SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q/A

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2004

Commission File Number: 1-1927

THE GOODYEAR TIRE & RUBBER COMPANY

(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, and (2) has been subject to such filing requirements for the past 90 days.

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

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

Table of Contents

EXPLANATORY NOTE

This Amendment No. 1 to The Goodyear Tire & Rubber Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004 (the “Form 10-Q/A”) includes unaudited, restated consolidated financial statements as of March 31, 2004 and for the three month periods ended March 31, 2004 and 2003, and a restated consolidated balance sheet as of December 31, 2003. The accompanying restated consolidated financial statements, including the notes thereto, have been revised to reflect the restatement adjustments.

     The Goodyear Tire & Rubber Company (the “Company”) has restated, by means of its Annual Report on Form 10-K for the year ended December 31, 2004 (the “2004 Form 10-K”) filed on March 16, 2005, its consolidated balance sheet as of December 31, 2003, and consolidated statements of income, cash flows, and shareholders’ equity (deficit) for the years ended December 31, 2003 and 2002. Quarterly financial information for 2004 and 2003 was also affected by the restatement as well as 2002 and prior periods. Note 2 to the consolidated financial statements included in the 2004 Form 10-K shows the impact of the restatement adjustments on periods prior to 2002. The restated amounts for the first quarter of 2004 and the comparable interim period in 2003 are presented in this Form 10-Q/A. The restated amounts for the second and third quarters of 2004 and the comparable interim periods in 2003 are presented in the Company’s Quarterly Reports on Form 10-Q/A for the quarterly periods ended June 30, 2004 and September 30, 2004.

     Refer to Note 1A, “Restatement” in this Form 10-Q/A for further information on the restatement impact for the first quarter of 2004 and 2003. Refer also to Note 2, “Restatement” in the Company’s 2004 Form 10-K, for additional discussion on the nature of the restatement adjustments, the impact of the restatement adjustments on net income (loss) and the cumulative impact of the adjustments on the Consolidated Statement of Income and Consolidated Balance Sheet for each annual period.

     This Form 10-Q/A amends and restates Items 1, 2 and 4 of Part I and Item 6 of Part II of the original Form 10-Q as well as the information set forth under “Forward-Looking Information — Safe Harbor Statement,” and no other information included in the original Form 10-Q is amended hereby.

     All referenced amounts in this Form 10-Q/A for prior periods and prior period comparisons reflect the balances and amounts on a restated basis, as applicable.

     Except as otherwise described in Item 4 of Part I and “Forward-Looking Information – Safe Harbor Statement,” this Form 10-Q/A has not been updated for changes in events, estimates or other developments subsequent to June 18, 2004, the date of the original filing of the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004. For a discussion of subsequent events and developments as well as revisions to prior estimates, please refer to the Company’s filings with the Securities and Exchange Commission subsequent to June 18, 2004.

PART I. FINANCIAL INFORMATION

ITEM 1. RESTATED FINANCIAL STATEMENTS.

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

The accompanying notes are an integral part of this financial statement.

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

The accompanying notes are an integral part of this financial statement.

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THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
(Unaudited)

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

The accompanying notes are an integral part of this financial statement.

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

The accompanying notes are an integral part of this financial statement.

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

All per share amounts in these Notes to Financial Statements are diluted unless otherwise indicated.

NOTE 1. ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited, restated consolidated financial statements have been prepared in accordance with Form 10-Q instructions 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 generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These restated interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 (the “2004 10-K”). Refer to Note 1A, Restatement, for further discussion.

     Operating results for the three months ended March 31, 2004 are not necessarily indicative of the results expected in subsequent quarters or for the year ending December 31, 2004.

Consolidation of Variable Interest Entities

In January 2003, the Financial Accounting Standards Board (the “FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities – an Interpretation of ARB No. 51,” as amended by FASB Interpretation No. 46 (revised December 2003) (collectively, “FIN 46”). FIN 46 requires companies to consolidate, at fair value, the assets, liabilities and results of operations of variable interest entities (VIEs) in which the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties or in which they hold a controlling financial interest through means other than the majority ownership of voting equity. Controlling financial interests typically are present when a company either 1) has the direct or indirect ability to make decisions about the VIE’s activities, 2) holds an obligation to absorb expected losses of a VIE, or 3) is entitled to receive the expected residual returns of a VIE. FIN 46 became effective immediately for all VIEs created after January 31, 2003 and required certain disclosures in financial statements issued after January 31, 2003 about the nature, purpose, size and activities of all VIEs covered by its provisions, and their maximum exposure to loss. FIN 46 also required companies to consolidate VIEs created before February 1, 2003, in financial statements for periods ending after June 15, 2003. During 2003, the FASB delayed the required implementation date of FIN 46 for entities that are not special purpose entities (SPEs) until the first reporting period ending after March 15, 2004.

The Company applied the provisions of FIN 46, effective July 1, 2003, to those VIEs representing lease-financing arrangements with SPEs. The Company has evaluated the impact of FIN 46 for entities that are not SPEs and deferred, until the first quarter of 2004, the application of FIN 46 to two unconsolidated investments; South Pacific Tyres (SPT), a tire manufacturer, marketer and exporter of tires in Australia and New Zealand and T&WA, a wheel mounting operation in the United States which ships to original equipment manufacturers. The Company consolidated these investments effective January 1, 2004. This consolidation was treated as a noncash transaction on the Consolidated Statement of Cash Flows with the exception of approximately $24 million of cash and cash equivalents from SPT and T&WA which is included in other assets and liabilities in the operating activities section of the statement. The consolidation of SPT and T&WA resulted in an increase in total assets of approximately $371 million (as restated) and total liabilities of approximately $373 million (as restated). 2004 first quarter net sales of approximately $254 million for SPT and T&WA were included in Goodyear’s total consolidated net sales. Loss before income taxes of approximately $3 million (as restated) were recorded for SPT and T&WA during the first quarter of 2004. In connection with the consolidation of SPT and T&WA during the first quarter of 2004, Goodyear recorded approximately $5 million of goodwill. This increase in goodwill was partially offset by approximately $2 million of translation adjustments.

     Goodyear and certain of its subsidiaries guarantee certain debt obligations of SPT and T&WA. Goodyear, Goodyear Australia Limited, a wholly owned subsidiary of Goodyear, and certain subsidiaries of Goodyear Australia Limited guarantee SPT’s obligations under credit facilities in the amount of $80.7 million. The guarantees

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

are unsecured. The SPT credit facilities are secured by certain subsidiaries of SPT. As of March 31, 2004, the carrying amount of the secured assets of these certain subsidiaries was $232.7 million, consisting primarily of accounts receivable, inventory and fixed assets. Goodyear guarantees an industrial revenue bond obligation of T&WA in the amount of $7.2 million (as restated). The guarantee is unsecured.

