SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the Quarterly Period Ended September 30, 2009

Commission File Number: 1-1927

THE GOODYEAR TIRE & RUBBER COMPANY

(Exact Name of Registrant as Specified in its Charter)

Ohio (State or Other Jurisdiction of Incorporation or Organization)		34-0253240 (I.R.S. Employer Identification No.)
1144 East Market Street, Akron, Ohio (Address of Principal Executive Offices)		44316-0001 (Zip Code)

(330) 796-2121
(Registrant’s Telephone Number, Including Area Code)

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No þ

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Number of Shares of Common Stock,
Without Par Value, Outstanding at September 30, 2009:			242,153,987

 

 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In millions, except per share amounts)		2009				2008				2009				2008
NET SALES		$	4,385			$	5,172			$	11,864			$	15,353
Cost of Goods Sold			3,523				4,316				10,095				12,473
Selling, Administrative and General Expense			617				627				1,764				1,997
Rationalizations (Note 2)			16				34				207				134
Interest Expense			85				73				228				238
Other (Income) and Expense (Note 3)			4				4				66				(24	)
Income (Loss) before Income Taxes			140				118				(496	)			535
United States and Foreign Taxes Expense			38				66				3				217
Net Income (Loss)			102				52				(499	)			318
Less: Minority Shareholders Net Income (Loss)			30				21				(17	)			65
Goodyear Net Income (Loss)		$	72			$	31			$	(482	)		$	253
Goodyear Net Income (Loss) — Per Share
Basic		$	0.30			$	0.13			$	(2.00	)		$	1.05
Weighted Average Shares Outstanding (Note 4)			242				241				241				241
Diluted		$	0.30			$	0.13			$	(2.00	)		$	1.04
Weighted Average Shares Outstanding (Note 4)			245				243				241				243

The accompanying notes are an integral part of these consolidated financial statements.

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

		September 30,				December 31,
(In millions)		2009				2008
Assets:
Current Assets:
Cash and Cash Equivalents		$	2,590			$	1,894
Accounts Receivable, less Allowance — $110 ($93 in 2008)			3,065				2,517
Inventories:
Raw Materials			441				714
Work in Process			148				119
Finished Products			1,954				2,759
			2,543				3,592
Prepaid Expenses and Other Current Assets			407				307
Total Current Assets			8,605				8,310
Goodwill			710				683
Intangible Assets			155				160
Deferred Income Tax			53				54
Other Assets			444				385
Property, Plant and Equipment
less Accumulated Depreciation — $8,560 ($8,310 in 2008)			5,710				5,634
Total Assets		$	15,677			$	15,226
Liabilities:
Current Liabilities:
Accounts Payable-Trade		$	2,042			$	2,529
Compensation and Benefits			710				625
Other Current Liabilities			902				778
Notes Payable and Overdrafts (Note 6)			243				265
Long Term Debt and Capital Leases due within one year (Note 6)			647				582
Total Current Liabilities			4,544				4,779
Long Term Debt and Capital Leases (Note 6)			5,020				4,132
Compensation and Benefits			3,440				3,487
Deferred and Other Noncurrent Income Taxes			222				193
Other Long Term Liabilities			800				763
Total Liabilities			14,026				13,354
Commitments and Contingent Liabilities (Note 9)
Minority Shareholders’ Equity (Note 1)			624				619
Shareholders’ Equity:
Goodyear Shareholders’ Equity:
Preferred Stock, no par value:
Authorized, 50 shares, unissued			—				—
Common Stock, no par value:
Authorized, 450 shares, Outstanding shares — 242 (241 in 2008) after deducting 9 treasury shares (10 in 2008)			242				241
Capital Surplus			2,778				2,764
Retained Earnings			975				1,463
Accumulated Other Comprehensive Loss			(3,213	)			(3,446	)
Goodyear Shareholders’ Equity			782				1,022
Minority Shareholders’ Equity — Nonredeemable			245				231
Total Shareholders’ Equity			1,027				1,253
Total Liabilities and Shareholders’ Equity		$	15,677			$	15,226

The accompanying notes are an integral part of these consolidated financial statements.

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In millions)		2009				2008				2009				2008
Net Income (Loss)		$	102			$	52			$	(499	)		$	318
Other Comprehensive Income (Loss):
Foreign currency translation			154				(402	)			202				(135	)
Reclassification adjustment for amounts recognized in income			(17	)			—				(17	)			—
Defined benefit plans:
Amortization of prior service cost and unrecognized gains and losses included in net periodic benefit cost			46				26				139				91
Less: Taxes			(21	)			(4	)			(38	)			(7	)
Decrease (increase) in net actuarial losses			21				69				(18	)			66
Less: Taxes			(12	)			(5	)			(12	)			(5	)
Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments and settlements			4				52				8				53
Less: Taxes			—				—				(1	)			—
Unrealized investment gain (loss)			5				4				3				(3	)
Comprehensive Income (Loss)			282				(208	)			(233	)			378
Less: Comprehensive Income (Loss) Attributable to Minority Shareholders			70				(64	)			16				54
Comprehensive Income (Loss) Attributable to Goodyear Shareholders		$	212			$	(144	)		$	(249	)		$	324

The accompanying notes are an integral part of these consolidated financial statements.

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Nine Months Ended
		September 30,
(In millions)		2009				2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income		$	(499	)		$	318
Adjustments to reconcile net (loss) income to cash flows from operating activities:
Depreciation and amortization			471				494
Amortization and write-off of debt costs			14				23
Net rationalization charges (Note 2)			207				134
Net losses (gains) on asset sales (Note 3)			33				(41	)
VEBA funding			—				(980	)
Pension contributions and direct payments			(304	)			(297	)
Rationalization payments			(183	)			(57	)
Changes in operating assets and liabilities, net of asset acquisitions and dispositions:
Accounts receivable			(419	)			(687	)
Inventories			1,160				(818	)
Accounts payable — trade			(454	)			338
Compensation and benefits			312				83
Other current liabilities			82				(14	)
Other long term liabilities			10				47
Prepaid expenses and other current assets			1				(39	)
Other assets and liabilities			(2	)			95
TOTAL CASH FLOWS FROM OPERATING ACTIVITIES			429				(1,401	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(502	)			(771	)
Asset dispositions (Note 3)			40				42
Asset acquisitions			—				(46	)
(Increase) decrease in restricted cash			(98	)			13
Investment in The Reserve Primary Fund			—				(360	)
Return of investment in The Reserve Primary Fund			40				—
Other transactions			3				—
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES			(517	)			(1,122	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short term debt and overdrafts incurred			87				72
Short term debt and overdrafts paid			(181	)			(41	)
Long term debt incurred			1,998				1,501
Long term debt paid			(1,142	)			(813	)
Debt issuance costs			(21	)			(2	)
Common stock issued			2				4
Dividends paid to minority shareholders			(3	)			(53	)
Other transactions			—				6
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES			740				674
Effect of exchange rate changes on cash and cash equivalents			44				(8	)
Net Change in Cash and Cash Equivalents			696				(1,857	)
Cash and Cash Equivalents at Beginning of the Period			1,894				3,463
Cash and Cash Equivalents at End of the Period		$	2,590			$	1,606

The accompanying notes are an integral part of these consolidated financial statements.

