SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

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 þ 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		Smaller reporting company o
				(Do not check if a smaller reporting company)

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 March 31, 2011:			244,144,455

 

 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

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

		Three Months Ended
		March 31,
(In millions, except per share amounts)		2011				2010
NET SALES		$	5,402			$	4,270
Cost of Goods Sold			4,461				3,456
Selling, Administrative and General Expense			668				605
Rationalizations (Note 2)			9				2
Interest Expense			74				74
Other Expense (Note 3)			4				104
Income before Income Taxes			186				29
United States and Foreign Taxes			62				53
Net Income (Loss)			124				(24	)
Less: Minority Shareholders’ Net Income			21				23
Goodyear Net Income (Loss)		$	103			$	(47	)
Goodyear Net Income (Loss) — Per Share of Common Stock
Basic		$	0.42			$	(0.19	)
Weighted Average Shares Outstanding (Note 6)			243				242
Diluted		$	0.42			$	(0.19	)
Weighted Average Shares Outstanding (Note 6)			246				242

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

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

		March 31,				December 31,
(In millions, except share data)		2011				2010
Assets:
Current Assets:
Cash and Cash Equivalents		$	2,215			$	2,005
Accounts Receivable, less Allowance — $109 ($106 in 2010)			3,550				2,736
Inventories:
Raw Materials			826				706
Work in Process			190				168
Finished Products			2,321				2,103
			3,337				2,977
Prepaid Expenses and Other Current Assets			390				327
Total Current Assets			9,492				8,045
Goodwill			712				683
Intangible Assets			161				161
Deferred Income Taxes			52				58
Other Assets			510				518
Property, Plant and Equipment less Accumulated Depreciation — $9,068 ($8,807 in 2010)			6,329				6,165
Total Assets		$	17,256			$	15,630
Liabilities:
Current Liabilities:
Accounts Payable-Trade		$	3,358			$	3,107
Compensation and Benefits (Note 11)			792				756
Other Current Liabilities			1,055				1,018
Notes Payable and Overdrafts (Note 8)			245				238
Long Term Debt and Capital Leases due Within One Year (Note 8)			244				188
Total Current Liabilities			5,694				5,307
Long Term Debt and Capital Leases (Note 8)			4,795				4,319
Compensation and Benefits (Note 11)			3,412				3,415
Deferred and Other Noncurrent Income Taxes			262				242
Other Long Term Liabilities			849				842
Total Liabilities			15,012				14,125
Commitments and Contingent Liabilities (Note 12)
Minority Shareholders’ Equity (Note 1)			628				584
Shareholders’ Equity:
Goodyear Shareholders’ Equity:
Preferred Stock, no par value:
Authorized, 50 million shares, Outstanding shares — 10 million (0 in 2010), liquidation preference $50 per share			500				—
Common Stock, no par value:
Authorized, 450 million shares, Outstanding shares — 244 million (243 million in 2010) after deducting 7 million treasury shares (8 million in 2010)			244				243
Capital Surplus			2,795				2,805
Retained Earnings			969				866
Accumulated Other Comprehensive Loss			(3,181	)			(3,270	)
Goodyear Shareholders’ Equity			1,327				644
Minority Shareholders’ Equity — Nonredeemable			289				277
Total Shareholders’ Equity			1,616				921
Total Liabilities and Shareholders’ Equity		$	17,256			$	15,630

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
		March 31,
(In millions)		2011				2010
Net Income (Loss)		$	124			$	(24	)
Other Comprehensive Income (Loss):
Foreign currency translation, net of tax of $1 in 2011 ($1 in 2010)			94				(54	)
Defined benefit plans:
Amortization of prior service cost and unrecognized gains and losses included in total benefit cost, net of tax of $3 in 2011 ($3 in 2010)			40				41
Decrease (increase) in net actuarial losses, net of tax of $0 in 2011 ($0 in 2010)			3				(1	)
Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments and settlements, net of tax of $0 in 2011 ($0 in 2010)			—				1
Deferred derivative loss, net of tax of $0 in 2011 ($0 in 2010)			(9	)			(1	)
Unrealized investment (losses) and gains, net of tax of $0 in 2011 ($0 in 2010)			(1	)			1
Comprehensive Income (Loss)			251				(37	)
Less: Comprehensive Income (Loss) Attributable to Minority Shareholders			59				(11	)
Comprehensive Income (Loss) Attributable to Goodyear Shareholders		$	192			$	(26	)

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)

		Three Months Ended
		March 31,
(In millions)		2011				2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)		$	124			$	(24	)
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Depreciation and amortization			182				159
Amortization and write-off of debt issuance costs			5				4
Net rationalization charges (Note 2)			9				2
Net gains on asset sales (Note 3)			(2	)			(16	)
Pension contributions and direct payments			(17	)			(39	)
Rationalization payments			(13	)			(16	)
Venezuela currency devaluation (Note 3)			—				110
Changes in operating assets and liabilities, net of asset acquisitions and dispositions:
Accounts receivable			(754	)			(340	)
Inventories			(292	)			(300	)
Accounts payable — trade			276				349
Compensation and benefits			56				91
Other current liabilities			7				86
Other assets and liabilities			(14	)			57
TOTAL CASH FLOWS FROM OPERATING ACTIVITIES			(433	)			123
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(284	)			(141	)
Asset dispositions (Note 3)			2				16
Increase in restricted cash (Note 8)			(68	)			(60	)
Return of investment in The Reserve Primary Fund			—				24
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES			(350	)			(161	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short term debt and overdrafts incurred			16				21
Short term debt and overdrafts paid			(21	)			(56	)
Long term debt incurred			917				201
Long term debt paid			(423	)			(81	)
Proceeds from issuance of preferred stock			485				—
Common stock issued			4				1
Debt related costs and other transactions			(4	)			—
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES			974				86
Effect of exchange rate changes on cash and cash equivalents (Note 3)			19				(196	)
Net Change in Cash and Cash Equivalents			210				(148	)
Cash and Cash Equivalents at Beginning of the Period			2,005				1,922
Cash and Cash Equivalents at End of the Period		$	2,215			$	1,774

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

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES

NOTE 1. ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by The Goodyear Tire & Rubber Company (the “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, 2010 (the “2010 Form 10-K”).