Restricted Cash

The Company will from time to time maintain balances on deposit at various financial institutions as collateral for borrowings incurred by various subsidiaries. The availability of these balances is restricted to the extent of the borrowings. In addition, restricted cash includes insurance proceeds received related to Entran II litigation. Refer to Note 7, Commitments and Contingent Liabilities, for further information about Entran II claims. At March 31, 2004, cash balances totaling $87.4 million were subject to such restrictions, compared to $23.9 million at December 31, 2003.

Stock-Based Compensation

The Company uses the intrinsic value method to measure compensation cost for stock-based compensation. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company’s common stock at the date of the grant over the amount an employee must pay to acquire the stock. Compensation cost for stock appreciation rights and performance units is recorded based on the quoted market price of the Company’s stock at the end of the reporting period.

     The following table presents the pro forma effect from using the fair value method to measure compensation cost:

Reclassification

Certain items previously reported in specific financial statement captions have been reclassified to conform to the 2004 presentation.

NOTE 1A. RESTATEMENT

The consolidated financial statements have been restated in order to reflect certain adjustments to Goodyear’s financial statements for 2004 as previously reported in Goodyear’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004 filed on June 18, 2004. The restatement also affects the three month period ended March 31, 2003. All amounts are before tax unless otherwise noted.

     Refer to Note 2, “Restatement” and “Supplementary Data” in the 2004 Form 10-K for further discussion of this restatement including the adjustments recorded in the 2003 and 2002 annual periods and quarterly periods of

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

2004 and 2003. This footnote discusses the restatement adjustments included in the 2004 Form 10-K as they relate to the first quarters of 2004 and 2003.

Restatements Included in 2003 Form 10-K

The Company had restated by means of its Annual Report on Form 10-K for the year ended December 31, 2003, filed on May 19, 2004, its consolidated balance sheet as of December 31, 2002, and consolidated statement of operations, cash flows and shareholders’ equity (deficit) for the years ended December 31, 2002 and 2001. The restatement also affected balance sheet periods prior to 2002 and income statement periods prior to 2001. In addition, the Company’s 2003 and 2002 quarterly financial information had been restated to reflect adjustments to the Company’s previously reported financial information on Form 10-Qs for the quarters ended March 31, 2003, June 30, 2003, and September 30, 2003. These adjustments increased the previously reported net loss by $33.2 million for the three month period ended March 31, 2003.

     The restatements initially arose out of an intensified effort to reconcile certain general ledger accounts in the second and third quarters of 2003. As a result of the Company’s efforts to reconcile these accounts, the Company identified various adjustments that were recorded in the second quarter of 2003 and subsequently identified additional adjustments that needed to be recorded. Based on an assessment of the impact of the adjustments, management and the Audit Committee decided to restate the Company’s previously issued financial statements on the Form 10-Q for the quarter ended September 30, 2003 and for prior periods. Following the identification of these adjustments, PricewaterhouseCoopers LLP (PwC) advised the Company in October 2003 that the failure to identify certain issues that had affected several years financial statements related to the monitoring and review of general ledger accounts collectively resulted in a material weakness in internal controls that required strengthening of procedures for account reconciliations.

     In December 2003, the Company discovered accounting irregularities in its European Union Tire business segment. The Audit Committee initiated a special investigation of these irregularities, and this investigation was subsequently expanded to other overseas locations. The investigations identified accounting irregularities primarily related to earnings management whereby accrual accounts were improperly adjusted between periods or expenses was improperly deferred. In the first and second quarters of 2004, the Company identified other adjustments. Some of these adjustments resulted from accounting irregularities including the understatement of workers’ compensation liability and the valuation of real estate received in payment of trade accounts receivable in Chile. The Audit Committee also initiated an investigation into these adjustments. As a result of these investigations, management and the Audit Committee decided that a further restatement of our financial statements for 2003 and prior years was necessary.

     In May 2004, PwC advised the Company that the circumstances it previously identified to the Company as collectively resulting in a material weakness had each individually become a material weakness. PwC advised the Company that this determination was due to the number of previously undetected errors that were attributable to the material weakness previously identified. A significant portion of these errors were detected by the Company. PwC further identified an additional material weakness resulting from intentional overrides of internal controls by those in authority, particularly related to the European Union Tire segment and workers’ compensation liability in the United States. These material weaknesses, if unaddressed, could result in material errors in the Company’s financial statements. In addition, PwC advised the Company that it had identified as reportable conditions the Company’s need to enhance certain finance personnel’s knowledge of U.S. GAAP and internal controls and the need to enhance controls related to the establishment of bank accounts.

     The restatement also included changes to the timing of certain previously recognized adjustments not arising from account reconciliations as well as other adjustments identified during the restatement process.

     The adjustments resulting from the Company’s initial restatement efforts, the special overseas accounting and workers’ compensation investigations, and the 2003 year-end closing process are described as follows:

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

Accounting Irregularities. This category includes adjustments reducing income by a total of $1.6 million in the three months ended March 31, 2003. These adjustments resulted from the overseas special accounting investigation and the understatement of the Company’s liability for workers’ compensation payments.

     Adjustments reducing income by a total of $1.2 million in the three months ended March 31, 2003 were included in the restatement as a result of the special accounting investigation overseas. The majority of the adjustments addressed accrual accounts that were improperly adjusted between periods or expenses that were improperly deferred. These adjustments primarily related to accounts receivable, fixed assets, accounts payable-trade and other long-term liability accounts that were improperly adjusted. An adjustment was made to defer income of $0.1 million beyond the first quarter of 2003 that was improperly recognized in the first quarter of 2003.

     The workers’ compensation adjustments to reduce income totaled $0.4 million in the three months ended March 31, 2003. These adjustments resulted from an understatement of the Company’s potential liability for estimated payments relating to workers’ compensation claims by employees. In the first quarter of 2004, it was noted that claims arising from one of the Company’s United States tire manufacturing plants were under-reserved. As a result, the Company, with the assistance of the outside administrator, reviewed approximately 85% of the open claims handled by this administrator at this plant as well as other facilities and determined that reserves needed to be increased to accurately value the claims. The under-reserving resulted in part from improper efforts to reduce, or restrict the amount of increase in, the reserves for certain workers’ compensation claims leading to claims data in the Company’s workers’ compensation claims database that did not reflect the probable ultimate exposure to the Company.

     A summary of the accounting irregularities adjustments that affected the three months ended March 31, 2003 follows:

Account Reconciliations. This category includes adjustments reducing income totaling $27.7 million in the three months ended March 31, 2003, resulting from the failure to either reconcile accounts or resolve certain reconciliation issues in a timely manner. The most significant adjustments in this category relate to certain reconciliations for accounts receivable, inventories, fixed assets, intercompany accounts, prepaid expenses and accounts payable-trade. Certain of these adjustments were associated with the integration of a new enterprise resource planning system (ERP) into the Company’s accounting processes beginning in 1999.

     The following categories represent a majority of the account reconciliation adjustments included in the restatement.