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1. ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by The Goodyear Tire & Rubber Company (“Goodyear,” “we,” “us” or “our”) in accordance with Securities and Exchange Commission rules and regulations and in the opinion of management contain all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2008, as retrospectively adjusted by our Current Report on Form 8-K filed on May 5, 2009 to reflect our adoption of standards related to accounting for convertible debt instruments and the presentation of noncontrolling interests in consolidated financial statements as discussed below (collectively, the “2008 Form 10-K”). We have evaluated the impact of subsequent events on these interim consolidated financial statements through the time of filing this Quarterly Report on Form 10-Q on October 28, 2009.

     We have adopted the new standard pertaining to accounting for convertible debt instruments that may be settled in cash upon conversion, effective January 1, 2009. This standard specifies that issuers of convertible debt instruments that may be settled in cash upon conversion should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate. In July 2004, we issued $350 million of 4% convertible senior notes due 2034, and subsequently exchanged $346 million of those notes for common stock and a cash payment in December 2007. The remaining notes were converted into common stock in May 2008. The adoption of this standard resulted in a $62 million reclassification in our consolidated statements of shareholders’ equity by decreasing retained earnings and increasing capital surplus. Prior period information presented in this Form 10-Q has been restated, where required.

     We also have adopted the new standard pertaining to accounting and reporting for noncontrolling interests (i.e., minority interests) in a subsidiary, including changes in a parent’s ownership interest in a subsidiary. The standard was effective January 1, 2009 and requires, among other things, that nonredeemable noncontrolling interests in subsidiaries be classified as shareholders’ equity. Prior period information presented in this Form 10-Q has been reclassified, where required.

     We are a party to shareholder agreements concerning certain of our less-than-wholly-owned consolidated subsidiaries. Under the terms of certain of these agreements, the minority shareholders have the right to require us to purchase their ownership interests in the respective subsidiaries if there is a change in control of Goodyear or a bankruptcy of Goodyear. Accordingly, we have reported the minority equity in those subsidiaries outside of shareholders’ equity.

     Operating results for the three and nine months ended September 30, 2009 are not necessarily indicative of the results expected in subsequent quarters or for the year ending December 31, 2009.

Reclassifications

Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation.

Recently Issued Accounting Standards

In May 2009 the Financial Accounting Standards Board (“FASB”) issued a new standard pertaining to subsequent events that defined the period after the balance sheet date during which a reporting entity shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements and the circumstances under which a company shall recognize events or transactions occurring after the balance sheet date in its financial statements. This standard also requires a company to disclose the date through which subsequent events have been evaluated for recognition or disclosure in the financial statements. We have reflected the recognition and disclosure requirements of this standard in this Form 10-Q.

     In June 2009 the FASB issued a new standard pertaining to the consolidation of variable interest entities that requires an analysis to determine whether a variable interest gives the entity a controlling financial interest in a variable

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

interest entity. This standard also requires an ongoing reassessment of the primary beneficiary of the variable interest entity and eliminates the quantitative approach previously required for determining whether an entity is the primary beneficiary. This standard is effective for fiscal years beginning after November 15, 2009. We are currently assessing the impact of adopting this standard on our consolidated financial statements.

     In June 2009 the FASB issued a new standard pertaining to accounting for transfers of financial assets that removes the concept of a qualifying special-purpose entity from accounting for transfers and servicing of financial assets and extinguishment of liabilities. This standard also clarifies the requirements for transfers of financial assets that are eligible for sale accounting. This standard is effective for fiscal years beginning after November 15, 2009. We are currently assessing the impact of adopting this standard on our consolidated financial statements.

NOTE 2. COSTS ASSOCIATED WITH RATIONALIZATION PROGRAMS

We have implemented rationalization actions over the past several years in order to maintain our global competitiveness and more recently to respond to the global economic slowdown that began in 2008 by reducing manufacturing capacity and associate headcount.

     The net rationalization charges included in Income (Loss) before Income Taxes are as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In millions)		2009				2008				2009				2008
New charges		$	23			$	39			$	221			$	140
Reversals			(7	)			(5	)			(14	)			(6	)
		$	16			$	34			$	207			$	134

     The following table shows the reconciliation of our liability between periods:

		Associate-				Other Than
(In millions)		related Costs				Associate-related Costs				Total
Balance at December 31, 2008		$	118			$	18			$	136
First half charges			187				11				198
Incurred			(154	)			(10	)			(164	)
Reversed to the statement of operations			(7	)			—				(7	)
Balance at June 30, 2009			144				19				163
Third quarter charges			16				7				23
Incurred			(27	)			(6	)			(33	)
Reversed to the statement of operations			(6	)			(1	)			(7	)
Balance at September 30, 2009		$	127			$	19			$	146

The rationalization actions taken in 2009 were initiated to reduce our cost structure as a result of lower sales demand due to the global economic slowdown. North American Tire initiated manufacturing headcount reductions at several facilities, including Union City, Tennessee; Danville, Virginia and Topeka, Kansas, to respond to lower production demand. Additional salaried headcount reductions were initiated at our corporate offices in Akron, Ohio, in North American Tire and throughout Europe, Middle East and Africa Tire (“EMEA”). We also initiated the discontinuation of consumer tire production at one of our facilities in Amiens, France. Finally, Latin American Tire initiated manufacturing headcount reductions at each of its two facilities in Brazil.

     During the third quarter of 2009, $16 million of net charges were recorded. New charges of $23 million represent $12 million for plans initiated in 2009 and $11 million for plans initiated in 2008 and prior years. New charges for the 2009 plans were primarily for associate severance costs which require future cash outflows. New charges for the 2008 and prior year plans include $6 million related to associate severance costs and $5 million primarily for other exit costs and non-cancelable lease costs. These amounts include $3 million related to future cash outflows and $8 million for other non-cash exit costs, including $6 million for pension settlements. The third quarter of 2009 includes the reversal of $7 million of reserves for actions no longer needed for their originally-intended purposes.

