the Company to refine its valuation assumptions. First, in calculating the Company’s estimated liability, the valuation expert determined that the Company had previously assumed that it would resolve more claims in the foreseeable future than is likely based on its historical record and nationwide trends. As a result, the Company now assumes that a smaller percentage of pending claims will be resolved within the predictable future. Second, the valuation expert determined that it was not possible to estimate a liability for as many non-malignancy claims as the Company had done in the past. As a result, the Company’s current estimated liability includes fewer liabilities associated with non-malignancy claims.

      Goodyear maintains primary insurance coverage under coverage-in-place agreements as well as excess liability insurance with respect to asbestos liabilities. Goodyear records a receivable with respect to such policies when it determines that recovery is probable and it can reasonably estimate the amount of a particular recovery.

      Prior to 2003, Goodyear did not record a receivable for expected recoveries from excess carriers in respect of asbestos related matters. Goodyear has instituted coverage actions against certain of these excess carriers. After consultation with its outside legal counsel and giving consideration to relevant factors including the ongoing legal proceedings with certain of its excess coverage insurance carriers, their financial viability, their legal obligations and other pertinent facts, Goodyear determined an amount it expects is probable of recovery from such carriers. Accordingly, Goodyear recorded a receivable during 2003, which represents an estimate of recovery from its excess coverage insurance carriers relating to potential asbestos related liabilities.

      The valuation expert also reviewed the Company’s method of valuing its receivables recorded for probable insurance recoveries. Based upon the model employed by the valuation expert, as of December 31, 2003, the Company recorded a receivable related to asbestos claims of $110.4 million. Based on the Company’s current asbestos claim profile, the Company expects that approximately 85% of asbestos claim related losses will be recoverable up to its accessible policy limits. The receivable recorded consists of an amount the Company expects to collect under coverage-in-place agreements with certain primary carriers as well as an amount it believes is probable of recovery from certain of its excess coverage insurance carriers. Of this amount, $20.4 million was included in Current Assets as part of Accounts and notes receivable at

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      Goodyear believes that its reserve for asbestos claims, and the insurance assets recorded in respect of these claims, reflect reasonable and probable estimates of these amounts, subject to the exclusion of claims for which it is not feasible to make reasonable estimates. The estimate of the assets and liabilities related to pending and expected future asbestos claims and insurance recoveries is subject to numerous uncertainties, including, but not limited to, changes in (i) the litigation environment; (ii) federal and state law governing the compensation of asbestos claimants; (iii) the Company’s approach to defending and resolving claims; and (iv) the level of payments made to claimants from other sources, including other defendants. As a result, with respect to both asserted and unasserted claims, it is reasonably possible that the Company may incur a material amount in excess of the current reserve, however such amount cannot be reasonably estimated.

Heatway (Entran II). The Company is a defendant in 22 class actions or potential class actions and four other civil actions in various Federal, state and Canadian courts asserting non-asbestos property damage claims relating to Entran II, a rubber hose product that it supplied from 1989-1993 to Chiles Power Supply, Inc. (d/b/a Heatway Systems), a designer and seller of hydronic radiant heating systems in the United States. The plaintiffs in these actions are generally seeking recovery under various tort, contract and statutory causes of action, including breach of express warranty, breach of implied warranty of merchantability, breach of implied warranty of fitness for a particular purpose, negligence, strict liability and violation of state consumer protection statutes. In one of the above mentioned class actions, on October 9, 2003, the United States District Court for District Court of New Jersey preliminarily approved a proposed national settlement agreement (the Proposed Settlement) for pending Entran II claims in the U.S. and Canada, except for claims related to property in six New England states, two judgments in Colorado state court, two judgments in Colorado Federal court, and any future judgments involving claimants that opt out of the Proposed Settlement. Claimants had until May 7, 2004, to opt out of the Proposed Settlement. The Company has the right to withdraw from the Proposed Settlement if it determines in good faith and in its sole discretion that an excessive number of persons have opted out of the class and the Proposed Settlement. As of May 17, 2004, the Company had received notice that at least 525 potential sites had been opted out of the Proposed Settlement. The Company is currently assessing its options with respect to the Proposed Settlement and expects to decide shortly whether or not to withdraw from the Proposed Settlement.