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

     In addition, net adjustments totaling $22.8 million were recorded in OCI through March 31, 2003. An adjustment was made to record an $18.0 million increase to deferred derivative losses, with an offsetting credit to liabilities. This adjustment was associated with three interest rate swaps and a cross-currency contract for the period March 2001 through March 2003. An adjustment was also made to record a $3.0 million increase to currency translation, with an offsetting credit to long-term assets. This adjustment affected the period from January 1, 2003 to March 31, 2003. These adjustments were identified in conjunction with the completion of account reconciliations.

Out-of-Period Adjustments. This category includes adjustments previously identified but deemed to be immaterial and recorded in the period the Company identified the error or in a subsequent period. Adjustments in this category change the timing of income and expense items that were previously recognized. Income of $0.7 million is included in the three months ended March 31, 2003 for out-of-period adjustments.

Discount Rate Adjustments. In preparing the 2003 annual financial statements, the Company reassessed the estimate of the discount rate used in determining the net periodic benefit cost and benefit obligations of the Company’s domestic pension, workers’ compensation and other postretirement benefit plans. Consistent with that effort and the restatement process, the Company determined that it would be appropriate to make similar reassessments for discount rates for all periods presented. As a result, the discount rate was revised to 6.75%, 7.25% and 7.50% from 7.25%, 7.75% and 8.00% for 2003, 2002 and 2001, respectively. Income was decreased by $4.3 million in the three months ended March 31, 2003. This change also resulted in a charge to deferred pension costs in OCI totaling $150.1 million for the years ended December 31, 2002 and 2001. Additionally, in 2002, the Company had established a valuation allowance against its net Federal and state deferred tax assets. Accordingly, this restatement includes a charge to income tax expense of $81.2 million to provide a valuation allowance against the tax benefit included in the adjustment to OCI in 2001, and a charge to OCI of $10.8 million to provide a valuation allowance against the tax benefit included in the adjustment to OCI in 2002. These adjustments similarly impacted OCI at March 31, 2003.

Chemical Products Segment. This category primarily includes adjustments identified as a result of a stand-alone audit conducted in 2003 of a portion of the Chemical Products business segment. The most significant adjustments in this category relate to the timing of the recognition of manufacturing variances to reflect the actual cost of inventories, the fair value adjustment of a hedge for natural gas, and the correction of intercompany profit elimination in inventory to eliminate selling and administrative expenses in inventory. Income of $2.4 million is included in the three months ended March 31, 2003 for Chemical Products segment adjustments.

Tax Adjustments. Adjustments related to the correction of errors in the computation of deferred tax assets and liabilities were $2.7 million in the three months ended March 31, 2003.

Restatements Included in 2004 Form 10-K

     On November 5, 2004, the Company announced that it would file an amended 2003 Form 10-K to include summarized financial information related to certain investments in affiliates. The Company also announced a restatement of its previously reported financial statements. On December 30, 2004, the Company announced that it was working to resolve an accounting issue concerning an Australian affiliate, South Pacific Tyres (“SPT”), and that the resolution of this matter could have an impact on its previously reported financial results. Although the primary focus of this effort was to resolve the accounting treatment for a 10-year supply agreement between the Company

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

and SPT, the Company also noted the possibility that other items having an impact on SPT’s prior period financial statements could arise in the course of the review. On February 25, 2005, the Company announced that it would restate its 2004 third quarter Form 10-Q for additional adjustments identified subsequent to its filing on November 9, 2004. The 2004 Form 10-K filed on March 16, 2005 reflected the resolution of the SPT accounting matters and included a restatement of the Company’s previously reported financial information on Form 10-Q for the quarterly periods ending March 31, 2004, June 30, 2004 and September 30, 2004. These adjustments increased the previously reported net loss by $1.2 million for the three month period ended March 31, 2004 and $4.0 million for the three month period ended March 31, 2003.

The adjustments included in the restatements are described as follows:

SPT. These adjustments increased income by $0.6 million and decreased income by $0.4 million in the three months ended March 31, 2004 and 2003, respectively, and resulted primarily from the recognition of a contractual obligation related to a supply agreement that was entered into in 2000 with the Company’s 50% owned affiliate in Australia, SPT, an impairment of certain property, plant and equipment, the timing of the recognition of certain rationalization charges and other adjustments identified in conjunction with a restatement of SPT’s historical U.S. GAAP financial results.

General and Product Liability. The Company identified adjustments related to general and product liability – discontinued products which decreased income by $1.5 million in the first quarter of 2004. These adjustments were the result of the valuation firm’s review of additional historical defense cost data.

Account Reconciliations. The Company identified adjustments related to account reconciliation items in 2004 which increased income by $0.8 million and decreased income by $2.9 million in the three months ended March 31, 2004 and 2003, respectively. These adjustments were primarily comprised of expenses related to the write-off of goodwill associated with certain retail stores previously sold in France, a clerical error in recording adjustments to our workers’ compensation reserve as part of our restatement as of December 31, 2003, and the reconciliation of an intra-company account. Also included in the adjustments were an offsetting charge and credit of $2.7 million identified in 2004 that related to a leased tire asset account. Since it was not possible to allocate these offsetting $2.7 million adjustments to the applicable periods, the Company recorded both adjustments in the first quarter of 2004. The Company also reassessed its estimate of the discount rate used in determining net periodic pension cost and benefit obligations for two minor pension plans, and recorded an expense related to these two plans.

     Other restatement adjustments included expenses resulting from the incorrect calculation of depreciation on certain fixed assets, account reconciliations at a subsidiary in Europe, and the failure to record expenses related to bank credit facilities. Adjustments were also identified that increased income for an overstatement of accounts payable. Other less significant adjustments were also reflected in the restatement.

     Additionally, the Company identified an error related to intercompany transactions arising from a programming and systems interface change with a computer program. This error caused sales and cost of goods sold in North American Tire to be understated by equal amounts. The restatement reflects an increase in sales and costs of goods sold during the first quarter of 2004 of $10.4 million each. There was no effect on income before taxes or net income.

     The Company also identified a misclassification of deferred income tax assets and liabilities on its Consolidated Balance Sheet at December 31, 2003. The Company had recorded certain deferred tax assets and liabilities on a gross basis rather than netting short term deferred tax assets with short-term deferred tax liabilities and long-term deferred tax assets with long-term deferred tax liabilities. The misclassification overstated total assets and total liabilities by $356.7 million beginning at December 31, 2003. This had no impact on shareholders’ equity (deficit), net income, or cash flows.

     The Company also identified adjustments to OCI totaling $3.8 million through March 31, 2004, primarily related to the revaluation of various foreign currency-denominated goodwill accounts and certain other accounts. This revaluation error resulted in goodwill and minority equity being understated and shareholders’ equity (deficit) being overstated by approximately $32 million, $24 million and $8 million, respectively, at March 31, 2004 and $40

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

million, $31 million and $9 million, respectively, at December 31, 2003. The U.S. dollar value of these accounts increased since the time the goodwill was initially recorded, due primarily to the recent strengthening of the Euro.