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

     For the first nine months of 2009, $207 million of net charges were recorded. New charges of $221 million were comprised of $188 million for plans initiated in 2009 and $33 million for plans initiated in 2008 and prior years. New charges for the 2009 plans were primarily for associate severance costs which require future cash outflows. The first nine months of 2009 includes the reversal of $14 million of reserves for actions no longer needed for their originally-intended purposes. Approximately 4,000 associates will be released under 2009 plans, of which 2,500 were released by September 30, 2009. The $33 million of new charges for 2008 and prior year plans consist of $19 million of associate-related costs and $14 million primarily for other exit costs and non-cancelable lease costs. These amounts include $22 million related to future cash outflows and $11 million for other non-cash exit costs, including $8 million for pension settlements and curtailments.

     The accrual balance of $146 million at September 30, 2009 includes $19 million related to long-term non-cancelable lease costs and $127 million of associate-related costs that are expected to be substantially utilized within the next twelve months.

     Asset write-offs and accelerated depreciation charges of $18 million and $40 million were recorded as cost of goods sold (“CGS”) in the three and nine months ended September 30, 2009, respectively, primarily related to the closure of our Las Pinas, Philippines and Somerton, Australia tire manufacturing facilities and the discontinuation of a line of tires at one of our plants in North America. Accelerated depreciation charges of $13 million and $17 million were recorded as CGS in the three and nine months ended September 30, 2008, respectively, primarily related to the closure of our Somerton, Australia tire manufacturing facility and Tyler, Texas mix center.

     During the third quarter of 2008, $34 million of net charges were recorded. New charges were comprised of $23 million for plans initiated in 2008 and $16 million for plans initiated in 2007 and prior years. New charges were primarily for associate severance costs which require future cash outflows. The third quarter of 2008 included the reversal of $5 million of reserves for actions no longer needed for their originally-intended purposes.

     For the first nine months of 2008, $134 million of net charges were recorded. New charges of $140 million were comprised of $101 million for plans initiated in 2008 and $39 million for plans initiated in 2007 and prior years. New charges for the 2008 plans primarily were for associate severance costs which require future cash outflows. The $39 million of new charges for 2007 and prior year plans consist of $26 million of associate-related costs and $13 million primarily for other exit costs and non-cancelable lease costs. These amounts include $33 million related to future cash outflows, $5 million for other non-cash exit costs and $1 million for non-cash pension termination benefit costs. The first nine months of 2008 included the reversal of $6 million of reserves for actions no longer needed for their originally-intended purposes. Approximately 3,800 associates will be released under programs initiated in 2008 and 2007, of which approximately 3,300 were released by September 30, 2009, including 1,400 in the first nine months of 2009.

NOTE 3. OTHER (INCOME) AND EXPENSE

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In millions)		2009				2008				2009				2008
Net (gains) losses on asset sales		$	(7	)		$	(4	)		$	33			$	(41	)
Interest income			(4	)			(13	)			(11	)			(60	)
Royalty income			(7	)			(8	)			(22	)			(24	)
Financing fees and financial instruments			9				10				30				72
Subsidiary liquidation loss			18				—				18				—
Foreign currency exchange			(6	)			7				1				9
General & product liability — discontinued products (Note 9)			1				5				9				11
Miscellaneous			—				7				8				9
		$	4			$	4			$	66			$	(24	)

Other (Income) and Expense was $4 million of expense in the third quarter of 2009 and 2008. Net gains on asset sales were $7 million in the third quarter of 2009 compared to gains on asset sales of $4 million in the third quarter of 2008 and related primarily to the sale of property in Luxembourg in 2009 and the sale of properties in England and North American Tire in 2008. Interest income decreased by $9 million due primarily to lower average interest rates in 2009 compared to the prior

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

year. We liquidated our subsidiary in Guatemala in the third quarter of 2009 and recognized a loss of $18 million primarily due to the recognition of accumulated foreign currency translation losses.

     Other (Income) and Expense was $66 million of expense in the first nine months of 2009, compared to $24 million of income in the first nine months of 2008. Net losses on asset sales were $33 million in the first nine months of 2009 compared to gains on asset sales of $41 million in the first nine months of 2008, related primarily to the sale of certain properties in Akron, Ohio, Luxembourg and Australia in 2009 and the sale of properties in England, Germany, Morocco, Argentina and New Zealand in 2008. Interest income decreased by $49 million due primarily to lower average cash balances and interest rates in 2009 compared to the prior year. Financing fees decreased by $42 million due primarily to $43 million of charges in 2008 related to the redemption of $650 million of senior secured notes due 2011, of which $33 million related to cash premiums paid on the redemption and $10 million related to the write-off of deferred financing fees and unamortized discount.

NOTE 4. PER SHARE OF COMMON STOCK

Basic earnings per share are computed based on the weighted average number of common shares outstanding. Diluted earnings per share are calculated to reflect the potential dilution that could occur if securities or other contracts were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

     The following table presents the number of incremental weighted average shares used in computing diluted per share amounts:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In millions)		2009				2008				2009				2008
Average shares outstanding — basic			242				241				241				241
Stock options and other dilutive securities			3				2				—				2
Average shares outstanding — diluted			245				243				241				243

Weighted average shares outstanding — diluted for the nine months ended September 30, 2009, excludes the effect of approximately 4 million equivalent shares related to options with exercise prices less than the average market price of our common shares (i.e., “in-the-money” options), as their inclusion would have been anti-dilutive due to the Goodyear net loss.

     Weighted average shares outstanding — diluted excluded approximately 11 million and 13 million equivalent shares for the three and nine months ended September 30, 2009, respectively, and excluded approximately 10 million and 9 million equivalent shares for the three and nine months ended September 30, 2008, respectively, related to options with exercise prices greater than the average market price of our common shares (i.e., “underwater” options).