     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 months ended March 31, 2011 are not necessarily indicative of the results expected in subsequent quarters or for the year ending December 31, 2011.

Reclassifications

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

NOTE 2. COSTS ASSOCIATED WITH RATIONALIZATION PROGRAMS

In order to maintain our global competitiveness, we have implemented rationalization actions over the past several years to reduce high-cost manufacturing capacity and to reduce associate headcount. The net rationalization charges included in Income before Income Taxes are as follows:

		Three Months Ended
		March 31,
(In millions)		2011				2010
New charges		$	11			$	10
Reversals			(2	)			(8	)
		$	9			$	2

     The following table shows the roll-forward of our liability between periods:

		Associate-				Other
(In millions)		Related Costs				Costs				Total
Balance at December 31, 2010		$	212			$	18			$	230
2011 charges			2				9				11
Incurred			2				(10	)			(8	)
Reversed to the statement of operations			(1	)			(1	)			(2	)
Balance at March 31, 2011		$	215			$	16			$	231

During the first quarter of 2011, net rationalization charges of $9 million were recorded. New charges of $11 million were comprised of $1 million for plans initiated in 2011, consisting of associate severance costs, and $10 million for plans initiated primarily in 2010, consisting of $1 million of associate severance costs and $9 million of other exit and non-cancelable lease costs. The net charges in 2011 also included the reversal of $2 million of charges for actions no longer needed for their originally intended purposes. Approximately 20 associates will be released under 2011 plans.

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

     In the first quarter of 2011, $5 million was incurred for associate severance payments and $10 million was incurred for non-cancelable lease and other exit costs. Associate-related costs in the first quarter of 2011 also include the favorable impact of $7 million of foreign currency translation.

     The accrual balance of $231 million at March 31, 2011 consists of $215 million for associate severance costs that are expected to be substantially utilized within the next 12 months and $16 million primarily for long term non-cancelable lease and other exit costs. At March 31, 2011, $83 million and $113 million of the accrual balance relates to plans associated with the announced closure of our Union City, Tennessee manufacturing facility and the discontinuation of consumer tire production at one of our facilities in Amiens, France, respectively.

     Accelerated depreciation charges of $9 million, primarily related to property and equipment in our Union City, Tennessee manufacturing facility, were recorded in cost of goods sold (“CGS”) in the first quarter of 2011.

     During the first quarter of 2010, net rationalization charges of $2 million were recorded. New charges of $10 million were comprised of $4 million for plans initiated in 2010, consisting of $2 million for associate severance and pension costs and $2 million for other exit and non-cancelable lease costs, and $6 million for plans initiated in 2009, consisting of $1 million for associate severance and pension costs and $5 million for other exit and non-cancelable lease costs. The net charges in 2010 also included the reversal of $8 million of charges for actions no longer needed for their originally intended purposes. Approximately 2,200 associates will be released under 2010 plans of which approximately 400 have been released as of March 31, 2011. Approximately 4,100 associates will be released under 2009 plans of which approximately 3,500 have been released as of March 31, 2011.

     In the first quarter of 2010, $15 million was incurred for associate severance payments and pension curtailment costs, and $6 million was incurred for non-cancelable lease and other exit costs. Additionally, asset write-offs and accelerated depreciation charges of $3 million were recorded in CGS in the first quarter of 2010.

NOTE 3. OTHER EXPENSE

		Three Months Ended
		March 31,
(In millions) (Income) Expense		2011				2010
Net foreign currency exchange losses		$	3			$	109
Financing fees and financial instruments			9				13
General and product liability — discontinued products (Note 12)			5				4
Net gains on asset sales			(2	)			(16	)
Royalty income			(9	)			(6	)
Interest income			(3	)			(3	)
Miscellaneous			1				3
		$	4			$	104

Net foreign currency exchange losses in the first quarter of 2011 were $3 million, compared to $109 million of losses in the same period in 2010. Losses in 2010 included a loss of $110 million resulting from the January 8, 2010 devaluation of the Venezuelan bolivar fuerte against the U.S. dollar and the establishment of a two-tier exchange rate structure. Foreign currency exchange also reflected net gains and losses resulting from the effect of exchange rate changes on various foreign currency transactions worldwide.

     Effective January 1, 2010, Venezuela’s economy was considered to be highly inflationary under U.S. generally accepted accounting principles since it experienced a rate of general inflation in excess of 100% over the latest three year period, based upon the blended Consumer Price Index and National Consumer Price Index. Accordingly, the U.S. dollar was determined to be the functional currency of our Venezuelan subsidiary. All gains and losses resulting from the remeasurement of its financial statements since January 1, 2010 were determined using official exchange rates.