Tax Adjustments. The Company identified an additional adjustment to its net deferred tax valuation allowance that reduced net income by $0.6 million in each of the three months ended March 31, 2004 and 2003. The remaining tax adjustments relate to the correction of errors in the computation of deferred tax assets and liabilities.

     The following table sets forth the effects of the restatement adjustments for both “Restatement Included in 2003 Form 10-K” and “Restatements Included in 2004 Form 10-K”, as discussed above, on the Consolidated Statement of Operations for the three months ended March 31, 2004 and 2003.

Effect of restatement adjustments on Goodyear’s previously issued financial statements

Increase (decrease) in income (loss)

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

The following table sets forth the effects of the restatement adjustments discussed above on the Consolidated Statement of Operations for the three months ended March 31, 2004.

The following table sets forth the effects of the restatement adjustments discussed above on the Consolidated Statement of Operations for the three months ended March 31, 2003.

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

The following table sets forth the effects of the restatement adjustments discussed above on the Consolidated Balance Sheet at March 31, 2004.

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

NOTE 2. COSTS ASSOCIATED WITH RATIONALIZATION PROGRAMS

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.

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

During 2004, net charges of $23.8 million ($19.9 million after tax or $0.11 per share) were recorded, which included reversals of $0.2 million ($0.2 million after tax or $0.00 per share) for reserves from rationalization actions no longer needed for their originally intended purposes and new charges of $24.0 million ($20.1 million after tax or $0.11 per share). Included in the $24.0 million of new charges are $3.0 million of expenses, consisting of $1.1 million of associate-related costs and $1.9 million of other than associate-related costs, incurred in 2004 related to plans initiated during 2003. $0.5 million of the $3.0 million charge related to the non-cash write-off of raw materials inventory in connection with the closure of a facility in the Latin American Tire segment. The 2004 rationalization actions consist of administrative consolidations and a manufacturing consolidation in the European Union Tire segment. Of the $21.0 million of new charges for plans initiated in 2004, $20.6 million related to future cash outflows, primarily associate severance costs, and $0.4 million related to non-cash pension curtailments. Approximately 380 associates will be released under the programs initiated in 2004, of which approximately 60 were exited during the first quarter.

     In the first quarter of 2004, $44.9 million and $3.6 million (as restated) was incurred primarily for severance payments and noncancellable lease costs, respectively. The majority of the remaining accrual balance for all programs of $119.8 million (as restated) is expected to be utilized by December 31, 2004.

     Accelerated depreciation charges were recorded for fixed assets that will be taken out of service in connection with certain rationalization plans initiated in 2003 and 2004 in the European Union Tire, Latin American Tire and Engineered Products segments. During the first quarter of 2004, $4.2 million was recorded as Cost of Goods Sold and $0.1 million was recorded as Selling, Administrative and General Expense for accelerated depreciation charges.

     The following table summarizes, by segment, the total charges expected to be recorded and the total charges recorded in 2004, related to the new plans initiated in 2004:

The additional restructuring costs not yet recorded are expected to be incurred and recorded during the remainder of 2004 and subsequent periods.

     During 2003, net charges of $291.5 million ($267.1 million after tax or $1.52 per share) were recorded, which included reversals of $15.7 million ($14.3 million after tax or $0.08 per share) for reserves from

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

rationalization actions no longer needed for their originally intended purposes and new charges of $307.2 million ($281.4 million after tax or $1.60 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. Approximately 4,400 associates will be released under the programs initiated in 2003, of which approximately 2,700 were exited in 2003 and approximately 660 were exited during the first quarter of 2004. The reversals are primarily the result of lower than initially estimated associate-related payments of approximately $12 million, sublease contract signings in the European Union of approximately $3 million and lower contract termination costs in the United States of approximately $1 million. These reversals do not represent a change in the plan as originally approved by management. Of the $307.2 million of new charges recorded in 2003, $60.7 million was recorded during the first quarter of 2003.

     The following table summarizes, by segment, the total charges expected to be recorded, the total charges recorded in 2004, the total charges recorded to date and the total amounts reversed to date, related to the new plans initiated in 2003:

The additional restructuring costs not yet recorded are expected to be incurred and recorded during the remainder of 2004 and subsequent periods.

NOTE 3. OTHER (INCOME) AND EXPENSE

Other (Income) and Expense in 2004 included a gain of $4.7 million (as restated) ($3.6 million (as restated) after tax or $0.02 per share) on the sale of assets in the North American Tire, European Union Tire and Engineered Products Segments and a loss of $1.9 million (as restated) ($1.6 million (as restated) after tax or $0.01 per share (as restated)) on the sale of corporate assets and assets in the European Union Tire Segment. Other (Income) and Expense in 2003 included a gain of $1.4 million ($1.0 million after tax or $0.01 per share, and a loss of $1.1 million (as restated) ($0.8 (as restated) after tax or $0.00 per share (as restated)) on the sale of assets in the European Union Tire Segment.

     Financing fees and financial instruments in the first quarter of 2004 included $12.9 million (as restated) of deferred costs written off in connection with the Company’s refinancing activities during the period. Refer to Note 5, Financing Arrangements, for further information on the Company’s first quarter 2004 refinancing activities. Financing fees and financial instruments in 2003 included $14.4 million of costs incurred in connection with the restructuring and refinancing of the Company’s bank credit and receivables securitization facilities in 2003.

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

     General & product liability–discontinued products includes charges for claims against Goodyear related to asbestos personal injury claims and for anticipated liabilities related to Entran II claims. Of the $9.2 million (as restated) of expense recorded in the first quarter of 2004, $6.7 million relates to Entran II claims and $2.5 million (as restated) relates to asbestos claims, net of probable insurance recoveries. For the first quarter of 2003, $2.9 million related to Entran II claims and $16.2 million related to asbestos claims, net of probable insurance recoveries. Refer to Note 7, Commitments and Contingent Liabilities, for further information about general and product liabilities.

     Miscellaneous expense in the first quarter of 2004 includes $11.7 million ($11.6 million after tax or $0.07 per share) of expense for insurance fire loss deductibles related to fires at Company facilities in Germany, France and Thailand. As of March 31, 2004, Goodyear did not record any insurance recoveries in excess of the net book value of the assets destroyed, less the insurance deductible limits. Any insurance recoveries in excess of amounts recorded will be accounted for pursuant to FASB Statement No. 5, “Accounting for Contingencies.”

NOTE 4. PER SHARE OF COMMON STOCK

Basic earnings per share has been computed based on the average number of common shares outstanding. The following table presents the number of incremental weighted average shares used in computing diluted per share amounts:

For all periods presented, average shares outstanding-diluted excludes the effect of stock options with exercise prices that were greater than the average market price of the Company’s common shares, as the effect would have been antidilutive. In addition, restricted stock and performance grants have been excluded from the calculation of average shares outstanding-diluted as the effect would have been antidilutive in both the three months ended March 31, 2004 and 2003.