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 5. FAIR VALUE MEASUREMENTS

The following table presents information about assets and liabilities recorded at fair value at September 30, 2009 on the Consolidated Balance Sheet:

										Significant
		Total Carrying				Quoted Prices in Active				Other				Significant
		Value in the				Markets for Identical				Observable				Unobservable
		Consolidated				Assets/Liabilities				Inputs				Inputs
(In millions)		Balance Sheet				(Level 1)				(Level 2)				(Level 3)
Assets:
Investments		$	35			$	35			$	—			$	—
Derivative Financial Instruments			15				—				15				—
Total Assets at Fair Value		$	50			$	35			$	15			$	—
Liabilities:
Derivative Financial Instruments		$	34			$	—			$	33			$	1
Total Liabilities at Fair Value		$	34			$	—			$	33			$	1

Derivative financial instrument valuations classified as Level 3 at September 30, 2009 include our interest rate basis swap discussed in Note 6 and embedded currency derivatives in long-dated operating leases. The valuation of the basis swap is calculated using a net present value of future cash flows based on available market rates. The valuation of the embedded currency derivative is based on an extrapolation of forward rates to the assumed expiration of the leases. Realized and unrealized gains and losses are included in Other (Income) and Expense. A reconciliation of the fair value of instruments classified as Level 3 follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In millions)		2009				2008				2009				2008
Asset (liability)
Balance at beginning of period		$	(5	)		$	10			$	(9	)		$	6
Realized/unrealized gains and (losses)			4				(2	)			8				2
Balance at end of period		$	(1	)		$	8			$	(1	)		$	8

     The following table presents supplemental fair value information about long term fixed rate and variable rate debt, excluding capital leases, at September 30, 2009 and December 31, 2008. The fair value was estimated using quoted market prices or discounted future cash flows.

		September 30,				December 31,
(In millions)		2009				2008
Fixed Rate Debt:
Carrying amount — liability		$	2,452			$	1,514
Fair value — liability			2,500				1,207
Variable Rate Debt:
Carrying amount — liability		$	3,196			$	3,164
Fair value — liability			3,063				2,531

NOTE 6. FINANCING ARRANGEMENTS

At September 30, 2009, we had credit arrangements totaling $8,163 million, of which $1,760 million were unused, compared to $7,127 million and $1,671 million, respectively, at December 31, 2008.

Notes Payable and Overdrafts, Long Term Debt and Capital Leases due Within One Year and Short Term Financing Arrangements

At September 30, 2009, we had short term committed and uncommitted credit arrangements totaling $523 million, of which $280 million were unused, compared to $481 million and $216 million, respectively, at December 31, 2008. These

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

arrangements are available primarily to certain of our international subsidiaries through various banks at quoted market interest rates. There are no commitment fees associated with these arrangements.

     The following table presents amounts due within one year:

		September 30,				December 31,
(In millions)		2009				2008
Notes payable and overdrafts		$	243			$	265
Weighted average interest rate			5.13	%			6.33	%
Long term debt and capital leases due within one year:
Floating rate notes due 2009		$	500			$	498
Other domestic and international debt (including capital leases)			147				84
		$	647			$	582
Weighted average interest rate			4.74	%			6.28	%
Total obligations due within one year		$	890			$	847

Long Term Debt and Capital Leases and Financing Arrangements

At September 30, 2009, we had long term credit arrangements totaling $7,640 million, of which $1,480 million were unused, compared to $6,646 million and $1,455 million, respectively, at December 31, 2008.

     The following table presents long term debt and capital leases, net of unamortized discounts, and interest rates:

		September 30, 2009								December 31, 2008
						Interest								Interest
(In millions)		Amount				Rate				Amount				Rate
Notes:
Floating rate notes due 2009		$	500				5.01	%		$	498				6.29	%
7 6/7% due 2011			650				7 6/7	%			650				7 6/7	%
8.625% due 2011			325				8.625	%			325				8.625	%
9% due 2015			260				9	%			260				9	%
10.5% due 2016			960				10.5	%			—				—
7% due 2028			149				7	%			149				7	%
Credit Facilities:
€505 million revolving credit facility due 2012			—				—				182				4.75	%
$1.5 billion first lien revolving credit facility due 2013			800				1.50	%			700				1.73	%
$1.2 billion second lien term loan facility due 2014			1,200				2.00	%			1,200				2.22	%
Pan-European accounts receivable facility due 2015			478				2.87	%			483				5.81	%
Other domestic and international debt(1)			326				4.99	%			231				7.54	%
			5,648								4,678
Capital lease obligations			19								36
			5,667								4,714
Less portion due within one year			(647	)							(582	)
		$	5,020							$	4,132

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTES

$1.0 Billion Senior Notes due 2016

On May 11, 2009, we issued $1.0 billion aggregate principal amount of 10.5% senior notes due 2016. The senior notes were sold at 95.846% of the principal amount and will mature on May 15, 2016. The senior notes are our unsecured senior obligations and are guaranteed by our U.S. and Canadian subsidiaries that also guarantee our obligations under our senior secured credit facilities.

     We have the option to redeem the senior notes, in whole or in part, at any time on or after May 15, 2012 at a redemption price of 107.875%, 105.250%, 102.625% and 100.000% during the 12-month period commencing on May 15, 2012, 2013, 2014 and 2015, respectively, plus accrued and unpaid interest to the redemption date. Prior to May 15, 2012, we may redeem the senior notes, in whole or in part, at a price equal to 100% of the principal amount plus a make-whole premium. In addition, prior to May 15, 2012, we may redeem up to 35% of the senior notes from the net cash proceeds of certain equity offerings at a redemption price equal to 110.5% of the principal amount plus accrued and unpaid interest to the redemption date.

     The terms of the indenture for the senior notes, among other things, limits our ability and the ability of certain of our subsidiaries to (i) incur additional debt or issue redeemable preferred stock, (ii) pay dividends, or make certain other restricted payments or investments, (iii) incur liens, (iv) sell assets, (v) incur restrictions on the ability of our subsidiaries to pay dividends to us, (vi) enter into affiliate transactions, (vii) engage in sale and leaseback transactions, and (viii) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications. For example, if the senior notes are assigned an investment grade rating by Moody’s and Standard & Poor’s (“S&P”) and no default has occurred or is continuing, certain covenants will be suspended.

CREDIT FACILITIES

$1.5 Billion Amended and Restated First Lien Revolving Credit Facility due 2013

This facility is available in the form of loans or letters of credit, with letter of credit availability limited to $800 million. Subject to the consent of the lenders whose commitments are to be increased, we may request that the facility be increased by up to $250 million. Our obligations under the facility are guaranteed by most of our wholly-owned U.S. and Canadian subsidiaries. Our obligations under the facility and our subsidiaries’ obligations under the related guarantees are secured by first priority security interests in a variety of collateral.

     This facility has customary representations and warranties including, as a condition to borrowing, that all such representations and warranties are true and correct, in all material respects, on the date of the borrowing, including representations as to no material adverse change in our financial condition since December 31, 2006.