     On January 8, 2010, Venezuela established a two-tier exchange rate structure for essential and non-essential goods. For essential goods the official exchange rate was 2.6 bolivares fuertes to the U.S. dollar and for non-essential goods the official exchange rate was 4.3 bolivares fuertes to the U.S. dollar. As announced by the Venezuelan government in December 2010, on January 1, 2011, the two-tier exchange rate structure was eliminated and the exchange rate for essential goods cannot be used for our unsettled amounts at December 31, 2010. Effective January 1, 2011, the official exchange rate of 4.3 bolivares fuertes to the U.S. dollar was established for substantially all goods.

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

     The $110 million foreign currency exchange loss in the first quarter of 2010 primarily consisted of a $157 million remeasurement loss on bolivar-denominated net monetary assets and liabilities, including deferred taxes, at the time of the January 2010 devaluation. The loss was primarily related to cash deposits in Venezuela that were remeasured at the official exchange rate of 4.3 bolivares fuertes applicable to non-essential goods, and was partially offset by a $47 million subsidy receivable related to U.S. dollar-denominated payables that were expected to be settled at the official subsidy exchange rate of 2.6 bolivares fuertes applicable to essential goods. Since we expected these payables to be settled at the subsidy essential goods rate, we established a subsidy receivable to reflect the expected benefit to be received in the form of the difference between the essential and non-essential goods exchange rates. Throughout 2010, we periodically assessed our ability to realize the benefit of the subsidy receivable and a substantial portion of purchases by our Venezuelan subsidiary had qualified and settled at the official exchange rate for essential goods. As a result of the elimination of the official subsidy exchange rate for essential goods, we recorded a foreign exchange loss of $24 million in the fourth quarter of 2010 related to the reversal of the subsidy receivable at December 31, 2010.

     Financing fees and financial instruments expense consisted primarily of the amortization of deferred financing fees, commitment fees and charges incurred as a result of financing transactions.

     General and product liability — discontinued products includes charges for claims against us related primarily to asbestos personal injury claims, net of probable insurance recoveries. We recorded $5 million and $7 million of expense related to asbestos claims in 2011 and 2010, respectively. In addition, we recorded $2 million and $3 million of income related to probable insurance recoveries in each of those periods.

     Net gains on asset sales were $2 million in the first quarter of 2011 compared to $16 million in the first quarter of 2010. The net gains in 2010 were due primarily to the sale of land in Thailand.

     Royalty income is derived primarily from licensing arrangements related to divested businesses. Interest income consisted primarily of amounts earned on cash deposits.

NOTE 4. SALE OF FARM TIRE BUSINESSES

On December 13, 2010, we entered into agreements with Titan Tire Corporation, a subsidiary of Titan International Inc., to sell our European and Latin American farm tire businesses, including licensing agreements that will allow Titan to manufacture and sell Goodyear-brand farm tires in Europe, Latin America and North America, for approximately $130 million, subject to post-closing conditions and adjustments. The Latin American portion of the transaction was completed on April 1, 2011. Proceeds from the sale were $99 million, before withholding taxes of $5 million and subject to post-closing conditions and adjustments. We expect to record a small gain on the sale in the second quarter of 2011. The European portion of the transaction, which has not yet been completed, is subject to the exercise of a put option by us following completion of a social plan related to the previously announced discontinuation of consumer tire production at one of our facilities in Amiens, France and required consultation with various works councils.

     The assets and liabilities of the Latin American farm tire business have been classified as held-for-sale at March 31, 2011 and at December 31, 2010. The carrying amount of the net assets at March 31, 2011 totaled $34 million. The carrying amount of the major assets and liabilities at March 31, 2011 totaled $43 million of property, plant and equipment, $14 million of inventories, $12 million of deferred income, $7 million of compensation and benefit liabilities, and $6 million of deferred income taxes. The carrying amount of the net assets at December 31, 2010 totaled $33 million. The carrying amount of the major assets and liabilities at December 31, 2010 totaled $44 million of property, plant and equipment, $16 million of inventories, $14 million of deferred income, $10 million of compensation and benefit liabilities, and $5 million of deferred income taxes. Due to uncertainty surrounding the timing of the completion of the Amiens social plan, the European business was classified as held-and-used at March 31, 2011 and at December 31, 2010. The long-lived assets of the European business did not have identifiable cash flows that were largely independent of other assets and liabilities and, accordingly, were tested for impairment at the reporting unit level. No impairment was indicated as a result of that testing. Additionally, the remaining useful life and estimated residual value of the long-lived assets were reviewed and no modifications were indicated as a result of that review.

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

NOTE 5. INCOME TAXES

For the first three months of 2011, we recorded tax expense of $62 million on income before income taxes of $186 million. Income tax expense was unfavorably impacted by $8 million due primarily to the settlement of prior tax years. For the first three months of 2010, we recorded tax expense of $53 million on income before income taxes of $29 million. Income tax for the first three months of 2010 was favorably impacted by $5 million due to various discrete items.

     We continue to maintain a full valuation allowance against our net Federal and state deferred tax assets, however this did not have a significant impact on the consolidated effective tax rate for the first three months of 2011 due to the near break-even results in the U.S. For the first three months of 2010, the difference between our effective tax rate and the U.S statutory rate was primarily attributable to maintaining a full valuation allowance against our net Federal and state deferred tax assets.

     At January 1, 2011, we had unrecognized tax benefits of $87 million that, if recognized, would have a favorable impact on our tax expense of $81 million. We had accrued interest of $13 million as of January 1, 2011. If not favorably settled, $23 million of the unrecognized tax benefits and $13 million of the accrued interest would require the use of our cash. It is reasonably possible that our unrecognized tax benefits may change during the next 12 months. However, we do not expect changes during the next 12 months to have a significant impact on our financial position or results of operations.