     The average shares outstanding-diluted for the first three months of 2004 does not include the antidilutive impact of 1.2 million shares of potential common stock associated with stock options.

NOTE 5. FINANCING ARRANGEMENTS

Goodyear had credit arrangements of $6.67 billion (as restated) available at March 31, 2004, of which $775.4 million (as restated) were unused.

Short Term Debt and Financing Arrangements

At March 31, 2004, Goodyear had short term committed and uncommitted credit arrangements totaling $509.4 million (as restated), of which $139.7 million (as restated) related to the consolidation of VIEs. Of the total amount, $211.4 million (as restated) was unused. These arrangements are available to the Company or certain of its international subsidiaries through various domestic and international banks at quoted market interest rates. There are no commitment fees associated with these arrangements.

     Goodyear had outstanding debt obligations, which by their terms are due within one year, amounting to $339.0 million (as restated) at March 31, 2004 ($260.2 million (as restated) at December 31, 2003), of which $131.8 million (as restated) related to the consolidation of VIEs. Current maturities of long term debt represented $41.0 million of this total, with a weighted average interest rate of 5.34% at March 31, 2004 ($113.5 million and 5.25% at December 31, 2003, respectively). The remaining $298.0 million (as restated), of which $130.4 million (as restated)

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

related to VIEs consolidated in the period, was short term debt of international subsidiaries, with a weighted average interest rate of 5.53% (as restated) at March 31, 2004 ($146.7 million (as restated) and 4.81% at December 31, 2003, respectively).

Long Term Debt and Financing Arrangements

At March 31, 2004, Goodyear had long term credit arrangements totaling $6.16 billion, of which $563.9 million were unused.

     The following table presents long term debt at March 31, 2004 and December 31, 2003:

At March 31, 2004, the fair value of Goodyear’s long term fixed rate debt amounted to $2.42 billion, compared to its carrying amount of $2.61 billion. At December 31, 2003, the fair value of Goodyear’s long term fixed rate debt amounted to $2.11 billion, compared to its carrying amount of $2.23 billion. The difference between the carrying value in 2004 and 2003 was attributable to the issuance of the 11% Notes due 2011 in 2004. The fair value was estimated using quoted market prices or discounted future cash flows. The fair value of the 6 5/8% Notes due 2006 was hedged by floating interest rate contracts of $200 million at March 31, 2004 ($200 million at December 31, 2003). The fair value of Goodyear’s variable rate debt approximated its carrying amount at March 31, 2004 and December 31, 2003.

     The Notes and Euro Notes have an aggregate face amount of $2.58 billion and are reported net of unamortized discounts aggregating $4.3 million ($1.96 billion and $1.7 million, respectively, at December 31, 2003). On March 12, 2004, the Company completed a private offering of $650 million in 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 outstanding amount under the Company’s U.S. term facility discussed below, to permanently reduce its commitment under the U.S. revolving credit facility discussed below by $70 million, and for general corporate purposes.

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

     At March 31, 2004, the bank term loans due 2005 and 2006 were comprised of $1.85 billion of variable rate agreements based upon LIBOR plus a fixed spread, bearing interest at a weighted average rate of 5.37% per annum. At December 31, 2003, the bank term loans due 2005 and 2006 were comprised of $1.78 billion of variable rate agreements based upon LIBOR plus a fixed spread bearing interest at a weighted average rate of 5.17% per annum, of which the interest rate on $325 million principal amount of bank term loans due 2005 and 2006 was hedged by interest rate contracts. There were no domestic short term bank borrowings outstanding at March 31, 2004 or December 31, 2003.

     At March 31, 2004, borrowings under the revolving credit facilities due 2005 and 2006 were comprised of $320.0 million of variable rate agreements based upon LIBOR plus a fixed spread bearing interest at a weighted average rate of 5.09% per annum ($839.0 million and 5.15% at December 31, 2003, respectively).

     Other domestic and international debt at March 31, 2004 and December 31, 2003, consisted of fixed and floating rate loans denominated in U.S. dollars and other currencies that mature in 2004-2023. The weighted average interest rate in effect under these loans was 6.23% at March 31, 2004, compared to 6.25% at December 31, 2003.

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

The Company’s amended and restated senior secured $750 million revolving credit facility provides for borrowing up to the $750 million commitment at any time until April 30, 2005. Up to $600 million of the facility is available for the issuance of letters of credit. On March 12, 2004, $70.0 million of the outstanding balance was prepaid and the bank commitments under this facility were permanently reduced to $680 million. Under the facility, as of March 31, 2004, there were no borrowings and $496.1 million in letters of credit issued. The Company pays an annual commitment fee of 75 basis points on the undrawn portion of the commitment under the U.S. revolving credit facility.

$645 Million Senior Secured U.S. Term Facility

As of December 31, 2003, the balance due on the U.S. term facility was $583.3 million due to a partial pay down of the balance during the second quarter of 2003. On March 12, 2004, all outstanding amounts under the facility were prepaid and the facility was retired. The U.S. term facility had a maturity date of April 30, 2005.

     In 2003, the Company obtained loans under the U.S. revolving credit facility and the U.S. term facility (collectively, the “U.S. facilities”) bearing interest at LIBOR plus 400 basis points or an alternative base rate (the higher of JPMorgan’s prime rate or the federal funds rate plus 50 basis points) plus 300 basis points.

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

     The indenture for the Company’s Swiss franc denominated bonds limits its ability to use its domestic tire and automotive parts manufacturing facilities as collateral for secured debt without triggering a requirement that bond holders be secured on an equal and ratable basis. The manufacturing facilities indicated above will be pledged to ratably secure the Company’s Swiss franc denominated bonds to the extent required under the applicable indenture. However, the aggregate amount collateralized by these manufacturing facilities will be limited to 15% of

- 18 -

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

the Company’s shareholders’ equity, in order that the security interests granted to the lenders under the restructured facilities will not be required to be shared with the holders of indebtedness outstanding under the Company’s other existing bond indentures.

     The facilities have customary representations and warranties including material adverse change representations in the Company’s financial condition since December 31, 2002. In addition, the U.S. facilities contain certain covenants that, among other things, limit the Company’s ability to incur additional secured indebtedness (including a limit, subject to certain exceptions, of 275 million Euros in accounts receivable transactions), make investments, and sell assets beyond specified limits. The facilities prohibit Goodyear from paying dividends on its common stock. Goodyear must also maintain a minimum consolidated net worth (as such term is defined in the U.S. facilities) of at least $2.50 billion for quarters ending in 2004 and $2.00 billion for the quarter ending March 31, 2005. Goodyear also is not permitted to fall below a ratio of 2.00 to 1.00 of consolidated EBITDA to consolidated interest expense (as such terms are defined in the U.S. facilities) for any period of four consecutive fiscal quarters. In addition, Goodyear’s ratio of consolidated senior secured indebtedness to consolidated EBITDA (as such terms are defined in the U.S. facilities) is not permitted to be greater than 4.00 to 1.00 at any time. As of March 31, 2004, the Company was in compliance with the financial covenants under the credit facilities.