      The ultimate cost of disposing of Entran II claims is dependent upon a number of factors, including the Company’s ability to satisfy the contingencies in any settlement, the number of claimants that opt out of any settlement, final approval of the terms of any settlement. Goodyear’s ability to resolve claims not subject to any settlement (including the cases in which the Company received adverse judgments), and, in the event Goodyear fails to consummate a settlement for any reason, future judgments by courts in other currently pending or yet unasserted actions. Depending on the resolution of these uncertainties, the costs associated with Entran II claims could be significant and could have a material adverse effect on the Company’s results of operations, financial position and liquidity in future periods. Due to the uncertainties inherent in Entran II matters, it is reasonably possible that there exists material liability beyond what Goodyear has already reserved for, but such amounts cannot be reasonably estimated.

Other Actions. The Company is currently a party to various claims and legal proceedings in addition to those noted above. If management believes that a loss arising from these matters is probable and can reasonably be estimated, the Company records the amount of the loss, or the minimum estimated liability when the loss is estimated using a range, and no point within the range is more probable than another. As additional information becomes available, any potential liability related to these matters is assessed and the estimates are revised, if necessary. Based on currently available information, management believes that the ultimate outcome of these matters, individually and in the aggregate, will not have a material adverse effect on the Company’s financial position or overall trends in results of operations. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages or an injunction prohibiting the Company from selling one or more products. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the financial position and results of operations of the period in which the ruling occurs, or future periods.

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Environmental Matters. Goodyear had recorded liabilities totaling $32.8 million at December 31, 2003 and $53.5 million at December 31, 2002 for anticipated costs related to various environmental matters, primarily the remediation of numerous waste disposal sites and certain properties sold by Goodyear. Of these amounts, $7.7 million and $21.4 million were included in Other current liabilities at December 31, 2003 and December 31, 2002, respectively. The 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. The liability was reduced in 2003 by approximately $17 million due to the resolution related to one site during the year.

Workers’ Compensation. Goodyear had recorded liabilities, on a discounted basis, totaling $194.0 million and $152.4 million (as restated) for anticipated costs related to workers’ compensation at December 31, 2003 and December 31, 2002, respectively. Of these amounts, $112.7 million and $66.4 million (as restated) were included in Current Liabilities as part of Compensation and benefits at December 31, 2003 and December 31, 2002, 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.

Goodwill. In January 2002, Goodyear adopted Statement of Financial Accounting Standards No. 142 (SFAS 142), “Goodwill and Other Intangible Assets.” Under this standard, Goodyear no longer amortizes goodwill, but tests it annually for impairment because it is an asset with an indefinite useful life. However, the occurrence of a potential indicator of impairment, such as a significant adverse change in legal factors or business climate, an adverse action or assessment by a regulator, unanticipated competition, loss of key personnel or a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or disposed of, would result in Goodyear’s having to perform the impairment analysis more frequently than on an annual basis. These types of events and the resulting analysis could result in goodwill impairment charges in future periods.

      The Company determined estimated fair values of the reporting units using a valuation methodology based largely on comparable company analysis. Under this method, the Company used an EBITDA multiple representative of the global automotive industry sector to arrive at the fair value of each reporting unit. The EBITDA multiple was adjusted to reflect local market conditions and recent transactions. The EBITDA of the reporting units was adjusted to exclude certain non-recurring or unusual items and corporate charges.

Deferred Tax Asset Valuation Allowance. At December 31, 2003, Goodyear had valuation allowances aggregating $2.00 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.