     Generally, years beginning after 2004 are still open to examination by foreign taxing authorities, and in Germany, we are open to examination from 2006 onward. In the United States, we are open to examination from 2010 onward.

NOTE 6. EARNINGS (LOSS) PER SHARE

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.

     The dividends and dilutive effect of the mandatory convertible preferred stock were de minimis on the earnings per share calculation since the preferred shares were issued on March 31, 2011.

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

		Three Months Ended
		March 31,
(In millions)		2011				2010
Weighted average shares outstanding — basic			243				242
Mandatory convertible preferred stock			—				—
Stock options and other dilutive securities			3				—
Weighted average shares outstanding — diluted			246				242

Weighted average shares outstanding — diluted exclude the effects of approximately 2 million equivalent shares for the three months ended March 31, 2010, 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 Goodyear Net Loss.

     Additionally, weighted average shares outstanding — diluted exclude approximately 9 million equivalent shares related to options with exercise prices greater than the average market price of our common shares (i.e., “underwater” options), at March 31, 2011 and 2010.

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

NOTE 7. BUSINESS SEGMENTS

		Three Months Ended
		March 31,
(In millions)		2011				2010
Sales:
North American Tire		$	2,307			$	1,779
Europe, Middle East and Africa Tire			1,959				1,529
Latin American Tire			585				478
Asia Pacific Tire			551				484
Net Sales		$	5,402			$	4,270
Segment Operating Income (Loss):
North American Tire		$	40			$	(14	)
Europe, Middle East and Africa Tire			153				109
Latin American Tire			67				76
Asia Pacific Tire			67				69
Total Segment Operating Income			327				240
Rationalizations			(9	)			(2	)
Interest expense			(74	)			(74	)
Other expense			(4	)			(104	)
Asset write-offs and accelerated depreciation			(9	)			(3	)
Corporate incentive compensation plans			(14	)			(7	)
Intercompany profit elimination			(9	)			(9	)
Other			(22	)			(12	)
Income before Income Taxes		$	186			$	29

Rationalizations, as described in Note 2, Costs Associated with Rationalization Programs, net gains on asset sales, as described in Note 3, Other 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
		March 31,
(In millions)		2011				2010
Rationalizations:
North American Tire		$	6			$	6
Europe, Middle East and Africa Tire			1				(6	)
Latin American Tire			—				2
Asia Pacific Tire			2				1
Total Segment Rationalizations			9				3
Corporate			—				(1	)
		$	9			$	2
Net Gains on Asset Sales:
North American Tire		$	—			$	—
Europe, Middle East and Africa Tire			(1	)			(1	)
Latin American Tire			(1	)			—
Asia Pacific Tire			—				(15	)
Total Segment Asset Sales		$	(2	)		$	(16	)
Asset Write-offs and Accelerated Depreciation:
North American Tire		$	8			$	1
Europe, Middle East and Africa Tire			—				—
Latin American Tire			—				—
Asia Pacific Tire			1				2
Total Segment Asset Write-offs and Accelerated Depreciation		$	9			$	3

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

NOTE 8. FINANCING ARRANGEMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS

At March 31, 2011, we had total credit arrangements of $7,821 million, of which $2,096 million were unused. At that date, 45% of our debt was at variable interest rates averaging 3.72%.

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

At March 31, 2011, we had short term committed and uncommitted credit arrangements totaling $565 million, of which $320 million were unused. These 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:

		March 31,				December 31,
(In millions)		2011				2010
Notes payable and overdrafts		$	245			$	238
Weighted average interest rate			4.61	%			4.56	%
Long term debt and capital leases due within one year:
Other domestic and international debt (including capital leases)		$	244			$	188
Weighted average interest rate			7.98	%			8.77	%
Total obligations due within one year		$	489			$	426

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

Long Term Debt and Capital Leases and Financing Arrangements

At March 31, 2011, we had long term credit arrangements totaling $7,256 million, of which $1,776 million were unused.

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

		March 31, 2011								December 31, 2010
						Interest								Interest
(In millions)		Amount				Rate				Amount				Rate
Notes:
10.5% due 2016		$	967							$	966
8.25% due 2020			994								993
8.75% due 2020			263								263
7% due 2028			149								149
Credit Facilities:
€505 million revolving credit facility due 2012			291				2.84	%			—				—
$1.5 billion first lien revolving credit facility due 2013			—				—				—				—
$1.2 billion second lien term loan facility due 2014			1,200				1.96	%			1,200				1.96	%
Pan-European accounts receivable facility due 2015			418				3.56	%			319				3.73	%
Chinese credit facilities			261				5.66	%			153				5.45	%
Other domestic and international debt(1)			477				9.27	%			446				9.04	%
			5,020								4,489
Capital lease obligations			19								18
			5,039								4,507
Less portion due within one year			(244	)							(188	)
		$	4,795							$	4,319

See Note 16, Subsequent Events for a discussion of the call for redemption of a portion of our 10.5% senior notes due 2016, the amendment and restatement of our European revolving credit facility and the issuance of €250 million of Goodyear Dunlop Tires Europe B.V. (“GDTE”) 6 ³/4% senior notes due 2019.

CREDIT FACILITIES

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

Our amended and restated €505 million revolving credit facilities consist of a €155 million German revolving credit facility, which is only available to Goodyear Dunlop Tires Germany GmbH (the “German borrower”), and a €350 million European revolving credit facility, which is available to the German borrower and to GDTE and certain of its other subsidiaries and contains a €50 million letter of credit sublimit. Goodyear and its subsidiaries that guarantee our U.S. facilities provide unsecured guarantees to support the German and 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. At March 31, 2011, $177 million (€125 million) was outstanding under the German revolving credit facility and $114 million (€80 million) was outstanding under the European revolving credit facility. At December 31, 2010, there were no borrowings under the German or the European revolving credit facilities. Letters of credit issued under the European revolving credit facility totaled $7 million (€5 million) at March 31, 2011 and $12 million (€9 million) at December 31, 2010.