     The U.S. facilities also limit the amount of capital expenditures the Company may make to $500 million in 2004 and 2005 ($200 million through April 30, 2005). The amounts of permitted capital expenditures may be increased by the amount of net proceeds retained by the Company from permitted asset sales and equity and debt issuances after application of the prepayment requirement in the U.S. term facility described above. To the extent the Company does not reach the limit of permitted capital expenditures in any given year, such shortfall may be carried over into the next year. With respect to 2004, increases totaling $270 million are permitted as a result of capital market transactions completed during the first quarter of 2004 and unused allowances from 2003.

$650 Million Senior Secured European Facilities

Goodyear Dunlop Tires Europe B.V. (“GDTE”) is party to a $250 million senior secured revolving credit facility and a $400 million senior secured term loan facility (collectively, the “European facilities”). These facilities mature on April 30, 2005. As of March 31, 2004, there were borrowings of $250.0 million and $400.0 million under the European revolving and term facilities, respectively.

     GDTE pays an annual commitment fee of 75 basis points on the undrawn portion of the commitments under the European revolving facility. GDTE may obtain loans under the European facilities bearing interest at LIBOR plus 400 basis points or an alternative base rate (the higher of JPMorgan’s prime rate or the federal funds rate plus 50 basis points) plus 300 basis points.

     The collateral pledged under the European facilities includes:

     Consistent with the covenants applicable to Goodyear in the U.S. facilities, the European facilities contain certain representations, warranties and covenants applicable to GDTE and its subsidiaries which, among other things, limit GDTE’s ability to incur additional indebtedness (including a limit of 275 million Euros in accounts receivable transactions), make investments, sell assets beyond specified limits, pay dividends and make loans or advances to Goodyear companies that are not subsidiaries of GDTE. The European facilities also contain certain covenants applicable to the Company identical to those in the U.S. facilities. The European facilities also limit the amount of capital expenditures that GDTE may make to $250 million and $100 million in 2004 and 2005 (through April 30), respectively.

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

     Subject to the provisions in the European facilities and agreements with Goodyear’s joint venture partner, SRI (which include limitations on loans and advances from GDTE to Goodyear and a requirement that transactions with affiliates be consistent with past practices or on arms-length terms), GDTE is permitted to transfer funds to Goodyear.

     Any amount outstanding under the term facility is required to be prepaid with:

     The U.S. and European facilities can be used, if necessary, to fund ordinary course of business needs, to repay maturing debt, and for other needs as they arise.

$1.95 Billion Senior Secured Asset-Backed Credit Facilities

The Company has also entered into senior secured asset-backed credit facilities in an aggregate principal amount of $1.30 billion, consisting of a $500 million revolving credit facility and an $800 million term loan facility. On February 20, 2004, the Company added a $650 million term loan tranche to the facility, not subject to the borrowing base, and with junior liens on the collateral securing the facility. As of March 31, 2004, there were borrowings of $70.0 million and $800.0 million under the revolving credit and term loan asset-backed facilities, respectively. As of March 31, 2004, the $650.0 million tranche was fully drawn. The facilities mature on March 31, 2006.

     Availability under the facilities other than the $650 million term loan tranche is limited by a borrowing base equal to the sum of (a) 85% of adjusted eligible accounts receivable and (b) (i) if the effective advance rate for inventory is equal to or greater than 85% of the recovery rate (as determined by a third party appraisal) of such inventory, 85% of the recovery rate of such inventory, or (ii) if the effective advance rate for inventory is less than 85% of the recovery rate, (A) the sum of 35% of eligible raw materials, 65% of adjusted eligible finished goods relating to the North American Tire Segment, and 60% of adjusted eligible finished goods relating to the retail division, Engineered Products Segment and Chemical Products Segment minus (B) a rent reserve equal to three months’ rent and warehouse charges at facilities where inventory is stored.

     The calculation of the borrowing base and reserves against inventory and accounts receivable included in the borrowing base are subject to adjustment from time to time by the administrative agent and the majority lenders in their discretion (not to be exercised unreasonably), based on the results of ongoing collateral and borrowing base evaluations and appraisals. Availability under the facilities is further limited by a $50 million availability block. If at any time the amount of outstanding borrowings under the facilities subject to the borrowing base exceeds the borrowing base, the Company will be required to prepay borrowings sufficient to eliminate the excess or maintain compensating deposits with the agent bank.

     The facilities are collateralized by first and second priority security interests in all accounts receivable and inventory of Goodyear and its domestic and Canadian subsidiaries (excluding accounts receivable and inventory related to the Company’s North American joint venture with SRI) and, effective as of February 20, 2004, second and third priority security interests on the other assets securing the U.S. facilities. The facilities contain certain representations, warranties and covenants which are materially the same as those in the U.S. facilities, with capital expenditures of $500 million and $150 million permitted in 2005 and 2006 (through March 31), respectively.

Debt Maturities

The annual aggregate maturities of long term debt and capital leases for the five years subsequent to March 31, 2004 are presented below. Maturities of debt supported by the availability of the revolving credit agreements have been reported on the basis that the commitments to lend under these agreements will be terminated effective at the end of their current terms.

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

NOTE 6. PENSION, OTHER POSTRETIREMENT BENEFIT AND SAVINGS PLANS

Goodyear and its subsidiaries provide substantially all employees with pension benefits and substantially all domestic employees and employees at certain international subsidiaries with health care and life insurance benefits upon retirement. The December 31, 2003 benefit obligation for other postretirement benefits includes $11.0 million for the increase in the Company’s contribution requirements based upon the attainment of certain profit levels by certain businesses in 2004 and 2005. On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act (the “Act”) was signed into law. The Act will provide plan sponsors a federal subsidy for certain qualifying prescription drug benefits covered under the sponsor’s postretirement health care plans. In accordance with FASB Staff Position 106-1, all amounts are presented without reflecting any potential effects of the Act. On May 19, 2004, the FASB issued Staff Position 106-2 which requires measures of the accumulated postretirement benefit obligation and net periodic postretirement benefit cost to reflect the effects of the Act in the first interim or annual period beginning after June 15, 2004. The Company does not expect the adoption of the Act to have a material impact on the Company’s consolidated financial statements.

     Pension cost follows:

The Company previously disclosed in its consolidated financial statements for the year ended December 31, 2003, that it expects to contribute approximately $210 million to its major U.S. and international pension plans in 2004. For all funded pension plans, the Company now expects to contribute approximately $220 million in 2004. For the three months ended March 31, 2004, the Company contributed $15.6 million to these plans.