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

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      As of December 31, 2003, the aggregate projected benefit obligation for Goodyear’s pension plans was $6.88 billion. A 25 basis point change in the U.S. discount rate would impact pension expense in 2004 by approximately $8 million. As of December 31, 2003, Goodyear’s accumulated postretirement benefit obligation was $3.08 billion. A 25 basis point change in the discount rate for its main U.S. plans would impact 2004 postretirement benefit expense by approximately $2 million.

      Goodyear’s U.S. pension asset returns were 23.5% for the year ended December 31, 2003. The unfunded amount of Goodyear’s projected benefit obligation at December 31, 2003 was $2.75 billion, compared to $2.46 billion (as restated) at December 31, 2002. For the year ended December 31, 2003, Goodyear recorded a $128 million benefit to Accumulated Other Comprehensive Income (Loss) for unfunded pension benefit obligations, compared to a $1.28 billion charge for the year ended December 31, 2002. If market conditions deteriorate, charges could increase in future periods.

      Although subject to change, based on current estimates, Goodyear expects to make contributions to its domestic pension plans of approximately $160 million in 2004, and approximately $325 million to $350 million in 2005 to satisfy statutory minimum funding requirements. Goodyear will be subject to additional statutory minimum funding requirements after 2005. 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.

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 (excluding accelerated depreciation charges, asset impairment charges and asset writeoffs) 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.

      Total segment operating income was $516.0 million in 2003, $416.7 million (as restated) in 2002 and $321.1 million (as restated) in 2001. Total segment operating margin (segment operating income divided by segment sales) in 2003 was 3.3%, compared to 2.9% (as restated) in 2002 and 2.2% (as restated) in 2001.

      Management believes that total segment operating income is useful because it represents the aggregate value of income created by the Company’s SBUs and excludes items not directly related to the SBUs for performance evaluation purposes. Total segment operating income is the sum of the individual SBUs’ segment operating income as measured in accordance with Statement of Financial Accounting Standard No. 131, “Disclosures about Segments of an Enterprise and Related Information.” Refer to the note to the financial statements No. 18, Business Segments, for further information and for a reconciliation of total segment operating income to Income (loss) before income taxes.

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North American Tire

North American Tire Segment unit sales in 2003 decreased 2.7 million units or 2.5% from 2002 and 10.8 million units or 9.6% from 2001. Replacement unit sales in 2003 decreased 1.2 million units or 1.5% from 2002 and 11.1 million units or 13.9% from 2001. Original equipment volume in 2003 decreased 1.5 million units or 4.5% from 2002 and increased 0.3 million units or 0.7% from 2001.

      Revenues in 2003 increased 0.6% from 2002 and decreased 5.9% from 2001. Net sales increased in 2003 due to improved pricing and product mix of approximately $118 million, primarily in the consumer replacement and original equipment markets, and lower product related adjustments of approximately $10 million. The production slowdown by automakers and a decrease in the consumer replacement custom brand channel contributed to lower volume of approximately $86 million in 2003.

      Revenues (as restated) in 2002 decreased 6.5% from 2001. Sales in 2002 decreased compared to 2001 due to reduced volume of approximately $435 million, primarily in certain segments of the replacement market and the lower tire units delivered in connection with the Ford tire replacement program initiated in 2001, partially offset by increased sales to original equipment manufacturers in 2002 as automakers increased production. Unfavorable product mix in consumer and commercial replacement of approximately $27 million also negatively impacted sales compared to 2001.

      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.

      North American Tire segment operating income in 2003 decreased significantly from 2002 and 2001. Higher raw materials costs of approximately $151 million, higher manufacturing conversion costs of approximately $86 million, primarily related to contractual increases, and lower consumer volume of approximately $12 million adversely impacted 2003 segment operating income. Segment operating income benefited by approximately $66 million in savings related to rationalization programs and by approximately $37 million due to lower research and development expenditures. One-time benefits of approximately $51 million due to the change in the salaried associates’ vacation policy discussed above and insurance recoveries related to general and product liabilities of approximately $20 million also positively impacted 2003 segment operating income.