     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. These facilities also have customary defaults, including cross-defaults to material indebtedness of Goodyear and our subsidiaries.

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

$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 this 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. This facility also has customary defaults, including a cross-default to material indebtedness of Goodyear and our subsidiaries.

     At March 31, 2011, we had no borrowings and $453 million of letters of credit issued under the revolving credit facility. At December 31, 2010, we had no borrowings and $474 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 March 31, 2011 and December 31, 2010, this facility was fully drawn.

     This facility has customary defaults, including a cross-default to material indebtedness of Goodyear and our subsidiaries.

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. At March 31, 2011 and December 31, 2010, the amount available, and fully utilized under this program, totaled $418 million (€295 million) and $319 million (€238 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 an accounts receivable securitization program totaling $60 million and $72 million at March 31, 2011 and December 31, 2010, respectively. The receivables sold under this program also serve as collateral for the related facility. We retain the risk of loss related to these receivables in the event of non-payment. 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, refer to the Note to the Consolidated Financial Statements No. 12, Financing Arrangements and Derivative Financial Instruments, in our 2010 Form 10-K.

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

Other Foreign Credit Facilities

Our Chinese subsidiary has two financing agreements in China. At March 31, 2011, these non-revolving credit facilities had total unused availability of 1.9 billion renminbi ($291 million) and can only be used to finance the relocation and expansion of our manufacturing facilities in China. The facilities contain covenants relating to our Chinese subsidiary and have customary representations and warranties and defaults relating to our Chinese subsidiary’s ability to perform its obligations under the facilities. One of the facilities (with 1.1 billion renminbi of unused availability at March 31, 2011) matures in 2016 and principal amortization begins in 2013. There were $191 million and $99 million of borrowings outstanding under this facility at March 31, 2011 and December 31, 2010, respectively. The other facility (with 0.8 billion renminbi of unused availability at March 31, 2011) matures in 2018 and principal amortization begins in 2015. There were $70 million and $54 million of borrowings outstanding under this facility at March 31, 2011 and December 31, 2010, respectively. Restricted cash of $50 million and $8 million was related to funds obtained under these credit facilities at March 31, 2011 and December 31, 2010, respectively.

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. We do not hold or issue derivative financial instruments for trading purposes.

Foreign Currency Contracts

We will enter into foreign currency contracts in order to manage the impact of changes in foreign exchange rates on our consolidated results of operations and future foreign currency-denominated cash flows. These 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.

     The following table presents fair values for foreign currency contracts not designated as hedging instruments:

		March 31,				December 31,
(In millions)		2011				2010
Fair Values — asset (liability):
Accounts receivable		$	3			$	25
Other assets			1				1
Other current liabilities			(33	)			(15	)

At March 31, 2011 and December 31, 2010, these outstanding foreign currency derivatives had notional amounts of $1,394 million and $1,324 million, respectively, and were primarily related to intercompany loans. Other Expense included net transaction losses of $35 million and net transaction gains of $33 million on foreign currency derivatives in the first three months of 2011 and 2010, respectively. These amounts were substantially offset in Other Expense by the effect of changing exchange rates on the underlying currency exposures.

     The following table presents fair values for foreign currency contracts designated as cash flow hedging instruments:

		March 31,				December 31,
(In millions)		2011				2010
Fair Values — asset (liability):
Other current liabilities		$	(9	)		$	(2	)

At March 31, 2011 and December 31, 2010, these outstanding foreign currency derivatives had notional amounts of $247 million and $75 million, respectively, and primarily related to intercompany transactions. At March 31, 2011 and December 31, 2010, deferred losses totaling $11 million and $2 million, respectively, were recognized in Accumulated Other Comprehensive Loss (“AOCL”). During the first three months of 2011 and 2010, respectively, there were no deferred losses reclassified from AOCL into income.

     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

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

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.

NOTE 9. FAIR VALUE MEASUREMENTS

The following table presents information about assets and liabilities recorded at fair value on the Consolidated Balance Sheet at March 31, 2011 and December 31, 2010:

										Quoted Prices in
		Total Carrying								Active Markets for																Significant
		Value in the								Identical								Significant Other								Unobservable
		Consolidated								Assets/Liabilities								Observable Inputs								Inputs
		Balance Sheet								(Level 1)								(Level 2)								(Level 3)
(In millions)		2011				2010				2011				2010				2011				2010				2011				2010
Assets:
Investments		$	38			$	38			$	38			$	38			$	—			$	—			$	—			$	—
Derivative Financial Instruments			4				26				—				—				3				25				1				1
Total Assets at Fair Value		$	42			$	64			$	38			$	38			$	3			$	25			$	1			$	1
Liabilities:
Derivative Financial Instruments		$	42			$	17			$	—			$	—			$	42			$	17			$	—			$	—
Total Liabilities at Fair Value		$	42			$	17			$	—			$	—			$	42			$	17			$	—			$	—

Derivative financial instrument valuations classified as Level 3 included embedded currency derivatives in long-dated operating leases. The valuation of the embedded currency derivatives is based on an extrapolation of forward rates to the assumed expiration of the leases. Realized and unrealized gains and losses related to the embedded currency derivatives are included in Other Expense.