     At September 30, 2009, we had $800 million outstanding and $498 million of letters of credit issued under the revolving credit facility. At December 31, 2008, we had $700 million outstanding and $497 million of letters of credit issued under the revolving credit facility.

$1.2 Billion Amended and Restated Second Lien Term Loan Facility due 2014

Our obligations under this facility are guaranteed by most of our wholly-owned U.S. and Canadian subsidiaries and are secured by second priority security interests in the same collateral securing the $1.5 billion first lien revolving credit facility. At September 30, 2009 and December 31, 2008, this facility was fully drawn.

€505 Million Amended and Restated Senior Secured European and German Revolving Credit Facilities due 2012

Our amended and restated €505 million European revolving credit facilities consist of a €155 million German revolving credit facility, which is only available to certain of our German subsidiaries of Goodyear Dunlop Tires Europe B.V. (“GDTE”) (collectively, “German borrowers”), and a €350 million European revolving credit facility, which is available to the same German borrowers and to GDTE and certain of its other subsidiaries with a €125 million sublimit for non-German borrowers and a €50 million letter of credit sublimit. Goodyear and its subsidiaries that guarantee our U.S. facilities provide

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

unsecured guarantees to support the European revolving credit facilities and GDTE and certain of its subsidiaries in the United Kingdom, Luxembourg, France and Germany also provide guarantees. GDTE’s obligations under the facilities and the obligations of its subsidiaries under the related guarantees are secured by first priority security interests in a variety of collateral. As of September 30, 2009 and December 31, 2008, there were no borrowings under the German revolving credit facility. Under the European revolving credit facility, there were no borrowings as of September 30, 2009 and there were $182 million (€130 million) of borrowings (including $84 million (€60 million) of borrowings by the non-German borrowers) as of December 31, 2008. Letters of credit issued under the European revolving credit facility totaled $14 million (€10 million) as of September 30, 2009 and $16 million (€11 million) at December 31, 2008.

     These facilities have customary representations and warranties including, as a condition to borrowing, that all such representations and warranties are true and correct, in all material respects, on the date of the borrowing, including representations as to no material adverse change in our financial condition since December 31, 2006.

International Accounts Receivable Securitization Facilities (On-Balance Sheet)

GDTE and certain of its subsidiaries are parties to a pan-European accounts receivable securitization facility that provides up to €450 million of funding and expires in 2015. Utilization under this facility is based on current available receivable balances. The facility is subject to customary annual renewal of back-up liquidity commitments.

     The facility involves an ongoing daily sale of substantially all of the trade accounts receivable of certain GDTE subsidiaries to a bankruptcy-remote French company controlled by one of the liquidity banks in the facility. These subsidiaries retain servicing responsibilities. As of September 30, 2009 and December 31, 2008, the amount available and fully utilized under this program totaled $478 million (€328 million) and $483 million (€346 million), respectively. The program did not qualify for sale accounting, and accordingly, these amounts are included in Long-term debt and capital leases.

     In addition to the pan-European accounts receivable securitization facility discussed above, subsidiaries in Australia have accounts receivable programs totaling $58 million and $61 million at September 30, 2009 and December 31, 2008, respectively. These amounts are included in Notes payable and overdrafts.

     For a description of the collateral securing the facilities described above as well as the covenants applicable to them, please refer to the Note to the Consolidated Financial Statements No. 12, Financing Arrangements and Derivative Financial Instruments, in our 2008 Form 10-K.

Other Foreign Credit Facilities

Our facilities in China provide for availability of up to 3.6 billion renminbi (approximately $530 million at September 30, 2009 and $535 million at December 31, 2008) and can only be used to finance the relocation and expansion of our manufacturing facilities in China. There were no borrowings outstanding at September 30, 2009 or December 31, 2008.

Derivative Financial Instruments

We utilize derivative financial instrument contracts and nonderivative instruments to manage interest rate, foreign exchange and commodity price risks. We have established a control environment that includes policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. Our policy prohibits holding or issuing derivative financial instruments for trading purposes.

Interest Rate Contracts

We manage our fixed and floating rate debt mix, within defined limitations, using refinancings and unleveraged interest rate swaps. We will enter into fixed and floating interest rate swaps to hedge against the effects of adverse changes in interest rates on our consolidated results of operations and future cash outflows for interest. Fixed rate swaps are used to reduce our risk of increased interest costs during periods of rising interest rates, and are normally designated as cash flow hedges. Floating rate swaps are used to convert the fixed rates of long term borrowings into short term variable rates, and are normally designated as fair value hedges. We use interest rate swap contracts to separate interest rate risk management from the debt funding decision. At September 30, 2009, 57% of our debt was at variable interest rates averaging 2.74% compared

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

to 68% at an average rate of 3.83% at December 31, 2008. The decrease in the average variable interest rate was driven by decreases in the underlying market rates associated with our variable rate debt.

     We may also enter into interest rate contracts that change the basis of our floating interest rate exposure. There was one contract outstanding at September 30, 2009, under which we pay six-month LIBOR and receive one-month LIBOR plus a premium. This contract applies to $1.2 billion of notional principal, has a contractual life of twelve months and matures in October 2009. During the third quarter of 2009, the weighted average interest rates paid and received were 1.66% and 0.75%, respectively. During the first nine months of 2009, the weighted average interest rates paid and received were 2.41% and 0.84%, respectively. The contract was not designated as a hedging instrument and accordingly, fair value gains and losses on the contract are recorded in Other (Income) and Expense. The fair value of the contract was $1 million and $10 million at September 30, 2009 and December 31, 2008, respectively, and was included in Other Current Liabilities.

Foreign Currency Contracts

We enter into foreign currency contracts in order to reduce the impact of changes in foreign exchange rates on our consolidated results of operations and future foreign currency-denominated cash flows. Foreign currency forward and option contracts reduce exposure to currency movements affecting existing foreign currency-denominated assets, liabilities, firm commitments and forecasted transactions resulting primarily from trade receivables and payables, equipment acquisitions, intercompany loans, royalty agreements and forecasted purchases and sales. Contracts hedging short term trade receivables and payables normally have no hedging designation.