     Postretirement benefit cost follows:

Substantially all domestic employees are eligible to participate in a savings plan. The main Hourly Bargaining Plans provided for matching contributions, through April 20, 2003, (up to a maximum of 6% of the employee’s annual pay or, if less, $12,000) at the rate of 50%. Goodyear suspended the matching contributions for all participants in the

- 21 -

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

main Salaried Plan effective January 1, 2003. The expenses recognized for Goodyear domestic contributions were $1.1 million and $5.6 million during the first quarters of 2004 and 2003, respectively.

     In addition, defined contribution pension plans are available for certain foreign employees. The expenses recognized for Company contributions for these plans were $3.3 million and $1.1 million in the first quarters of 2004 and 2003, respectively. The 2004 amounts have increased compared to 2003 primarily due to the inclusion of contributions for SPT due to the adoption of FIN 46.

NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES

At March 31, 2004, Goodyear had binding commitments for raw materials and investments in land, buildings and equipment of $561.4 million, and off-balance-sheet financial guarantees written and other commitments totaling $67.5 million.

Warranty

At March 31, 2004, Goodyear had recorded liabilities, included in other current liabilities, totaling $15.5 million (as restated) ($12.5 million (as restated) at December 31, 2003) for potential claims under warranties offered by the Company. Tire replacement under most of the warranties offered by Goodyear is on a prorated basis. Warranty reserves are based on past claims experience, sales history and other considerations. The amount of Goodyear’s ultimate liability in respect of these matters may differ from these estimates.

     The following table presents changes in the warranty reserve during the first three months of 2004 and 2003:

Environmental Matters

Goodyear had recorded liabilities totaling $33.9 million (as restated) and $32.6 million (as restated) for anticipated costs related to various environmental matters, primarily the remediation of numerous waste disposal sites and certain properties sold by Goodyear, at March 31, 2004 and December 31, 2003, respectively. Of these amounts, $7.8 million (as restated) and $7.5 million (as restated) were included in Other current liabilities at March 31, 2004 and December 31, 2003, 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.

Workers’ Compensation

Goodyear had recorded liabilities, on a discounted basis, totaling $202.1 million and $195.7 million (as restated) for anticipated costs related to workers’ compensation at March 31, 2004 and December 31, 2003, respectively. Of these amounts, $117.8 million and $112.6 million (as restated) were included in Current Liabilities as part of Compensation and benefits at March 31, 2004 and December 31, 2003, 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

- 22 -

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

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.

General and Product Liability and Other Litigation

Goodyear had recorded liabilities totaling $496.5 million (as restated) and $495.3 million (as restated) for potential product liability and other tort claims, including related legal fees expected to be incurred, presently asserted against Goodyear, at March 31, 2004 and December 31, 2003, respectively. Of these amounts, $144.8 million (as restated) and $147.4 million (as restated) were included in Other current liabilities at March 31, 2004 and December 31, 2003, 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 $134.4 million (as restated) at March 31, 2004 and $210.2 million (as restated) at December 31, 2003. Of these amounts, $17.2 million (as restated) and $91.5 million (as restated) were included in Current Assets as part of Accounts and notes receivable at March 31, 2004 and December 31, 2003, 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 braking systems manufactured by Goodyear in the past or to asbestos in certain Goodyear facilities. Typically, these lawsuits have been brought against multiple defendants in state and Federal courts. To date, Goodyear has disposed of approximately 24,300 cases by defending and obtaining the dismissal thereof or by entering into a settlement. The sum of the Company’s accrued asbestos related liability and gross payments to date, including legal costs, totaled approximately $215 million (as restated) through March 31, 2004 and approximately $212 million (as restated) through December 31, 2003.

     A summary of approximate asbestos claims activity in recent years 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.

In connection with the preparation of its 2003 consolidated financial statements, the Company engaged an independent asbestos valuation firm to review the Company’s existing reserves for pending claims, determine whether or not the Company could make a reasonable estimate of the liability associated with unasserted 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 firm, has recorded liabilities for both asserted and unasserted claims at March 31, 2004 totaling $133.9 million (as restated), inclusive of defense costs, compared to $134.7 million (as restated) at December 31, 2003. 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 March 31, 2004 is $53.1 million (as restated) compared to $54.4 million (as restated) at December 31, 2003. Prior to the fourth quarter of 2003, the Company did not have an accrual for unasserted claims as sufficient information was

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

deemed to be not available to reliably estimate such an obligation. This conclusion was further confirmed by the valuation firm during the preparation of the 2003 consolidated financial statements. At March 31, 2004, the Company’s liability with respect to asserted claims and related defense costs was $80.8 million (as restated) compared to $80.3 million (as restated) at December 31, 2003, notwithstanding an increase in the number of pending claims between December 31, 2003 and March 31, 2004.

     At December 31, 2003, after reviewing the Company’s recent settlement history by jurisdiction, law firm, disease type and alleged date of first exposure, the valuation firm cited two primary reasons for the Company to refine its valuation assumptions. First, in calculating the Company’s estimated liability, the valuation firm determined that the Company had previously assumed 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 firm 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 firm also reviewed our method for valuing receivables recorded for probable insurance recoveries. Based upon the model employed by the valuation firm, as of March 31, 2004, (i) we had recorded a receivable related to asbestos claims of $120.5 million (as restated), compared to $121.3 million, at December 31, 2003, and (ii) we expect that approximately 90% of asbestos claim related losses will be recoverable up to its accessible policy limits through the period covered by the estimated liability. 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 its excess coverage insurance carriers. Of this amount, $12.5 million (as restated) and $11.8 million (as restated) was included in Current Assets as part of Accounts and notes receivable at March 31, 2004 and December 31, 2003, respectively.

     The Company believes that at March 31, 2004, it had approximately $410 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 $120.5 million (as restated) insurance receivable recorded at March 31, 2004. The Company also had approximately $27 million in aggregate limits for products claims as well as coverage for premise claims on a per occurrence basis and defense costs available with its primary insurance carriers through coverage-in-place agreements at March 31, 2004.

     Goodyear believes that its reserve for asbestos claims, and the insurance receivables recorded in respect of these claims, reflect reasonable and probable estimates of these amounts. 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 liability in excess of the current reserve. Coverage under insurance policies is subject to varying characteristics of asbestos claims including, but not limited to, the type of claim (premise vs. product exposure), alleged date of first exposure to the Company’s

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

products or premises and disease alleged. Depending upon the nature of these characteristics, as well as the resolution of certain legal issues, some portion of the insurance may not be accessible by the Company.

     Heatway (Entran II). The Company is a defendant in 22 class actions or potential class actions and a number of 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 in New Jersey preliminarily approved a proposed national settlement agreement (the “Original 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 Original Settlement. The Company has the right to withdraw from the Original 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 Original Settlement. Potential claimants had until May 7, 2004 to exercise their right to opt out of the Original Settlement. Approximately 528 potential sites were timely opted out of the Original Settlement.