     The following table presents supplemental fair value information about long term fixed rate and variable rate debt, excluding capital leases, at March 31, 2011 and December 31, 2010. The fair value was estimated using quoted market prices or discounted future cash flows.

		March 31,				December 31,
(In millions)		2011				2010
Fixed Rate Debt:
Carrying amount — liability		$	2,787			$	2,691
Fair value — liability			2,966				2,791
Variable Rate Debt:
Carrying amount — liability		$	2,233			$	1,798
Fair value — liability			2,196				1,770

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

NOTE 10. PENSION, SAVINGS AND OTHER POSTRETIREMENT BENEFIT PLANS

We provide employees with defined benefit pension or defined contribution savings plans.

     Defined benefit pension cost follows:

		U.S.								Non-U.S.
		Three Months Ended								Three Months Ended
		March 31,								March 31,
(In millions)		2011				2010				2011				2010
Service cost — benefits earned during the period		$	11			$	10			$	8			$	7
Interest cost on projected benefit obligation			71				75				38				37
Expected return on plan assets			(77	)			(70	)			(33	)			(32	)
Amortization of: — prior service cost			6				8				—				—
— net losses			34				33				10				9
Net periodic pension cost			45				56				23				21
Curtailments/settlements/termination benefits			—				—				(1	)			1
Total defined benefit pension cost		$	45			$	56			$	22			$	22

We expect to contribute approximately $250 million to $300 million to our funded U.S. and non-U.S. pension plans in 2011. For the three months ended March 31, 2011, we contributed $8 million to our non-U.S. plans.

     The expense recognized for our contributions to defined contribution savings plans for the three months ended March 31, 2011 and 2010 was $26 million and $25 million, respectively.

     We provide certain domestic employees and employees at certain non-U.S. subsidiaries with health care benefits or life insurance benefits upon retirement. Postretirement benefit cost for the three months ended March 31, 2011 and 2010 was $3 million and $2 million, respectively.

NOTE 11. STOCK COMPENSATION PLANS

Our Board of Directors granted 1.5 million stock options and 0.1 million performance share units during the first quarter of 2011 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 the stock option grants during the first quarter was $13.91 and $6.91, respectively. We estimated the fair value of the stock options using the following assumptions in our Black-Scholes model:

Expected term: 6.25 years
Interest rate: 2.46%
Volatility: 48.37%
Dividend yield: Nil

     We measure the fair value of grants of performance share units based primarily on the closing market price of a share of our common stock on the date of the grant, modified as appropriate to take into account the features of such grants. The fair value per share for grants made during the first quarter of 2011 was $15.58.

     We recognized stock-based compensation expense of $6 million and $3 million during the first quarter of 2011 and 2010, respectively. At March 31, 2011, unearned compensation cost related to the unvested portion of all stock-based awards was approximately $33 million and is expected to be recognized over the remaining vesting period of the respective grants, through February 28, 2015.

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

NOTE 12. COMMITMENTS AND CONTINGENT LIABILITIES

Environmental Matters

We have recorded liabilities totaling $44 million at March 31, 2011 and December 31, 2010 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, $11 million and $12 million were included in Other Current Liabilities at March 31, 2011 and December 31, 2010, 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 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. We have limited potential insurance coverage for future environmental claims.

Workers’ Compensation

We have recorded liabilities, on a discounted basis, totaling $300 million and $291 million for anticipated costs related to workers’ compensation at March 31, 2011 and December 31, 2010, respectively. Of these amounts, $72 million and $71 million were included in Current Liabilities as part of Compensation and Benefits at March 31, 2011 and December 31, 2010, 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. We periodically, and at least annually, update our loss development factors based on actuarial analyses. At March 31, 2011 and December 31, 2010, the liability was discounted using a risk-free rate of return.

General and Product Liability and Other Litigation

We have recorded liabilities totaling $298 million and $328 million, including related legal fees expected to be incurred, for potential product liability and other tort claims presently asserted against us at March 31, 2011 and December 31, 2010, respectively. Of these amounts, $48 million and $91 million were included in Other Current Liabilities at March 31, 2011 and December 31, 2010, respectively. The amounts recorded were estimated based on 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 amount of our ultimate liability in respect of these matters may differ from these estimates. The decrease in the liability from December 31, 2010 was due primarily to payment in 2011 of an unfavorable judgment from 2010.

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 91,700 claims by defending and obtaining the dismissal thereof or by entering into a settlement. The sum of our accrued asbestos-related liability and gross payments to date, including legal costs, totaled approximately $370 million through March 31, 2011 and $365 million through December 31, 2010.

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

     A summary of recent approximate asbestos claims activity 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. The passage of tort reform laws and creation of deferred dockets for non-malignancy claims in several states has contributed to a decline in the number of claims filed in recent years.

		Three Months Ended				Year Ended
(Dollars in millions)		March 31, 2011				December 31, 2010
Pending claims, beginning of period			83,700				90,200
New claims filed			600				1,700
Claims settled/dismissed			(1,000	)			(8,200	)
Pending claims, end of period			83,300				83,700
Payments (1)		$	4			$	26

     We periodically, and at least annually, review our existing reserves for pending claims, including a reasonable estimate of the liability associated with unasserted asbestos claims, and estimate our receivables from probable insurance recoveries. We had recorded gross liabilities for both asserted and unasserted claims, inclusive of defense costs, totaling $127 million and $126 million at March 31, 2011 and December 31, 2010, respectively. At March 31, 2011, we estimate that it is reasonably possible that our gross liabilities, net of our estimate for probable insurance recoveries, could exceed our recorded amounts by approximately $10 million.