      North American Tire segment operating income (as restated) decreased substantially in 2002 from 2001 due to lower tonnage and higher plant compensation costs and operating expenses of approximately $161 million (as restated). Segment operating income was also negatively impacted by lower replacement sales volume, including the Ford program, of approximately $74 million (as restated). Product mix, primarily replacement consumer and commercial, unfavorably impacted segment operating income by approximately $122 million (as restated) as did the impact of the $10 million charge related to the closure of Penske Automotive Centers. Segment operating income in 2002 was favorably impacted by a decrease in raw material costs of approximately $120 million and lower transportation costs of approximately $30 million. Lower SAG expenses, due primarily to reduced advertising and information technology expenses, of approximately $20 million (as restated) and savings from rationalization programs of approximately $13 million also benefited 2002 segment operating income. 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.

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      Segment operating income in 2001 included expenses related to amortization of goodwill and intangible assets with indefinite useful lives totaling $3.5 million. 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 $191.9 million in 2003, $(1.9) million in 2002 and $31.6 million in 2001. Segment operating income also did not include the loss on asset sales of $3.8 million in 2003 and the writeoff of a miscellaneous investment totaling $4.1 million in 2002.

      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, continued increases in raw material and energy prices, higher wage and benefit costs and general economic conditions.

European Union Tire

European Union Tire Segment unit sales in 2003 increased 0.7 million units or 1.2% from 2002 and 1.1 million units or 1.9% from 2001. Replacement unit sales in 2003 increased 2.6 million units or 6.3% from 2002 and 2.3 million units or 5.4% from 2001. Original equipment volume in 2003 decreased 1.9 million units or 9.2% from 2002 and 1.2 million units or 5.7% from 2001.

      Revenue in 2003 increased 18.1% from 2002 and 25.5% from 2001. Net sales increased in 2003 compared to 2002 primarily due to the favorable impact of currency translation, mostly the Euro, of approximately $587 million. Higher volume of approximately $42 million in the consumer replacement markets also positively impacted 2003 sales, but were in part offset by approximately $30 million due to negative pricing and product mix in the segment’s retail operations.

      Revenues (as restated) in 2002 increased 6.2% from 2001. Revenues increased in 2002 compared to 2001 primarily due to the favorable impact of currency translation of approximately $166 million (as restated). Revenues were also positively impacted by higher volume of approximately $21 million in the original equipment, high performance and winter tire markets.

      European Union Tire segment operating income increased 33.2% from 2002 and substantially from 2001. Segment operating income in 2003 increased primarily due to savings from rationalization programs of approximately $57 million and the benefit from higher production tonnage and productivity improvements of approximately $17 million. The favorable impact of currency translation of approximately $26 million, improved volume of approximately $10 million, particularly in the replacement market, and favorable pricing and product mix of approximately $5 million, mainly consumer replacement and original equipment, also benefited 2003 segment operating income. Higher raw material costs of approximately $50 million, higher pension costs of approximately $18 million and higher SAG costs due to increased advertising of approximately $13 million negatively impacted 2003 segment operating income. In addition, 2003 included a charge of approximately $13 million for an unfavorable court settlement.

      Segment operating income (as restated) increased substantially in 2002 from 2001. Segment operating income increased in 2002 due primarily to lower raw material costs of approximately $28 million, savings from rationalization programs of approximately $15 million, higher production tonnage and cost containment programs of approximately $13 million (as restated), the favorable impact of currency translation of approximately $6 million and higher volume of approximately $5 million. Higher SAG expenses of approximately $19 million (as restated) adversely impacted segment operating income in 2002.

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      Segment operating income in 2001 included expenses related to amortization of goodwill and intangible assets with indefinite useful lives totaling $13.0 million. 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 totaling $54.3 million and a gain on asset sales of $2.1 million in 2003, net rationalization credits totaling $(0.4) million (as restated) and gains on asset sales of $13.6 million (as restated) in 2002, and net rationalization charges totaling $84.2 million (as restated) and gains on asset sales of $18.4 million (as restated) in 2001.

      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