     There were no foreign currency contracts designated as hedging instruments at September 30, 2009. The following table presents amounts included in the Consolidated Balance Sheets for foreign currency derivatives:

		September 30,				December 31,
(In millions)		2009				2008
Accounts receivable		$	13			$	3
Prepaid Expenses and Other Current Assets			3				—
Other Assets			—				1
Other Current Liabilities			33				27

Net transaction losses on foreign currency derivatives totaled $44 million and $102 million in the three and nine months ended September 30, 2009, respectively, and are reported in Other (Income) and Expense. These losses were substantially offset by the effect of changing exchange rates on the underlying currency exposures.

     The counterparties to our interest rate and foreign exchange contracts were substantial and creditworthy multinational commercial banks or other financial institutions that are recognized market makers. We control our credit exposure by diversifying across multiple counterparties and by setting counterparty credit limits based on long term credit ratings and other indicators of counterparty credit risk such as credit default swap spreads. We also enter into master netting agreements with counterparties when possible. Based on our analysis, we consider the risk of counterparty nonperformance associated with these contracts to be remote. However, the inability of a counterparty to fulfill its obligations when due could have a material adverse effect on our consolidated financial position, results of operations or liquidity in the period in which it occurs.

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 7. STOCK COMPENSATION PLANS

Our Board of Directors granted 2.8 million stock options and 0.2 million performance share units during the first quarter of 2009 under our 2008 Performance Plan. The 2008 Performance Plan will expire on April 8, 2018. The weighted average exercise price per share and weighted average fair value per share of these stock options was $4.81 and $3.49, respectively. The expected term was estimated using the simplified method, as historical data was not sufficient to provide a reasonable estimate. We estimated the fair values using the following assumptions in our Black-Scholes model:

Expected term: 6.25 years
Interest rate: 2.30%
Volatility: 83.6%
Dividend yield: Nil

Stock based compensation expense (income) follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In millions)		2009				2008				2009				2008
Stock-based compensation expense (income) recognized		$	11			$	(5	)		$	25			$	3
Tax impact on stock-based compensation expense (income)			(2	)			1				(3	)			3
After-tax stock-based compensation expense (income)		$	9			$	(4	)		$	22			$	6

As of September 30, 2009, unearned compensation cost related to the unvested portion of all stock-based awards was approximately $31 million and is expected to be recognized over the remaining vesting period of the respective grants, through September 30, 2013.

NOTE 8. PENSION, SAVINGS AND OTHER POSTRETIREMENT BENEFIT PLANS

We provide employees with defined benefit pension or defined contribution savings plans. In addition, we provide substantially all domestic employees and employees at certain non-U.S. subsidiaries with health care benefits or life insurance benefits upon retirement.

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

     Pension cost follows:

		U.S.								U.S.
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In millions)		2009				2008				2009				2008
Service cost — benefits earned during the period		$	9			$	9			$	26			$	45
Interest cost on projected benefit obligation			77				76				235				234
Expected return on plan assets			(59	)			(92	)			(177	)			(278	)
Amortization of: — prior service cost			8				9				25				27
— net losses			38				6				116				28
Net periodic pension cost			73				8				225				56
Curtailments/settlements			—				2				—				3
Termination benefits			—				1				—				1
Total pension cost		$	73			$	11			$	225			$	60

		Non-U.S.								Non-U.S.
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In millions)		2009				2008				2009				2008
Service cost — benefits earned during the period		$	7			$	6			$	20			$	25
Interest cost on projected benefit obligation			37				41				105				126
Expected return on plan assets			(30	)			(34	)			(85	)			(109	)
Amortization of: — prior service cost			—				1				1				2
— net losses			10				12				24				39
Net periodic pension cost			24				26				65				83
Curtailments/settlements			9				—				16				1
Total pension cost		$	33			$	26			$	81			$	84

We expect to contribute approximately $300 million to $325 million to our funded U.S. and non-U.S. pension plans in 2009. For the three and nine months ended September 30, 2009, we contributed $23 million and $106 million, respectively, to our non-U.S. plans and $69 million and $154 million, respectively, to our U.S. plans.

     Substantially all employees in the U.S. and employees of certain non-U.S. locations are eligible to participate in a defined contribution savings plan. The expenses recognized for our contributions to these plans for the three months ended September 30, 2009 and 2008 were $24 million and $10 million, respectively, and $63 million and $28 million for the nine months ended September 30, 2009 and 2008, respectively.

      Effective August 29, 2009, all newly hired U.S. hourly employees covered by the United Steelworkers master labor contract will be eligible for a Company-funded contribution into the Hourly Savings Plan, as they will no longer be eligible to participate in our defined benefit pension plan.

     As announced in 2007, we froze our U.S. salaried pension plans effective December 31, 2008 and implemented improvements to our U.S. defined contribution savings plan effective January 1, 2009. The service cost component of total pension cost for the U.S. salaried pension plans recognized in the nine months ended September 30, 2008 was $16 million.

     The Medicare Prescription Drug Improvement and Modernization Act provides plan sponsors a federal subsidy for certain qualifying prescription drug benefits covered under the sponsor’s postretirement health care plans. Our postretirement benefit costs are presented net of this subsidy.

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Postretirement benefit (credit) cost follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In millions)		2009				2008				2009				2008
Service cost — benefits earned during the period		$	1			$	3			$	3			$	9
Interest cost on projected benefit obligation			7				24				24				76
Expected return on plan assets			—				(5	)			—				(5	)
Amortization of: — prior service credit			(10	)			(4	)			(29	)			(10	)
— net losses			1				2				4				6
Net periodic postretirement benefit (credit) cost			(1	)			20				2				76
Settlement			—				11				—				11
Total postretirement benefit (credit) cost		$	(1	)		$	31			$	2			$	87

Effective August 22, 2008, health care benefits for current and future domestic retirees who were represented by the United Steelworkers (“USW”) became the responsibility of an independent Voluntary Employees’ Beneficiary Association (“VEBA”), which resulted in the settlement of the OPEB obligation for the affected plans in the 2008 third quarter. Net postretirement benefit cost recognized in the three and nine months ended September 30, 2008 for these plans was $17 million and $67 million, respectively.

NOTE 9. COMMITMENTS AND CONTINGENT LIABILITIES

At September 30, 2009, we had binding commitments for raw materials and investments in land, buildings and equipment of approximately $1,056 million, and off-balance-sheet financial guarantees written and other commitments totaling $40 million. In addition, we have other contractual commitments, the amounts of which cannot be estimated, pursuant to certain long-term agreements under which we will purchase minimum amounts of various raw materials and finished goods at agreed upon base prices that are subject to periodic adjustments for changes in raw material costs and market price adjustments, or in quantities that are subject to periodic adjustments for changes in our production levels.