     We recorded a receivable related to asbestos claims of $67 million as of March 31, 2011 and December 31, 2010. We expect that approximately 50% of asbestos claim related losses would be recoverable through insurance through the period covered by the estimated liability. Of these amounts, $8 million was included in Current Assets as part of Accounts Receivable at March 31, 2011 and December 31, 2010. The recorded receivable 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 March 31, 2011, we had approximately $170 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 $67 million insurance receivable recorded at March 31, 2011. We also had approximately $14 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 March 31, 2011.

     With respect to both asserted and unasserted claims, it is reasonably possible that we may incur a material amount of cost in excess of the current reserve, however, such amount cannot be reasonably estimated. 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 our 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 us.

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 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 the financial position and results of operations of the period in which the ruling occurs, or in future periods.

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

Income 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 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 have off-balance sheet financial guarantees written and other commitments totaling approximately $25 million. We will from time to time issue guarantees to financial institutions or other entities on behalf of certain of our affiliates, lessors or customers. Normally there is no separate premium received by us as consideration for the issuance of guarantees. We also generally do not require collateral in connection with the issuance of these guarantees. If our performance under these guarantees is triggered by non-payment or another specified event, we would be obligated to make payment to the financial institution or the other entity, and would typically have recourse to the assets of the affiliate, lessor or customer. The guarantees expire at various times through 2023. We are unable to estimate the extent to which our affiliates’, lessors’ or customers’ assets would be adequate to recover any payments made by us under the related guarantees.

NOTE 13. MANDATORY CONVERTIBLE PREFERRED STOCK

On March 31, 2011, we issued 10,000,000 shares of our 5.875% mandatory convertible preferred stock, without par value and with an initial liquidation preference of $50.00 per share, at a price of $50.00 per share, raising $500 million before offering costs which included $15 million in underwriting discounts and commissions and approximately $1 million in offering expenses.

     Quarterly dividends on each share of the mandatory convertible preferred stock will accrue at a rate of 5.875% per year on the initial liquidation preference of $50.00 per share. Dividends will accrue and accumulate from the date of issuance and, to the extent that we are legally permitted to pay a dividend and the board of directors declares a dividend payable, we will pay dividends in cash on January 1, April 1, July 1 and October 1 of each year, commencing on July 1, 2011 and ending on April 1, 2014. The mandatory convertible preferred stock ranks senior to our common stock with respect to distribution rights in the event of any liquidation, winding-up or dissolution of the Company.

     Unless converted earlier, each share of the mandatory convertible preferred stock will automatically convert on April 1, 2014 into between 2.7454 and 3.4317 shares of common stock, depending on the market value of our common stock for the 20 consecutive trading day period ending on the third trading day prior to April 1, 2014, subject to customary anti-dilution adjustments. At any time prior to April 1, 2014, holders may elect to convert shares of the mandatory convertible preferred stock at the minimum conversion rate of 2.7454 shares of common stock, subject to customary anti-dilution adjustments. If certain fundamental changes involving the Company occur, holders of the mandatory convertible preferred stock may convert their shares into a number of shares of common stock at the fundamental change conversion rate described in our Amended Articles of Incorporation. If the Company at any time has not paid the equivalent of six full quarterly dividends on the mandatory convertible preferred stock, the Company may, at its option, cause all, but not less than all, outstanding shares of the mandatory convertible preferred stock to be automatically converted into a number of shares of our common stock based on the fundamental change conversion rate.

     Upon conversion, we will pay converting holders all accrued and unpaid dividends, whether or not previously declared, on the converted shares and, in the case of a conversion upon a fundamental change or a conversion following nonpayment of dividends, the present value of the remaining dividend payments on the converted shares. Except as required by law or as specifically set forth in our Amended Articles of Incorporation, the holders of the mandatory convertible preferred stock have no voting rights.

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

     So long as any of the mandatory convertible preferred stock is outstanding, no dividend, except a dividend payable in shares of our common stock, or other shares ranking junior to the mandatory convertible preferred stock, may be paid or declared or any distribution be made on shares of the common stock unless all accrued and unpaid dividends on the then outstanding mandatory convertible preferred stock payable on all dividend payment dates occurring on or prior to the date of such action have been declared and paid or funds sufficient therefor set apart.

NOTE 14. CHANGES IN SHAREHOLDERS’ EQUITY

The following table presents the changes in shareholders’ equity during the first three months of 2011 and 2010:

		Three Months Ended March 31, 2011												Three Months Ended March 31, 2010
						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		$	644			$	277			$	921			$	735			$	251			$	986
Comprehensive income (loss):
Net income (loss)			103				11				114				(47	)			7				(40	)
Foreign currency translation (net of tax of $1 in 2011 and $1 in 2010)			55				4				59				(19	)			2				(17	)
Amortization of prior service cost and unrecognized gains and losses included in total benefit cost (net of tax of $3 in 2011 and $3 in 2010)			39				—				39				40				—				40
Decrease (increase) in net actuarial losses (net of tax of $0 in 2011 and $0 in 2010)			3				—				3				(1	)			—				(1	)
Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments and settlements (net of tax of $0 in 2011 and $0 in 2010)			—				—				—				1				—				1
Deferred derivative loss (net of tax of $0 in 2011 and $0 in 2010)			(7	)			—				(7	)			(1	)			—				(1	)
Unrealized investment (losses) and gains (net of tax of $0 in 2011 and $0 in 2010)			(1	)			—				(1	)			1				—				1
Other comprehensive income (loss)			89				4				93				21				2				23
Total comprehensive income (loss)			192				15				207				(26	)			9				(17	)
Dividends declared to Minority Shareholders			—				(4	)			(4	)			—				—				—
Stock-based compensation plans (Note 11)			3				—				3				1				—				1
Preferred stock issued, net of expenses			484				—				484				—				—				—
Common stock issued from treasury			4				—				4				4				—				4
Other			—				1				1				—				—				—
Balance at end of period		$	1,327			$	289			$	1,616			$	714			$	260			$	974