     Under the Original Settlement, Goodyear was to 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 was also to make an additional contingent payment of $10 million in each of 2005, 2006, 2007 and 2008 if Goodyear met the following EBITDA target for such year: $1.2 billion in 2004 and $1.4 billion in each of 2005, 2006 and 2007. For purposes of the Original 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. 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. Because the insurance recoveries were less than $120 million at February 27, 2004, the terms of the Original Settlement gave the plaintiffs the right to withdraw from the settlement through May 7, 2004.

     On June 4, 2004, an amended settlement agreement was filed with the United States District Court in New Jersey (the “Amended Settlement”). The Amended Settlement includes all claims involved in the Original Settlement, as well as claimants in the six New England states not in the Original Settlement. Under the Amended Settlement, Goodyear is to make annual cash contributions to a settlement fund of $60 million, $40 million, $15 million, $15 million and $20 million in 2004, 2005, 2006, 2007 and 2008, respectively. Unlike the Original Settlement, no contingent payments are to be made under the Amended Settlement. In addition to the funds Goodyear will contribute, the Amended Settlement requires Goodyear to contribute $150 million of insurance proceeds to the settlement fund. Goodyear has received a total of $75 million in insurance recoveries, all of which have been, or will be, deposited into the settlement fund. In the event that Goodyear has not obtained an additional $75 million of insurance proceeds by the date of the fairness hearing (which is currently scheduled for October 19, 2004), Goodyear will have the right, but not the obligation, to fund the amount of the shortfall. In the event that Goodyear elects to fund any shortfall, Goodyear retains the right to pursue recovery of such amount from its insurers. In the event the Company elects not to fund the shortfall, the Amended Settlement will terminate and the terms of the Original Settlement will again become effective. In the event the Original Settlement becomes effective, all funds in the settlement fund, except 80% of the insurance proceeds, will be returned to the Company. The insurance proceeds remaining in the fund will be used to fund the settlement fund created by the Original Settlement. No assurance can be given as to the Company’s ability to recover insurance proceeds sufficient to adequately fund the settlement. The settlement fund would 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.

     Under the Amended Settlement, notice of the settlement is expected to be given to potential class members pursuant to a court approved notice plan beginning on July 1, 2004. Class members will have until September 10, 2004 to opt out of the Amended Settlement. Claimants that opted out of the Original Settlement must affirmatively

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THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
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(Unaudited)

withdraw their prior opt out notice by submitting a Request to Re-join in order to participate in the Amended Settlement. The Amended Settlement will not eliminate the liability associated with those claimants who opt out of the Amended Settlement or those claimants who do not submit a Request to Re-join this Amended Settlement, however, Goodyear will be entitled to assert a proxy claim against the settlement fund for the payment such claimant would have been entitled to under the Amended Settlement. Goodyear reserves the right to withdraw from the Amended Settlement if it determines in its sole discretion that an excessive number of persons have excluded themselves from the settlement. In the event that Goodyear withdraws from the Amended Settlement or fails to meet the funding contingencies in the Amended Settlement, the parties will retain their rights and obligations under the Original Settlement. In that event, Goodyear retains its right to withdraw from the Original Settlement if it determines that too many claimants have opted out. In addition, because certain funding contingencies were not met, the plaintiffs also have the right to withdraw from the Original Settlement. Assuming that the funding contingencies in the Amended Settlement are satisfied by October 19, 2004, and Goodyear does not exercise its right to withdraw due to an excessive number of opt outs, the United States District Court in New Jersey is expected to conduct a fairness hearing on October 19, 2004 to resolve any objections and to determine final approval of the Amended Settlement.

     In 2002, two state courts in Colorado entered judgments against the Company in Entran II cases of $22.7 million and $1.3 million, respectively. These cases are excluded from both the Original and the Amended Settlements, and the Company will continue to pursue appeals of these judgments.

     On June 19, 2003, a jury in Colorado Federal court awarded a judgment in an Entran II case against the Company of $4.1 million. An additional $5.7 million in prejudgment interest was awarded on September 8, 2003. The Company has obtained a stay of proceedings pending appeal of this matter. On May 13, 2004, in another Entran II case, a federal jury in Colorado awarded a judgment against the Company of $3.2 million. On June 7, 2004, a trial commenced in an Entran II case pending in a Colorado state court. These cases are also excluded from both the Original and Amended Settlements.

     The ultimate cost to the Company of disposing of Entran II claims is dependent upon a number of factors, including the satisfaction of 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 past cases in which the Company received adverse judgments) and to recover under its insurance policies, 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 have a material adverse effect on the Company’s results of operations, financial position and liquidity in future periods.

     Refer to Part II, Item 1, Legal Proceedings in the Form 10-Q filed on June 18, 2004, for further information about Heatway matters.

     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.

Guarantees

The Company is a party to various agreements under which it has undertaken obligations resulting from the issuance

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

of certain guarantees. Guarantees have been issued on behalf of the Company’s affiliates or customers of the Company. Normally there is no separate premium received by the Company as consideration for the issuance of guarantees. The Company’s 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 the Company under these agreements were not significant.

Customer Financing

At March 31, 2004, the Company had guarantees outstanding under which the maximum potential amount of payments totaled $4.5 million, and which expire at various times through 2011.

Affiliate Financing

The Company will from time to time issue guarantees to financial institutions on behalf of certain of its affiliates, which are accounted for using the equity method. The financing arrangements of the affiliates may be for either working capital or capital expenditures. The Company generally does not require collateral in connection with the issuance of these guarantees. In the event of non-payment by an affiliate, the Company is obligated to make payment to the financial institution, and will typically have recourse to the assets of that affiliate. At March 31, 2004, the Company had guarantees outstanding under which the maximum potential amount of payments totaled $10.1 million, and which expire at various times through 2007. The Company is unable to estimate the extent to which its affiliates’ assets would be adequate to recover the maximum amount of potential payments with that affiliate.

Indemnifications

At March 31, 2004, the Company was a party to various agreements under which it had assumed obligations to indemnify the counterparties from certain potential claims and losses. These agreements typically involve standard commercial activities undertaken by the Company in the normal course of business; the sale of assets by the Company; the formation of joint venture businesses to which the Company has contributed assets in exchange for ownership interests; and other financial transactions. Indemnifications provided by the Company pursuant to these agreements relate to various matters including, among other things, environmental, tax and shareholder matters; intellectual property rights; government regulations and employment-related matters; and dealer, supplier and other commercial matters.

     Certain indemnifications expire from time to time, and certain other indemnifications are not subject to an expiration date. In addition, the Company’s potential liability under certain indemnifications is subject to maximum caps, while other indemnifications are not subject to caps. Although the Company has been subject to indemnification claims in the past, the Company cannot reasonably estimate the number, type and size of indemnification claims that may arise in the future. Due to these and other uncertainties associated with the indemnifications, the Company’s maximum exposure to loss under these agreements cannot be estimated.

     The Company has determined that there are no guarantees other than liabilities for which amounts are already recorded or reserved in its financial statements under which it is probable that it has incurred a liability.

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

NOTE 8. BUSINESS SEGMENTS