Environmental Matters

We have recorded liabilities totaling $43 million and $40 million at September 30, 2009 and December 31, 2008, respectively, for anticipated costs related to various environmental matters, primarily the remediation of numerous waste disposal sites and certain properties sold by us. Of these amounts, $6 million and $8 million were included in Other Current Liabilities at September 30, 2009 and December 31, 2008. 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 our ultimate liability in respect of these matters may be affected by several uncertainties, primarily the ultimate cost of required remediation and the extent to which other responsible parties contribute.

Workers’ Compensation

We have recorded liabilities, on a discounted basis, totaling $316 million and $288 million for anticipated costs related to workers’ compensation at September 30, 2009 and December 31, 2008, respectively. Of these amounts, $77 million and $75 million were included in Current Liabilities as part of Compensation and Benefits at September 30, 2009 and December 31, 2008, 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 our assessment of potential liability using an analysis of available information with respect to pending claims, historical experience, and current cost trends. The amount of our ultimate liability in respect of these matters may differ from these estimates.

General and Product Liability and Other Litigation

We have recorded liabilities totaling $302 million and $291 million, including related legal fees expected to be incurred, for potential product liability and other tort claims presently asserted against us at September 30, 2009 and December 31, 2008, respectively. Of these amounts, $76 million and $86 million were included in Other Current Liabilities at September 30, 2009 and December 31, 2008, 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,

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

recent and current trends. We have recorded insurance receivables for potential product liability and other tort claims of $66 million at September 30, 2009 and $65 million at December 31, 2008. Of these amounts, $10 million was included in Current Assets as part of Accounts Receivable at both September 30, 2009 and December 31, 2008.

Asbestos. We are a defendant in numerous lawsuits alleging various asbestos-related personal injuries purported to result from alleged exposure to certain asbestos products manufactured by us or present in certain of our facilities. Typically, these lawsuits have been brought against multiple defendants in state and Federal courts. To date, we have disposed of approximately 75,500 claims by defending and obtaining the dismissal thereof or by entering into a settlement.

     A summary of approximate asbestos claims activity in recent periods follows. Because claims are often filed and disposed of by dismissal or settlement in large numbers, the amount and timing of settlements and the number of open claims during a particular period can fluctuate significantly from period to period.

		Nine Months Ended				Year Ended
(Dollars in millions)		September 30, 2009				December 31, 2008
Pending claims, beginning of period			99,000				117,400
New claims filed			1,100				4,600
Claims settled/dismissed			(3,400	)			(23,000	)
Pending claims, end of period			96,700				99,000
Payments (1)		$	13			$	23

We engaged an independent asbestos valuation firm, Bates White, LLC (“Bates”), to review our existing reserves for pending claims, provide a reasonable estimate of the liability associated with unasserted asbestos claims, and estimate our receivables from probable insurance recoveries.

     The sum of our accrued asbestos-related liability and gross payments to date, including legal costs, totaled approximately $341 million through September 30, 2009 and $325 million through December 31, 2008. We had recorded gross liabilities for both asserted and unasserted claims, inclusive of defense costs, totaling $135 million and $132 million at September 30, 2009 and December 31, 2008, respectively. The portion of the liability associated with unasserted asbestos claims and related defense costs was $70 million and $71 million at September 30, 2009 and December 31, 2008, respectively. Our liability with respect to asserted claims and related defense costs was $65 million at September 30, 2009 and $61 million at December 31, 2008. At September 30, 2009, we estimate that it is reasonably possible that our liabilities, net of our estimate for probable insurance recoveries, could exceed our recorded amounts by $10 million.

     Based upon a model employed by Bates, as of September 30, 2009, (i) we recorded a receivable related to asbestos claims of $66 million, compared to $65 million at December 31, 2008, and (ii) we expect that approximately 50% of asbestos claim related losses would be recoverable up to our accessible policy limits through the period covered by the estimated liability. Of these amounts, $10 million was included in Current Assets as part of Accounts Receivable at both September 30, 2009 and December 31, 2008. The receivable recorded consists of an amount we expect to collect under coverage-in-place agreements with certain primary carriers as well as an amount we believe is probable of recovery from certain of our excess coverage insurance carriers.

     We believe that at September 30, 2009, we had at least $180 million in aggregate limits of excess level policies potentially applicable to indemnity payments for asbestos products claims, in addition to limits of available primary insurance policies. Some of these excess policies provide for payment of defense costs in addition to indemnity limits. A portion of the availability of the excess level policies is included in the $66 million insurance receivable recorded at September 30, 2009. We also had approximately $15 million in aggregate limits for products claims, as well as coverage for premise claims on a per occurrence basis and defense costs available with our primary insurance carriers through coverage-in-place agreements at September 30, 2009.

Other Actions. We are 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, we record 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

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

ultimate outcome of these matters, individually and in the aggregate, will not have a material adverse effect on our 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 us from selling one or more products. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on our financial position and results of operations in the period in which the ruling occurs, or future periods.

Tax Matters

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We also recognize tax benefits to the extent that it is more likely than not that our positions will be sustained when challenged by the taxing authorities. We derecognize tax benefits when based on new information we determine that it is no longer more likely than not that our position will be sustained. To the extent we prevail in matters for which liabilities have been established, or determine we need to derecognize tax benefits recorded in prior periods, or that we are required to pay amounts in excess of our liabilities, our effective tax rate in a given period could be materially affected. An unfavorable tax settlement would require use of our cash, and result in an increase in our effective tax rate in the period of resolution. A favorable tax settlement would be recognized as a reduction in our effective tax rate in the period of resolution.

Guarantees

We are a party to various agreements under which we have undertaken obligations resulting from the issuance of certain guarantees. Guarantees have been issued on behalf of certain of our affiliates and customers. Normally there is no separate premium received by us as consideration for the issuance of guarantees. Our performance under these guarantees would normally be triggered by the occurrence of one or more events as provided in the specific agreements. Collateral and recourse provisions available to us under these agreements were not significant.