The following table presents changes in Minority Equity presented outside of Shareholders’ Equity:

		Three Months Ended
		March 31,
		2011				2010
(In millions)
Balance at beginning of period		$	584			$	593
Comprehensive income (loss):
Net income			10				16
Foreign currency translation, net of tax of $0 in 2011 ($0 in 2010)			35				(37	)
Amortization of prior service cost and unrecognized gains and losses included in total benefit cost, net of tax of $0 in 2011 ($0 in 2010)			1				1
Deferred derivative loss, net of tax of $0 in 2011 ($0 in 2010)			(2	)			—
Total comprehensive income (loss)			44				(20	)
Balance at end of period		$	628			$	573

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

NOTE 15. CONSOLIDATING FINANCIAL INFORMATION

Certain of our subsidiaries have guaranteed our obligations under the $1.0 billion outstanding principal amount of 10.5% senior notes due 2016, the $1.0 billion outstanding principal amount of 8.25% senior notes due 2020, and the $282 million outstanding principal amount of 8.75% notes due 2020 (collectively, the “notes”). The following presents the condensed consolidating financial information separately for:

(i)

The Goodyear Tire & Rubber Company (the “Parent Company”), the issuer of the guaranteed obligations;

(ii)

Guarantor subsidiaries, on a combined basis, as specified in the indentures related to Goodyear’s obligations under the notes;

(iii)

Non-guarantor subsidiaries, on a combined basis;

(iv)

Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between or among the Parent Company, the guarantor subsidiaries and the non-guarantor subsidiaries, (b) eliminate the investments in our subsidiaries, and (c) record consolidating entries; and

(v)

The Goodyear Tire & Rubber Company and Subsidiaries on a consolidated basis.

     Each guarantor subsidiary is 100% owned by the Parent Company at the date of each balance sheet presented. The notes are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary. Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements, except for the use by the Parent Company and guarantor subsidiaries of the equity method of accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation. Intercompany cash advances and loans made primarily for the purpose of short-term operating needs are included in cash flows from operating activities. Intercompany transactions reported as investing or financing activities include the sale of the capital stock of various subsidiaries and other capital transactions between members of the consolidated group.

     Certain non-guarantor subsidiaries of the Parent Company are restricted from remitting funds to it by means of dividends, advances or loans due to required foreign government and/or currency exchange board approvals or restrictions in credit agreements or other debt instruments of those subsidiaries.

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

		Consolidating Balance Sheet
		March 31, 2011
														Consolidating
						Guarantor				Non-Guarantor				Entries and
(In millions)		Parent Company				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Assets:
Current Assets:
Cash and Cash Equivalents		$	1,088			$	24			$	1,103			$	—			$	2,215
Accounts Receivable			975				217				2,358				—				3,550
Accounts Receivable From Affiliates			—				475				142				(617	)			—
Inventories			1,397				185				1,853				(98	)			3,337
Prepaid Expenses and Other Current Assets			59				4				317				10				390
Total Current Assets			3,519				905				5,773				(705	)			9,492
Goodwill			—				24				498				190				712
Intangible Assets			109				1				51				—				161
Deferred Income Taxes			—				1				52				(1	)			52
Other Assets			232				48				230				—				510
Investments in Subsidiaries			4,002				333				4,324				(8,659	)			—
Property, Plant and Equipment			2,125				173				3,999				32				6,329
Total Assets		$	9,987			$	1,485			$	14,927			$	(9,143	)		$	17,256
Liabilities:
Current Liabilities:
Accounts Payable-Trade		$	800			$	152			$	2,406			$	—			$	3,358
Accounts Payable to Affiliates			617				—				—				(617	)			—
Compensation and Benefits			433				31				328				—				792
Other Current Liabilities			306				43				709				(3	)			1,055
Notes Payable and Overdrafts			—				—				245				—				245
Long Term Debt and Capital Leases Due Within One Year			1				—				243				—				244
Total Current Liabilities			2,157				226				3,931				(620	)			5,694
Long Term Debt and Capital Leases			3,575				—				1,220				—				4,795
Compensation and Benefits			2,269				208				935				—				3,412
Deferred and Other Noncurrent Income Taxes			32				3				220				7				262
Other Long Term Liabilities			627				32				190				—				849
Total Liabilities			8,660				469				6,496				(613	)			15,012
Commitments and Contingent Liabilities
Minority Shareholders’ Equity			—				—				406				222				628
Shareholders’ Equity:
Goodyear Shareholders’ Equity:
Preferred Stock			500				—				—				—				500
Common Stock			244				333				5,022				(5,355	)			244
Capital Surplus			2,795				35				1,025				(1,060	)			2,795
Retained Earnings			969				1,123				2,776				(3,899	)			969
Accumulated Other Comprehensive Loss			(3,181	)			(475	)			(1,087	)			1,562				(3,181	)
Goodyear Shareholders’ Equity			1,327				1,016				7,736				(8,752	)			1,327
Minority Shareholders’ Equity – Nonredeemable			—				—				289				—				289
Total Shareholders’ Equity			1,327				1,016				8,025				(8,752	)			1,616
Total Liabilities and Shareholders’ Equity		$	9,987			$	1,485			$	14,927			$	(9,143	)		$	17,256