NOTE 10. BUSINESS SEGMENTS

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In millions)		2009				2008				2009				2008
Sales:
North American Tire		$	1,862			$	2,185			$	5,093			$	6,312
Europe, Middle East and Africa Tire			1,581				1,936				4,242				5,910
Latin American Tire			486				581				1,306				1,683
Asia Pacific Tire			456				470				1,223				1,448
Net Sales		$	4,385			$	5,172			$	11,864			$	15,353
Segment Operating Income (Loss):
North American Tire		$	2			$	(19	)		$	(278	)		$	37
Europe, Middle East and Africa Tire			106				134				41				457
Latin American Tire			99				101				220				318
Asia Pacific Tire			68				50				140				151
Total Segment Operating Income (Loss)			275				266				123				963
Rationalizations			(16	)			(34	)			(207	)			(134	)
Interest expense			(85	)			(73	)			(228	)			(238	)
Other income and (expense)			(4	)			(4	)			(66	)			24
Asset write-offs and accelerated depreciation			(18	)			(13	)			(40	)			(17	)
Corporate incentive compensation plans			(15	)			7				(29	)			(8	)
Intercompany profit elimination			16				7				(13	)			(6	)
Curtailments/Settlements			—				(11	)			—				(11	)
Other			(13	)			(27	)			(36	)			(38	)
Income (Loss) before Income Taxes		$	140			$	118			$	(496	)		$	535

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Rationalizations, as described in Note 2, Costs Associated with Rationalization Programs, Asset sales, as described in Note 3, Other (Income) and Expense, and Asset write-offs and accelerated depreciation are not charged (credited) to the strategic business units (“SBUs”) for performance evaluation purposes, but were attributable to the SBUs as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In millions)		2009				2008				2009				2008
Rationalizations:
North American Tire		$	13			$	26			$	102			$	37
Europe, Middle East and Africa Tire			1				3				81				20
Latin American Tire			2				—				16				—
Asia Pacific Tire			—				4				6				76
Total Segment Rationalizations			16				33				205				133
Corporate			—				1				2				1
		$	16			$	34			$	207			$	134
Asset Sales (gain) / loss:
North American Tire		$	(3	)		$	(2	)		$	(3	)		$	(3	)
Europe, Middle East and Africa Tire			(4	)			(1	)			(1	)			(22	)
Latin American Tire			—				(1	)			(1	)			(6	)
Asia Pacific Tire			—				—				(5	)			(10	)
Total Segment Asset Sales (gain) / loss			(7	)			(4	)			(10	)			(41	)
Corporate			—				—				43				—
		$	(7	)		$	(4	)		$	33			$	(41	)
Asset write-offs and accelerated depreciation:
North American Tire		$	3			$	2			$	14			$	2
Europe, Middle East and Africa Tire			—				—				1				—
Asia Pacific Tire			15				11				25				15
Total Segment Asset write-offs and accelerated depreciation		$	18			$	13			$	40			$	17

NOTE 11. INCOME TAXES

For the third quarter of 2009, we recorded tax expense of $38 million on income before income taxes of $140 million. Our income tax expense or benefit is allocated among operations and items charged or credited directly to shareholders’ equity. Pursuant to this allocation requirement, for the three and nine months ended September 30, 2009, a $28 million and $36 million, respectively, non-cash tax benefit has been allocated to the loss from our U.S. operations, with offsetting tax expense allocated to items, primarily attributable to employee benefits, charged directly to shareholders’ equity. Income tax expense for the third quarter of 2009 was also impacted unfavorably by a charge of $6 million after minority, related to various discrete adjustments.

     For the first nine months of 2009 we recorded tax expense of $3 million on a loss before income taxes of $496 million. Income tax expense for the first nine months of 2009 also was impacted favorably by $21 million primarily related to a second quarter 2009 benefit resulting from the settlement of our 1997 through 2003 Competent Authority claim between the United States and Canada. The difference between our effective tax rate and the U.S. statutory rate was primarily attributable to continuing to maintain a full valuation allowance against our net Federal and state deferred tax assets.

     Our losses in various taxing jurisdictions in recent periods represented sufficient negative evidence to require us to maintain a full valuation allowance against certain of our net deferred tax assets. However, in certain foreign locations it is reasonably possible that sufficient positive evidence required to release all, or a portion, of these valuation allowances within the next 12 months will exist, resulting in one-time tax benefits of up to $30 million.

     At January 1, 2009, we had unrecognized tax benefits of $143 million that if recognized, would have a favorable impact on our tax expense of $135 million. We report interest and penalties as income taxes and have accrued interest of $11

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

million as of January 1, 2009. In the second quarter of 2009, our Competent Authority claim between the United States and Canada for the years 1997 through 2003 was settled reducing our unrecognized tax benefits by $38 million. It is reasonably possible that the total amount of unrecognized tax benefits will also change for other reasons in the next 12 months. However, we do not expect those changes to have a significant impact on our financial position or results of operations.

     Generally, years beginning after 2003 are still open to examination by foreign taxing authorities, including in Germany and other major taxing jurisdictions. In the United States, we are open to examination from 2008 onward.

NOTE 12. CHANGES IN SHAREHOLDERS’ EQUITY

The following tables present the changes in Shareholders’ Equity for the nine months ended September 30, 2009 and 2008.

		Nine Months Ended September 30, 2009												Nine Months Ended September 30, 2008
						Minority												Minority
		Goodyear				Shareholders’				Total				Goodyear				Shareholders’				Total
		Shareholders’				Equity —				Shareholders’				Shareholders’				Equity —				Shareholders’
(In millions)		Equity				Nonredeemable				Equity				Equity				Nonredeemable				Equity
Balance at beginning of period		$	1,022			$	231			$	1,253			$	2,850			$	300			$	3,150
Comprehensive (loss) income:
Net (loss) income			(482	)			13				(469	)			253				25				278
Foreign currency translation			171				4				175				(118	)			3				(115	)
Reclassification adjustment for amounts recognized in income			(17	)			—				(17	)			—				—				—
Amortization of prior service cost and unrecognized gains and losses included in total benefit cost (net of tax of $37 in 2009 and $5 in 2008)			98				—				98				79				—				79
(Increase) decrease in net actuarial losses (net of tax of $12 in 2009 and $4 in 2008)			(29	)			—				(29	)			49				—				49
Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments and settlements (net of tax of $1 in 2009)			7				—				7				64				—				64
Unrealized investment loss			3				—				3				(3	)			—				(3	)
Other comprehensive (loss) income			233				4				237				71				3				74
Total comprehensive (loss) income			(249	)			17				(232	)			324				28				352
Transactions between Goodyear and Minority Shareholders			—				(3	)			(3	)			—				(25	)			(25	)
Issuance of shares for conversion of debt			—				—				—				4				—				4
Common stock issued from treasury:
Stock-based compensation plans (Note 7)			2				—				2				6				—				6
Other			7				—				7				30				—				30
Balance at end of period		$	782			$	245			$	1,027			$	3,214			$	303			$	3,517